Construction Law/Defect Liability

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Question
We, as Contractor failed to remedy all defects in Defect Liability period. Amount of the rectifying works are minor to the amount of contract (less than 1%). Now Employer announced his intention to collect our Bank Guarantee. My question is: will the Employer collect the Bank Guarantee in whole amount or just amount claimed for finishing the subject works.

Answer
Dear Gornaid,

My apologies for the delayed response, which has been due to the end of year activities.

You do not mention the form of contract nor the applicable law, so the following comments will be generic.  

Under clause 4.2 (c) of FIDIC 99, the Employer is allowed to claim the cost of incomplete defects, but he must indemnify the Contractor against all costs for a wrongful claim.  Thus generally, the Employer can claim reimbursement of his costs, but no more.  I would suggest that you ask the Employer to claim the cost from your retention, if possible, rather than your performance security.  Claims against performance securities have a negative effect on your credit facilities and reputation.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

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