Contractual Remedies and Practical Solutions - Assignment Example

Contractual Remedies and Practical Solutions [Name of the Student] [Name of the University] TABLE OF CONTENTS Contractual Remedies and Practical Solutions 3 Summary 3 Task One 3 Delay and its Causes 4 Employer Interference 5 Log of Telephonic Conversations 7 Task Two 10 Task Three 11 Adjudication in Construction Contracts 12 Case- law 14 Right of Adjudication 16 List of References 18 Contractual Remedies and Practical Solutions Summary This work deals with an analysis and recommendations for a client regarding the options and validity of his claims against his employer, regarding delay in the completion of the contracted work. In this regard, problems arising out of construction contracts were discussed. In addition, specific problems encountered by the contractor in completing the work, and the delays that occurred were examined. With respect to this, a telephone log provided by the client had been scrutinised. There are several excusable delays, which have been clearly stated in the telephone log provided by the contractor. Moreover, a notice revealing the intention of the contractor with respect to adjudication was submitted. Finally adjudication rights of the parties and procedures were taken up for discussion. The employer has claimed liquidated damages from the contractor. This work claims that the contractor was entitled to a grant of Extension of Time by the CA. He can resort to adjudication, as the employer had refused to accept his excusable delay reasons for granting an Extension of Time. Task One Sub: Report / Advice regarding your claims against the building employer / administrator with respect to the contract no—xyz. Member counsel, Legal Service team, QS legal firm, Guilford. Dear Contractor, The usual claims that arise in construction work are; a claim by a contractor against the employer with regard to modification or delay in the construction project. Moreover, a professional consultant could claim against the employer with respect to the non-payment of fees or for breach of copyright. In addition, the employer could have a claim against the professional consultant for not designing the works adequately, and the contractor for delay or defect in the works. Delay and its Causes Construction projects can be delayed due to several reasons. The construction of a portion of a project remains incomplete when the deadline specified for the same in the contract is reached. Another reason is that the scope of the work envisaged in the contract, increases to the extent that a greater amount of time is required to complete it. There are several events that could prevent the completion of the work within the time stipulated in the contract. Some of the common causes of delay are; conditions at the construction site that are unexpected, inclement weather, striking of work by the labour force, floods and other natural disasters, acts of the governmental and local authorities, and Acts of God. Non-excusable delays are those over which the contractor has control. On the other hand, excusable delays are delays over which the contractor has no control. For excusable delays, compensation may be available, depending upon whether the event is compensable or not. If the event cannot be compensated, then the contractor has to be provided with an Extension of Time. Some instances of excusable delay are; design problems, employer initiated changes, unanticipated weather, labour disputes, Acts of God, delay in receiving special furnishing from the employer, and differing site conditions. In our present problem, excusable delays can be deduced from the events such as design changes, unforeseeable labour disputes, floods, delays in owner supplied furnishings. The contractor informed the CA about these developments, which the latter ignored and merely reiterated that the work had to be completed within the stipulated time, if liquidated damages were not to be imposed. Consequently, the contractor is entitled to claim Extension of Time and compensation for accelerated working. Extension of Time. It is usual for construction projects to be delayed, and this is provided for in the standard form construction contracts. Extensions of time are permitted for variation, and any impediment or prevention due to the employer or his personnel. Under English delay caused by the employer, in contracts where there is no provision for extending the completion date, will deprived the employer of his right to claim liquidated damages. The contractor has to complete the work within a reasonable period, otherwise he will be liable to pay general damages to the employer. Employer Interference In general, the concerned architect or engineer in building and civil contracts is empowered to grant extensions of time and payment under the contract. Such engineers have to act fairly and without prejudice. Moreover, the employer is precluded from influencing or obstructing the architect or engineer in the performance of his duties. The courts have been consistent in their rulings, where the employer had attempted to influence those appointed by him to certify or value as per the contractual provisions. Thus, in Morrison-Knudsen v BC Hydro & Power, each and every request of the contractor for extension of time had been rejected. The contractor was compelled to accelerate the work, and he completed the work soon after the deadline stipulated for its completion in the contract. The employer had formed an agreement with a government