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Construction Law/Liquadated damage & interim payments

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QUESTION: Dear Sir,

with reference to Fidic 1987 and as per clause 60.2 of the monthly payment the deduction from the interim payments should be considered by the engineer other than pursuant to Clause 47 (liquidated damages) whereas as per clause 60.10 the employer would consider Clause 47 upon payment the interim payment to the contractor within 28 days ??!!
May you explain this discrepancy and explain if the liquidated damages could be deducted from interim payments or only from payment at completion???

Thank you

Khaled

ANSWER: Dear Khaled,

The timing of payment of liquidated damages is not clear, considering clause 47 and 60.2.  The can be problems if the Contractor has submitted claims for extensions of time which are unresolved or still in dispute.  If an EoT were to be granted at a later date, then the Employer would have to repay any liquidated damages and pay interest for the time that they were deducted.  Clause 60.10 allows the Employer to deduct liquidated damages from any payment due under an IPC.

The Employer can deduct the liquidated damages from any payments certified by the Engineer for payment or from any other payments due to the Contractor.  It could be that the liquidated damages are greater than any payments which are due to the Contractor.  I recommend that the Employer submit a claim to the Engineer for liquidated damages.  If the Engineer agrees the claim, then the Employer instructs him to deduct the amount from the IPC and the Employer pays the certified amount.  

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

QUESTION: Thank you Sir, however;

1- please explain what are the cases  which will allow the engineer to agree the claim of the employer to deduct liquidated damage from any IPC and the cases which will not.
2- Also, you mentioned that If the Engineer agrees the claim, then the Employer instructs him to deduct the amount from the IPC and the Employer pays the certified amount. what do you mean by the certified amount that will be paid by the employer??

Thanks again

Answer
Dear Khaled,

1. The Engineer will agree the Employer's claim when it is valid, i.e. the time for completion has expired and the Contractor has not submitted a valid claim for extension of time.  The Engineer will reject the Employer's claim if the time for completion, plus extensions granted, has not expired.  The Engineer may delay a decision if there is a valid claim for an extension of time which has not been resolved when the time for completion, plus extensions, if any, expires.

2. The certified amount is the value of work done in the period less any deductions, including the Employer's claims for delay damages.

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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.

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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')

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

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B Sc(Hons) in Civil Engineering

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