You are here:

Construction Law/Claim under Sub-Clause 13.7

Advertisement


Question
QUESTION: Dear Sir,

During the Contract Period, Government has imposed a new Sales Tax on Construction Services provided by the Contractor. The Contractor has notified the Engineer under Sub-Clause 13.7 & 20.1 GCC (FIDIC MDB Harmonized Conditions) after 6 months of legislation. In accordance with Sub-Clause 20.1, the Contractor has to notify the Engineer within 28 days after the event occur (which in our case 6 month before occur).
Further Sub-Clause 13.7 GCC states “After receiving this notice, the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determination] to agree or determine this matter”.
My questions are as follows:

(i)   Has the Employer discharged from his responsibilities in connection with the claim? because the Contractor has notified 6 months after the event occur.
(ii)   If Employer is not discharged from his responsibilities, then when the event is considered to occur. Either (a) when notice received or (b) 28 days before the date of submitting notice or (c) when the actual event occurs?
(iii)   On what basis the Engineer has to determine the cost or time in accordance with Sub-Clause 3.5 when only the Contractor has given notice and not submitted the fully detailed claim?
(iv)   Is the last paragraph of Sub-Clause 20.1 GCC has any effect on Contractor entitlements in the subject case?
your expert opinion is requested.  

Regards,

UMER SHABBIR

ANSWER: Dear Umer,

Thank you for this question.

Sub-clause 13.7 makes clear that a notice is required from the Contractor under sub-clause 20.1 and, therefrom the time constraints within sub-clause 20.1 are applicable; the Contractor is to give its notice "not later than 28 days after [it] became aware, or should have become aware, of the event or circumstance". Please note that events and circumstances do not have to occur at the same time.

The event is the change in legislation. The question is when the Contractor should have become aware of that change and, secondly, when did it become aware of the effects of that change? Those questions I will need your assistance with.

Another aspect for me to enquire of is the law governing the Contract. If you are in a civil law jurisdiction the notification pre-condition under sub-clause 20.1 might be of very limited effect.

I will be happy to revisit this question of you can provide the further information identified.



I hope that this assists you.

Kind regards,
John Dowse

Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)


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

QUESTION: Thanks for the Answer, The further detail of the case is as follows;

In my view, the Contractor should have become aware of the change when Government announces it which is written in official Gazette and separately relevant Government Department (Revenue Department) has also inform the Contractor by issuing SRO to the Contractor. Means Contractor was fully aware of this legislation when Government announces it.

In our Country, Common Law is applicable. Please also advice me about notice requirement in CIVIL and Common Law.

Answer
Dear Umer,

Thank you for this information.

Given the manner of publication of the change of law as you have described it, it seems to me that the Contractor will have some difficulty in claiming it did not know of the change and could not have issued the notice required by sub-clause 20.1 at an earlier time.

This leads to whether or not, under the law governing the Project and/or the jurisdiction in which the Project is being undertaken a notification that is issued late by the Contractor has the effect of relieving the Employer of any liability, as is clearly intended by the FIDIC General Terms and Conditions.

In England and Wales, a common law jurisdiction, such provisions are generally upheld; however this is not the case in every common law jurisdiction or some of the civil law jurisdictions. In Australia for example, which is a common law jurisdiction, the courts have taken a softer stance than the English judges. This seems too have been founded upon the knowledge of the two parties and an inference of a need to deal in good faith. In civil law jurisdictions, where the doctrine of good faith tends to have a significantly higher priority, it is less likely that the late delivery of the notification would have such draconian effect. From the foregoing you will see that there is no clearly defined legal principle.

Turning now to your questions.


(i) Has the Employer discharged from his responsibilities in connection with the claim? because the Contractor has notified 6 months after the event occur.

On a strict interpretation of the FIDIC provision the Employer is discharged from liability and the claim can be rejected. Whether a DAB or court in your jurisdiction would consider that appropriate or fair and reasonable I cannot say with certainty.

I suggest that consideration is given to the wider good of the Project. The Employer might want to make a without prejudice, ex gratis payment to the Contractor to cover in part any additional costs.



(ii) If Employer is not discharged from his responsibilities, then when the event is considered to occur. Either (a) when notice received or (b) 28 days before the date of submitting notice or (c) when the actual event occurs?

The timing for the Contractor to submit the notice runs from the date of the event or the date of the circumstance, or the date on which the Contractor ought reasonably to have known of the event or circumstance. In terms of changes in legislation it can be argued that such are publicised well before the actual enactment and the time should run from a much earlier date.


(iii) On what basis the Engineer has to determine the cost or time in accordance with Sub-Clause 3.5 when only the Contractor has given notice and not submitted the fully detailed claim?

FIDIC intends the notification to be a pre-cursor to further and better details. The contract requires the Engineer to make a decision on the principle of the claim even if the Contractor only submits the notification. The Engineer is obliged to assess the value of the claim absent any particular from the Contractor; however that assessment might be very low of nothing at all in the circumstances.


(iv) Is the last paragraph of Sub-Clause 20.1 GCC has any effect on Contractor entitlements in the subject case?

The final paragraph of sub-clause 20.1 refers to the case of the Engineer making a determination where the Contractor has not submitted the further details required of him. Provided that the Contractor has submitted the notification of intention to claim within the stated 28 days, the Engineer can proceed to assess the claim value within any further information from the Contractor, taking account of any prejudicial effect suffered through the lack of detail.




I hope that this assists you.

Kind regards,
John Dowse


Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)

Construction Law

All Answers


Answers by Expert:


Ask Experts

Volunteer


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

©2016 About.com. All rights reserved.