5. SESSION THREE(3)- GCC CONTRACT CASE STUDIES
• DIVIDE PARTICIPANTS INTO GROUPS OF 5 PER GROUP
• GROUP ANALYSIS OF GCC CONTRACT CASE STUDIES
• GROUP PRESENTATION-FORMAT
• Facts
• The relevant contract provision;
• Applicable GCC Clause/Sub-Clause
• Case Discussion
• Conclusion
ZAATHI ENGINEERS & PROJECT MANAGERS
7. CLAIMS
• Claims are based on the Law of Contract or the Law of Tort.
• In this seminar we shall deal mainly with claims under the Law of Contract.
Construction Claims
- a key source of dispute in the construction industry both in
the past, present and the future
ZAATHI ENGINEERS & PROJECT MANAGERS
8. CLAIMS- SOURCE/CAUSE
• Work Variations
• Inclement Weather,
• Unforeseen site conditions
• Scope Change/Additional Works
• Delays; Contractor, Employer, Engineer
• Change of Regulations
• Etc
• The sources and causes of claims are numerous but the legal or contractual-
based claims are few. The law allows claims in only limited circumstances
ZAATHI ENGINEERS & PROJECT MANAGERS
9. CLAIMS- LEGAL/CONTRACTUAL BASIS
• Any claim must;
• have a basis in the contract
• There is no claim, unless the party can point to a clause in the contract which
gives him an entitlement to the claim
• Contractor/Employer carries the burden to prove that the claim has a basis in
the contract
• OR
• In some unusual circumstances a claim outside the contract will be
recognised- Where there is some unjustified enrichment -Common Law
• Claims outside of contract are limited and unreliable
ZAATHI ENGINEERS & PROJECT MANAGERS
10. CLAIMS-JUSTIFICATION
• Not much on its merits(Contract Basis)
• Dwells much on the Supportive Evidence(Records)
• Abrahamson
• “ As a party to a dispute,particularly if there is arbitration,will learn three(3)
lessons(often too late); the importance of records,the importance of records and
the importance of records”
ZAATHI ENGINEERS & PROJECT MANAGERS
11. CLAIMS- WRONG NOTION
• A claim does not simply arise because the work cost more or took longer than
expected.
ZAATHI ENGINEERS & PROJECT MANAGERS
12. 10.1 CONTRACTOR’S CLAIMS-PROCEDURE
• Within 28 days after the event giving rise to the claim contractor deliver written
notice/intention to claim and claim to the employer’s agent.
• Claim Content;
• Particulars of the circumstance,event that caused the claim
• Contractual basis of claim
• Length of the extension of time claim & the basis of calculation
• The amount of money claimed and the basis of calculation(prove).
• Employer’s Agent to give ruling within 28 days.
• The amount or time allowed for shall be included in the next payment
ZAATHI ENGINEERS & PROJECT MANAGERS
13. 10.2 DISSATISFACTION CLAIM
• Contractor to issue a written substantiated dissatisfaction claim within 28 days
to the employer’s agent.
• Employer’s Agent to give a ruling within 28 days.
ZAATHI ENGINEERS & PROJECT MANAGERS
14. CLAIMS- 3 CATEGORIES
•Claims can be made pursuant to:
•Provisions of a contract
•Claims for additional time or money
•Non-performance of Contract
•Breach of Duty
ZAATHI ENGINEERS & PROJECT MANAGERS
15. 1. CLAIMS-PROVISIONS OF A CONTRACT
-CLAIMS FOR ADDITIONAL TIME OR MONEY
ZAATHI ENGINEERS & PROJECT MANAGERS
17. 5.12 TIME EXTENSION CLAIMS-IMPORTANCE
• Clauses to protect the interests of the employers
• Importance
• If there is no extension of time clause, the employer may loose the right to claim penalties for late
completion i.e. If the employer causes delays and breaches the contract there will be no contractual
completion date. The contractor will be obliged only to complete “within reasonable time”
• Where there is an extension provision, the employer’s breach will not result in time becoming at
large and will not deny the employer the right to claim penalties.
• Rather the contractual date remains, as does the right to penalties, but the contractor may apply to
extend the completion date.
• An extension of time clause is essential in every construction contract. In the absence of an
appropriately worded power to grant extension of time, a provision for payment of penalties will
fail if completion is delayed by acts such as variations and other acts and risks of the employer.
• The provisions for time extension and penalties are closely linked and must be administered in
conjunction with the provisions on the Works Program.
• Extensions of time given under the contract for the relevant time of completion will extend the date
of completion and also the date from which penalties will be calculated.ZAATHI ENGINEERS & PROJECT MANAGERS
18. 5.12 TIME EXTENSION CLAIMS-OBSTACLES
• The erroneous assumption that an extension of time is automatically linked to
additional payment
• Late, insufficient or total lack of notice on the part of the contractor
• Failure to recognise delays at the appropriate time and maintain contemporary records.
• Failure to regularly update the program so that the effects of the delay can be
monitored against a meaningful “program of the day”.
• Poor presentation of the claim to show how the progress of the work has been delayed.
• Insistence on the part of the employer’s agent, that unreasonably detailed critical path
programs are essential in order to assess the effects of the delay.
• The probability that the cause of the delay will reflect on the performance or lack of
performance on the part of the employer’s agent.
• Pressure, on the part of the employer, to complete on time, irrespective of delays which
occur. ZAATHI ENGINEERS & PROJECT MANAGERS
19. 5.12 TIME EXTENSION CLAIMS-ITEMS TO BE INCLUDED
• Cause of the delay and the contractual provision relied upon for the extension claim
• Date of commencement of the delay and the period of the delay(giving details of
intermittent effects if appropriate)
• Date of notice of delay, specify the reference of the relevant document
• Summary of records & particulars relied upon.
• A narrative of events and effects on progress.
• Status of the programme(RevA),progress and current completion date prior to the
commencement of the delay.(A diagrammatical Illustration)
• Effects of the delay on the progress and completion date(Including subsequent delays
which may have reduced the float in the programme)(A diagrammatical illustration)
• A statement requesting an extension of time for the delay to completion for the period
shown on the diagrammatic illustration.
