QUESTION: Dear Peter
Our contract is based on FIDIC MDB 2010 the applicable law is English.
As you are aware for notice to commence there are certain pre-conditions given in 8.1 after which the engineer is to issue the notice to commence. Unfortunately there were two major delays:
1. Upon issuance of letter of acceptance the contract was signed after a 4 months delay whereas it should have been signed within 28 days of LOA.
2. after signing of the contract the notice to commence was delayed by another 5 months.
unfortunately we do not have an escalation clause (as it has been deleted)our project was to be completed within 12 months of the notice to commence.
our contract requires that the possession of site is to be granted within 15 days of notice to commence.
Please note all the pre-conditions listed in cl 8.1 had been fulfilled and as such there was no contractual reason for withholding the notice to commence. however we understand there were some issues in possession of the site because of with the notice to commence was withheld.
Clause 8.1 provides that if the notice to commence is not granted within 180 days of letter of acceptance the contractor is entitled to terminate the contract. in our case we did not terminate the contract.
However we are interested to be compensated for the price escalation especially for the delay in completion consequent to delay in issuance of the notice to commence after the contract signing now my question is:
1. Notice period pursuant to clause 20.1 is to be calculated from letter of acceptance or can we consider the period after the contract signing separately. as we issued the notice within 28 days of an estimated time (no period is given we estimate one week of signing of contract) within which the notice to commence should have been issued after the contract signing
2. Under which clause can we claim additional cost? can we claim under cl 2.1 (b)as delay in notice to commence consequently delayed the grant of possession of site.
3. Any other route to claim compensation
I shall be grateful for a quick and a detailed reply
ANSWER: Dear Abu Hashim,
1. First you have to decide when a contract existed. As you are operating under English Law, a contract exists from the date of the LoA. However, since you had no obligations until the Contract was signed, you did not expect to have any extra costs, so I would say that the clock, for notification of a claim, started when the Contract was signed.
2. Clause 20.1 is the basis for the claim. Clause 2.1 is supportive. Clause 8.1 requires that the Commencement Date must be within 42 days of the LoA. Clause 8.4 covers the application for an Extension of Time for Completion, which is tied to the Commencement Date, unless your contract specifies something different.
3. Under English Law you have the principle of 'prevention' and the courts have been impatient with time bar clauses where the Employer is at fault. Under Sharia Law, you have the principal of unjust enrichment.
I guess you will have some difficulty in justifying your case, so I suggest that you will need to collect a lot of price data.
---------- FOLLOW-UP ----------
Some clarifications, our contract is not standard FIDIC rather as mentioned it is FIDIC MDB 2010, which is being used by the multilateral banks. And it does not provide the 42 days within which the notice to commencement is to be issued rather it just provides the pre-conditions after which the notice to commence is to be issued.
Here EOT is not the issue as you mentioned the time for completion starts with the notice to commencement therefore the clock starts clicking only after the commencement notice.
The problem is that cl 2.1 is worded in such a way (at least on the face of it) that the contractor is to be compensated in case there is delay in possession after the notice to commence (there was no delay in possession once the notice to commence was issued) however we are concerned about the delay btw the contract signing and the notice to commence.
Can we still rely on 2.1 to claim cost compensation for the delay prior to the notice because it did result ultimately in delay in possession of site or can we adopt any other route.
Dear Abu Hashim,
I have been researching this question, but I do not have a definite answer for you to the problem. If I find something then I will add to this answer.
Yes Cl 2.1 does appear to relate to only delays in possession after the notice to commence, so what to do? I guess that you would have priced for the Contract to be signed within 28 days and the Commencement within a further 42 days after that, so you would have allowed for any price escalation within that period. Thereafter, the Employer has no excuse. Clause 1.9 might offer an opportunity, if you had given the required notice of a need for an instruction to commence. I suppose that you submit a claim under 20.1, mentioning the expected durations and the effect of the delays. Possession of the site is a common problem in road contracts, but usually after the order to commencement.
I apologise for not being able to give more positive advice.