representative, whereby no extensions were to be granted to the contractor. The court permitted the contractor to recover the acceleration costs, incurred by him due to the breach of contract. Whilst claiming an extension of time, a contractor frequently claims loss and expense. This constitutes the monetary aspect of a claim for delay and disruption by the contractor. Instances being claims for the cost of inefficient working and for employing additional resources. Moreover, standard form contracts permit the contractor to claim for disrupted or delayed work. As such, a contractor can roll-up unattributed costs, in their totality, and claim them as loss and expense from the employer. When the individual expense details are not provided in the sum claimed, it is termed a total cost or global claim. Finance charges, loss of profits, general disruption, prolongation costs, and wasted management time are some of the more common heads of loss and expense. However, at present, analysts have to consider resource allocations, during their delay analyses. This became evident in McAlpine Humberoak v McDermott International, wherein the presiding justice disapproved of the delay claim submitted by the plaintiff. The disapproval was on the grounds that there was no consideration regarding the planning related to the actual utilisation of the resources to be used in the construction. In subsequent decisions, the courts ruled that a period of delay or delay, regarded as a matter of causation, could be attributed to several delaying events. This ruling was provided in Henry Boot Construction (UK) Limited v Malmaison Hotel (Manchester) Limited [1999] 70 Con LR 32 and Royal Brompton Hospital NHS Trust v Hammond and Others (No. 7). Under these circumstances, the court opined, an architect could legitimately allow a contractor an extension of time for the presence of inclement weather. This extension would not be affected by the inability of the contractor, during the very same period, to procure the resources to complete the works under contract. Therefore, the operative cause would be determined on the basis of risk allocation between the parties as per the contract. In our present problem, contractor provided a phone log, which shows that delay of the completion of the works are due to reasons beyond his control and also that the employer had not been responded positively to his reminders. The details of phone Log are given hereunder. After all these calls, contractor had not been provided with sufficient extension of time. The call log shows that that the events resulting in delays are excusable. Log of Telephonic Conversations Name: Contract Administrator (CA). Company: Duplicitous Builders. Phone Number: 01483 456777. Date of Call Purpose Response of the CA 1 November 2014 Site conditions radically different from the usual. The work has to be completed within the time stipulated in the contract. 10 December 2014 Extreme bad weather conditions obstructing the work. As stated clearly on previous occasions also, the work has to be completed by the time specified in the contract. 15 December 2014 Labour disputes of a serious nature. These excuses are unacceptable, and a penalty will be exacted for any delay in completing the work. 20 December 2014 Considerable delay in the provision of special furnishings to be incorporated in the construction, from the employer. Such developments should have been anticipated and suitable provision should have been made for the same. 1 January 2015 Changes made to the working plan, by the employer, which have not been fully sanctioned by the concerned authorities. As already informed, these are problems that have to be addressed, without allowing delay in the completion of the construction work. 5 January 2015 Sleet and freezing rain, preventing any outdoor work. This should have been anticipated and provided for. 15 January 2015 Heavy rains and flooding, which have brought the construction work to a standstill. Any construction project has to make allowances for the vagaries of the weather. The excuse is untenable, and the contractual penalties will be imposed for any delay. After perusing the call log details and other information provided by you, we suggest that your claims can be successfully made against the building employers for redressal. As such, you will have the choice of appointing an adjudicator in this regard. The first step in this process is giving a notice of adjudication to the other party. If you have any questions in this regard, please contact me at the following address. Yours sincerely, …………… Member Counsel, QS Legal Firm. Guildford. Task Two In the Matter of the Housing Grants, Construction and Regeneration Act 1996 And in the Matter of the Scheme for Construction Contracts And in the Matter of an Adjudication Between Credible Contractors And Duplicitous Builders To: Duplicitous Builders TAKE NOTICE that the above-named Credible Contractors have decided to refer the dispute, the particulars of which are appended below, to adjudication. 1. The nature and brief description of the dispute and relevant contract are as follows: 1.1. The amount due from Duplicitous Builders pursuant to the contract for the construction of a hypermarket and / or damages for breach of this contract including: 1.1.1. Extension of Time. 1.1.2. The amount of damages, or direct loss and expense incurred by Credible Contractors, on account of disruption to its works. 