B.

1 Give 2 examples of the type of events which under many of the standard forms of construction contract give rise to an entitlement for the contractor to claim the recovery of losses which result from delays? Compensable and excusable delays give rise to an entitlement for the contractor to claim the recovery of losses which result from delays. Examples: Delayed design hand-over by the Employer; Delayed hand-over of the site by the Employer. B.2 How does a Contractor comply with a condition precedent in respect of quantum? The most standard forms requires for the Contractor to give notice to the Contractor administrator Architect, Engineer when he becomes aware of an event who entitles him to a claim ( for additional payment or time extension). In some contracts serving a notice of an event that is the ground of a claim is made a condition precedent to the contractors right for that claim, consisting in our case for additional payment. The term condition precedent is a legal term and it has been held that if a contractor has not adhere to a condition precedent then he forfeits his entitlement that were subject to the condition precedent. Therefore the Contractor shall submit any notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance. Contrary in most standard forms, for instance FIDIC sub clause 20.1, this will lead in losing his entitlement to additional payment, and the Employer shall be discharged from all liability in connection with the claim. But, nevertheless, the burden of proofs as to whether there have been events entitling him for an extra payment (or time extension), rest with the Contractor. Therefore is contractors responsibility to keep sufficient records with all the events that entitle him to that specific claim. In this respect is recommended: That a prudent Contractor ought to produce at the start of the project a comprehensive program that is regularly marked up; For the Contractor to add to the same program record the dates on which relevant instruction, variation or events occurred by case; That in case extra works has been instructed then new items has to be added. In conclusion following the above said the best advice for the contractor is: To give notice timeously, in writing, and in terms and condition of the contract; To keep adequate records.

B.3

What is the measured mile method of evaluating disruption and give an example? Is an analysis comparing the productivity of a period that has been impacted by a negative condition or event to the productivity of similar work under normal, un-impacted conditions. Example: Case of Whittall Builders Company Ltd v Chester Le Street District Council (1985).

In this case, the Employer encountered difficulties in granting possession of the site. These lead in the contractors work being disrupted. The evaluation of the disruption was made by comparing the output per man week achieved when work was disrupted with that achieved when there was no disruption which produced a net additional labour cost.

B.4

What is a total cost claim and does it contain any flaws? Total Cost Claim: type of claim where the contractor claims that the whole of his additional cost in performing the contract has been caused by events for which the employer is responsible. Yes, contains flaws since the Contractor cannot identify causal links between each cause of delay and disruption and the cost consequence thereof. Practically this method ignores: Losses due to the risk undertaken by the contractor and for which not proper allowances has been made; Additional costs incurred as a result of errors in tender; Inefficient working and correcting defects. This method is often used when the Contractor failed to keep accurate site records. Losses are actually determined under this method by comparing the actual costs expended upon labour with the ones mentioned in the tender.

B.5

Explain what is causation? Is mental concept, generally based upon inference or induction from uniformity of sequence as between two events that there is a causal connection between them. As it was stated in the case law John Doyle Construction Limited vs. Laing Management (Scotland) Limited 1 BLR295 Inner House the Inner House causation is a matter of interference and in construction is based on experts reports, but over-elaborated analysis should be avoided.

B.6

What is evaluation of disruption by assessment and when can it be used? It is a method to evaluate disruption when due to the nature of the disrupting matters and the complexity of the project the measured mile approach to evaluation cannot be employed. Therefore a solution could be to try, at least, to isolate the additional hours of labour and plant which results from the events giving rise to disruption. In this respect recommendable is to schedule the matters which have actually caused disruption should be prepared, setting out each disrupting event and indicating the additional labour and plant hours expended. Nevertheless is possible to encounter difficulties in isolating the additional hours of labour and plant which result from each and every disrupting matter. Form legal point of view the Courts has provided with some guidance stating, for example in the case Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd (1975), that difficulties of accurate assessment cannot relieve the wrongdoer of the duty of paying damages for breach of contract.

In the case Chaplin v Hicks (1911) it was held: Where it is clear that there has been actual loss resulting from the breach of contract which it is difficult to estimate in money, it is for the jury to do their best to estimate, it is not necessary that there should be an absolute measure of damages in each case.

