GCC2015 Course_Day2

Date: 19-20TH September 2016 • Venue: Blue Waters Hotel,DurbanPresented by: Mr J.B. Nartey – Director(Operations)

Zaathi Engineers & Project Managers

E-mail: [email protected]

Tel: +27 82 727 8736

GENERAL CONDITIONS OF CONTRACT FOR CONSTRUCTION WORKS(GCC 2015,3rd edition)

•GENERAL CONDITIONS OF CONTRACT FOR CONSTRUCTION WORKS 2015

(3rd edition)

•DAY TWO(2)

ZAATHI ENGINEERS & PROJECT MANAGERS

SESSION ONE(1)-CLAIMS• 1. CLAIMS

• 1a. CONTRACTOR’S CLAIMS

• Monthly Payment Claims

• Interest Payment Claims

• Extension of time claims

• Extension of time with additional compensation

• Insurance Claims

• Other Monetary Claims• 1b. EMPLOYER’S CLAIMS

• Monetary Compensation for unsuitable/Delayed work/Over-payments• Monetary Compensation for non-performance

• 1c. CLAIMS JUSTIFICATION/MOTIVATION • 1d. CLAIMS HANDLING/PROCEDURE• 1e. CLAIMS VALIDITY• 1f. CLAIMS ADJUDICATION• 1g. DISATISFACTION CLAIM ZAATHI ENGINEERS & PROJECT MANAGERS

SESSION TWO(2)-CLAIM DISPUTES

2. CLAIM DISPUTE•Definition of claim dispute•Claim Dispute notice•Claim Dispute Resolution•Amicable Settlement•Adjudication•Arbitration•Court Proceedings


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


SESSION ONE(1)-CLAIMS


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


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


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


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”


CLAIMS- WRONG NOTION

• A claim does not simply arise because the work cost more or took longer than expected.


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


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.


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


1. CLAIMS-PROVISIONS OF A CONTRACT-CLAIMS FOR ADDITIONAL TIME OR MONEY


TIME EXTENSION CLAIMS


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.


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.


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.


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 RisksZAATHI ENGINEERS & PROJECT MANAGERS

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?


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

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.


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

ADDITIONAL PAYMENT CLAIMS


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.


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


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 furtherquote.

• 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

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


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.


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.


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 failingto 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

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.


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

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?


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.


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 Quantitiesfor 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 wouldnot be based on the rate in the Bill of Quantities.

• Which rate should be used to value the variation?ZAATHI ENGINEERS & PROJECT MANAGERS

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? Motivate ZAATHI ENGINEERS & PROJECT MANAGERS

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

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.


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.


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.


EMPLOYER’S CLAIMS


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.


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

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.


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.


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”


5.13.2.2 PENALTIES WAIVER – EMPLOYER OCCUPATION

• Occupation or usage by employer, his agents, employees or other contractors(not employed by the contractor)


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

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


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

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.


2. CLAIMS FOR NON-PERFORMANCE


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.


3. CLAIMS-BREACH OF DUTYThis is usually the breach of duty set out under a contract

or reasonably to be presumed under the contract.


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.


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.


EXAMPLE -BREACH OF DUTIES• Contractor not constructing according to specifications

• Contract suspended or terminated after 14 day notices/warnings are issued.


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


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


CASE STUDY-GLOBAL CLAIMSUnited 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 Amelcowas 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.


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

SESSION 2-CLAIM DISPUTES


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.


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

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


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


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


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


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


10.5 ADJUDICATIONADJUDICATION 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

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

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.


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.


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

SESSION THREE(3)-GCC CONTRACT CASE STUDY


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.


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?


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.


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.


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?


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?


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

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”



Documents

GCC2015 Course_Day2