Construction Law/Demobilization

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Question
If a client requests that the contractor be demobilized from site till further notice due to lack of funds, what are the implications to the client and the contract as a whole?

Answer
Dear Toks,

Thank you for your question.

Unfortunately, i am limited in answering the question with full authority using the specific contract involved because, the contract conditions in use was not not cited. Notwithstanding, should a client instruct the Contractor to demobilize due to lack of funds; in most common contract conditions; it is either that, the contract has been terminated as a result of insolvency or for clients' convenience or for economic reasons or implied any of those.

Most common contract conditions like FIDIC, JCT though in different wordings but similar intent has provided the implication to the Client, in any events of such an instruction to naturally include:

Compensating for and reimbursing the contractors cost resulting from:  
1. any loss suffered by him for cost incurred directly on the contract which are likely not to be able to recover by him by the non - ability to execute the works by the Clients instruction to demobilize. This cost include payment of the cost incurred on  preliminaries items for the contract, any cost for the works executed and the materials on site, any cost for materials offsite specifically ordered for the project and all costs in ensuring clients possession of such materials, cost of any machinery and plants bought purposely for use on the contract in equivalent of the cost using any agreed depreciation formula to put the contractor in a position on "no-loss" on the purchase, any anticipated profits that may have been lost which was expected from the contract, Overheads charges include home office overheads for the contractor.
2. any loss or damages suffered by the Contractor for costs suffered indirectly but which has been a resultant effect from the clients instruction.

In any one if the 1 & 2 above, the Contractor would have to justify its entitlement to the claim by forwarding documents, calculations and convincingly and detailed narratives that is capable of verifiably supporting the claims. It is also possible that, if the intention of the instruction is "only to demobilize" and with the plan or further intention to re-mobilize for the execution of the works when funds are now available; then; in that case; it would be assumed that the instruction only "impliedly meant to suspend the works". Where works are suspended, the claims and implication to the client are similar to the ones mentioned in 1 above except that; the losses / compensation would only be limited to the period of the suspension. However, it is good to know that, some contract conditions, have cap for suspension period within which, if the Client does not lift the suspension order and ask the Contractor to resume work, the Contractor can terminate the contract (following certain procedures) and thereater, be compensated as in 1 above.


I hope i have been able to assist?


Thanks

Femi

Construction Law

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Femi Alofe

Expertise

I can answer all questions relating to the followings: 1. Contract Administration - variations, contract clauses interpretation, all post contract procedures, valuations and certificates questions, extension of time issues and prolongation cost matters. 2. Contract Practice - Any questions regarding forms of contract like JCT, FIDIC & other Bespoke forms. 3. Quantification, measurements and Estimating questions 4. Contracts and construction law questions and dispute resolutions problems. 5. All FIDIC Conditions of contracts

Experience

Out of my 24 years experience in construction industry, i have the following specific experience: 1. Contract Administration - 15 years in contract administration with over 10yrs in Managerial positions covering africa and the middleeast. 2. Contract Practice - 15 years experience with over 10yrs in Managerial and expert positions covering africa, north america and the middleeast. 3. All pre-contract procedures, Tendering, Quantification, measurements and Estimating questions - 20 years experience. 4. Contracts and construction law questions and dispute resolutions problems - 15 years experience with over 10yrs in Managerial and expert positions and 5 years expert witness and active practice in arbitration proceedings covering africa and the middleeast.

Organizations
1. FAIQS - Fellow, Australian Institute of Quantity Surveyors, Australia 2. FRICS - Fellow, Royal Institution of Chartered Surveyors, UK 3. CCP - Certified Cost Professional AACEI, USA 4. PQS - CIQS, CANADA 5. ACIArb. - CIArb, UK 6. MNIQS - NIQS, NIGERIA 7. RQS - QSRBN, NIGERIA

Publications
1. AACEI RP on Estimating, 2010

Education/Credentials
1. B.Tech (QS) 2. RICS professional course, CEM - UK 3. MSc , UK NARIC 4. Professional Doctorate ( to commence 2016)

Past/Present Clients
1. Larsen & Toubro Ltd, Dubai UAE 2. Larsen & Toubro (oman) LLC 3. Archi + Web consortium, Abuja Nigeria 4. George Dike & Associates, Minna Nigeria 5. Public works Authority (Ashghal), Doha Qatar

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