B.7 Is there legal support for the argument that in the absence of a proper written notice the contractor will lose entitlements to additional cost which results from delays which under the terms of the contract are at the risk of the employer? Yes, for example according to FIDIC: Sub- Clause 20 (1) - if the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. The Contractor shall submit any notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance. Yes, for example according to the NEC 3rd Edition: If the contractor fails to serve on the Project Manager a written notice within 8 weeks of becoming aware of an event he considers is a compensation event then he is not entitled to a change in the Price for the works. Yes, for example, according to ICE 6th and 7th Editions: A notice must be sent within 28 days of the event giving rise to the claim. Contemporary records must be kept by the contractor in order to support the claim.

B.8

What is constructive acceleration? It is a term used when the Employer denies the Contractor an extension of time and the Contractor accelerates the resources to meet the contractual completion date. The situation is characterized by the Architect/Engineers mistaken belief that no extension of time is due and the Employer pressing the contractor to complete by the fixed date for completion. The problem faced by the contractor is that in the absence of an extension of time he may be faced with the possibility of liquidation damages being levied against him.

B.9 Is the Contractor entitled to claim interest and if not what is an alternative approach? Generally, under the common law there is no basic right for interest for a late payment of a debt unless the contract specifically provides for it. The Courts do not recognize interest as a claimable head of damages Despite all these: There may be a right for interest under Governing Law - UK Later Payment of Debts;

There may be a right of interest in the contract, but will need to have commenced an action.

B.10 What is the difference between liquidated damages, abatement, set off and contra-charges?

Liquidated damages are: damages agreed in the contract as compensation for: Late performance; Failure to achieve a guarantee figure. A common law court will not adjust liquidated damages; a civil court may adjust them. Abatement: a decrease in the payment to creditors or legatees when the assets of the debtor or estate are insufficient to meet all payments in full. Set off: a demand which a defendant makes against the plaintiff in the suit for the purpose of liquidating the whole or a part of his claim. Contra-charges: effectively a back-charge. A term often used in Construction that refers to offsetting a particular element of works to another contractor. I.e. A main contractor will contra charge a sub-contractor if they had to incur additional costs for fixing a fault.

TAKE-HOM EXAM Assessment Questions Pricing & Claim Practices 26/27/28 April 2012 LLM/MLS International Construction Law @ Vienna University

Author: Mag. ARIZAN MARIUS-ANDREI (L.L.M.) - Romania

B.1 Give 2 examples of the type of events which under many of the standard forms of construction contract give rise to an entitlement for the contractor to claim the recovery of losses which result from delays? Compensable and excusable delays give rise to an entitlement for the contractor to claim the recovery of losses which result from delays.

Examples: Delayed design hand-over by the Employer; Delayed hand-over of the site by the Employer. B.2 How does a Contractor comply with a condition precedent in respect of quantum? The most standard forms requires for the Contractor to give notice to the Contractor administrator Architect, Engineer when he becomes aware of an event who entitles him to a claim ( for additional payment or time extension). In some contracts serving a notice of an event that is the ground of a claim is made a condition precedent to the contractors right for that claim, consisting in our case for additional payment. The term condition precedent is a legal term and it has been held that if a contractor has not adhere to a condition precedent then he forfeits his entitlement that were subject to the condition precedent. Therefore the Contractor shall submit any notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance. Contrary in most standard forms, for instance FIDIC sub clause 20.1, this will lead in losing his entitlement to additional payment, and the Employer shall be discharged from all liability in connection with the claim. But, nevertheless, the burden of proofs as to whether there have been events entitling him for an extra payment (or time extension), rest with the Contractor. Therefore is contractors responsibility to keep sufficient records with all the events that entitle him to that specific claim. In this respect is recommended: That a prudent Contractor ought to produce at the start of the project a comprehensive program that is regularly marked up; For the Contractor to add to the same program record the dates on which relevant instruction, variation or events occurred by case; That in case extra works has been instructed then new items has to be added. In conclusion following the above said the best advice for the contractor is: To give notice timeously, in writing, and in terms and condition of the contract; To keep adequate records.

B.3

What is the measured mile method of evaluating disruption and give an example? Is an analysis comparing the productivity of a period that has been impacted by a negative condition or event to the productivity of similar work under normal, un-impacted conditions. Example: Case of Whittall Builders Company Ltd v Chester Le Street District Council (1985). In this case, the Employer encountered difficulties in granting possession of the site. These lead in the contractors work being disrupted. The evaluation of the disruption was made by comparing the output per man week achieved when work was disrupted with that achieved when there was no disruption which produced a net additional labour cost.