ZAATHI ENGINEERS & PROJECT MANAGERS
20. 5.12 TIME EXTENSION CLAIMS-CAUSES
• 2.2 Adverse Physical Condition & Artificial Obstructions
• 4.7 Delays-Archeaological Discoveries
• 4.8 Facilities/Services for others
• 5.4.3 Delays-Possession of site
• 5.9.6 Delays-Instructions & Drawings
• 5.10 Delays attributable to Employer
• 5.11 Work Suspension or stoppage by Employer’s Agent
• 5.12.1.1 Additional Work
• 5.12.2.2 Inclement Weather
• 5.12.2.4 Work Disruption beyond Contractor’s control
• 6.3 Variation Orders
• 7.5 Delays-Work Examinations
• 7.5.5 Additional Testing
• 8.2.2 Damage Repairs to excepted risks
• 8.3.2 Excepted Risks ZAATHI ENGINEERS & PROJECT MANAGERS
21. CASE STUDY-WORK DISRUPTION CLAIMS
• You are the building surveyor for a construction company that is executing a
pipeline. During the constructing of the said line you encountered an
underground river, which was nowhere mentioned in the contract
documentation. This necessitated the use of a special, but time consuming,
method to lay the pipes. This engineer is prepared to pay for the re-measured
work, but refuse to allow extension of time.
• What argument(s) will you use to convince him of the validity of your claim?
ZAATHI ENGINEERS & PROJECT MANAGERS
22. CONCURRENT DELAYS-(EMPLOYER/CONTRACTOR)
• If 2 events occur concurrently leading to delays one caused by the employer and
the other the contractor. Eg. Late and uncoordinated information from the design
team.
• Solution;
• Both parties deliver expert’s reports on the delay issues.
• Analysis of the cause/effect of the delays
• Delays on the critical path/beyond the float on a non-critical path
• Contractor is entitled to extension of time to practical completion irrespective of
his own delay responsibility( Henry Boot Vs Malmaison Hotel-English Case)
OR
• Delay apportioned between the parties and contractor gets extension of time for
a portion of the employer’s delay( City Inn Vs Shepherd Construction-Scottish
Case) ZAATHI ENGINEERS & PROJECT MANAGERS
23. CASE STUDY- TIME EXTENSION CLAIMS
• EXTENSION GRANTED RETROSPECTIVELY
• The completion date provided in the contract is 7 September 2005.
• The contracts provides that, in the event of a delay caused by circumstances beyond the
contractor’s control, the contractor shall be entitled to claim an extension to the time
for completion. The contracts further provides that the employer’s agent shall decide a
claim for an extension of time within five working days of the application for an
extension.
• The contract also provides for penalties in the amount of R2 000.00. per day after the
date in the contract that the works remains unfinished.
• The contractor is delayed due to the failure of the employer to give timeous access to
the site.
• On 15 June 2005 the contractor claims a three week extension of time which would
take the completion date to 28 September 2005.
• The contractor hears nothing about his claim from the agent and therefore rushes to
complete on time.
ZAATHI ENGINEERS & PROJECT MANAGERS
24. CASE STUDY- TIME EXTENSION CLAIMS
• The works are finally completed on 21 September 2005.
• The employer claims two weeks’ penalties.
• The contractor responds by arguing that he is entitled to three weeks’ extension.
• The employer then argues that the contractor cannot possible be entitled to three
weeks’ extension since he only finished two weeks late. Furthermore, argues the
employer, it is now too late for an extension of time to be granted.
• The contractor’s response to this is to argue that, if it too late for an extension then
time has become at large due to the employer’s breach, there is no date for completion
and there is certainly no right to penalties.
• Does the agent still have the authority to grant an extension?
• If not, has time became at large?
• If so, how long an extension will the contractor get?
• Is the contractor entitled to claim the cost of his acceleration to complete two rather
than three weeks late?
ZAATHI ENGINEERS & PROJECT MANAGERS
26. ADDITIONAL PAYMENT CLAIMS
• Most construction contracts place the onus on the contractor to warn the
employer of any increases in cost
• This is usually done through the claims clause which stipulate the type of
information and when it should be delivered by the contractor. If the contractor
does not comply with this contractual obligation he will,under most construction
contracts,lose any right to claim additional money or payment
• If the contract is silent on any claims for additional money which is most unusual
today,then the common law probably will imply a duty to advise the employer of
any increases in cost,unless such increases were very small.
ZAATHI ENGINEERS & PROJECT MANAGERS
27. ADDITIONAL PAYMENT CLAIMS
-ITEMS TO BE INCLUDED
• Contractor’s claim will stand or fall based on the quality and extent of
information that he can provide to substantiate his claim.
• Reg Thomas(Construction Contract Claims)
• The ff. details needs to be included in addition to the details provided in the
extension of time claim;
• Details of the effects of any delay or disruption on all activities in parallel and subsequent
to the circumstances giving rise to the claim.
• An introduction to the claim siting the contractual provisions under which the claim is
made.
• Summary of notices and particulars given during the contract.
• Diagrammatic illustrations where appropriate
• References to recognised authorities and case law relied upon
• Additional or alternative claims under the general law.(if applicable)
• A statement setting out the amount of the claim
ZAATHI ENGINEERS & PROJECT MANAGERS
28. CASE STUDY-CLAIMS FOR ADDITIONAL PAYMENT
New Zealand case of J. and J.C. Abrahams v Ancliffe (1938) 2 NZLR 420.
While this case arose some time ago, the principals remain relevant.
• The employer wished to have two residential buildings constructed. He entered into discussions with the contractor, giving a
description of the work to be done.
• The contractor quoted the employer a price, the agent issued specifications and work commenced.
• It soon became clear that the specifications issued by the agent were far more complicated than had initially been discussed
between the contractor and the employer. There were also problems in the foundations which called for extra work.
• The employer wrote to the contractor on a number of occasions and requested a new quote for the more complicated
specifications. The contractor did not reply. There is no doubt that the contractor received and read these requests for further
quote.
