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Construction Law/Contract vs Applicable law

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QUESTION: Dear Sir

Hope you are fine. Very simply, in case of conflict between a Contract and the reference applicable law, which one shall prevail(and which FIDIC clause speaks about that) . let us have two cases:

1- . if the applicable law says that the interim payment to be paid after 45 days but the Particular conditions say that it is to be paid after 30 days, which period shall apply?

2- if the particular conditions of the contract say that Design should follow the latest reference codes and standards (Contract is Design-Build) and when checking the code (we are the consultant) ; the main irrigation pipe according to site conditions should be 4" , however, in the project technical specification the main irrigation pipe is to be 3" and the BoQ also includes prices for 1", 2" and 3" only. knowing that the priority of documents in case of conflict in our contract are as following orders: Particular Conditions then technical specifications then BOQ , and knowing also that the contract is re measurable ... what your viewpoint in such case , Sir?

Thank you

ANSWER: Dear Khaled,

The applicable law always overrules over anything in the Contract.  The Employer, or Engineer, should have ensured that the Contract was consistent with the applicable law.  

1. 45 days shall apply, but there is nothing to stop earlier payment.

2. The reference codes and standards overrule the Specification, and you have to pay for the error.  Please do not be mean with the Contractor as the Employer, or his advisers, have made a mistake.  

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

QUESTION: Thank you Sir

However ;

1- if the Employer or the Engineer has missed to ensured some conditions to be consistent with the applicable law as well as the contractor within tender period and clarifications that to be raised by him has also missed to query about those conditions and accordingly the Contract has been signed as such, does this will allow the contractor to claim for receiving his money within 30 days according to the contract?
also, if the contract says in absolute statement that the advance payment is to be 10% however there is a Cabinet Decision that was issued as an extension to the applicable law says that the advance payment to be 20%,Can the Contractor  use this to get paid 20% although the contract states 10%?

2- I will not be mean if I will enforce the contractor to execute the 4" without paying him if you know, Sir, that the contract is  stating precisely that the contractor as Design - Build should check the documents very accurately within the tender period and raise any conflict via his clarifications and if he doesn't do this for an obligation which has no item or similar one in the BoQ, he shall implement that obligation work as included in his overall price. what do you think Sir?

Thank you and sorry for the repeated inconvenience

ANSWER: Dear Khaled,

Two wrongs do not make a right.  I suggest that you go easy at this stage of the Contract, so that the Employer is not accused of acting in bad faith.  Do you want to win battles, but lose the war?  The courts will always side with the Contractor over the consequences of conflicts in the Contract.  

1. I suggest that you pay within 30 days and allow the Contractor to request a 20% advance, against the necessary guarantees.  Myself, I prefer to choose a financially stable contractor and avoid advance payments, except in very specific circumstances.  

2. Again, you are acting in an aggressive manner, which will not serve the Employer well.  This is not a lump sum contract, where the prices would be much higher to cover the bidder's increased risk.  The Engineer had an obligation to ensure that the documents were fit for purpose, and, by your own statements, they are not!  Remeasurable contracts make inaccuracies in the BoQ an Employer's Risk.  What would you do if the law allowed a 2" pipe and you had specified a 3" pipe?  Would you pay for a 2" or a 3" pipe?  Consistency is important in the application of the Contract.  

There is a proverb that says do not bind the mouth of the oxen that grind the corn.  

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

QUESTION: Dear Sir

actually discussion with you is really enjoyable. Thank you and sorry for my continuous disturbance.

1- I am still confused. you went for 30 days which is a contract condition and went for 20% which is let us say an applicable law statement. You go always for teh sake of the Contractor because as you said this is what will the courts do !!  anyway, I need your final input as legal point of view.

2- wonderful explanation !! thank you. I am convinced now that the 4" will be implemented and paid to the Contractor however in I will suggest to be paid in the price of 3" item because the contract doesn't allow me to generate a varied item since it was clearly under  the obligation of the contract. is this ok?

Thank you again Sir

awaiting

Answer
Dear Khaled,

Thank you for your kind comments.  

I am not a lawyer, thankfully, and so I cannot give you a legal opinion, only an engineer's pragmatic approach.  

1.  Sure, I went for gentleness with the Contractor, because I know that a project has to start correctly.  You need to be fair but firm, apply the Contract impartially.  Interpreting the Contract sympathetically at this stage encourages the Contractor to do well in future.  Cashflow is the oxygen of contracting; no oxygen, no life, no cashflow, no progress.  

2. Don't be mean.  Pay the Contractor for 4", not 3".  If the contract is truly remeasure, then it will allow for variations in quantities and items.  If not, then you will have more problems when the contract gets a knowledgeable quantity surveyor or lawyer.  If you don't, you will build up resentment in the Contractor's staff and there will be more and more bitter claims.  What would it cost in the overall scheme of things relative to the total cost of the project?  Remember, you are only paying for the extra material.  I always worked on the principle of the iron fist in the velvet glove, and told my contractor to hope that they never felt the iron fist.  

If you pay the Contractor promptly and well, he cannot complain that he is short of funds when he falls behind programme. Remember that contract overruns cost about 1% of the Contract Price per MONTH, and clients love projects that come in on time.  

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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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