Construction Law/Sub-CLause 13.7


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.  



Dear Umer Shabbir,

Time bar clause are causing a lot of problems, especially in the courts.  I would be generous in this case as the Government has imposed a new Sales Tax and the Employer could be accused of unjust enrichment if he refuses the claim.  The notice might have been published six months before, but when did the tax actually come into effect?  When did the Contractor actually realise that he had to pay the tax?  

The Contractor could have been challenging the new tax and only recently realised that he must pay it.  I would be generous and say that the event was just before the notice.  

The Engineer could refuse the claim within 42 days stating exactly why he is refusing - due to insufficient information and stating the information needed.  Alternatively he could ask for receipts of the tax paid.  

The last paragraph is a fall back due to delayed presentation of information by the Contractor.  

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Peter M. Elliott


First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol before submitting a question.


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