• When it came to settle the account the contractor claimed an amount far in excess of the original price quoted. The employer
argued that this increased amount was far too high and did not represent the true value of the more complicated contract. He
further argued that, anyway, the contractor had lost any right to claim additional money because he had failed to provide an
updated quote, notwithstanding repeated requests to do so.
• The contractor argued that he was under no duty to warn the employer of the increased cost and that he did the work in good
faith and to the specification presented to him.
• Is the contract bound by his original quote or is he entitled to claim additional money for the more complex work?
• If the contractor is entitled to claim additional money, how will the amount be calculated?
• In the absence of the quote, could the employer have refused to go on with the work and cancelled the contract?
ZAATHI ENGINEERS & PROJECT MANAGERS
29. ADDITIONAL PAYMENT CLAIMS-CAUSES
• 2.2 Adverse Physical Condition & Artificial Obstructions
• 2.4 Contract Document-Ambiguities & Discrepancies
• 4.2.2 Site Instruction Delays
• 4.7 Delays-Archeaological Discoveries
• 4.8 Facilities/Services for others
• 5.4.3 Delays-Possession of site
• 5.9.6 Delays-Instructions & Drawings
• 5.10 Delays attributable to Employer
• 5.11 Work Suspension or stoppage by Employer’s Agent
• 6.3 Variation Orders
• 7.5 Delays-Work Examinations
• 7.5.5 Additional Testing
• 8.2.2 Damage Repairs to excepted risks
• 9.1.4 Excepted Risks
ZAATHI ENGINEERS & PROJECT MANAGERS
30. CASE STUDY- ADVERSE PHYSICAL CONDITION CLAIMS
• The Site Agent on a Civil Engineering Contract subjected to the GCC 2015 puts in
a claim for extra time and cost as a result of a recent flooding. He based the claim
on Clause2.2.1 of G.C.C. and says that the flood was an unfavourable physical
condition that an experienced Contractor could not have been expected to
foresee. The Engineering representative rejected the claim because he says that
the flood was certainly a condition caused by weather.
• Discuss.
ZAATHI ENGINEERS & PROJECT MANAGERS
31. CASE STUDY-ARTIFICIAL WORK OBSTRUCTION CLAIMS
• You have accepted a position as Construction Surveyors Technician at Civil
Engineers Incorporated. A contractor submitted a claim against your client
because overhead cables prevented him from using a crane on site. Will you
allow the claim? Motivate your answer.
ZAATHI ENGINEERS & PROJECT MANAGERS
32. CASE STUDY –EXTENSION OF TIME & ACCELERATION
• The works to be completed the demolition of structures on site and the clearing of the site.
• The employer is very concerned that the works should be completed timeously so that the rest of the project, which is to
follow from this demolition, is not delayed.
• Early on in the works it becomes clear that the contractor will not complete on time. The delays are due to the employer failing
to give proper access, as required under the contract.
• The employer’s agent approached the contractor and asks if he is prepared to accelerate work so as to complete on time. The
contractor agrees to do so and a rate for this acceleration is agreed.
• An addendum is added to the contract which provides as follows:
• “The contractor undertakes to accelerate work in order to achieve completion on the contractual completion date. The
employer agrees to pay an additional Rx.00 in return for the undertaking to complete by the contractual completion date. The
provisions for the contract shall apply mutatis mutandis to this addendum.”
• The main contract provides for an extension of time where the contractor is delayed by weather conditions.
• The contractor brings additional labour and machinery onto the site and work progress very quickly until freak weather
conditions occur and there is out of season rain and storms, during which time the contractor is unable to work. This delays
the works by one week, for which the contractor claims an extension.
• The agent argues that the contractor is not entitled to an extension since he agreed, in the acceleration agreement, to
complete by the contractual date. Any costs are for the contractor, since he agreed to complete on the contractual date. The
agent further argues that the employer is now entitled to deduct penalties.
• Is the contractor entitled to an extension?
• Would your answer be different if the delay was not caused by weather conditions but rather by some default of the agent?
• Is the contractor entitled to payment of the acceleration premium?
ZAATHI ENGINEERS & PROJECT MANAGERS
33. CASE STUDY- EXTENSION OF TIME & WORK ACCELERATION
• Early in the process of the works it becomes clear that contractor falling behind his programme and that he will
not complete the works in time.
• The contractor claims an extension of time, citing weather conditions and delays by the agent in issuing drawings.
• The contract allows the agent twenty- one working days to evaluate the claim.
• In the interim, pressure is put on the contractor to speed up the work so that the work is still completed on the
contractual completion date. On the third day of the twenty-one of the agent and the contractor’s representative
hold a meeting, at which the agent says as follows:
• “You should not count on getting the extension. If I were you I would think about penalties and hurry up the
completion of time.”
• The contractor’s representative asks the agent if he would like to negotiate an acceleration fee but the agent says:
• “There is no need for us to negotiate anything for the sort right now. Just remember that penalty provision.”
• The contractor comes to you for advice. He believes that his extension claim is a strong one. He tells you that the
cost of acceleration would be great, particularly since he would have to hire additional plant and man power. He is
not sure whether he would wait out the twenty-one days or whether he should accelerate. If he does wait out the
twenty-one days it will be too late to take the decision to accelerate.
• Advice the contractor.
ZAATHI ENGINEERS & PROJECT MANAGERS
34. CASE STUDY -WORK VARIATION CLAIMS
Australian case of Wegan Construction Pty Ltd v Wodonga Sewerage Authority.
• The work to be done in the construction of sewerage pipes to connect forty-
seven houses to the sewerage works.
• During the course of the work a variation was issued which increased the number
of houses to be linked from forty-seven to ninety-one. The new plan involved an
increase of excavation of 20%, an increase in sewer length from 85m to 1200m,
an increase in manhole numbers form nineteen to twenty-seven. The changes
required an additional 160m of excavation below 4m deep and required a 90%
increase in concrete.
• The contractor argued that this variation fell outside the scope of the contract
and that he was therefore entitled to payment outside of the rate in the contract.
• The employer argues that the variation fell within the scope of the contract and
that payment was therefore to be calculated on the rates in the contract.ZAATHI ENGINEERS & PROJECT MANAGERS
35. CASE STUDY -WORK VARIATION CLAIMS
• Are the rates in the contract to be used in valuing the additional work or is the
contractor entitled to payment on some other basis?
