The document provides an overview of commercial management best practices for construction contracts. It discusses when commercial managers should be appointed and their key responsibilities, such as managing contract terms and conditions, mapping out notification dates, and ensuring procedures are followed correctly. It also summarizes two recent court cases related to payment disputes, where the courts emphasized strict adherence to contractual payment processes and timelines.
Panel discussion on Statutory or Contractual ADR?
Some insights about the development of Security of Payment Legislation in Hong Kong and recent proposal of implementing SOPL Spirit in the public works sector.
Clause 14.1 The Contract Price- Understanding Clauses in FIDIC ‘Conditions of...Divyanshu Dayal
•Contract Price is an agreed amount or lump sum amount for the design, execution and completion of the works, remedying of defects and adjustments.
•The Contract Price is inclusive of all taxes, duties and fees and adjusted as per changes in legislation.
•The Contract Price is linked with variation, legislation, access to site, delay damages, provisional sum, costs, unforeseeable difficulties, employer’s risk etc.
Managing the Construction Lien Process: A Primer on the Lien Act and Recurrin...Bodman PLC
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An overview of the Michigan Construction Lien Act and how construction liens work. Modern construction lien statutes provide procedures that allow builders who make property improvements on credit to have assurance (or security) of payment, while property owners protect themselves against double-payment. Knowing and following the process to preserve and enforce lien rights will provide real estate improvers security for the debt owed, bargaining leverage, and a way to seek payment from the owner or interested party.
Matthew T. Jane is a member in Bodman's Ann Arbor office, focusing in construction law, contracts, and general business litigation, including contract development and negotiation, construction liens, construction defect and delay claims design errors and omissions, insurance matters, and disputes under the Uniform Commercial Code. He is active in local construction industry & bar associations and was recently listed as a 2015 Michigan Super Lawyer for Construction Litigation.
Matthew R. Rechtien is a member in Bodman's Ann Arbor office, focusing his practice in construction law as well as commercial & insurance litigation. He is a licensed professional engineer, and prior to law school, Matt worked as a consulting structural engineer in Texas, designing structures for buildings & stadiums. He is listed as a "Rising Star" in Construction Litigation in the 2015 edition of Michigan Super Lawyers.
Bodman's Construction practice group represents owners, developers, architects, engineers, general contracts, construction manager, and specialty and other subcontractors both public and private projects. We have extensive experience representing clients in various phases of the construction project process, including the acquisition & development of real estate; project bonding & financing; contract negotiation; risk management; employment issues; zoning & land use; intellectual property matters; and claim avoidance, litigation & alternative dispute resolution (ADR). For more information, please visit http://www.bodmanlaw.com
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March 2018 newsletter for the adjudicator nominating body UK Adjudicators. Articles on UK and foreign adjudication cases, FIDIC 2017 and events taking place globally.
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Original air dates:
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The FASB's new standard on revenue recognition will impact most companies and their internal accounting practices. Are you ready? This new standard for revenue recognition does away with industry guidance in favor of a single contract based model. This will result in significant changes in internal accounting practices for virtually all industries. During this webinar, experts from CBIZ and Mayer Hoffman McCann will discuss requirements of the new standard; the implications of the standard to your business; and timing of the implementation.
Case Laws on Construction and Works contractsandesh mundra
A compilation of various Judgments of Service Tax and VAT on relevant issues in works contract and construction sector is made. Stands of High court is highlighted on complex issues arising in Constructions and taxation of works contract. A brief description of matter, appellant and petitioner's contemplation and order passed by authorities is also included to add more value.
Panel discussion on Statutory or Contractual ADR?
Some insights about the development of Security of Payment Legislation in Hong Kong and recent proposal of implementing SOPL Spirit in the public works sector.
Clause 14.1 The Contract Price- Understanding Clauses in FIDIC ‘Conditions of...Divyanshu Dayal
•Contract Price is an agreed amount or lump sum amount for the design, execution and completion of the works, remedying of defects and adjustments.
•The Contract Price is inclusive of all taxes, duties and fees and adjusted as per changes in legislation.
•The Contract Price is linked with variation, legislation, access to site, delay damages, provisional sum, costs, unforeseeable difficulties, employer’s risk etc.
