 Introductionand Types of claims

 Detection and Analysis of Claim Events

 Counterclaims against the Contractor
 Claims for extension of time
 Claims for additional payment
 Procedures for Claims
 The Global Approach
 Preparation and Presentation of claims
 Defenses to Claims
 Dispute Resolution

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 This Topic and the following Topic explore the detection
and analysis of the following samples of claim events:
 Delayed Drawings or Instructions
 Delay in Giving Possession of the Site
 Suspension of Work
 Unforeseeable Physical Conditions
 Delayed Payment
 Fossils
 Setting-Out Errors
 Nominated Subcontractors
 Ambiguities/discrepancies in Contract documents
 Variations
 The last claim event is explored in the following Topic.

 Normal entitlement to Contractor:

 extension of time
 additional payment

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 Normal entitlement to Contractor:
 extension of time
 additional payment
 If failure is substantial, could result in termination

 Normal entitlement to Contractor:

 extension of time
 additional payment

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 Is the Contractor required to do boreholes during
the tender period? In such case, who is responsible
for the risks of unforeseeable physical conditions?
 Is the Contractor required to do boreholes after the
award of the Contract? In such case, who is
responsible for the risks of unforeseeable physical
conditions?

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 To whom should the risks for unforeseeable

physical conditions best be allocated?

 What will the Contractor be entitled to, if he

encounters unforeseeable physical conditions?
o Extension of Time
o Additional cost

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4
 What are the normal remedies in case of delayed
payments?
 Interest/Financing Charges

 Suspension or reduction of the rate of work

 Termination

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 Normal entitlement to Contractor:

 extension of time
 additional payment

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5
 The Contractor shall set out the Works in relation to
original points, lines and levels of reference
specified in the Contract or notified by the Engineer.
 The Employer shall be responsible for any errors in
these specified or notified items of reference, but
the Contractor shall use reasonable efforts to verify
their accuracy before they are used.
 If the Contractor suffers delay and/or incurs cost as
a result of an error in these items of reference, and
an experienced contractor could not reasonably
have discovered such error, the Contractor shall be
entitled to extension of time and additional payment.
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 Sub-contractors can be classified in two main

categories: nominated and domestic sub-contractors.
 What is a nominated Subcontractor?
means a Subcontractor
(a) who is stated in the Contract as being a nominated
Subcontractor, or
(b) whom the Engineer instructs the Contractor to
employ as a Subcontractor through a variation.
 Why have nominated subcontractors?
Because the Employer wishes the Contractor to be
responsible for the administration and co-ordination of
the Subcontract and pays the Contractor for such
services.
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6
 The Contractor shall not be under an obligation to
employ a nominated Subcontractor against whom
the Contractor raises reasonable objection.
 An objection shall be deemed reasonable if it arises
from any of the following matters:
(a) the Subcontractor does not have sufficient
competence or resources
(b) the subcontract does not specify that the
nominated Subcontractor shall indemnify the
Contractor against any failure by the Subcontractor
to perform his obligations
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 The Employer may:

(a) nominate an alternative subcontractor
(b) instruct the Contractor to carry out the work
himself through a variation
(c) indemnify the Contractor against any liability he
might experience through entering into the
subcontract with such subcontractor

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7
 The contractor would have to find an alternative
sub-contractor to carry out the work. If there is a
difference in price, such difference between the
original and new price would have to be met by the
Contractor.

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 Contract is Interpreted as a Whole

 Construed Against Drafter
 Ordinary Meaning of Language
 Conduct of Parties
 Construed in the Context of the Trade
 Order of Precedence of Contract Documents
 Prior Negotiations Cannot Be Relied upon to Vary the
Terms of the Contract
 Others

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A phrase could have more than one meaning.
 No one section will be read alone in such a manner
to make it inconsistent and defeat the uniform
purpose of all the sections interpreted as a whole.
 No single phrase will be interpreted out of context
with the rest of the contract.
 A sample clause in this context, Clause 1.5 of FIDIC
99 “The documents forming the Contract are to be
taken as mutually explanatory of one another.”

 Example: Identify at least 2 meanings for each of the

following phrases:
 Computer furniture design
 Disabled Parking
 To recap

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 Computer furniture design
 Design of furniture using computers;
 The design of computer furniture (by whatever means)
 Disabled Parking
 Disabled Parking literally means that the parking has
been disabled – it is not able to be used.
 However, in ‘street language’, this phrase means (and
should read as) “parking for disabled (people)”.
 To recap
 “To recap” is, literally, to put the cap back on.
 In street language, it is almost always used as an
abbreviation for “to recapitulate” – “to go over again; to
summarise”
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 Ifthe words are ambiguous, the provision will be

construed against the party who drafted it.
 The contract may be subject to more than one
reasonable interpretation, and a court is often faced
with the burden of choosing between the two.
 The reasoning behind this principle is that the party
that drafted the document had ample opportunity to
avoid ambiguity and clearly express the intended
meaning, but failed to do so.