• If some other basis for valuing the work is to be used, what would that basis be
and how would you evaluate the work under it?
• Would your answer be different if the last two clause provided here were not
included in the contract?
• If so, how?
ZAATHI ENGINEERS & PROJECT MANAGERS
36. CASE STUDY-WORK VARIATION CLAIMS
- WORK QUANTITY UNDER-ESTIMATION
•
After award of a contract it is discovered that quantity of rock was underestimated by more
than 600%, apparently contractor had priced very low on the rock bcoz he thought the quantity
was low. In this case, is the contractor entitled to revise the rates? Please bear in mind that the
low prices made him competitive at tender stage and revising the rates would prejudice other
tenderers. How would you then handle this case?
Quantities in the bill are estimates and only gives us a rough idea of the scope and are re-
measurable and adjustable upon execution unless it is a fixed price contract. So over or
under-estimations due to errors in calculations are compensated for by the contingency.
However if the under-estimation is overwhelming beyond what the contingency can absorb
then the Engineer has to apply for VO at agreed rates.
• Increase in quantity of rock does not change the scope of work in contract. It will be treated
as a normal item if Contingencies are enough to accommodate the increase otherwise
Engineer has to apply for VO at agreed rates.
ZAATHI ENGINEERS & PROJECT MANAGERS
37. CASE STUDY-WORK VARIATIONS CLAIMS
• HENRY BOOT CONSTRUCTION LTD V ALSTOM COMBINED CYLES LTD, COURT OF APPEAL (JUDGMENT DELIVERED 4 APRIL
2000)
• The works to be completed was a new power station.
• Alstom engaged Henry Boot to complete the civil engineering work.
• The work included the provision of certain sheet piling in the Turbine Hall and a price was provided for this sheet piling in the
Bill of Quantities.
• The work was (validly) varied so that Henry Boot would also provide sheet pilling in the cooling towers and other areas of the
work.
• When the additional work was valued it became clear that Henry Boot had made an error (in its favour) in the calculation of
the figure for the sheet piling in the Turbing Hall. If this rate were to be applied to the new work it would result in the large
windfall gain for Henry Boot.
• The valuation of the sheet pricing in these new areas became the subject of dispute.
• The contract provided that any variation in the works is to be priced using the rates and prices set out in the Bill of Quantities,
unless the differences in the work carried out are so great as to render it unreasonable to base the valuation on those rates. If
it is unreasonable to base the valuation on the rates then a “fair and reasonable” valuation shall be applied.
• Henry Boot argue that its mistake was of no relevance and that it was entitled to the rate as provided in the Bill of Quantities
for the sheet piling in the Turbine Hall.
• Alston argued that a fair and reasonable rate should be used and that this rate would take into account the mistake and would
not be based on the rate in the Bill of Quantities.
• Which rate should be used to value the variation?
ZAATHI ENGINEERS & PROJECT MANAGERS
38. CASE STUDY-WORKS VARIATION CLAIMS
• The engineer on a roads construction project issues a variation on a piece of
paper due to the fact that the official book for these variation is unavailable. He
places the piece of paper on which the instruction is written on the corner of the
contractor’s desk and asks the contractor’s tea maker to show the contractor,
who is on the other side of this very large site, the variation. A strong wind blows
the instruction from the desk and tea maker disposes of it together with other
rubbish. He also forgets to inform the contractor of the engineer’s visit. The
engineer arrives two weeks later on site and find that the variation is still not
executed. He issues the variation again by writing it into the proper book. The
contractor however, in the meantime, has executed work, which because of the
variation, is superfluous. The engineer refuses to pay for this said superfluous
work.
• Will the contractor be entitled to payment for this said work or will he not be
entitled to payment? MotivateZAATHI ENGINEERS & PROJECT MANAGERS
39. 6.10 MONTHLY PAYMENT CLAIMS
• A payment certificate is drawn up by the Engineer based on a statement received
from the Contractor of all the amounts he believes to be due to him.
• The payment certificate should include:
• estimated value of the permanent works to the date of the Contractor's statement, based
on agreed measurements of work done multiplied by the appropriate rates from the Bill of
Quantities
• an estimate of the value of the temporary works and any other special items provided in
the Bill of Quantities
• other amounts that the Contractor has asked for and are due to him
• contract price adjustments (clause 6.8) due to escalation, variations in the cost of special
materials or due to changes in legislation
• materials on site, valued at invoiced value times the percentage stated in the Contract Data
(usually 80%), with provisos about ownership and indemnities
• deduction of all previous payments
• deduction of penalties (if any) ZAATHI ENGINEERS & PROJECT MANAGERS
40. 6.10.6 INTEREST ON DELAYED PAYMENTS(CHANGED)
• Contractor charges monthly compound Interest charged on delayed or
overdue payments at the prime overdraft rate of the contractor’s bank.
ZAATHI ENGINEERS & PROJECT MANAGERS
41. 6.10.3 RETENTION CLAIMS
•Retention release
•50% on completion certificate and 50% within 14 days after
the expiry of the defects liability period.
•Retention on termination of contract
•Forfeiture of retention and all other entitlements
•Interest on retention
•Interest can be claimed on retention if a separate escrow
account is opened for retention by client.
ZAATHI ENGINEERS & PROJECT MANAGERS
42. 8.6.1.1 INSURANCE CLAIMS
• Contractor may claim monetary compensation from Insurance
houses/COIDA/DOL for workmen injuries, death, damage of works,
materials and plant.
ZAATHI ENGINEERS & PROJECT MANAGERS
44. 7.8./7.9 REMEDIAL WORK CLAIMS
• 7.8.3 Failure to effects repairs/remedial work during defects liability period
• 7.9.1 Failure to effect urgent remedial work necessary for safety and protection
of works,persons or property.
ZAATHI ENGINEERS & PROJECT MANAGERS
45. CASE STUDY-REMEDIAL WORK CLAIMS
• R J Young v Thames Properties Limited, CA 21 January 1999
• This case arose out of a contract for the re-surfacing of a car park, for which the
contractor was to be paid a lump sum amount.