Managing the Construction Lien Process: A Primer on the Lien Act and Recurrin...Bodman PLC
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An overview of the Michigan Construction Lien Act and how construction liens work. Modern construction lien statutes provide procedures that allow builders who make property improvements on credit to have assurance (or security) of payment, while property owners protect themselves against double-payment. Knowing and following the process to preserve and enforce lien rights will provide real estate improvers security for the debt owed, bargaining leverage, and a way to seek payment from the owner or interested party.
Matthew T. Jane is a member in Bodman's Ann Arbor office, focusing in construction law, contracts, and general business litigation, including contract development and negotiation, construction liens, construction defect and delay claims design errors and omissions, insurance matters, and disputes under the Uniform Commercial Code. He is active in local construction industry & bar associations and was recently listed as a 2015 Michigan Super Lawyer for Construction Litigation.
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Time Bars and their enforceability in English law EPC contractsEversheds Sutherland
The use of time bar clauses in standard form EPC contracts is common. How effective a tool are such clauses for managing contractors’ claims for extensions of time and additional payment, and what challenges will there be in enforcing a time bar clause?
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Original air dates:
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The FASB's new standard on revenue recognition will impact most companies and their internal accounting practices. Are you ready? This new standard for revenue recognition does away with industry guidance in favor of a single contract based model. This will result in significant changes in internal accounting practices for virtually all industries. During this webinar, experts from CBIZ and Mayer Hoffman McCann will discuss requirements of the new standard; the implications of the standard to your business; and timing of the implementation.
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This presentation includes:
1. What is tender and types of tender?
2. What is contract and types of contracts?
3. Process of inviting tender and awarding contract.
4. Important definitions:- EMD, SD, Bill of quantities, Quotation, etc.
UK Adjudicators are an Adjudicator Nominating Body (ANB) for the United Kingdom and International construction and engineering industries.
www.ukadjudicators.co.uk
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1. NEWSLETTER PRIORY CONTRACT LAW LTD Issue 2
Construction
Law
Update
QUARTER 2
2015
IN THIS ISSUE
COMMERCIAL MANAGEMENT
The Start. When should a Commercial
Manager be appointed? To put it bluntly as
soon as possible. They should be involved in
the tender or at least have an understanding
of what has been tendered, the intended
margin for the project, how it has been
tendered and the risks being assumed by the
parties. They need to understand the form of
contract that the project is being procured
under and the terms and conditions
contained therein. They should be allowed to
discuss and negotiate some of those terms
and conditions, what damages apply, any
agreements made before contract
commencement and the limitations of entire
agreement clauses. On Utilities contracts an
understanding of the law appertaining to
Public Procurement, both EU Directives and
the UK Public Procurement Regulations
would be invaluable.
Managing. Once the contract commences
then the Commercial Manager should be able
to manage the contract. This means that
when the contract requires a condition
precedent to commence an action that this is
complied with, a good example is the FIDIC
time bar clause (20.1) and notification or the
NEC III clause 60.3 where it states, “If the
Contractor does not notify a compensation
event within eight weeks of becoming aware
of the event, he is not entitled to a change in
the Prices, the Completion Date or a Key
Date unless the Project Manager should have
notified the event to the Contractor but did
not”.
They should map out the key notification dates
and application submission dates, but most
importantly, they should do exactly what the
contract says. Too many times the parties set off
in commercial bliss where the submission of
notifications and applications are not as per the
contract, the parties fall out later down the road
and end up in dispute.
A good example of this was where a contractor
failed to submit notification as per FIDIC clause
20.1, the employer just accepted this and the
parties continued on their merry way. Near
completion the Employer declared that a large
amount of outstanding money was not due
because of a breach of clause 20.1 and therefore
they were not entitled to recover entitlement
under clause 20.5.
The contractor argued that the Early Warnings
submitted constituted notification, more by luck
than judgement the early warning was followed
by a letter which gave very sparse details on the
events and circumstances giving rise to the claim,
this was successfully argued as the required
notification.
Commercial Contracts – Acuity
After predominantly handling disputes that arise due to
the failure of one or more of the parties to follow the
terms and condition laid down in the contract, from
inception to completion, we have decided to review the
basics.
Case Law Reports
A number of disputes about payment have
ended up in the Technology and Construction
Court in recent months, as such this newsletter
concentrates on those cases.
COMMERCIAL AND CASES LAW UPDATE.
