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Construction Law/Termination of contract

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QUESTION: Dear Florin
hello
I have two contracts which are terminated by the client under clause 15.2 of MDB FIDIC1999 pink book.
1. in one contract agreement ,contract was signed on 29.06.2011 for the period of 18 months to complete the project and date of commencement was 19.07.2011. After expiry of contract period progress was in terms financial  54% .The Engineer has served various notices as per clause 15.1 to the contractor but no improvement has noticed for the acceleration of progress.Finally Engineer has recommended action of termination under clause 15.2(a) &(c)(i) termination of contract. Employer has terminated the contract as per recommendation of Engineer and exercise to invoke the Bank guarantees of Mobilisation advance and of Performance security by giving the notice of 14 days.

2.In another contract agreement, contract was signed on 29.06.2011 for the period of 24 months to complete the project and date of commencement was 27.07.2011. After expiry of 96% contract period progress was in terms financial 32% .The Engineer has served various notices as per clause 15.1 to the contractor but no improvement has noticed for the acceleration of progress.Finally Engineer has recommended action of termination under clause 15.2(a) &(c)(i) termination of contract. Employer has terminated the contract as per recommendation of Engineer and exercise to invoke the Bank guarantees of Mobilisation advance and of Performance security by giving the notice of 14 days.

Contractor has claimed that action of termination as well as the action to invoke the bank guarantee is against the contract agreement.
My questions are that;

1. Action of termination taken by the authority. Does has the right to invoke the bank guarantees given by the contractor against payment of Mobilisation advance and for Performance security before expiry of notice period of 14 days?
2. Can you clarify that notice of !4 days is necessary or not to terminate the contract under clause 15.2?
3. How the contractor can claim under the contract agreement, the action to invoke the bank guarantee is against the provisions of contract agreement?

Thanks and regards are in advance.I hope an early reply in this matter.

Sanjay

ANSWER: Dear Samna,


Thank you for your questions.

I take you also contend the contracts termination. You may probably request the Engineer to indicate which Sub-Clause of Clause 8 are they invoking, but with such rates of progress, do not expect much sympathy.

In respect of bank guarantees:

- for the Advance Payment, you must've started already to recover it and assume you have also provided a bank guarantee (probably the Bank guarantees of Mobilisation that you mentioned). The portion of the Advance Payment that has not been recovered, is to be recovered from that bank guarantee, but only up to that amount.

- Performance Guarantee: Employer can take out of it, only as much as they can reasonably claim as losses. As that include re-doing the tender dossier, re-launching the tender, etc, which means wasting of time and money, it is possible to justify quite a large amount out of it, or even all, but again, they must make a calculation to demonstrate/ substantiate the loss they suffer.

As for the 14 days, I assume you are referring to those indicated under Sub-Clause 15.2:

- yes, Contract can not be terminated prior that;

- that period does not refer to cashing the bank guarantees.

Hope that answers your queries, if any further issues, please get back to me.

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

QUESTION: Dear Florin Neculescu
Hello
Thanks for an early response;My further query is that ;
Can Employer invoke the termination notice? if the contractor will successful to convince the Employer; to complete the work within a reasonable time by enhancing the deployment of machinery and manpower and within the conditions of agreement.
Thanks in advance for your great efforts.
With due regards
SANJAY

Answer
Dear Sanjay,


Thank you for coming back.

I am somewhat uncertain what do you mean by "Can Employer invoke the termination notice?", but if you think about convincing the Employer to give you one more chance, despite having issued the termination notice, that is of course possible.

It should be sufficient a notice from their side, saying they suspend the 14 days deadline until a certain period, when your progress shall be reviewed and a decision in respect of proceeding with the termination, or continuing the contract, shall be taken.

If that's not your actual question, please come back to me with clarifications.

Hope that helps.

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Florin NICULESCU

Expertise

Questions related to Civil Engineering Contracts, using FIDIC or other Conditions of Contract, concerning Procurement procedures and documents (pre-qualification, tendering and contracting) and Services/ Works Contracts implementation matters including Determinations, Payments, Time Extensions, VOs, Claims/Disputes. Additionally, questions related to dealing with International Financing Institutions. Can also answer questions in Romanian. Can not answer improperly formulated questions.

Experience

Over 20 years of experience in the field of design, works supervision, construction, management of aid funds and technical assistance for various types of contracts implementation, including severe conflictual contractual situations leading to Claims and disputes. Claims/ Contract management, Disputes adjudication, Arbitration.

Organizations
Member of Romanian Professional Association of Roads and Bridges; Listed on President's List of Adjudicators of Romanian Association of Consulting Engineers www.aric.org Former member of the Disputes Resolution Board Foundation (DRBF) of United States – nominee on DRBF President’s Disputes Board Members List www.drb.org and of DRBF Chapter for Eastern Europe http://dabdrb.googlepages.com Former member of Polish Association of Consulting Engineers (SIDiR) – nominee on SIDiR President’s Disputes Board Members National List http://www.sidir.pl/sidir/index.php?action=czlonkowie&a2=r Member of “AllExperts.com” volunteers pool http://www.allexperts.com/user.cgi?m=4&expID=85358&catID=914 Member of the "Constructions Disputes Resolution Services” International Panel of Construction ADR Specialists" of United States www.constructiondisputes-cdrs.com

Education/Credentials
- Graduate in 1994 the Construction Institute - Graduate of several FIDIC,Procurement and other courses - Graduate of first Disputes Board Members Mentoring Scheme (http://www1.fidic.org/resources/adjudicators/pupilage.html) - FIDIC Accredited Adjudicator

Past/Present Clients
- Several State organisations/Ministries , such as Ministry of Transport, National Admistration of Roads, Ministry of Regional Development (former Ministry of European Integration), Public Works and Housing, Central Contracting and Financing Unit in Romania and also in Turkey, Croatia and Macedonia - Numerous Western based private consultancy companies - full CV and other relevant information available at www.abinitio.ro

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