Construction Industry/FIDIC contract- extension of time/ LD
Dear Sir/ Madam, it would be grateful, if you can review and reply you on the below; though question is longer, it is all about a wording in the contractual provision.
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)
Time for 43.1 The whole of the Works and, if applicable, any Section required to be
Completion completed within a particular time as stated in the Appendix to Tender, shall be completed, in accordance with the provisions of Clause 48, within the time stated in the Appendix to Tender for the whole of the Works or the Section (as the case may be), calculated from the Commencement Date, or such extended time as may be allowed under Clause 44.
Extension of 44.1 In the event of
Completion (a) the amount or nature of extra or additional work, or
(b) any cause of delay referred to in these Conditions, or
(c) exceptionally adverse climatic conditions, or
(d) any delay, impediment or prevention by the Employer, or
(e) other special circumstances which may occur, other than through a default of or breach of contract by the Contractor or for which he is responsible,
being such as fairly to entitle the Contractor to an extension of the Time for Completion of the Works, or any Section or part thereof, the Engineer shall, after due consultation with the Employer and the Contractor, determine the amount of such extension and shall notify the Contractor accordingly, with a copy to the Employer.
Liquidated 47.1 If the Contractor fails to comply with the Time for Completion in
Damages for accordance with Clause 48, for the whole of the Works or, if applicable,
Delay any Section within the relevant time prescribed by Clause 43, then the Contractor shall pay to the Employer the relevant sum stated in the Appendix to Tender as liquidated damages for such default and not as a penalty (which sum shall be the only monies due from the Contractor for such default) for every day or part of a day which shall elapse between the relevant Time for Completion and the date stated in a Taking-Over Certificate of the whole of the Works or the relevant Section, subject to the applicable limit stated in the Appendix to Tender. The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due or to become due to the Contractor. The payment or deduction of such damages shall not relieve the Contractor from his obligation to complete the Works, or from any other of his obligations and liabilities under the Contract.
Reduction of 47.2 If, before the Time for Completion of the whole of the Works or, if
Liquidated applicable, any Section, a Taking-Over Certificate has been issued for
Damages any part of the Works or of a Section, the liquidated damages for delay in completion of the remainder of the Works or of that Section shall, for any period of delay after the date stated in such Taking-Over Certificate, and in the absence of alternative provisions in the Contract, be reduced in the proportion which the value of the part so certified bears to the value of the whole of the Works or Section, as applicable. The provisions of this Sub-Clause shall only apply to rate of liquidated damages and shall not affect the limit thereof.
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??
Thank you for this very interesting questions.
usually the EOT is given on the whole project or on certain parts if such parts are defined in the original contract. in your case the EOT was issued to certain parts only which should mean that the 3rd part is earlier completed and EOT issued or it is treated as separate part. the logic here will be that the Engineer will apply liquidated damage on each part separately as it is not possible to apply liquidated damages on the 3rd part which is complete if so.
the interesting question here would the Employer be able to use each part of the road separately or not. if such use is possible then the above explanation is correct but if the road can not be used in parts, then the issuance of EOT on parts was not appropriate from the Engineer and he should have issued on EOT for the whole project up to 31 Marc 2014.