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Construction Law/Yellow FIDIC - IPC rejections


QUESTION: Dear Mr. Niculescu,
we have a contract where the Contractor has submitted among others, EXACTLY the same items in 3 consecutive IPCs. These items have been deducted in all these IPCs due to pending NCRs. Now in the 3rd IPC he submits a notice to claim (sub-clause 20.1). Can he do that, or since he didn't claim for these items in the deduction of the 1st IPC where they were included, now he is not entitled to claim (since the 28 days notification period are over)? The physical condition of these items hasn't change one bit in the elapsed time between the IPC submissions.
The question could be put also like this: When one has lost the right to claim for one event due to elapsed notification time, if he includes exactly the same event under another claim is he entitled to it, or this portion is excluded from this claim?
Thank you in advance!

ANSWER: Dear George,

Thank you for your question.

I am uncertain what the "NCR" stands for, but understand that Contractor has included in his Monthly Statements, some same three items for being paid, consecutively for the last three months, but each time, these items were rejected from payment.

If those "pending NCRs" #whatever they are# are correct and the three items were not paid because there was a pre-condition that was not fulfilled, you were right not to pay and Contractors' claim has no ground.

If by the contrary, those "NCRs" are not constituting a proper reason to reject from payment the three items, then Contractor is entitled to claim.

You did not indicate what is the basis of Contractors' claim, so I will try to guess some alternatives:

a) Contractor claimed for delayed payment: wrong, until amounts certified and deadline for payment exceeded, there is no entitlement.

b) failure to issue IPC for those amounts: yes, that claim is absolutely perfect and the fact that you rejected them twice, is exactly what proves the Contractor is right. And they claimed in time, apparently. I presume the claim came WITH, not IN, the last Statement.

c) mind you, IPC is issued by the Engineer, based on Contractor's Monthly Statement. Please make sure you always use the right contractual terms, otherwise you're running the risk of misleading people and even ruin your eventual case(s).
And if Engineer has indeed issued the IPC, but you as Employer, did not pay, then you are in breach of contract and Contractor can claim for delayed payment. Probably the two months since first request for payment, are practically the deadline for payment that just elapsed. Not paying an issued IPC is a gross error/ breach of Contract, even if that IPC contains plenty of items that are actually not due. But once issued an IPC MUST be paid - you can always deduct in the next month the undue amounts.

There are some unclear or missing details in your question, therefore please check again your situation based on above considerations/ alternatives and see where are you exactly.

As well, there may be some Particular/ Special Mandatory Conditions of which I am unaware and may as well change the situation, thus please verify eventual such related Sub-Clauses too.

Hope that helps, but if certain aspects are still unclear, please do come back to me and will gladly develop the answer.

Look forward hearing again from you.

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

QUESTION: Dear Mr. Niculescu,
that was fast!!! Thank you very much for your immediate answer. Yes, I should probably be more specific:
(a) NCR stands for Non Conformity Report, therefore it indicates a significant quality problem of the item which is requested to be paid. (b) I am talking about the Engineer's position. The Engineer has deducted amounts from these items for specific reasons for which the Contractor never took ANY action to rectify or amend in any way. Therefore, the fact sequence was like that:
1. IPC N (N stands for one month during the course of the Contract) is submitted. After evaluation the Engineers deducts some amount for items x, y, z and issues IPC N to the Employer with a corrected total amount.
2. Contractor does not express in any way his dissatisfaction again these corrections.
3.  IPC N+1 is submitted (next month from N). Contractor, without taking any action (as explained above) for items x, y, z requests again payment as he did in IPC N. The Engineer rejects these amounts for x, y, z and issues IPC N+1 to the Employer with a corrected total amount.
4. Contractor does not express in any way his dissatisfaction again these corrections.
5. IPC N+2 is submitted (next month from N+1). Contractor, again without taking any action for items x, y, z requests payment as he did in IPC N and N+1. The Engineer, again, rejects these amounts for x, y, z, but, now, he cannot issue the IPC since its value is less than the min amount for certification and notifies the Contractor.
6. The Contractor submits a claim for the rejected IPC N+2 within 28 days (correctly so) from the Engineer's notice.
Therefore my question is, since x, y, z were corrected for the first time 3 months ago and were never questioned in any form (monthly reports, letter etc) nor their physical condition changed in any way, can he claim them now? I understand that he claims, within time, against not issuing IPC N+2, but isn't it clear that, in fact, he claims for the same corrections which were performed for the first time 3 months ago? Is there no application of sub-clause 20.1 "became aware, or should have become aware, of the event" for these x,y,z deductions?
Finally, there are no other special conditions, in this case, apart from what the Yellow book includes.
In that sense, my second question is:
When one has lost the right to claim for one event (let's call it A) due to elapsed notification time, if he includes exactly the same event A under another claim for events A+B, then is he entitled to A, or this portion is excluded from this claim (so it is only evaluated for B)?
Looking forward for your reply!!
Thank you in advance for your time!!

ANSWER: Dear George,

Thank you for coming back with these details.

Before anything else, for an item to go in the Monthly Statement, it has to be certified by the Engineer as accepted. Which means it has to be compliant with the Technical Specifications/ Employer's Requirements.

And to demonstrate that, the Contractor normally includes in his Monthly Statement the supporting evidences for demonstrating he has done his job.

If an item has not reached that stage, the Contractor is not entitled to get paid. Hence no ground for any claim, at any point in time.

As such, while I would maybe continue to say the claim is time barred, just in case (though arguable), I would simply reject the claim as groundless.

The Engineer has deducted the x,y,z items and informed the Contractor - presumably also issued a Notice to Correct. Contractor does nothing to correct, but ask again for money he is not due. If that's the situation, I see no entitlement whatsoever and Engineer should reject the principle of the claim.

Suggest you carefully read 20.1 and 3.5 and see exactly what they say. Also look at Payment and Delayed Payment.

Hope that answer your query

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

QUESTION: Dear Mr. Niculescu,
Yes it does answer up to certain point. In order for me to get the whole idea: Let's say that the first two times that the Engineer deducted the x,y,z items, he was completely wrong, then could an answer to the Contractor's claim be that it is time barred, since he hadn't mention anything within the 28 days period from the first time of the deduction? I don't say if this is fair or not, but is it contractually correct?
Also, could you please give me an answer to my 2nd question at the end of my previous correspondence?
Thank you once more!

Hello George,

Thank you for coming back.

I do not understand why clutching yourself to the time barring. The Engineer righteously did not included x,y,z in the IPCs and any claim in that respect is groundless.

Because there is no event that would trigger a claim, hence no time barring!

Please go back to the Contract and put on a piece of paper all steps that must be undertaken by each part, along from the moment a Monthly Statement is issued till Payment, or eventual Delayed Payment that may trigger a claim. As well, put on that paper the steps to be undertaken by each part.

In respect of the query you mention, yes, it might be possible, but highly dependant on actual specific case. Do not think you have it here, because there is nothing constituting the moment when Contractor "became aware, or should have become aware, of the event", there is no event.

Hope that clarifies the matter.

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