• The employer argued that the work was defective and that, as a consequence of the
defects, the contractor was not entitled to any payment at all. The defect complained of
was that the base coat of limestone scalpings had been laid to a thickness of 30mm
while the contract called for a depth of 100mm.
• Despite these defects, the car park usable.
• Is the employer entitled to withhold payment on the contract?
• If the contractor is entitled to some payment, how will the value of the payment be
calculated?
ZAATHI ENGINEERS & PROJECT MANAGERS
46. 5.13.1 PENALTIES/LIQUIDATED DAMAGES CLAIMS
• If the contractor fails to complete the works to the extent which entitles him to
receive a certificate of practical completion in terms of clause 5.14.2 by the due
completion date, the contractor shall be liable to the employer for the sum stated
in the contract data as a penalty for every day that elapses between the due
completion date and the actual date of practical completion, including special
non-working days.
ZAATHI ENGINEERS & PROJECT MANAGERS
47. 5.13.2 -PENALTIES WAIVER/REDUCTION
• Waiver/reduction of penalties are based on two things;
• Partial/sectional hand over.
• Occupation and usage by Employer, his agents,employees or other
contractors.
ZAATHI ENGINEERS & PROJECT MANAGERS
48. 5.13.2.1 PENALTIES WAIVER - SECTIONAL COMPLETION/HANDOVER
• “Penalties shall be applied on a pro-rata or proportional basis for each section”
• OR
• “ Penalties shall ONLY be applied for the whole contract”
ZAATHI ENGINEERS & PROJECT MANAGERS
49. 5.13.2.2 PENALTIES WAIVER – EMPLOYER OCCUPATION
• Occupation or usage by employer, his agents, employees or other contractors(not
employed by the contractor)
ZAATHI ENGINEERS & PROJECT MANAGERS
50. CASE STUDY-PENALTY CLAIMS
• DELAYS CAUSED BY THE EMPLOYER AFTER THE CONTRACTUAL COMPLETION DATE HAS
PASSED
• The contractual completion date is 16 October 2005.
• The contractor experiences labour problems which result in a two weeks delay (which would
take the completion date to 30 October 2005).
• On 23 October 2005 the employer’s agent fails to deliver drawings, so delaying the works by an
additional two weeks, taking the completion date to 7 November 2005.
• The employer claims penalties form 16 October 2005 until the 7 November 2005.
• The contractor counter-claims with an extension of time claim, arguing that he is entitled to a
week’s extension and that the employer is not entitled to any penalties at all since his agent
culpably caused a delay.
• Is the employer entitled to claim penalties?
• If so, for which period(s)?
• Is the contractor entitled to an extension of time claim?
• If so, for how long?
ZAATHI ENGINEERS & PROJECT MANAGERS
51. CASE STUDY-PENALTY CLAIMS
English case of Temloc Ltd v Erril Properties Ltd (1987) 39 BLR 30
• The works to be completed is a hotel which the employer wishes to have completed in
time for the high tourist season.
• The contractor experiences labour shortage and, as a result, completes the work some
four weeks later.
• The employer’s agent now wished to look for penalties and pulls out the contract. He
finds that the contract has the following provisions:
• “Penalties: The contractor shall pay the following rate per day for every day after the
completion date that he fails to finish: Rnil.”
• The contractor argues that he is not liable for any damages or loss at all for the late
completion.
• The employer argues that he is entitled to claim damages for late completion.
• Is the employer entitled to claim damages for late completion?
• Note: in addressing this case study please consider the Conventional Penalties Act
ZAATHI ENGINEERS & PROJECT MANAGERS
52. CASE STUDY-TIME EXT CLAIM & PENALTIES EMPLOYER DELAYS
• DELAYS CAUSED BY THE EMPLOYER AFTER THE CONTRACTUAL COMPLETION DATE HAS
PASSED
• The contractual completion date is 16 October 2005.
• The contractor experiences labour problems which result in a two weeks delay (which would
take the completion date to 30 October 2005).
• On 23 October 2005 the employer’s agent fails to deliver drawings, so delaying the works by an
additional two weeks, taking the completion date to 7 November 2005.
• The employer claims penalties form 16 October 2005 until the 7 November 2005.
• The contractor counter-claims with an extension of time claim, arguing that he is entitled to a
week’s extension and that the employer is not entitled to any penalties at all since his agent
culpably caused a delay.
• Is the employer entitled to claim penalties?
• If so, for which period(s)?
• Is the contractor entitled to an extension of time claim?
• If so, for how long? ZAATHI ENGINEERS & PROJECT MANAGERS
53. 6.10.6 SET-OFF OR DEDUCTIONS AGAINST
PAYMENTS(CHANGED)
• Employer deductions or set off against payments in a written notice to
contractor, the reasons for such deductions.
ZAATHI ENGINEERS & PROJECT MANAGERS
54. 2. CLAIMS FOR NON-PERFORMANCE
ZAATHI ENGINEERS & PROJECT MANAGERS
55. 6.2 CLAIMS FOR NON-PERFORMANCE
• Non-performance and failure of its occurrence is the prime reason for the
demand and provision of bonds
• Bidding Stage- Bid Bond
• Before the Contract- Performance Bond or Surety
• These are to ensure that the employer will have ready access to some form of
money relief if the contractor should breach his duty to perform the contract or
in the case of the bidding stage, the contractor should fail to go on and execute a
contract with the employer after his bid is successful.
• Recall of performance surety
• Resort to common law and not contract law and it takes up to 3 years for delivery
by the bank.
ZAATHI ENGINEERS & PROJECT MANAGERS
56. 3. CLAIMS-BREACH OF DUTY
This is usually the breach of duty set out under a contract
or reasonably to be presumed under the contract.
ZAATHI ENGINEERS & PROJECT MANAGERS
57. CLAIMS-BREACH OF DUTY-EMPLOYER’S AGENT(Clause 3)
• The Employer’s Agent(Engineer) is stated in clause 3 to have a duty along with his
authority but the Engineer is not party to the contract and so cannot be sued for
breach of duty under the contract.
