Construction Law/Statement at Completion
QUESTION: Dear Madam,
In our project, FIDC MDB 2006 edition is being used. The Contractor has failed to submit Statement at Completion (Sub-Clause 14.10) even after the due date of 84 days after TOC.
Sub-Clause 14.14 states,
”The Employer shall not be liable to the Contractor for any matter or thing under or in connection with the Contract or execution of the Works, except to the extent that the Contractor shall have included an amount expressly for it:
(a) in the Final Statement and also
(b) (except for matters or things arising after the issue of the Taking-Over Certificate for the Works) in the Statement at completion described in Sub-Clause 14.10 [Statement at Completion].
However, this Sub-Clause shall not limit the Employer’s liability under his indemnification obligations, or the Employer’s liability in any case of fraud, deliberate default or reckless misconduct by the Employer.”
I have following questions;
(1) How this failure will effect Contractor’s Entitlements?
(2) Is this necessary for the amount (due to matters arising before TOC) which Contractor wishes to include in Final Statement after this failure, must also be expressly stated in Statement at Completion? Because Sub-Clause 14.14 (a) states the word “in the Final Statement and also”
(3) Issuance of Performance Certificate without submitting Statement at Completion, would affect Contractor’s entitlements?
Your expert opinion is requested.
ANSWER: Dear Sir,
For the issues that happened before the Taking Over, the amounts should be included in the Statement at Completion AND in the Final Statement. For the issues that happened between the TOC and the Final Statement, the amounts should be included, of course, only in the Final Statement. If in the Statement at Completion or/and in the Final Statement the amounts for the issues that happened before the TOC are not included, this means that the Contractor renounces at them.
14.10 says that the Contractor shall issue the Statement at Completion within 84 days from receiving the TOC, then the Engineer will certify according to 14.6. If the Contractor does not issue the Statement at Completion within the 84 days from the TOC, but later, the Engineer will certify according to 14.6 and the Contractor will get paid for the works done up to the date of the TOC only after he will submit the Statement at Completion - later than the 84 days - and after the Engineer will issue the Certificate according to 14.6. If the Statement at Completion is never issued, since there is no amount as per 14.10 (b) that the Contractor considers that he is entitled to, according to what happened before the TOC, he looses his entitlement to this amount. If the Statement at Completion is issued, eventually, after the 84 days, it is still valid - the same are valid the amounts as per 14.10 (b) - since the Contract does not provide any sanction in case the 84 days are not complied with (like the Contract foresee sanctions for not including an amount under 14.10(b), or if the notice of claim is not given in the 28 days foreseen in the clause 20.1, for example).
If no Statement at Completion is issued by the Contractor, at any time, there will be no certification after the Statement of Completion, as said above. Being no Statement at Completion, there will be no amount included, as per 14.10(b), of course, therefore the Contractor looses his entitlement to any such amounts. The Performance Certificate will be issued within 28 days after the last of the Defect Notification Periods, then within 56 days after receiving the Performance Certificate, the Contractor shall submit the Final Statement, including, as per 14.11(b), any further sums which the Contractor considers to be due to him under the Contract or otherwise. The amounts due, according to the Contractor's opinion, for things that happened before the TOC, even if they are included here, are not valid anymore, since they were not included in a Statement at Completion, as per 14.10(b). Only amounts related to things that happened after TOC can be included and be valid. So, yes, issuing the Performance Certificate without issuing the Statement at Completion affects the Contractor entitlements.
Hope this clarify your issues.
---------- FOLLOW-UP ----------
QUESTION: Dear Madam,
Good to see you back. I always keen to know your view point about Contract Interpretations.
One view point is that nothing in contract like clause 20.1 states that the Employer will be discharged from his liabilities in connection with the amounts for the issues occurs before TOC and not included in Statement at Completion.Only clause 14.10 guides some actions but it is not very clearly demonstrate the Contractor's non-entitlements. The Contractor has already bear a loss of non-payment due to this delay. your opinion is requested.
The clauses of the Contract are read together and together the clauses of the Contract form the contractual mechaanism. Something established in a clause is not established again in another clause - sometimes, the Particular Conditions made with not enough carefulness do this, i.e. include provisions regarding an issue in many clauses, and from here confusions are generated.
The clause 20 foresee the mechanism (procedure) of initiating, sending details and solving the Contractor's claims and settling disputes within the Contract. Particular issues about different situations that can occur during the lifetime of a Contract are dealt by the different clauses in the Contract. The Case in your question is dealt within the clause 14. Clause 20 foresees the general mechanism for all the Contractor's claims.
So, the general mechanism is that if the Contractor does not notify the claim within 28 days from the date when he knew or should have known about the event or circumstance giving raise to the claim, the Contractor loses his entitlements for that claim (any possible claim). The last paragraph of 20.1 says: "The requirements of this Sub-Clause are in addition to those of any other Sub-Clause which may apply to a claim. If the Contractor fails to comply with this or another Sub-Clause in relation to any claim, any extension of time and/or additional payment shall take account of the extent (if any) to which the failure has prevented or prejudiced proper investigation of the claim, unless the claim is excluded under the second paragraph of this Sub-Clause." Therefore, the provisions of the relevant clauses - in your case clause 14, especially 14.10 and 14.14, which says:
"The Employer shall not be liable to the Contractor for any matter or thing under or in
connection with the Contract or execution of the Works, except to the extent that the
Contractor shall have included an amount expressly for it:
(a) in the Final Statement and also
(b) (except for matters or things arising after the issue of the Taking-Over Certificate
for the Works) in the Statement at completion described in Sub-Clause 14.10
[Statement at Completion]."
Hope that this clarifies the issue.