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Construction Law/Extension of Subcontractor’s Time for Completionl

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QUESTION: Hi
I am working with one of the well-known MEP sub-contractor in UAE. Our Contract is based on FIDIC – Conditions of subcontract for works of Civil Engineering Construction (1st Edition 1994) with little amendments. Our Main Contract is based on FIDIC 1987 reprinted in 1992.

We have some issue with EOT and the Main Contractor is interpreting the clause 7.2 and 8.2 in different ways. I want to know what is the relief for the Sub-Contractor

m/c – Main Contractor
s/c – sub Contractor
TFC – time for completion
LD – Liquidated damages
EOT – extension of Time

1. What if the s/c is delayed by m/c more that the EOT granted to m/c?
2. Sometimes EOT to m/c will be 100 days while the s/c Time for completion (TFC) will only be  50 days, how will m/c decide how much EOT to grant to s/c?
3. What if there is enough float in the m/c programme and s/c delays beyond the s/c TFC, but it does not delay the m/c and m/c does not suffer a LD, will m/c apply a penalty on s/c?
4. What happens when ‘the extension shall not in any event exceeds the extension of time to which the Contractor is entitled under the Main Contract’?
5. If m/c negotiates a penalty with the employer and succeeds in reducing it, will he pass on the reduction to the s/c?
6. If m/c is delayed by s/c and is liable for 10%CP penalty and 10%CP is >= CP of s/c, how much will m/c recover?
7. What if s/c is delyed by m/c does he get EOT & cost from m/c?
8. Delays in ordering material, advance payments, Bill of Lading/LC issue. Who is responsible for these delays


7.2 Extension of Subcontractor’s Time for Completion
If the Subcontractor shall be delayed in the execution of the Subcontract Works or if applicable, any Section thereof by any:
a) circumstances in regard to which the Contractor is entitled to receive from the Engineer an extension of his time for completion of the Main Works under the Main Contract,
b) instruction pursuant to Sub-Clause 8.2 to which paragraph (a) of this Sub-Clause does not apply, or
c) breach of the Subcontract by the Contractor or for which the Contractor is responsible,

then in any such event the Subcontractor shall be entitled to such extension of the Subcontractor's Time for Completion of the Subcontract Works or such Section thereof as may in all the circumstances be fair and reasonable.

Provided that the Subcontractor shall not be entitled to such extension of time unless he has submitted to the Contractor notice of the circumstances which are delaying him within 14 days of such delay first occurring together with detailed particulars in justification of the extension of time claimed in order that the claim may be investigated at the time and, in any case to which paragraph (a) of this Sub-Clause applies, the extension shall not in any event exceed the extension of time to which the Contractor is entitled under the Main Contract.

Provided also that, where an event has a continuing effect such that it is not practicable for the Subcontractor to submit detailed particulars within the period of
14 days referred to in this Sub-Clause, he shall nevertheless be entitled to an extension of time provided that he has submitted to the Contractor interim particulars at intervals of not more than 14 days and final particulars within 14 days of the end of the effects resulting from the event.
 
8.2 Instructions under Subcontract
Subcontractor shall take instructions only from the Contractor. The Contractor shall have the like authority in relation to the Subcontract Works to give instructions as the Engineer has in relation to the Main Works under the Main Contract. The Subcontractor shall have the like obligations to abide by and comply therewith and the like rights in relation thereto as the Contractor has under the Main Contract. The said authority of the Contractor shall be exercisable in any case irrespective of whether the Engineer has exercised like authority in relation thereto under the Main Contract.

Thanks & Regards
Dan

ANSWER: Dear Dan,

Before replying your question I need to know that the Main contract between the Contractor and the Employer is FIDIC 1994 and the Sub-Contracting form of Contract is FIDIC 1987.

Are there any references between these two form of contracts ? Is sub-contractor's contract back to back to main contract ? What it the connection between two contracts ?

Best Regards

IRVALI

---------- FOLLOW-UP ----------

QUESTION: Dear Mr. Ali Irvali

Thanks for the question
Sorry i forget to mention, it is back to back contract (incorporation by reference)

Thanks & Regards
Dan

Answer
Dear Dan,

I will reply back in parawise order.

1. If the S/c is delayed by M/c more than the EoT granted, then burden and responsibility belongs to M/c. Same case as if you consider M/c as your Employer and due to reasons caused by him S/c is delayed, than he is entitled to EoT and prolongation cost (if any).
2. To decide to EoT to be granted, the Time Schedule and scope of Works of the S/c must be evaluated. It depends  on effect of Time Schedule of S/c on overall Time Schedule and how 50 days affecting 100 days?
3. If S/c is bound to complete his Works in accordance with his Time Schedule, than regardless of the M/c delay or non application of L/d to M/c, S/c is subject to Liquidated Damages (LD -Fidic 4 accepts Ld instead of penalty). You should consider that delay on one part of the project may have many side effects such as increased overheads, supervision cost, etc. However, at the end, it is decision of M/c to apply LD or not depends on relations between parties.
4. Same as above.
5. Same as above answer, since M/c has different contract signed with S/c, and if the delay is on account of S/c, it is M/c's skill to get it reduced from his Employer. If S/c negotiate and succeed, he may get reduction, otherwise contractually M/c may apply LD in full.
6. The percentage of LD of each day, its limit and method of recovery are  well defined in FIDIC (mostly in appendix to tender, therefore S/c is liable according to his contract.
7. Pls refer to answer.1
8. They are all different issues. If the Project delays because of late order of material which is in the scope of S/c, then he is liable. Advance payment is different issue and if S/c is not received or late received his advance money, then the payment conditions, interest, default clause to be referred and S/c has to document delay on his part due to late payment.


7.2 a# The reasons causing EoT are well defined in Fidic which the same are applicable to the S/c. Please also consider that both M/c and S/c doing the same job with same conditions, therefore reasons causing EoT is applicable for both parties #if they are beyond the control of S/c and M/c).
7.2 c) Breach of the Contract by M/c gives many rights to S/c depends on which clauses breached.

The importance of the last paragraph of the clause 7.2 is timely notification. After each event, S/c must timely notify the M/c. If he miss the specified period, then he may loose his rights which we call it time barred claim. Also after submission of such notice, S/c must provide particulars of the events in 14 days.

Wishing you good luck and best regards

IRVALI

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ALI IRVALI

Expertise

FIDIC, Arbitration Procedures, Claim Management, Project Management.

Experience

I have experience of working at 6 countries in MENA region (algeria, Libya, Saudi Arabia, Oman, Pakistan)as the Regional Director and General Manager of a construction company. I have experience on various applications of FIDIC and construction law, arbitration procedures, claim management, project management.

Organizations
CEO of TURCON Construction presently. www.turcon.com.pk

Education/Credentials
M.S. Civil Engineer, Various Courses on Project Management, Seminars on FIDIC.

Past/Present Clients
National Highway Authorities of various countries, Water and Power Development Authorities, Karachi Port Trust, etc.

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