• His professional liability in contract will arise from his terms of appointment
which is the contract between him and the employer and which excludes the
contractor. As such the employer will have access to him under the contract but
the contractor will not.
ZAATHI ENGINEERS & PROJECT MANAGERS
58. CLAIMS-BREACH OF DUTY- CONTRACTOR(Clause 4)
• The Contractor’s duty under GCC 2015 is set out in clause 4. He is to execute and
complete the works and remedy any defects therein in accordance to the provisions of
the contract while exercising due care and diligence. He is also to provide all
superintendence, labour, materials, plant, contractor’s equipment as well as take full
responsibility for the adequacy, stability and safety of all site operations and methods of
construction. In situations where he provides design for any part of the contract his
liability is extended to the design.
• It is within the perimeters of these duties that the contractor can be sued for breach of
contract and damages claimed from him apart from any other specific terms of the
contract.
• The contractors duty extends from commencement to the end of the defects liability
period and even beyond that depending on the construction put on clause 5.16.3 .
• This clause states that notwithstanding the issue of the final completion certificate, the
contractor shall remain liable for the fulfilment of any obligation incurred under the
provision of the contract prior to the issue of the final completion certificate which
obligation remains unperformed at the time of the issue of the final completion
certificate.
ZAATHI ENGINEERS & PROJECT MANAGERS
59. EXAMPLE -BREACH OF DUTIES
• Contractor not constructing according to specifications
• Contract suspended or terminated after 14 day notices/warnings are issued.
ZAATHI ENGINEERS & PROJECT MANAGERS
60. CLAIMS-BREACH OF DUTY-EMPLOYER
• The law presumes certain duties for the employer;(Naturalia)
• The duty to pay for work done under the contract
• The duty not to obstruct the performance of the contract
ZAATHI ENGINEERS & PROJECT MANAGERS
61. GLOBAL CLAIMS-COMPOSITE CLAIMS
• Contractors are entitled to present their claim in a global manner or whether
each cause of claim must be separately detailed with its corresponding claim.
• An issue that had arisen in the US,UK and other jurisdictions in recent years.
• Case
• Amelco Vs City of Thousand Oaks Cal 4th 2002 DJDAR 1285(Cal.2002)
• Global claims do not find favour in SA Courts
•JUST AVOID THEM
ZAATHI ENGINEERS & PROJECT MANAGERS
62. CASE STUDY-GLOBAL CLAIMS
United States decision of Amelco v City of Thousand Oaks Cal 4th 2002 DJDAR 1285 (Cal. 2002.)
• In 1992 Amelco contracted to carry out the electrical installation to a new Civic Arts Plaza on
behalf of City for $6 158 378.00. The progress of the works is describe by James E Acret as
follows:
• “It was a familiar story. A city with grandiose plans for a combination city hall performing arts
center put the project out of bid before working drawings had been fully finished and co-
ordinated. The project was under construction according to scheme under which major trades
contracted directly with the city, their activities coordinated by a contraction manager. The city
issued 248 sketches that changed electrical work. Every part of the electrical system was
changed at least once. In one room alone there were 40 changes. Electrical contractor Amelco
was flummoxed. Although 32 negotiated change orders increased the contract price by more
than $ 1 million, Amelco still lost more than $2 million but could not produce evidence to tie the
overruns in labour, equipment and materials to specific changes.”
• Amelco had to use workers with more experience than it had estimated. In addition, the work
was carried out in a disorganised and unco-ordinated manner. Amelco had to increase its
labour force and was often required to delay or accelerate particular tasks and to shift workers
among tasks to accommodate work by other trades. Losses were incurred due to decreased in
productivity and efficiency.
ZAATHI ENGINEERS & PROJECT MANAGERS
63. CASE STUDY-GLOBAL CLAIMS
• Rather than detailing every cause of additional cost separately, Amelco claimed the total/global
cost of the various changes and difficulties.
• The employer argued that Amelco could not simply lump all its claims together in one, as there
was no way for the employer to assess the merits of each individual claim. The employer
further argued that some of the difficulties arose through the contractor’s conduct and that, by
lumping everything in a global claim, the contractor managed to hide his own culpability.
• The contractor accepted that some of the claims may be traced to his own errors but argued
that these could be readily separated from the global claim. He further argued that the
dominant, substantial cause of the delay was the employer’s repeated changes of mind and
disruption of the work.
• Is the contractor entitle to lump his claim together and claim in a global manner?
• Would you answer be different if the employer was not the dominant, substantial cause of
the delay but rather that the contractor and employer were pretty much equal causes of the
delay? Assume that the aspects of the claim occasioned by the contractor can be readily
separated from the aspects of the claim occasioned by the employer.
• Would your answer be different if it was hard to divide the global claim into those aspects
caused by the employer and those aspects caused by the contractor?ZAATHI ENGINEERS & PROJECT MANAGERS
65. 10.3.1.1 CLAIM DISPUTES
• Dispute arises when a written claim and a dissatisfaction claim is presented and
rejected by the employer’s agent.
ZAATHI ENGINEERS & PROJECT MANAGERS
66. 10.3 DISPUTE RESOLUTION
• DISPUTE NOTICE( CLAUSE 10.3)
• The contractual parties issues a dispute notice within 28 days of the event giving rise to the dispute.
Failure of which parties have no right to dispute the matter.
• Contractor respond within 14 days to an amicable settlement of dispute./ADR Process
• MEDIATION/AMICABLE SETTLEMENT(CLAUSE 10.4)
• Within 28 days after the occurrence of the dispute the dispute should be referred to the stipulated
Mediator in the contract.
• All documentary evidence obtained prior to the dispute must be submitted upfront and not later or
during the adjudication. If document is obtained later it can be submitted.
• Work and payments to contractor must still continue on site despite the dispute
• ADJUDICATION (CLAUSE 10.5)
• Unresolved disputes can be referred to arbitration/DAB(Dispute adjudication board)-large/complex
projects-power stations etc.