1.1.3. Entitlement to payment of £ 300,000, which the contract administrator intends to withhold, towards liquidated damages for the alleged non-completion of the work. 2. The parties to the dispute are 2.1 Credible Contractors (Main Contractor) 2.2 Duplicitous Builders (Employer). 3. The dispute arose at Guilford on 15 January 2015. 4. Credible Contractors seek redress in the following: 4.2 Payment of the sum that properly represents the amount due to it pursuant to the contract and / or damages, including the £ 300,000, which the contract administrator intends to deduct on grounds of alleged delay. 4.3 Interest pursuant to the contract. 5. The names and addresses for service of the parties to the relevant contract are as follows: 5.1 Credible Contractors 121 Green Lane Guildford, Surrey GU1 4RF. 5.2 Duplicitous Builders 420 Red Lane Guildford, Surrey GU1 4RF. Dated: 16 February 2015 ……… Honest John, Director For and on behalf of Credible Builders. Task Three Sub: Report with respect to options available against denial of dispute by the building employer. Dear Contractor, The following discussion enable you to assess the options available against the denial of dispute in construction contracts. Section 108 of the Housing Grants, Construction and Regeneration Act 1996 obliges construction contracts, as defined by it, to incorporate minimum procedural requirements that enable the parties to it to serve notice. Such notice can be served at any time, and pertains to that party’s intention to submit its dispute with the other part to adjudication. It is indispensable for the contract to include a timetable, in order to facilitate the appointment of an adjudicator and referral of the dispute. This has to transpire within seven days of the serving of the notice. Moreover, under the provisions of the Scheme for Construction Contracts, the Notice of Adjudication should necessarily consist of the following; first, a description of the parties involved and the nature of the dispute between them. Second, details regarding the location and date when the dispute arose. Third, the remedy being sought by the aggrieved party. Fourth, the addresses and names of the parties to the contract. This has to furnish the addresses for serving documents. The serving of the Notice of Adjudication is the primary formal measure in the procedure of adjudication. With the exception of the information prescribed above, there is no stipulation regarding the form to be assumed by this document. Adjudication in Construction Contracts Section 108 of the Housing Grants, Construction and Regeneration Act 1996 bestows a right upon the parties to a construction contract to refer their disputes under contract to adjudication. Certain minimum procedural requirements have been specified for referring a dispute to an independent party. The latter has to arrive at a decision within 28 days of the referral. With respect to construction contracts that fail to comply with these requirements, the Scheme for Construction Contracts (Scheme) becomes applicable. The final settlement of a dispute does not necessarily result from adjudication. This is due to the fact that the parties to the dispute can approach a court for the dispute to be resolved. If the contract so specifies, the parties can resort to arbitration proceedings. All the same, most of the adjudication decisions are accepted as being final, by the parties involved. Adjudication can be resorted to at any stage, according to the legislation. For instance, when there is a contract between the parties, it can be employed for resolving contractual disputes with designers, prior to the commencement of construction. In addition, it can be utilised for resolving contractual disputes between contractors, subcontractors and designers during construction. Finally, it can be used for resolving disputes between these entities after completion of the construction. These constitute the provisions of Section 3 of the Housing Grants, Construction and Regeneration Act 1996. Section 10 of the Housing Grants, Construction and Regeneration Act 1996 provides as follows. After a dispute has arisen between the parties, they have the option of referring the same to adjudication. The adjudicator has to be selected within a week, and he has to decide the dispute within four weeks. The parties to the dispute have to comply with the decision of the adjudicator. In case of failure of one of the parties to do so, the other party can procure a court order for compliance. Such orders are granted by the courts, in a couple of days. Hence, adjudication is an expeditious process, in comparison to other methods of dispute resolution. Moreover, adjudication can be engaged in while the contract is in progress, and it does not entail lawyers. As such, arbitration and litigation are significantly less cost effective than adjudication. The Housing Grants, Construction and Regeneration Act 1996 entitles a party to a construction contract to take recourse to adjudication, any dispute arising under that contract. In the event of the contract being devoid of an adjudication procedure, of if the procedure stipulated does not comply with the Act, then the following have to be ensured, prior to referring the matter to adjudication. First, the contract has to be a construction contract, as defined in the Act. Second, there should be a dispute. Third, the dispute should have arisen under that contract. When the reason for the failure of the contractor to complete the construction, within time is partially or totally due to the fault of the Employer, then time could become at large. Moreover, the contractual