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Construction Law/Delay Damages under Sub-Clause 8.7

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Question
Dear Madam,

I am working with the consultant firm on a contract based on FIDIC 1999 conditions of Contract. The Contractor has failed to complete the Works within the Scheduled Time for Completion and time is at large. The Employer has notified under Sub-Clause 2.5 for deduction of Delay Damages. Sub-Clause 8.7 states that “ the Contractor shall subject to notice under Sub-Clause 2.5 pay delay damages to the Employer for this default”. My questions are as follows;
(i)   Should the Delay Damages be deducted just by passing the Scheduled Time for Completion or the Employer has to wait until the issuance of TOC for the Works which will define the delay period?
(ii)   If the Delay Damages are deducted before issuance of TOC and then afterward an EOT is awarded, then the Contractor is to be entitled for the compensation of the deducted amount for the awarded time period?

Regards,
UMER SHABBIR

Answer
Dear Sir,
Usually, the Delay Damages are to be applied after the Time for Completion is settled, i.e. after the Contractor's claim (if any) for EOT as per 20.1 is determined by the Engineer according to 3.5 or the Parties agree to an EOT. Then, the Employer notifies a claim 2.5 and 8.7 for Delay Damages from the new Date of Completion to the actual date when the Works are finalized according to the Taking Over Certificate. In practice, the Employer notifies a claim 2.5 and 8.7 after the Completion Date, asking Delay Damages, provisionally, up to the date of the notice 2.5, and mentioning that they will calculate further Delay Damages, up to the actual Completion Date, but not exceeding the maximum amount of the Delay Damages included in the Appendix to Tender. Then, further notices 2.5 and 8.7, and determinations 3.5 are to be issued for Delay Damages (either from time to time, or another one at the end), up to the actual Completion Date, but nor exceeding the maximum amount of Delay Damages.
Therefore, the answer to your questions are:
i) the Employer should not wait the TOC to issue a notice 2.5 and 8.7, but he should wait at least after the initial Completion Date, if not after the new contractual Completion Date (the initial one plus EOT) to issue it.
ii) In this case, the Contractor should issue a claim 20.1 for claiming back his money (the Delay Damages applied from the original Completion Date to the new Completion Date, as per the EOT awarded). This is why in practice the Employer waits until the EOT claims of the Contractor are solved, then notifies a claim 2.5 and 8.7.
Hope it is clear.
Regards,
Alina

Construction Law

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Alina Valentina Oprea

Expertise

I can answer to questions regarding FIDIC 1999 contracts, including practical use of these conditions of contract, as well as to questions regarding dispute boards, both from theoretical and practical point of view. I cannot answer to questions related to other kind of contracts or to procurement process, except to some (limited) extent.

Experience

Implementation of works contracts (FIDIC 1999) financed by different financial institutions, including European Union; claims and disputes; dispute boards See more on www.alinaoprea.com

Organizations
Dispute Resolution Board Foundation

Publications
see http://alinaoprea.com/publications/ ; DRBF Forum Newsletter; Drumuri si Poduri; Revista Constructiilor; SIDiR Newsletter

Education/Credentials
Graduated the University of Civil Engineering Bucharest, Faculty of Railways, Roads and Bridges (1985-1990); Trained under Mr. Gwyn Owen’s pupilage program for arbitrators/adjudicators under FIDIC mentoring program (2006 – 2007)

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