By Colin Tomlinson
2. CONSTRUCTION LAW UPDATE | Issue 2 2
Once the procedures are in place, the
Commercial Manager is then reliant on the
surveyors to report the figures on how the project
is doing, their responsibility is reporting of the
figures, not for the management of the project,
or should not be. The construction works lies
outside the duties of the Commercial Manager,
there is some direct input with procurement and
subcontractor payment with the surveyor
checking that the application from the
subcontractor are correct and that the work
invoiced for has been completed but the direct
responsibility for the Project margin lies with the
project manager.
How the work is reported lies with Project Control
and it is now not unusual to see the Earned Value
Analysis method being used, this gives accurate
reporting of the work complete and the project
expenditure and any cost variance that has
occurred.
The finishing role of the Commercial Manager is
the final account and any dispute that may have
occurred. If the commercial manager has
managed the commercial aspects of the project
correctly then the approval of the submitted final
account should be completed with relative ease.
As is usually the case this is not so, and disputes
arise about an assortment of items on very minor
particulars. This is where a good Commercial
Manager will have kept meticulous records and
correspondence detailing any variations, notices
or warnings. One important note to consider is
that when you start the project, do so as if it will
go to Adjudication, keep your correspondence
polite, correct and detailed, do not as in so many
cases be pedantic, rude or insult the employer’s
representative, you can imagine the inference the
Adjudicator will infer from the commercial
representative of a company telling the
employers representative exactly what they think
of them.
CASE LAW
Caledonian Modular Ltd v Mar City
Developments Ltd [2015] EWHC 1855
(TCC).
In Caledonian Modular v Mar City Developments
Mr Justice Coulson declined to enforce an
Adjudicator's decision where the employer had
failed to serve the requisite payment notices but
where the contractor's application for payment
was found to be invalid. In this case the
contractor had submitted 15 applications, one at
the end of each month, during the project. Upon
submission of the 15th application a payless
notice was issued by the employer, as a
consequence very little was paid in response to it.
In the interim, the parties commenced final
account negotiations. Approximately a week
after the valid payless notice was served, the
contractor submitted further payment
substantiation and requested that the payless
notice be revised. When the employer queried
the status of the submitted documents, the
contractor confirmed they were "an update of the
account" the employer did not issue a further
payless notice. Consequently the contractor
initiated an adjudication asserting that the
documents constituted a 16th application for
payment which was due in full as no payless
notice had been served.
The Adjudicator decided for the contractor, on
the basis that the further documents were an
"early" 16th application, as a consequence the
employer had to pay GBP 1.5 million to the
contractor. The employer refused to pay and
the case came before Mr Justice Coulson for
enforcement, he had "no hesitation" in
rejecting the claim. He noted that the
Adjudicator had not considered the merits of
the contractor's claim, and that one of the
"baleful effects" of the amendments to the
HGCRA had been to increase the number of
claims from contractors relying on an
automatic right to payment where the
employer had failed to serve notices on time.
Mr Justice Coulson commented that if
contractors wished to benefit from the
provisions they needed to submit applications
with "proper clarity".
This decision provides some comfort to
employers that contractors will not be able to
engineer what Mr Justice Coulson described as
a "wholly undeserved windfall" in this way, and
also reminds contractors of the importance of
submitting payment applications in a clear and
straightforward fashion.
Henia Investments Inc v Beck Interiors
Ltd [2015] EWHC 2433 (TCC).
The commercial administration of a
Construction Contract can be quite difficult, the
contractual procedures are not always
straightforward, mistakes occur and, when
relationships break down, and parties often use
errors by the other side to get an "easy win".
Background
Henia Investments Inc ("Henia") appointed
Beck Interiors Ltd ("Beck") to carry out
construction and fitting out works under the
JCT Standard Building Contract without
Quantities 2011.
The payment process under the contract was:
Not later than seven days before the due
date, Beck could issue an Interim Application
setting out the sum it considered would
become due on the due date
The due date was the 29th of each month
FAST FACTS
Adjudicators Fees
For general information the
following are the last five
Adjudicators rates by nominating
body, primary profession and
hourly fee that PCL have managed
in 2015:
Tecbar Barrister - £230 hr
CIC Barrister - £275 hr
RICS QS - £210 hr
CIC Civil Eng. - £200 hr
CIC Solicitor - £250 hr
3. CONSTRUCTION LAW UPDATE | Issue 2 3
Interim Certificates were issued by the
Contract Administrator not later than five
days after the due date. These set out the
sum the Contract Administrator considered
was due on the due date
The final date for payment was 28 days from
the due date. Henia had to pay the sum set
out in the Interim Certificate before this date.