• ARBITRATION(CLAUSE 10.7)
• Complicated factual/Legal Disputes
• COURT PROCEEDINGS(LITIGATION) (CLAUSE 10.8)
• Court proceedings(Litigation)
• Dispute resolution can go on even after the completion of the contract.ZAATHI ENGINEERS & PROJECT MANAGERS
67. 10.3 DISPUTE RESOLUTION PROCESS
ADJUDICATION- DISPUTE BOARD
ARBITRATION
LITIGATION- COURTS
MEDIATION/AMICABLE SETTLEMENT
ALTERNATIVE DISPUTE
RESOLUTION
(ADR)
EXTRA-JUDICIAL PROCESS
ADR PROCESS STIPULATED IN THE CONTRACT(GCC)
-GENERIC ADR PROCESS- CONTRACT-SPECIFIC
Purely Legal
Disputes
JUDICIAL PROCESS
ZAATHI ENGINEERS & PROJECT MANAGERS
68. ADR PROCESS _UNSUITABLE DISPUTES
•Technical Disputes
•Seeking a technical/expert opinion or decision on an issue
disputed by the contractor
•Contractual ambiguities & Inconsistences
•The Engineer or an Independent Engineer can be appointed
to handle it.
•Undervalued/Over-paid monetary claim disputes
•Disputes over the appointment of the presiding officer by all
the parties
ZAATHI ENGINEERS & PROJECT MANAGERS
69. 10.4 MEDIATION/AMICABLE SETTLEMENT
• An independent mediator(3rd party) chosen privately, voluntarily or via an
agreement by the parties eg. SAICE Lists(President’s List of mediators),Retired
Engineers etc
• Confidential and without prejudice to either party.
• Does not rely on evidence from the parties but attempts to bring them together
for settlement
• Mediator’s opinion is irrelevant to be applied in any further ADR process ie the
process starts all over in the next ADR process.
• Mediation may be avoided if the agreement provides that mediation is only in
the alternative
• Cost of Mediation paid by both parties
ZAATHI ENGINEERS & PROJECT MANAGERS
70. 10.4 MEDIATION/AMICABLE SETTLEMENT
• Common-Law Mediation(Commonly Used)
• Statutory Mediation(Prescribed by an act)
• Court-Based Mediation(New), Similar to Common law mediation. Agreements
made an order of court
Unsuitable for disputes that require/have;
Legal representation/Legal Issues
Viva Voce
Expert Evidence
ZAATHI ENGINEERS & PROJECT MANAGERS
71. 10.5 ADJUDICATION
-DISPUTE BOARDS/DISPUTE ADJUDICATION BOARD/ADJUDICATION BOARD
• Adhoc vs Standing DBs/DABs(FIDIC)
• International trends;
• Specify standing DBs instead of adhoc DBs
• Standing DBs; Dispute Avoidance & Early Adjudication Process
• Time for the appointment of the Standing DB; Within 56 days of
contract commencement
• Adjudication Board Rules(ABR)-Annexure 1-GCC2015
• Decision Implementation; Immediate whether dispute is to be
referred to arbitration or court.
• Disagreement with the DB’s decision
ZAATHI ENGINEERS & PROJECT MANAGERS
72. 10.5 ADJUDICATION
ADJUDICATION BOARD RULES(ABR) -STANDARDISED
• APPOINTMENT & ESTABLISHMENT OF THE DB
• ADHOC & STANDING ADJUDICATION PROCEDURES
• SITE VISITS
• MEETINGS
• DUTIES OF THE DB & THE PARTIES
• PARTIES
• REFERRAL OF A DISPUTE
• CONDUCT OF THE DB & THE PARTIES
• DB DECISIONS
• DB REPRESENTATIVES
• DB CONFIDENTIALITY
• DB MEMBER LIABILITIES
• ADJUDICATION BOARD RULES(ABR)
• Annexure to the GCC 2015ZAATHI ENGINEERS & PROJECT MANAGERS
73. 10.5 ADJUDICATION PROCESS - STANDING DBs
• Appointment Process
• DB Members may be named in the construction contract or selected soon after the contract is signed.
• 3 Independent/Impartial Members- Nominated, agreed/accepted and appointed by contractual parties. Selection of the chairperson in
consultation with the other 2 members.
• 1 person DB-smaller contracts
• GCC Specifies the number of members- Contract data
• Appointing Authority
• Specified in the contract data in the event of a failure of parties to agree on the DB Members
• ICC International Court of Arbitration
• SAICE List of Mediators, Adjudicators & arbitrators(The President’s List)
• Association of Arbitrators
• Tri-partite Agreement
• Tripartite agreement amongst the contractual parties and the DB
• This includes the adjudication agreement & associated procedural rules
• Time of Appointment/Duration
• The GCC specifies within 56 days of the commencement date
• Early appointment is imperative and DB should exist throughout the duration of the contract.
• Convening/Availability/Dispute Notice
• GCC specifies within 28 days of the event giving rise to adjudication having arisen, to receive the referring party’s submission.
• Parties Submit written submissions to the DB
• DB conducts a hearing or determines the dispute on the written submissions fairly quickly- Parties are generally not
represented.
• Cost of adjudication borne 50:50 by both parties
• Aggrieved or unsatisfied party, within a specified time frame, refer the dispute to arbitration for a final decisionZAATHI ENGINEERS & PROJECT MANAGERS
74. 10.5 ADJUDICATION –STANDING DBs-DISPUTE AVOIDANCE
• Form a standing DB not an adhoc one with a primary objective of dispute avoidance
• Members of the DB carefully chosen to ensure they subscribe to the dispute avoidance role of the DB.
• Early involvement of the DB; DB-Contractual parties tripartite agreement should be finalised and signed at the
contract commencement.
• DB early involvement even at the design stage(stage of potential differences of opinion & disputes) eg. Additional
works or scope changes, change of procurement strategies, change of technology etc
• Assist in finding solutions to design-related issues or disputes
• Assist in the areas of ambiguity, inconsistency (Tender/Contract Documentations: Drawings,Specs,BOQs) or
reasonably interpreted requirements for performance or design standards
• Adjustment in the DB procedures or standardised rules to include a proactive routine of site visits and meetings.
