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Construction Law/Dispute on "mutually agreed" Determination

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Question
QUESTION: Dear Sir,

In Clause 20.4, it defines that Dispute may be related to any certificate, determination, instruction, opinion or valuation of the Engineer.

My question is based on a scenario. There was an item of work which was considered a Variation and determined by the Engineer under GC 3.5. The Employer and Contractor agreed to Determination but later, the Employer discovered that such work was deemed to be included in Contractor's scope as it was mentioned in one of the tender drawings which was probably overlooked in the Engineer's determination and later by the Employer & Contractor as well.

Now, the Contractor is insistent that the Employer can neither challenge a determination upon which 'mutual agreement' is already reached nor can he refer it to Dispute Board because Clause-20 does not provide any grounds to make a dispute on a matter on which an "agreement" is reached among the parties.

What do you advise in this case from a Neutral perspective?

Thanks.

ANSWER: Dear Muhammad,


This is quite a complex issue. I will, however, attempt to keep my response short.

It appears that no one initially knew that the work was in fact included. The Engineer's determination suggests this as does the subsequent agreement between the Parties. The question being asked is whether or not that agreement is binding, or whether it can be avoided.

Was a separate written agreement made to record this? If so, the wording will be important.  That agreement of itself may prevent the matter being referred to the Dispute Adjudication Board.

If there is no such agreement or the agreement does not limit the dispute resolution action, in my opinion the matter can be referred to the DAB.

On the question as to whether or not the agreement can be avoided, i think that it might be. It seems to me that the Contractor has, in essence, been paid for doing nothing; he has given no consideration for the payment received.


Thank you for this question.


I hope that this assists you.

Kind regards,
John Dowse

Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line; or visit www.cerno.org.


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

QUESTION: Dear Sir,

Thank you for your expert advice.

To clarify the above, I would like to add that the agreement was recorded by means of Minutes of Meeting signed by the Parties. Now, will it be a binding? Or, can it prevent the referring the matter to DAB? And, can it supersede the Contract Documents (i.e., the overlooked tender drawing is part of Contract Documents)?

Answer
Dear Muhammad,

Thank you for this additional question.

Usually minutes of meetings are not considered as sufficient notice of a claim or an agreement; the FIDIC contract requires such to be in a written form, which is interpreted further as a formal communication between the Parties. The fact of the minutes having been signed does, however, give a potential complication.

If the minutes are signed a question of intention arises; what was the signature intended to convey? If they are signed as a regular course of action after each meeting, to affirm agreement f the content of the meeting that may be less valuable than the record having been signed on a one-off occasion. Signing as a one-off occasion infers an intention to make a specific agreement - a collateral contract.

The question still remains though, given the importance of the issue why was it not communicated formally?

Clearly there is no agreement between the Parties; therefore, there is a dispute and that dispute can be referred to the DAB.

As to whether the signed minutes would supersede the contract, surely that is the issue in dispute; and all my prior comments apply.


I hope that this assists you.

Kind regards,
John Dowse

Follow me on Twitter: @CernoOrg
For my regular industry newsletter e-mail to info@cerno.org, stating SUBSCRIBE in the subject line; or visit www.cerno.org

Training and consulting services are available, bespoke to companies and individuals.
John Dowse can be contacted by e-mail to info@cerno.org (When e-mailing, please include “AllExperts” in the subject line.)
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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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