Do you have any problems with contracts, disputes with clients or other legal questions you want answered? Our regular legal Q&A can help provide the answers
We are working for a contractor on a project that has several phases, each timed to start as another concludes. But with the number of changes and
re-designs that have occurred, the scheduling of work has become almost impossible. All the phases are under way; the contractor is calling for more labour and is threatening us with notices of non-completion. We have warned him of delays but seemingly to no avail. What do we do?
When things go wrong on a construction project, no one wants to know and pandemonium ensues.
Your costs escalate, the valuations bear no resemblance to what is happening on site, and the one thing you hear is ‘finish the work’. You may also hear ‘we’ll sort it out at the end’. You know full well that you’ll be facing a huge loss, the employer will refute any claim and the contractor will deny having knowledge. It is unlikely anyone resident on site will have either the time or ability to act objectively. So what do you do? Appoint another member of staff to visit the site twice weekly and to issue the notices of delay. Respond to threats of non-completion with notices of disruption and a request for an extension of time and direct loss and/or expense. Review what the contract said in respect to partial possession, and formally advise that you consider the programme as having been abandoned with time going at large. Tell the contractor you’ll use your best endeavours to complete, in the most reasonable time-frame your resources will allow, and audit your record-keeping facilities. Support your site personnel, and do not become embroiled in a blame game. The task is to record what and why events are unfolding in the way they are, so when the inevitable dispute ensues you have all the evidence you need. Confirm, in writing, the actual completion dates of each phase.
Although the project started well, the employer is talking of a re-design, in order to cut costs. Payment times are pushing past the final date, as
prescribed by the contract, and we are worried that the employer may go bust. Is there anything we can do to protect ourselves?
56 ECA Today July 2011
In these cash-strapped times, insolvency of one or more of the contractual chain is an ever-present
threat. While historic records may not disclose the current cash situation, there is still much to be learned from a credit rating company report, such as those issued by Experian, the operator of the ECA credit rating facility. The sudden imposition of any cost-cutting measure is always a reason to be concerned, and it is a wise company that has a strategy in place for responding to such requests. The first thing to do is to read your contract. Any late payment should not be tolerated. Respond with a notice of suspension and leave site if payment is not forthcoming when the notice period expires. A number of contracts state that the title in unfixed goods transfers to the contractor or employer upon delivery to site. The key is to live hand-to-mouth and not to deliver, or fix, high value items until the last minute. Make sure all instructions are up to date and work to rule. Keep your valuations tight and ensure there is no cause for the account to be called into question. There is nothing better than to keep an ear open for what gossip there is on the unofficial grapevine. Consider the effect on your business of finding the site locked up when you return to it the next morning. Planning for the worst-case scenario helps and often seems to help avoid having it happen.
We have struggled to find work in recent times and so we were very pleased when an unsolicited tender dropped through our letter box. We
got straight on with pricing it, and are about to relay our offer. We have a nagging doubt whether we are doing the right thing though – what do you think? When the employer or contractor wishes to find tenderers he should first ask the tenderer whether he has
capacity and willingness to put a competitive offer forward. Sometimes this enquiry is met with a perplexed response: ‘Of course we want the work!’ But stop – it is at this time that certain information and checks must occur. Just who is the potential employer? Is the project viable? Does the employer deserve a credit
rating? Who are the other parties? Have you had a poor experience with any one of them? When is the project set to start, and finish? What are the payment terms? Is a bond or warranty required? Who is to execute the design? Will the design responsibility change by the pricing and acceptance of the price? Can the cash-flow requirement be funded from current overdraft facilities or will these need extending? What about the contract – is it one with which you are familiar? What onerous terms are on offer? Is there any attempt to disguise the nature of the onerous provisions? This pre-tender checklist isn’t exhaustive, but before submitting any price, it forms the barest information necessary before agreeing to their offer to tender.
We are half way through a job and the contractor has told us that he intends to contra-charge us for something we do not agree with.
Where do we stand?
Sometimes contracts are concluded on the basis of the most scant pieces of information. One side believes
something is included in the bargain, the other doesn’t. Or, worse, the agreement includes provisions that are so ill defined that they can be read in any number of ways. All this is food for the lawyers and is symptomatic of a job that has gone out to tender too soon. The dispute resolution mechanism could be used to ask the simple question: ‘Is the work included in our contract?’ However, this may be a sledgehammer to crack a nut, so some contracts make provision for senior representatives to hold a pre-dispute meeting to see whether compromise is possible. For a contractor to set-off any amount, a withholding certificate will be necessary, although the forthcoming revisions to the Construction Act will permit this to form part of the payment notice. The contractor is obliged to have instructed you to carry out the work and, only upon your refusal, to instruct others. He must show that, within his constraints, the work was obtained in an economic fashion and therefore the charge he proposes to levy is reasonable. It is often better to raise an objection and then argue about the validity of the ‘instruction’ after
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