If there was no a valid Interim Certificate,
then Henia instead had to pay the sum set
out in the Interim Application
If Henia wanted to pay less than the sum in
the Interim Certificate / Interim Application, it
had to issue a Pay Less Notice. This had to be
issued not later than three days before the
final date for payment.
Mr Justice Akenhead noted that the parties
had failed to follow the specific terms of the
contract in regards to payment, again a
commercial necessity to ensuring the parties
do not end up in this situation.
The dispute centred on payment numbers 18
and 19. And the facts are:
Beck issued Interim Application 18 on 28
April 2015 (six days late) and applied for a
net sum of £2,943,098.95 for the period to 30
April 2015
The Contract Administrator issued Interim
Certificate 18 on 6 May 2015 (one day late). It
showed a net sum payable to Beck of
£226,248.95
Beck did not issue an Interim Application 19
The Contract Administrator issued Interim
Certificate 19 on 4 June 2015 at 00:03 hours
(three minutes late). This showed a net sum
payable to Beck of £18,893.53
Henia issued a Pay Less Notice on 17 June
2015 (which was in time). This was based on
Interim Certificate 19 and deductions of
liquidated damages of £373,751.05. It stated
that £0 was due in relation to Interim
Payment 19.
The questions put before Mr. Justice
Akenhead were:
1. Was Beck's Interim Application 18 valid?
and
2. Was Henia's Pay Less Notice valid?
The Judgment
The Interim Application
The Contract allowed Beck to submit an
Interim Application setting out the sum it
considered would become due on each due
date (which was the 29th of each month).
However, Beck's Interim Application 18
indicated the works applied for were "Valued
to 30/04/15".
On this basis, Mr Justice Akenhead held that
Beck's Interim Application was invalid. The
Contract only allowed an application based
on a valuation of the works on either 29 April
or 29 May and as a consequence the
application submitted on the 30 April was not
valid.
Mr Justice Akenhead did not comment on the
timing of Beck's Interim Application which
was six days late, However, the Courts have
clearly shown lately that they will interpret
such provisions resolutely, most recently in
Caledonian Modular Ltd v Mar City
Developments Ltd [2015] EWHC 1855 (TCC)
and Leeds City Council v Waco UK Ltd [2015]
EWHC 1400 (TCC).
The Courts will show exception where there
has been a course of previous dealing
showing that the parties have varied the
provisions, for example by allowing
applications which are three-four days late.
The Pay Less Notice
Mr Justice Akenhead’s decision on Interim
Application 18 meant the dispute over
Henia's Pay Less Notice was no longer
pertinent. The entire contractual mechanism
had broken down, as there was no valid
Interim Application or Interim Certificates no
interim payment was due. Nevertheless, Mr
Justice Akenhead did go on to consider the
parties' arguments in relation to the Pay Less
Notice.
If Interim Application 18 had been valid,
Henia would have been required to pay the
sum in that application (as there were no
valid Interim Certificates), subject to the
effect of Henia's Pay Less Notice.
Beck argued that a Pay Less Notice allowed
Henia to pay less than the sum in the Interim
Certificate only on the basis of cross claims –
setoff. Therefore Beck was entitled to the
difference between the sum in its Interim
Application 18 (£2,943,098.95) and the
liquidated damages claimed by Henia
(£373,751.05).
Henia contended that, as well as including
any cross claims, it was also entitled to put
forward its own valuation of the works in its
Pay Less Notice. In this case, Henia's
valuation was based on the late Interim
Certificate 19 (which valued the work at
£18,893.53). Its claim for liquidated damages
far exceeded this and therefore no sums were
due to Beck.
Mr Justice Akenhead agreed with Henia. He
held that the contract required Henia to serve
a Pay Less Notice if it intended to "pay less
than the sums stated as due". There was
nothing in the wording to suggest this was
limited to cross-claims.
Henia could therefore, as part of a Pay Less
Notice, put forward its own valuation of the
works.
For More Information
Contact:
Enquiries
enquiries@priorycontractlaw.com
0044 8452 60 61 05
or
ctomlinson@priorycontractlaw.com
+44 07539 036 470
http://www.priorycontractlaw.com/