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Construction Law/Limit on an Employer's Claim

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Question
QUESTION: FIDIC 7.6 states, in part: “Except to the extent that the Contractor would have been entitled to payment for the work, the Contractor shall subject to Sub-Clause 2.5 pay to the Employer all costs arising from this failure.”

Our question follows.  If the “costs arising from this failure” exceed the payment that the Contractor would have been entitled to under the Contract, is the Employer limited, under FIDIC 7.6, only to what the Contractor would have been entitled to under the Contract?

Further, does the last sentence in FIDIC 2.5 limit the Employer to a maximum of what the Contractor would have been entitled to under the Contract?

ANSWER: There is no such limit in the FIDIC Contract, neither in the Sub-clause 17.6, or 2.5 or otherwise in the Contract. Such limitation can be only in the Applicable Law.
The Sub-clauses 7.6 and 2.5 mention the Contract Price, but the Contract Price is adjustable and shall be determined under the Sub-clause 12.3, says the Sub-clause 14.1. The Accepted Contract Amount is only the amount for which the Contract was awarded to the Contractor, but the Contract Price, that is described by the Sub-clause 14.1.
Best regards,
Alina Oprea

---------- FOLLOW-UP ----------

QUESTION: Thank you Alina:

Can you then explain what “Except to the EXTENT that the Contractor would have been entitled to payment for the work" (FIDIC 7.6) means?  In understanding an unclear "except" clause, sometimes it is helpful to rearrange the sentence.  Therefore, it can read thus.

'The Contractor shall subject to Sub-Clause 2.5 pay to the Employer all costs arising from this failure, except to the extent that the Contractor would have been entitled to payment for the work.' (Rearranged FIDIC 7.6)

This would seem to indicate that the Employer can only recover up to the extent or limit of what the Contractor would have received in the original Contract.

For example, say a Contractor was contracted to, inter alia, build a wall.  He does not build the wall, so the Employer contracts a third party to build the wall, but the third party charges say ten times what the Contractor originally bid for the wall.  Is the Employer entitled to claim all of the third party's costs from the main Contractor, or only what the Contractor was entitled to receive under his original Contract.

Best regards.

Answer
So, we have here:
"Except to the EXTENT that the Contractor would have been entitled to payment for the work, the Contractor shall subject to Sub-Clause 2.5 [Employer's Claims] pay to the Employer all costs arising from this failure." - this is after the Engineer instructs the Contractor to repair or remove and do again some works either because they were not in accordance with the Contract, or because something happened - like an earthquake, or so and there is an emergency.
For the works that the Contractor will do according to these instructions, there are 2 possibilities:
1. either the Contractor will pay damages to the Employer, if it was the Contractor's fault for the defective and not in compliance with the Contract works (meaning not according the Specifications, drawings etc.), and in this case the Employer shall make a claim according to 2.5 and have a 3.5 determination to get his money, or
2. the Contractor will get paid for these works, if it was not his fault - like in case of an earthquake and some works become necessary, and these works were not included previously in the Contract, or in case the fault of defective works was not his fault, but of the Employer's designer's fault, or some other Employer's contractor fault, or the fault of an user or so. This is the case when "the Contractor would have been entitled to payment for the work".
So, except the case no. 2 above, the Contractor will pay money to the Employer if the Employer will make a claim 2.5 and become entitled to those money, according to 3.5.
In conclusion, the phrase "Except to the EXTENT that the Contractor would have been entitled to payment for the work, the Contractor shall subject to Sub-Clause 2.5 [Employer's Claims] pay to the Employer all costs arising from this failure" means "the Contractor will get paid for these works instructed under 7.6 by the Engineer if these works are are other works than those included in the Contract and/or these works were to be made because of other causes than the Contractor's failure/fault, and the Contractor will pay money to the Employer, if these works were to be made or re-made because of the Contarctor;s fault/failure and the Employer follow the procedure 2.5-3.5.
Hope this helps.
Best 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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