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10
 The non-drafting party did not have such an
opportunity; they reasonably assumed that the
contract language meant a certain thing, and in
court that interpretation must prevail.
 However, the court will not apply the contra
proferentum rule to a standard form of contract that
has been agreed between professional bodies and
trade associations representing both sides to the
contract.

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 In some civil law countries, this rule is slightly

different. For example, Article 151(1) of the
Egyptian Civil Code states that "Doubt shall be
interpreted in the interest of the debtor”.
Accordingly, the judge looks to see who is the
debtor (the party that is required to perform the
obligation) under each situation and will interpret
the ambiguity in his favour.

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11
 The starting point for any consideration of the
meaning of a contract must be the words used.
 Language is usually given its ordinary meaning.
 Hence, when terms have a plain meaning, the
courts will not look beyond them to construe what
the parties meant.

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 When there is an ambiguity in the contract

documents, the court would examine the conduct of
the parties during performance of the contract to
check if the actions of the parties show mutual
understanding or intent. If so, the ambiguity will be
resolved by their actions.

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12
 If a word or phrase has a commonly accepted
meaning in the construction industry, that meaning
must be applied when reading and interpreting
construction contracts.
 If the provision is clear, then trade custom or usage
is irrelevant. That is true even if the trade custom or
usage is in direct conflict with the contract provision.
 But if the provision is, in fact, ambiguous, then trade
custom or usage becomes an important factor in
determining the meaning of the provision.

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 This rule is not applied when there is an express

term in the contract which conflicts with the trade
custom or usage.
 This situation can arise if the contract provides
stricter standards than those of industry standards.
Thus, trade custom or usage do not take
precedence over an express term in the contract.

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13
 Many contracts include an order-of-precedence
clause. Such clause establishes an order of
priority between the various documents when an
ambiguity occurs between the documents.

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“The documents forming the Contract are to be taken as mutually

explanatory of one another. For the purposes of interpretation, the
priority of the documents shall be in accordance with the following
sequence:
(a) the Contract Agreement (if any),
(b) the Letter of Acceptance,
(c) the Letter of Tender,
(d) the Particular Conditions,
(e) these General Conditions,
(f) the Specification,
(g) the Drawings, and
(h) the Schedules and any other documents forming part of the Contract.
If an ambiguity or discrepancy is found in the documents, the Engineer
shall issue any necessary clarification or instruction.”
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14
 Where the parties have reduced their agreement to a
written contract, all prior negotiations and understandings
are deemed to be merged into the written document.
 Prior negotiations or agreements cannot be relied upon to
vary the terms of the contract.
 The main reason for excluding prior negotiations is that
the parties’ intentions do not become crystallised until the
deal is eventually agreed.
 The conversations or exchanges between the parties
during the negotiation stages leading up to the contract
might alter right up until the contract is agreed.

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 This rule is applied when there is an existing written

contract and its terms are clear and unambiguous.
 Only the terms included in the contract will be considered
in determining its meaning; all prior negotiations and
understandings will not be considered in interpreting the
contract even if these prior understandings were in writing.
 There is an exception to this rule, this exception applies
where a word or phrase is ambiguous, and where its
meaning can be clarified from prior negotiations between
the parties.

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15
 Specific terms govern over general terms (special
conditions govern over general conditions)
 Written words prevail over printed words
 Written words prevail over figures

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 Section 1: “The Contractor shall perform the
finishing works as per drawings A, B and C”
 Section 2: “The Contractor shall perform the
finishing works as per drawings A and C and
Specifications Section 1.13”
 Section 2 has a higher priority than Section 1.
 In accordance with what should the Contractor
perform the finishing works? Explain your answer.

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A supplier contracts to furnish “sand” to an owner.

 The supplier delivers sand which includes a large
amount of dirt, stone and other materials.
 The owner rejects the delivery, because “sand”
normally means materials consisting of small grains
and, therefore, the supplier’s material did not
conform with the normal meaning of the term.
 The supplier argues that no specific specs for the
sand was included.
 Which interpretation shall prevail? Explain your
answer.

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  Solve Case Studies 3 and 4

 Bunni, Nael G. The FIDIC Forms of Contract. Blackwell 2005

 Chappell David, Powell-Smith Vincent & Sims John, Building
Contract Claims (Blackwell Publishing Ltd, UK, 2005)
 Hughes, G, Building and Civil Engineering – Claims in
Perspective (Longman, New York, Second Edition, 1985)
 Knowles R. 150 Contractual Problems and their Solutions
(Blackwell Publishing Ltd 2005)
 The Rules of Contract Interpretation -- How to Say What You
Mean and Mean What You Say by Allan Goodman, J.D.
 Wallace Duncan, Hudson’s Building and Engineering Contracts
(12th Edition, Sweet and Maxwell, London, 2012)
 Winter, J, Global Claims and John Doyle v Laing Management –
Good English Law? Good English Practice?, Society of
Construction Law paper 140, July 2007

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