Construction Law/Employers Loss

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Question
Dear John,

1.   We are the Engineer on a project in Botswana under FIDIC Conditions of Contract for Electrical and Mechanical Works Third Edition.
2.   Two separate tenders were received for the project:
•   Main Offer for a higher price for completion on or before 31 January 2012 providing the contract is awarded on or before 15 August 2011.
•   Alternative Offer for a lesser price for completion to contractors program of 245 days.
3.   The Employer awarded the Contractor the contract for the Main Offer for completion on or before 31 January 2012 in the higher amount in order to achieve accelerated completion.
4.   In the event the works were delayed due to the contractors fault (late equipment delivery) with handover of part of the works for beneficial use on 7 July 2012 (158 days late) and handover of the balance of plant on 11 April 2013 (436 days late).
5.   Clause 27.1 Delay in Completion of the Conditions of Contract provide for a reduction in contract price of 1% per week, or part thereof, up to a maximum of 10% of the contract price unless it can be reasonably concluded from the circumstances that the Employer will suffer no loss.
6.   In terms of the actual Contract the Employer did not suffer any losses thus from this perspective the Employer is not entitled to a reduction in Contract Price.
7.   Had the Employer opted for the Alternative Offer for completion to contractors program in the lesser amount it is likely that the project would have cost less. Even though this is speculation as the Alternative Offer never eventuated can the Employer claim the difference in price as losses suffered?

Answer
Dear John,

Thank you for this question.

The short answer to your question is NO; the Employer cannot claim the difference between the original tender values as a measure of his loss. That is not to say that the Employer is not entitled to some compensation, even with the caveat attaching to the Liquidated Damages/Delay damages clause.

There is insufficient information within your question to give precise guidance; however I think that the LD clause is unclear and, therefore, potentially void. If so, the Employer may be entitled to claim actual losses.

Further, depending upon both the law of the contract and how the contract is written the Employer may be entitled to damages outside of the contract




I hope that this assists you.

Kind regards,
John Dowse

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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