Construction Industry/FIDIC contract- extension of time/ LD
Dear Sir, It would be grateful if you could review and reply on my below question;
BACKGROUND TO THE QUESTION
Contract is for the construction of highway/ road for 11 km in Sri Lanka
Now project is near to completion.
Original Time for Completion was 42 months
Form of Contract- FIDIC 4th Edition- Red Book
The Engineer has recently given two extensions of times (EOTs). One EOT for the
first 10.5km(as a PART of Works) of the road up to end of 30 Nov 2013 and the other EOT for the last 0.5 km up to the 31 March 2014. the main reason to have two EOTs due to the fact that the last 0.5km en count unforeseeable rock and which require additional time to excavate.
However, the importance is these two PARTS are not defined in the Contract like for SECTIONS
RELEVANT CONTRACTS PROVISIONS: (same as standard Fidic 1987 4th edition)
43.1, 44.1, 47.1 and 47.2
I agree that the Engineer can give EOT for PARTS (if necessary) pursuant to sub clause 44.1, though those parts are not defined in the Contract
However my question is;
1. Can the Engineer apply LD (on whatever basis- prorata, etc) if the Contractor doesn’t finish the particular PART by the extended date for completion (in our example, by 30 Nov 2013)??
I think Engineer can not apply LD because sub clause 47.1 and 47.2 talks about LD only for Works, Sections and remainder of Work/ Sections- but not for the PART (in our example, for first 10.5 km/ first PART)
2. However sub clause 47.2 further says that "if a TOC has been issued for any part or sections……"
That means my above opinion (for question 01)is valid only after TOC for that particular PART has been issued; therefore the Engineer can apply LD till the time of issuing the TOC for that particular part.
If this is the case, what would be happen to the LD apply prior o issuance of TOC; will it be reversed at the end??
Thanks for your question.
I will answer your question as follows:
1. Eot cannot be issued parts or section of the works except such parts or section have been mentioned in the contract. If any of the party intend to amend the contract by including parts or sectional completion milestones, then, this has to be mutually agreed between the parties and it has to be properly documented as an addendum or annexure or supplementary agreement to the contract. Otherwise, if it is done in an improper way, it would not be enforceable in case of any dispute resolution matters because, it may not have a credible and valid evidence that the parties mutually intended such parts or sections under the contract.
If there is only one completion date mentioned in the contract; the EOT has to be applied in consideration of such completion date.
2. Clause 47.2 truly address the issue of partial or sectional completion and it would be relevant, valid and enforceable based on two circumstances:
a. If such parts or sections are mentioned in the contract or if they are mutually agreed to by parties to the contract during the contract execution.
b. If the employer elected to occupy and use such completed parts after they have passed the required tests.
Going by the two circumstances, if TOC is issued for any parts or sections; it cannot be reversed because; the provision of contract is that Maintenance period for such parts or sections which TOC has been issued starts after the date of issuance of the TOC and as such; it means you would have multiple Performance or Maintenance Certificate after the expiration of the respective sectional or partial sections.
Finally, if the completion of any parts or sections mentioned in the contract or mutually agreed to at any later time during the contract execution; is delay by the contractor thereby prevention TOC to be issued; the employer has right to levy LD (if it is applicable) and ones LD is levied, it cannot be reversed except the TOC date is later mutually reversed.
Hope this helps?