Construction Law/Final statement/Discharge Certificate when project is still under dispute
Dear Mr.Femi Alofe,
I would like to have your opinion on the following situation:
The Contractor is in the process of submitting the “Final Statement” along with the “Discharge Certificate”. The final value of all work done has been jointly corrected and agreed in the draft final statement, however the claims submitted earlier by the contractor is still under dispute after Engineer’s decision given pursuant to Clause 67.1 of Dubai Municipality Conditions of Contract, March 1991 and is presently being discussed for amicable settlement before the Employer and Contractor decide to go for Arbitration in absence of any settlement.
My question is:
1.Can contractor submit the discharge certificate without settling the dispute?
2.If no, how to close out the project since it may take time to arrive at settlement through amicable settlement or through process of arbitration (period is indefinite?)
3.If yes, can he submit the Discharge certificate stating the agreed final value of all work done under Clause 60.6(a) and his claim amount under Sub-Clause 60.6(b)( please note minor changes in wording of this Sub-Clause )
The “Final statement” Sub-clause 60.6 of Dubai Municipality of Contract (almost similar to FIDIC, 4th Edition, 1987 but with few changes and last paragraph omitted) dealing with this states that”
Not later than 56 days after the issue of the Defects Liability Certificate pursuant to Sub-Clause 62.1., the Contractor shall submit to the Engineer for consideration a draft final statement with supporting documents showing in detail, in the form approved by the Engineer after consultation with the Employer,
(a)the value of all work done in accordance with the Contract and
(b)any further sums which the Contractor considers to be due to him under the Contract.
If the Engineer disagrees with or cannot verify any part of the draft final statement, the Contractor shall submit further information as the Engineer may reasonably require and shall make such changes in the draft as may be agreed between them. The Contractor shall then prepare and submit to the Engineer the final statement as agreed (for the purposes of these Conditions referred to as the “Final Statement”).
The “Discharge Certificate” clause 60.7 of Dubai Municipality of Contract is exactly same as FIDIC, 4th Edition, 1987.
Thanks for your question.
Having gone through your narration, i can answer your questions using the condition stated in Clause 60.7 for issuance of DC as follows;
1. The Contractor cannot submit the discharge certificate without settling the dispute. This is to his advantage to have opportunity to seek redress on the disputes through the contractually provided redress mechanism. Again, if the Contractor is submitting the written discharge certificate, he has to submit it along with an evidence of the total final sums as agreed with and approved by the engineer under the final statement and if he has not agreed anything with the Engineer (because of the disputed claims), he can not definitely submit the discharge certificate. If he does by submitting a final statement of what the Engineer has recommended (which he is still disputing), then, it would be understood that, he has waived his rights to pursue the dispute further. It would then be obvious that, after the submission of the written discharge certificate, no claim can be entertained against the employer again except in the law court (if the law of the land permits that - anyway) but the written discharge will really hamper the outcome of such suit and possibility of the Contractor being successful therein is slim.
2.In case, the Contractor is unable to give this written discharge because of the pending dispute before arbitration, then, the Engineer would only send INTERIM FINAL STATEMENT with interim certified amount to be paid to the Contractor pending the outcome of the Arbitration. And thereafter, when the outcome of the Arbitration would have been known and enforcement of the award is concluded, then, the FINAL STATEMENT can then be agreed between the Engineer and the Contract and then further endorsed and approved by the Engineer. The Evidence of this agreed final statement would then, be attached the the written discharge certificate to be issued to the Employer by the Contractor. And this marks the closure when the final certified amount is paid and PB returned.
3. If there is current dispute, he (the Contractor) cannot submit written discharge certificate. If he does, he may be including his claim which is being disputed by the Engineer and therefore, the Engineer will not agree or approve the final certificate and the Engineer's agreement and approval to the final statement is a CONDITION PRECEDENT to submission of discharge certificate to the Employer by the Contractor (Clause 60.7). Or else, if the Engineer also agreed and approved the final draft of the final statement which include "disputed claims", it means, the Engineer (acting on behalf of the Employer) has WAIVED the employer's rights to pursue the Arbitration course forthwith.
Hope the above clears your doubt.