Topic 8 - Time & Delay Learning Objectives

1. Topic 8 - Time & DelayLearning Objectives • 2 key issues concepts that relate to time in standard forms of building contract; and • The close relationship of time and cost.

2. Course Content • Introduction • Key notes relating to Time; • Causes of Delay; • Conditions precedent; • Notice of Delay; • The prevention principle, Culpable Delay; • Builder’s Default (LAD/Penalty); • Proprietor’s Default (L&E/Costs Reimbursement); • Claims for delay.

3. Introduction • General rules: • Completion based on entire contract; • Builder is bound to complete the works by the date for completion in the contract; • If he fails, he may be liable for LAD to the proprietor; • This is subject to the condition that the completion is not prevented by the acts or omission of the proprietor. • The rules may be amended by express terms of the contract.

4. Key notes relating to time • Time is of the Essence; • Practical Completion; • Extension of Time (EOT); • Time at large.

5. Causes of Delay • Delays caused by the Builder, his supplier or subcontractors (include NS/NSC); • Delays caused by the Proprietor or his agents; and • Delay due to causes beyond the control of both parties.

6. Delays by Builder • Builder is solely responsible for his delay; • No EOT if delay is by Builder; • Can be avoided if done efficiently & diligently; • Common factors affecting delays: • Labour force on the job; • Time required for specified materials/plants; • progress of sub-contractors. • If delay is of a serious nature & Builder does nothing, Proprietor may determine the contract.

7. Builder’s Default • Liquidated ascertained damages (LAD); • Penalty.

8. Delays by Proprietor - Common Factors • Issuance of Instructions in relation to: • discrepancies, error in BQ or variations; • provisional sums; • postponement of any work; • opening up or material testing (unless Builder’s fault); • Late information or failure of architect to give necessary instructions; • Failure to supply materials/goods which Proprietor undertakes to supply; • Failure to give Builder due access to site; and • Deferment of site possession date.

9. Proprietor’s Default • EOT? • Costs of delays: • lost productivity, • additional fuel costs, and • additional supervision. • Damages (or Compensation).

10. Delays Beyond Control Of BothCommon Factors • Weather (allowed 15 working days or exceptional); • Industrial relations problems; and • Change in statutory provisions.

11. Causes Beyond Control of Both • EOT? • Loss & Expenses (or Costs & Expenses).

12. Delay Costs • Valuation in accordance with the contract; • Costs with time extended; • Costs with no time extended; • Prolongation costs i.e. can only be valued after a new date for EOT is determined or after work is completed; • Some standard forms of contract allowed a percentage to cover HQ’s overheads, financial charges, etc. • For L&E, JCC-C apportion risk through risk sharing e.g. 50%.

13. Conditions Precedent in JCC-C • A notice (in writing) must be provided; • Notice given within a time bar; • All steps to minimise delay must be taken; • Details must be given early for assessment; and • Accurate records.

14. Notice of Delay - JCC-C • the material circumstances; • cause or causes of the delay; • relevant event that the is entitled; • details of the expected effects; and • expected estimate time of delay.

15. The Prevention Principle - Culpable Delay • When Builder is incurring LAD for running over time, the ordering of variations to the work will deny the proprietor of the benefit of LAD. • Culpable Delay is defined as: • “the period where LAD have already begun to run after the completion or extended completion date.” • SIA Form has expressed term for extra work ordered during the period of culpable delay.

16. Claims for Delay • Concurrent Causes: • First occurring cause of Delay; • Global Claims for Delay; and • Predominant Cause of Delay.

17. Self Assessment Questions - 1 • In assessing the time required to complete a contract what considerations should be made? • Who would be responsible for making the decision as to how long a contract should take? • What factors may cause delay to the contract work? • Considering the factors above, who may be regarded as responsible? • What action may be taken by an Architect who has been delayed by the Builder?

18. Self Assessment Questions - 2 • What is your understanding of the term LAD? • How may LD’s be assessed?

19. Topic 9 - ClaimsLearning Objectives • 3 common reasons for a claim; • Heads of claims; • Preventive measures; and • Assessment of delay.

20. Claim - Definition • A request for something that one party to a contract believes that it is entitled to under the contract terms or implied terms but for which there is no clear or formal agreement. • Example, claim for a variation that has not been accepted by the parties to a contract. • The end result of a claim is either time or money or both.

