Deletion of "Claims Clauses" from Construction Contracts - Does it Prevent Claims?
This article discusses the risks associated with removing clauses that relate to claims from modern standard construction contracts (like FIDIC) while amending the same to suit a particular project/development.
Deletion of “Claims Clauses”
Some Investors/Employers try to remove all clauses that relate to claims from their standard construction contract agreements.
Most contract agreements in Europe are based on FIDIC or other popular forms of contract; however, they are heavily amended and claims clauses are sometimes deleted.
The main clauses that are excluded are the ones that relate to an extension of time to the Contract (EOT claims) due to Employer’s delays and/or any other claims such as disruption et al.
The rationale is that if there are no clauses that entitle the Contractor to claim for an extension of time, disruption etc, the Employer is protected from Claims. Unfortunately, this logic is flawed and deletion of “claims clauses” is disadvantageous and, in some cases, even dangerous for Employers.
The General rule of thumb is that if the Contractor does not have an entitlement within the Contract, he may well raise a claim outside the confines of the same (if there is an overriding statutory provision).
In most jurisdictions, it is legally possible for a Contractor to raise a claim outside the contract if he has been delayed/hindered by the Employer; this is possible even if the Contract does not have a “claims clause”. This is because of the basic principles of Contracts which obliges both parties to co-operate and not hinder the other from fulfilling his obligations.
Furthermore, if there is no extension of time clause in the contract, the Contractor could also raise a “Time at Large” argument (if he is delayed by the Employer) which would render the contractual completion date void.
If Time does become “at large”, the Contractor is only obliged to finish the Contract within a “reasonable” period of time. Obviously, this would put the Employer in a very uncomfortable situation.
What’s the Solution?
It is better to have a proper claims clause within contracts which would oblige the Contractor to follow the procedure to the hilt.
For example, the FIDIC form of Contract requires the Contractor to submit a notice with 28 days and he is also obliged to maintain contemporary records and submit regular interim particulars to support his claims.
If the Contractor does not submit a notice within 28 days, his claim could be “Time-Barred” and he could lose his rights to an extension of time and/or other entitlements.
To conclude, it is better to have a proper claims mechanism inside construction contracts by way of appropriate clauses which, in turn, would regulate claims.
Proper “claims clauses” will also enable the Employer and Contractor alike to manage the project pro-actively by understanding the “cause and effect” of variations to the project and, if possible, mitigate the negative impacts of the same.
ABOUT THE AUTHOR: N.M.Raj
N.M.Raj is the Principal Consultant and Managing Partner of Prime Consulting – Construction Claims and Contracts Consultants. Raj specialises in construction claims, FIDIC contracts and commercial/contracts management. N.M.Raj holds a bachelor’s degree in civil engineering and has close to 20 years of commercial/claims management experience in the industry.
Raj received legal training from the University of Reading (UK) and is a corporate member of the Chartered Institute Of Arbitrators (UK). He has also held memberships with the RICS (UK), CIOB (UK) and the AACE (US).
Raj has worked/consulted on several prestigious projects in Europe (incl. Ireland), Russia, Asia, Africa, Middle-East and the Far-East. The major projects he has been involved with include the Burj Dubai (the tallest building in the world - UAE), Zlote Tarasy (Poland), Limerick tunnel (Ireland), the landmark Gazprom tower project (Russia), Media city (Egypt) and various other iconic projects around the world.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.