obligation of the contractor would be diluted to completion of the construction within reasonable time. In addition, the liquidated damages (LD) clause would become inoperative, as there would be no specific date from which the LD would run. All the same, if there is an extension of time (EOT) clause that extends the time for completing the contract, due to delay brought about by the employer, and if this delay is such that the engineer or architect could grant EOT, and if the engineer or architect had exercised his power lawfully, then the LD clause will become effective. Case- law In English law a clear legal distinction is maintained between penalty and LD. The latter represent a genuine estimation of the probable loss to the employer, due to the breach of the contractor. This was the ruling in Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co Ltd. Nevertheless, the courts do not permit the process to be undermined by narrow and formal points regarding the content of the Notice of Adjudication. This was the ruling in LPL Electrical Services Ltd v Kershaw Electrical Services Ltd (unreported, 2 February 2001). This holds good, despite the fact that the individuals drafting such notices make them sufficiently broad to circumvent jurisdictional challenges. Moreover, in KNS Industrial Services (Birmingham) Ltd v Sindall Ltd, the court ruled that an adjudicator is appointed for resolving a dispute. In addition, the adjudicator’s jurisdiction is determined by the notice of adjudication. The process of adjudication commences with the serving of a written notice. This notice has to be given by the party referring the dispute to adjudication. In Griffin and Tomlinson v Midas Homes Ltd, the Adjudication Notice had been drafted by a solicitor. As a consequence, it was held that it had been prepared in a judicious manner. All the same, the description of the dispute was unclear, which served to limit the jurisdiction of the Adjudicator. In Jerome Engineering Ltd v Lloyd Electrical Services Ltd (unreported, 23 November 2001), the notice had failed to specify the precise relief sought. However, it was held that an officious bystander would have clearly concluded that the dispute related to the withholding of amounts that were allegedly due. Significantly, in Herschel Engineering Ltd v Breen Property Ltd, Dyson J ruled that a dispute could be submitted to adjudication, even after the commencement of arbitration or litigation. As such, on occasion, the other party to the dispute will raise a jurisdictional challenge. The party initiating adjudication has to be constantly on its guard, throughout the adjudication process, regarding the reaction of the other party. In the event of a jurisdictional challenge being raised by the other party, the adjudicator will take a decision on whether to proceed with the adjudication. The party that goes in for adjudication should ensure that the adjudication timetable is adhered to and should submit its Referral and other information within the stipulated time. Right of Adjudication If the adjudicator determines that the challenge is without substance, then he should persist with the process of adjudication. The courts have supported adjudicators who continued to act upon being convinced that they possessed the jurisdiction and that failure to continue would be detrimental to the aims of the Housing Grants, Construction and Regeneration Act 1996. Although, the adjudicator could take the process of adjudication to its logical conclusion, his decision regarding his jurisdiction is not binding upon the parties to the dispute. Even when one of the parties chooses to refer the issue of the jurisdiction of the arbitrator to the court, the arbitrator should continue with the adjudication and arrive at a decision. The exception is when the parties consent to a stay of the proceedings. In a similar vein, the adjudicator should continue with the adjudication, when the party contesting his jurisdiction participates in the process while reserving its right to challenge the adjudicator’s jurisdiction. Frequently, upon being granted a favourable decision by the adjudicator, the other party will adopt dilatory tactics or refuse to recognise the jurisdiction of the arbitrator. In such instances, the aggrieved party should approach the court for enforcing the decision of the adjudicator. These decisions are usually enforced by the courts. The latter, in general, issue enforcement orders, within 28 days. The process includes a short hearing that does not extend beyond a day. In addition, enforcement cost is usually quite low, and the successful applicant can recover a substantial amount of the legal costs from the other party. However, such recovery is subject to the capacity of the other party to make the payment. Since your allegation is that the employer is deliberately refusing to accept your reasons for any Extension of Time, although you had excusable reasons for the same, and that he was withholding amounts in the form of liquidated damages, you can proceed for adjudication, as recommended in the above report. You can also claim compensation for the extra expenditure incurred, due to accelerated work. Your chances of success, on the basis of the case law, are very bright. Under these circumstances, you should exercise the utmost care with regard to the adjudication time table, so as to convince the adjudicator to continue with the process of adjudication. Yours sincerely, ……………. Member counsel, QS Legal firm, Guildford. List of References Read More