B.4

What is a total cost claim and does it contain any flaws? Total Cost Claim: type of claim where the contractor claims that the whole of his additional cost in performing the contract has been caused by events for which the employer is responsible. Yes, contains flaws since the Contractor cannot identify causal links between each cause of delay and disruption and the cost consequence thereof. Practically this method ignores: Losses due to the risk undertaken by the contractor and for which not proper allowances has been made; Additional costs incurred as a result of errors in tender; Inefficient working and correcting defects. This method is often used when the Contractor failed to keep accurate site records. Losses are actually determined under this method by comparing the actual costs expended upon labour with the ones mentioned in the tender.

B.5

Explain what is causation? Is mental concept, generally based upon inference or induction from uniformity of sequence as between two events that there is a causal connection between them. As it was stated in the case law John Doyle Construction Limited vs. Laing Management (Scotland) Limited 1 BLR295 Inner House the Inner House causation is a matter of interference and in construction is based on experts reports, but over-elaborated analysis should be avoided.

B.6

What is evaluation of disruption by assessment and when can it be used? It is a method to evaluate disruption when due to the nature of the disrupting matters and the complexity of the project the measured mile approach to evaluation cannot be employed. Therefore a solution could be to try, at least, to isolate the additional hours of labour and plant which results from the events giving rise to disruption. In this respect recommendable is to schedule the matters which have actually caused disruption should be prepared, setting out each disrupting event and indicating the additional labour and plant hours expended. Nevertheless is possible to encounter difficulties in isolating the additional hours of labour and plant which result from each and every disrupting matter. Form legal point of view the Courts has provided with some guidance stating, for example in the case Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd (1975), that difficulties of accurate assessment cannot relieve the wrongdoer of the duty of paying damages for breach of contract. In the case Chaplin v Hicks (1911) it was held: Where it is clear that there has been actual loss resulting from the breach of contract which it is difficult to estimate in money, it is for the jury to do their best to estimate, it is not necessary that there should be an absolute measure of damages in each case.

B.7 Is there legal support for the argument that in the absence of a proper written notice the contractor will lose entitlements to additional cost which results from delays which under the terms of the contract are at the risk of the employer? Yes, for example according to FIDIC: Sub- Clause 20 (1) - if the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. The Contractor shall submit any notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance. Yes, for example according to the NEC 3rd Edition: If the contractor fails to serve on the Project Manager a written notice within 8 weeks of becoming aware of an event he considers is a compensation event then he is not entitled to a change in the Price for the works. Yes, for example, according to ICE 6th and 7th Editions: A notice must be sent within 28 days of the event giving rise to the claim. Contemporary records must be kept by the contractor in order to support the claim.

B.8

What is constructive acceleration? It is a term used when the Employer denies the Contractor an extension of time and the Contractor accelerates the resources to meet the contractual completion date. The situation is characterized by the Architect/Engineers mistaken belief that no extension of time is due and the Employer pressing the contractor to complete by the fixed date for completion. The problem faced by the contractor is that in the absence of an extension of time he may be faced with the possibility of liquidation damages being levied against him.

B.9 Is the Contractor entitled to claim interest and if not what is an alternative approach? Generally, under the common law there is no basic right for interest for a late payment of a debt unless the contract specifically provides for it. The Courts do not recognize interest as a claimable head of damages Despite all these: There may be a right for interest under Governing Law - UK Later Payment of Debts; There may be a right of interest in the contract, but will need to have commenced an action.

B.10

What is the difference between liquidated damages, abatement, set off and

contra-charges?

Liquidated damages are: damages agreed in the contract as compensation for: Late performance; Failure to achieve a guarantee figure. A common law court will not adjust liquidated damages; a civil court may adjust them. Abatement: a decrease in the payment to creditors or legatees when the assets of the debtor or estate are insufficient to meet all payments in full. Set off: a demand which a defendant makes against the plaintiff in the suit for the purpose of liquidating the whole or a part of his claim. Contra-charges: effectively a back-charge. A term often used in Construction that refers to offsetting a particular element of works to another contractor. I.e. A main contractor will contra charge a sub-contractor if they had to incur additional costs for fixing a fault.