Contractual problems - pre-contract, extension of time, liquidated damages etc in construction projects

Construction legal advice

COURSE CONTENT

DAY ONE
- 50 NEW CONTRACTUAL NIGHTMARES




A.M.


08.30 Registration and Coffee
09.15 Lecture One
10.00 Lecture Two
11.00 Coffee
11.15 Lecture Three
12.00 Questions and Discussion
12.30 Lunch


P.M.

1.30 Lecture Four
2.15 Lecture Five
3.00 Tea
3.15 Lecture Six
4.00 Questions and Discussion
4.45 Close


50 NEW CONTRACTUAL NIGHTMARES

PRE-CONTRACT

1. A Contractor or Subcontractor commences work on receiving a letter of intent before the contract is entered into. Can he recover payment for the work if the project is abandoned by the Employer before a contract has been entered into.

2. Does an Employer have any liability for not sending a subsoil survey to tendering contractors, the absence of which leads the successful contractor to significantly under-price his risk of bad ground.

3. During a tender vetting process a Contractor provides the name and experience of his proposed site manager and presents him at a pretender meeting. What liability will attach to the Contractor if he uses a different site manager. How would this be affected if the Architect could honestly say that the intended use of the original site manager was the clinching factor in appointing the Contractor.

4. A tender enquiry places the risk of any additional cost resulting from changes in legislation upon the Contractor. Is this the type of risk he is best able to bear and if not what should he do.


EXTENSION OF TIME ENTITLEMENT

5. Are Contractors and Subcontractors entitled to extensions of time even though they have not submitted a delay notice which the contract states must be sent as a condition precedent to an extension of time entitlement.

6. Is a Contractor or Subcontractor entitled to legitimately secure an extension of time where delay has been caused by the Architect or Engineer, when at the same time the Contractor or Subcontractor is suffering from delays of his own making.

7. Is a Contractor or Subcontractor, who is required under a contract to use best endeavours to avoid or prevent delay, under a greater obligation than would be the case if he was merely required to use reasonable endeavours. Would the situation be any different if the requirement is to minimise delays.


LIQUIDATED DAMAGES

8. Where a contract includes for a single liquidated damages amount for late completion to the whole of the work, what entitlement does the Employer have to claim from the Contractor who has failed to meet the milestone dates also included in the contract.

9. Is it possible to include in a subcontract an all embracing sum for liquidated damages for delay to completion. If so would the Subcontractor be obliged to pay the amount to the Contractor where delayed completion of the subcontract works did not delay the main contract works as the subcontract work was not on the critical path.

10. The Employer includes in the contract liquidated damages which, at the time the contract was entered into, represented a fair and reasonable anticipated loss. Due to a change of circumstances during the progress of the works, if payment were made in respect of liquidated damages the Employer would secure a windfall profit. Are they still enforceable.


DESIGN AND CONSTRUCT

11. Where an item of work has been properly provided for in the Employer's Requirements but is missing from the Contractor's Proposals, can the Contractor claim extra payment for doing the work on the grounds that it was never included for in the contract price.

12. Where the Contractor's Proposals specify the use of a particular material, can the Contractor replace it with a cheaper one with out passing on a credit to the Employer.
13. An Architect is switched from being employed by the Employer to employment by the Contractor under a novation agreement. If the Contractor is put to expense due to Architect's errors in his design work carried out before the switch, can the Contractor recover the cost from the Employer or the Architect or is it a Contractor's risk item.

PARTNERING

14. Does a contract merely by it being headed "Partnering Contract" imply that the parties will operate on a partnering basis.

15. Is it necessary where a partnering arrangement exists for it to be backed by a formal contract or will "heads of agreement" be sufficient.

16. How can an obligation to act in good faith be enforced.

17. Can the objectives in a partnering charter be enforced.

COST REIMBURSABLE

18. Where a contract provides for payment on a cost reimbursable basis, must credit be given to the Employer if work has to be redone due to defects or where extra cost is incurred due to inefficiencies on the part of the Contractor.

19. Where a contract includes a Target Cost how should it be calculated. Is it the Contractor's role to produce the Target or that of the Architect, Engineer or QS.

20. If a contract provides a "Gain Share and Pain Share" clause what would be regarded as a reasonable percentage split between Employer and Contractor.

21. How is payment in respect of plant owned by the Contractor differentiated from payment in respect of plant hired in by the Contractor.

22. How should the Fee be adjusted either up or down, if at all, when due to Architect's or Engineer's Instructions there are significant variations to the work which affect the final cost.

MONEY

23. The Contractor, when pricing an item in the contract, makes an error and includes a rate which is far too low. When work is completed, due to variations issued by the Architect or Engineer, the quantities substantially increase. Is the Contractor held to his quoted rate or can he claim a fair valuation for the excess quantity. What would be the position if the original rate was too high.

