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Construction Law/FIDIC Yellow Book - Delay Damages

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Question
We are using the FIDIC Yellow Book to manage a design-build contract for construction of an international hotel in Guyana, South America.
The Contractor was defaulted and delay damages were applied at the contract rate; a Taking Over Certificate was subsequently issued when the Works were 99% completed and the hotel was placed into operation.
With 1% of the Works still outstanding, can the same rate be applied for delay damages after the aforementioned take over or must this be done at a reduced date (based on the value of remaining Works to be done)?

In my view, since the hotel is in use and earning money, the rate should be reduced. The remaining Works are affecting the execution of an additional contract to further enhance the property but is not significantly affecting income generation but the Employer want to make deductions at the contract rate.

Regards

Paul Bonar

Nov. 16 2015

Answer
Dear Paul,

Clause 8.7 is relevant.  I see no contractual justification for imposing delay damages once the Taking Over Certificate has been issued.  If it were possible to apply delay damages, they would be limited to a proportion related to the proportion of unfinished work; i.e. 1% of value unfinished, damages of 1% of the specified daily rate.  However, the Employer may be able to get damages through the legal system for any actual losses caused by the unfinished works.  Should the Employer insist in applying any penalties, then he runs the risk of a claim from the Contractor and the obligation to pay interest on repayment of the deducted amounts.  

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Peter M. Elliott

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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 www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

Education/Credentials
B Sc(Hons) in Civil Engineering

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