Construction Claims

Claims
Possibly relating to :
• site conditions
• climatic conditions
• market conditions
• project characteristics
• available resources
 Claims
• they are provisions regarding risks
allocation
• absence of these provisions will
make contractors boost up tender
prices
 Claim
• recompense for some loss or
expense that has suffered
• an attempt to avoid the requirement
to pay liquidated and ascertained
damages.
 Types of Claims
Contractual claims
• founded in specific clauses
within the terms of the contract
 Types of Claims
Extra-contractual claims
• not based on clauses of a
contract
• may be due to sympathy
 Types of Claims
Common law claims
Basis :
– breach of contract
– tort
– repudiation
– implied terms and other related
matters
 Basis of claims
Although most claims concern matters within
the scope of the contract, there are matters
outside contract scope, such as :
– A binding contract has never been
established initially
– A contract has ceased to be binding
 Basis of claims
Concerning contract documentation:
Claims may arise when some part of the contract
is missed out , which cannot be amended except
by agreement of the two parties
Examples:
• pre-tender correspondence
• rejection letter
• tender qualifications
 Basis of claims
Concerning the execution of the work - Risks
– Clear allocation of risk enables
appropriate insurance to be effected
– Other risks such as ground conditions,
price fluctuation, weather etc. are not
insurable
 Basis of claims
Concerning the execution of the work - Risks
The arguments include consideration of
• fairness
• limited ability of contractors to bear risk in
view of the low profit/turnover ratios in
construction
• relative abilities of the parties to carry out
investigation in advance - test of
“foreseeability”
 Basis of claims
Concerning payment
Valuation of variation works
– valuation of variation works
– similarity or dissimilarity
– time
– timing
– sequences
– relationship to other work being done concurrently

All are compared with the tendered prices

 Basis of claims
Concerning prolongation (delay and disruption)
– securing timely completion enables client to
deduct damages for failure of contractor

– The entitlement for client to deduct LD would

be lost if the contractor is not allowed any
means of escape (EOT).
 Basis of claims
Concerning prolongation (delay and
disruption)
Risk allocation
– EOT is concerned with relief from L.D.
– relationship with claims for delay and
disruption costs exists
 Basis of claims
Concerning default, determination, forfeiture
etc.
Includes
– failure to complete within the stipulated
time
– failure to comply with the specification
Delays
 Delays

May be caused by :
– main contractor
– client
– neither party to the contract
Delays Caused by the Main
Contractor
• Main Contractor shall pay LD if he fails to
complete.
• If delay is of a serious nature, client may
terminate the contract.
• If the delay is caused by a NSC, and if the MC
has done all he can do to prevent the delay, this
delay will be treated as delay caused by neither
party.
Delays Caused by client
• Issue of Architect's instructions
• Late issue of drawings, instructions, and/or
other information.
• Delay on the part of artists, tradesmen or others
direct contractors engaged.
• Delays caused by open up for inspection or for
materials testing, provided the results are as
specified.
Delays Caused by client

The Architect has an obligation to

issue an Architect's instruction
awarding an extension of time.
Delays Caused by client

If such delays cause the Main

Contractor in direct loss and/or
expense for which he would not
otherwise be reimbursed, he will be
entitled for a claim. (Clause 24)
Delays Caused by Neither
Party to the Contract
Delays due to circumstances out of control by
either of the contract parties
– force majeure
– inclement weather
– insurance matters
– strikes affecting the Works
– delay on the part of NS or NSC
– unforeseeable shortages in materials and labour.
 Extension of Time
If the delay is caused by
• Client
• Neither party of the contract
– The MC is entitled for an extension of
time, that is, original completion date is
revised so relieving the Main Contractor
from LD.
 Extension of Time

If the delay is the fault of neither

party, the Main Contractor is
entitled to EOT only, no
monetary compensation is
allowed.
 Extension of Time

Under no circumstances will the

contractor be entitled to receive
financial compensation for the
delay caused by the MC himself.
 Extension of Time
Causes of Delay for Which the Main
Contractor is Entitled for EOT Under Clause
23
– Force majeure - something completely beyond
the control of either party such as earthquake,
or war.
 Extension of Time
Causes of Delay for Which the Main
Contractor is Entitled for EOT Under Clause
23
– Inclement weather - if the weather is exceptionally bad,
this means 20 mm of rain in 24 hours or typhoon signal
No.8.
– Insurance - loss or damage for which the Main
Contractor is insured under Clause 20 [A] or [B] which
is Insurance of the Works against Fire, etc.
 Extension of Time
Causes of Delay for Which the Main
Contractor is Entitled for EOT Under Clause
23
– Strikes, etc. - protects the Main Contractor from
unions and protects the Employer from increased
costs.
– Delay of NSC or NS
– Unforeseeable material and labour shortages
– Antiquities.
Causes of delay which are the fault
of the Employer or the Architect:
– Architect's instructions - may cause an
extension of time if the Main Contractor incurs
extra work.
– Lateness of drawings
– Delay of artists or tradesmen
– Inspection and testing of work - protects the
Main Contractor against unreasonable
inspection and testing.
Procedure for claiming an
extension of time
The Main Contractor must
initiate by giving notice of delay
and stating the cause of such
delay.
Procedure for claiming an
extension of time
• Upon receipt of notice, the
Architect must decide whether the
claim is valid or not, and
• if valid, what is the effect of the
delay
Procedure for claiming an
extension of time
In any case the Main Contractor
should
– Prevent delays as mush as possible, or
– Reduce the effects of any delay.
Procedure for claiming an
extension of time
If
– architect grants no EOT, or
– MC is not satisfied with the EOT
granted

The cases may be referred to arbitration.

Procedure for claiming an
extension of time
Causes of delay for which the Main Contractor may claim
direct loss and/or expenses (Clause 24)
– The Main Contractor not having received in time, instructions,
drawings, details or levels; or
– Opening up for inspection of work; or
– Discrepancy in or divergence between the Contract Drawings
and/or Contract Bills; or
– Delay on the part of artists, tradesmen or others engaged by
the Employer; or
– Architect's instructions issued in regard to postponement of
any work.
Claims for Direct Loss and/or
Expense
Loss
– When MC can not recover what he
could have expected to as a direct
result of disruption, variation, or
the discovery of antiquities etc.
Claims for Direct Loss and/or
Expense
Expense
– When MC needs to increase his
expected expenditure on an item of
work to produce the same result, also
as a direct result of disruption,
variation, or the discovery of
antiquities etc.
Claims for Direct Loss and/or
Expense
The word “direct” is used in order to
make it clear that such claims are
directly related to the cause, and are
not incidental losses or expenses.
Submission and Payment of
Direct Loss and/or Expense
• MC must submit a written application
within a reasonable time of the loss and/or
expense becoming apparent.
• Since there is no real definition of
“reasonable time”, disputes may arise
Claims for Direct Loss and/or
Expense
– MC is responsible for the submission, he should keep
all possible records for substantiation.
– The claim will be assessed by QS, usually by
negotiation with MC.
– Once approved by the Architect, the claim should be
included in the next Interim Certificate.
– All payments for loss and/or expense claims are subject
to retention.