24. A Contractor or Subcontractor submits a prolongation claim for time and money where the contract period overran due to numerous changes and late issue of instructions by the Architect or Engineer. The Contractor's claim is rejected for a failure to link each change or late instruction with its individual effect in term of time and money. To provide this information will be extremely costly and time consuming. What should the Contractor or Subcontractor do about the matter.

25. A contract provides for payment when the Contractor reaches certain milestones defined in the contract. Work is delayed due to late instructions issued by the Architect or Engineer and the milestones are likely to be reached much later than programmed. What should the Contractor do to ensure his cashflow is not adversely affected.

26. The Construction Act outlaws pay when paid clauses in subcontracts except where the Employer does not pay due to its insolvency. A Contractor delays payment beyond the final date for payment as, due to the Employer's cashflow problem, he has not been paid. Five days after the final date for payment the Employer goes into receivership. The contractor refuses to pay the Subcontractor relying on the "we don't have to pay you if the Employer is insolvent" clause in the subcontract. Is the Subcontractor entitled to be paid.

27. Varied work due to a lack of appropriate rates in the contract is to be valued on a fair and reasonable basis. Work which falls in this category is recorded on daywork sheets by the Contractor and signed by the Architect. The QS rejects the daywork sheets as representing an overvalue of the work and suggests a 25% reduction. What action should the Contractor take.


RIGHTS AND REMEDIES

28. Can an Architect or Engineer refuse to grant a certificate of completion on the grounds of incomplete or defective work even though the facility is capable of being used for its proper purpose by the Employer.

29. Where a term maintenance contract includes an approximate value of work to be ordered per annum what rights does the Contractor have to payment in respect of reduced levels of profit and overheads due to the value of the orders being significantly below the approximate value.

30. Will Courts refuse to enforce terms in a contract which they regards as onerous. If so how do they decide what constitutes an onerous term.

SUBCONTRACTS

31. Is a Subcontractor obligated to cover and protect the subcontract works or is protection of all work the responsibility of the main contractor. If it is the Subcontractor's obligation when does it cease.

32. If a Subcontractor, due to his own default, is behind programme and seems unlikely to meet the completion date, can the Main Contractor take work out of the subcontract and arrange for it to be carried out by others. If so, can any additional cost be recovered from the Subcontractor.

33. Where does liability lie if the Main Contractor is obliged under the subcontract conditions to insure the subcontract conditions but there is an uninsured value of the first £5,000 of any claim. If the Subcontractor claims for damage to the subcontract works will he stand the uninsured value. Will it be any different if the Subcontractor is unaware of the uninsured risk.

34. What steps should a Subcontractor take to ensure he received prompt certification and payment for design work and off site manufacture carried out prior to a start being made on site.

35. What is the Subcontractor's entitlement where a Bill of Quantities provided by the Main Contractor at tender stages includes quantities which are undermeasured. Does it make any difference if the subcontract states that the Contractor takes no responsibility for the accuracy of the quantities.

36. A Subcontractor submits his final account which includes several new rates not included in the tender. The Contractor does not include payment in respect of these rates explaining that until accepted by the Employer's QS he is unable to do so. What action should the Subcontractor take.

DEFECTS

37. What is the position if an Architect or Engineer instructs a Contractor not to correct defective work. Is the Contractor or Subcontractor obliged to offer a credit. If so, how should the credit be valued.

38. Can the Architect or Engineer insist on defective work being put right at any stage during the construction process or can the Contractor or Subcontractor refuse and correct the defective work if practical just prior to offering the facility for handover.

39. At the end of the defects liability period the Architect, due to an oversight, fails to include a significant item of defective work on the defects schedule. All defects are put right and a certificate of making good defects issued. Subsequently the oversight is discovered and the Employer puts the work right. Does the Contractor have any liability.


INSOLVENCY

40. Where a Main Contractor becomes insolvent and his employment is terminated, is the Employer entitled to refuse to make any payments to the receiver until all work is finished on the project and all final accounts including that of the finishing off Contractors completed and agreed.

41. Are unpaid Suppliers entitled to remove their materials from site when the Main Contractor goes into receivership.

42. Where defective work by the insolvent Contractor comes to light during the finishing off period, who takes the risk, the finishing off Contractor or the Employer.

43. How can Subcontractors recover money outstanding at the time the first Contractor became insolvent.


ADJUDICATION

44. Can adjudication be commenced at any time or will it have to wait until work has been completed.

45. Is adjudication intended for disputes concerning money only or does it cater for delays and defective work

46. Will a Court enforce an adjudication decision even if it appears to be wrong.

47. What does it cost financially in round figures to take a case to adjudication.

48. From the time of writing to the other party to the contract requiring a dispute to be referred to adjudication how long in fairly precise terms does the process take to complete up to the time of the Adjudicator's decision.


MEDIATION

49. Can parties to a contract be forced to go to mediation.

50. Do a Mediator's duties include the issue of a decision or recommendation and if so, how is it enforced.

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