• Ensure the “right people” from each contractual party attends all the DB Meetings(Senior off-site Executives)
• Actively encourage the contracting parties to speak up and to frankly discuss current issues that are foresee.
• Routine detailed project reports from the parties to the DB are afforded a “privileged or without prejudice status”
• Implement Issue tracking procedure
• Call for Risk Reports(Designs,Specs,Docs,Program,Construction Methodology)
• Act as a facilitator of party meetings/workshops convened to discuss or resolve particular issues
• Provide advisory opinion or independent or expert view on an issue for consideration and negotiation by the
parties before the issue escalates into a dispute and formal referral to the DB for a decision.
ZAATHI ENGINEERS & PROJECT MANAGERS
75. 10.7 ARBITRATION
• Suitability;
• Complicated factual and legal disputes
• Process ;
• Nominate & Appoint an independent arbitrator in terms of the Agreement: Attorney/Advocate
• SAICE President’s List of Arbitrators can be used.
• Agreed to by both parties
• Appointed in writing for the Arbitration Act to apply(Arbitration Act.No.42 of 1965,Section 1)
• Arbitrators function is judicial and not administrative
• Arbitrator cannot unilaterally resign his position. He/ She may be exposed to damages claim.
• Parties can determine the procedure
• Parties can by agreement change the rules to expedite proceedings.
• Arbitration award is final and binding.
ZAATHI ENGINEERS & PROJECT MANAGERS
76. 10.7 ARBITRATION PROCESS
• Declaration of Dispute
• Legal Representation
• Expert Evidence
• Apply for interlocutory order
• Ask for specific performance and special cost orders
• Similar to Civil Litigation
• No Appeal from the arbitration process
• Aggrieved party: Review Process
• Arbitrators award or decision is final and binding
• Award may be made an order of court and must contain a cost award
• Cost Adjusted in accordance to the award
• Parties contribute 50:50 to the cost of arbitrationZAATHI ENGINEERS & PROJECT MANAGERS
78. CASE STUDY 1
• The Site Agent on a Civil Engineering Contract subjected to the GCC 2004 puts in
a claim for extra time and cost as a result of a recent flooding. He based the claim
on Clause 47.1 of G.C.C. and says that the flood was an unfavourable physical
condition that an experienced Contractor could not have been expected to
foresee. The Engineering representative rejected the claim because he says that
the flood was certainly a condition caused by weather. Discuss.
ZAATHI ENGINEERS & PROJECT MANAGERS
79. CASE STUDY2
• During the execution of the work on a contract the contractor required further
drawings of temporary works, which he must prepare himself. Is this possible and
what are the contractor’s obligations in this regard?
ZAATHI ENGINEERS & PROJECT MANAGERS
80. CASE STUDY 3
• A contractor, during a pipe-laying contract, cover part of the laying pipe cunning
with filling material without the engineer inspecting the works. The engineer
thereupon issue a site instruction to the contractor instructing him to expose part
of the pipe run. What are the rights of the parties involved in the situation if:
• 6.1. The contractor neglected to inform the engineer to inspect the works, and;
• 6.2. If the engineer was not in a position to execute the inspection when notified
and allowed the contractor to continue with the covering of the said works.
ZAATHI ENGINEERS & PROJECT MANAGERS
81. CASE STUDY 4
• You have accepted a position as Construction Surveyors Technician at Civil
Engineers Incorporated. A contractor submitted a claim against your client
because overhead cables prevented him from using a crane on site. Will you
allow the claim? Motivate your answer.
ZAATHI ENGINEERS & PROJECT MANAGERS
82. CASE STUDY 5
• You are the building surveyor for a construction company that is executing a
pipeline. During the constructing of the said line you encountered an
underground river, which was nowhere mentioned in the contract
documentation. This necessitated the use of a special, but time consuming,
method to lay the pipes. This engineer is prepared to pay for the re-measured
work, but refuse to allow extension of time. What argument(s) will you use to
convince him of the validity of your claim?
ZAATHI ENGINEERS & PROJECT MANAGERS
83. CASE STUDY 6
• A contract consist of the building of an athletics track together with a grandstand.
The contract period is 9 months. The athletic track is completed after 6 months
whilst the grandstand is only half completed. The client requests to take over the
athletics track in order to stage an athletics meeting while the contractor proceed
to complete the grandstand. What are the rights of the client as well as the
contractor in this instance?
ZAATHI ENGINEERS & PROJECT MANAGERS
84. CASE STUDY 7
• The engineer on a roads construction project issues a variation on a piece of
paper due to the fact that the official book for these variation is unavailable. He
places the piece of paper on which the instruction is written on the corner of the
contractor’s desk and asks the contractor’s tea maker to show the contractor,
who is on the other side of this very large site, the variation. A strong wind blows
the instruction from the desk and tea maker disposes of it together with other
rubbish. He also forgets to inform the contractor of the engineer’s visit. The
engineer arrives two weeks later on site and find that the variation is still not
executed. He issues the variation again by writing it into the proper book. The
contractor however, in the meantime, has executed work, which because of the
variation, is superfluous. The engineer refuses to pay for this said superfluous
work. Will the contractor be entitled to payment for this said work or will he not
be entitled to payment? Motivate
• ZAATHI ENGINEERS & PROJECT MANAGERS
85. REFERENCES
• GENERAL CONDITIONS OF CONTRACT FOR CONSTRUCTION WORKS(GCC 2015,3rd edition)
• CONSTRUCTION LAW,THE 2005 UPDATE,BINNINGTON COPELAND & ASSOCIATES
• CONSTRUCTION CASE STUDIES,QUESTIONS & ANSWERS,BINNINGTON COPELAND &
ASSOCIATES
• NAJEL, C.J. ET AL.2011,COMMERCIAL LAW, 4TH EDITION,LEXIS NEXIS,BUTTERWORTHS
• CIDB- PRACTICE GUIDE NO.C2- GUIDELINES FOR THE SELECTION OF THE APPROPRIATE
STANDARD FORM OF CONTRACT FOR ENGINEERING AND CONSTRUCTION WORKS. JUNE 2003”
ZAATHI ENGINEERS & PROJECT MANAGERS