21. Claims vs Contractual Entitlements • Contractual entitlements: • fluctuations, extensions of time, ascertainment of direct loss and expense. • Claims: • relates to requests for money compensation for breaches of contract by a party or its professional agents for which there are no specific contractual entitlements. • A claim is a cause of action based in law. • It is an unresolved conflict.

22. Reasons for Claims • Alleged action; • Inaction; or • Wrong action.

23. Determination of Claim • Actual entitlement to the claim; and • The value of the claim.

24. Common Causes of Claims • Variations whether, alteration, addition, omission; • Ground conditions not as specified; • Poor scope definition; • Poor documentation; and • Slow or lack of supply of information.

25. Other Reasons for Claims • Weather; • Industrial relations problems; • Late information.

26. Heads of Claim • Prolongation costs; • Disruptive costs; • Loss (i.e.associated profit); and • Expense (i.e. the cost of hiring the plant).

27. Preventive Measures & Assessment of Delay - 1 • Improve & adhere to quality assurance programmes; • Review the contract carefully; • Review the programme of works carefully; • Establish an early warning system including diaries, reports and concise filing systems;

28. Preventive Measures & Assessment of Delay - 2 • Keep accurate records; • Be Prompt in your request for variation orders; • Accept a fair settlement, mitigate losses at all times if appropriate; • Act quickly do not ignore the problem.

29. Self Assessment Questions -1 • A housing project is tendered for that has a date for Practical Completion of 31 May 1999. Several variations are issued. One attracts an extension of time of one month and a second (after negotiations) is seen to have delayed the job by six weeks. The project is completed and handed over, the date of Practical Completion is determined by the Architect to be 31 August 1999. LDs are calculated as set out in the appendix as $5,000.00 per week or part of a week. Are LDs due to the Proprietor and if so what is the value?

30. Self Assessment Questions -2 • The Proprietor, via the Architect, is slow in providing detailed information to the Builder for the construction of pile caps on a particular high rise project. The Builder makes and details an extension of time on the basis of the late information. The Architect refuses to grant the Builder an extension of time. What are the Architect’s responsibilities? If the argument was taken to court what would be a likely outcome?

31. Self Assessment Questions -3 • If, in the same scenario as 2 above, the detailed information was a variation and the contract was found to be silent on the issue of variations what would be the likely outcome of a court battle?

32. Lecture 10 - CompletionLearning Objectives • Concept of Practical Completion; • Date of Practical Completion/Date for Practical Completion; • Builder’s contractual responsibilities to Making Good Defects; • Determination & Repudiation of a Contract.

33. Course Content • Introduction - ‘entire’ contracts; • Practical Completion (JCC-C); • Completion Dates; • Effect of Practical Completion; • Liquidated Damages (LD); • Making Good Defects; • Determination of the Contract; • Repudiation of the Contract; and • Self Assessment Questions.

34. Introduction • Completion based on entire contracts; • Bound to do everything required of the contract to attain completion; • In principle, building cannot be handed over until even the smallest items are are complete; and • Most standard forms adopt Practical Completion.

35. Practical Completion (PC) • PC is a state in which any work outstanding is so minimal that it will not affect the Proprietor’s use and enjoyment of the building. • PC is a decision of the Architect, based on an inspection of the works and reasonable judgement; • However, inspection follows only after Builder’s notice on completion. • Is Notice a requirement? (i.e. Notice A Condition Precedent)

36. Completion Dates • Date for completion; • Date of completion; and • The difference = delay in completion

37. Effect of Practical Completion • Builder is relief from LDs; • Commencement of DLP; • Proprietor takes possession of the site; • Release of half retention sum; • Insurance Coverage; • Permission to Builder for access to Site for making good; and • Power to order variation by the Architect ceases.

38. Making Good Defects • Difference between “Defects” and “Maintenance”; • Defects Liability Period: • Legally, Builder is in breach of contract when a defect occurs. • Defects Liability allows Builder to mitigate the effect of the breach and permit it to carry out the making good itself. • Builder may elect not to carry out the making good itself; • Third party called upon to carry out and cost deduction from Contract Sum. • Warranty, guarantee and indemnity; and • Collateral warranty.

39. Determination of Contract • The cessation of the contract under the terms of the contract; • Determination by Proprietor; and • Determination by Builder. • Effect of determination: • determination of works completed/outstanding; • complete survey report in case of litigation; • all site & building levels must be checked; • photographs of the completed works taken as records; • consider insurances and viability of sub-contractors.

40. Repudiation of the Contract - 1 • The right to repudiate a contract can occur in one of the two ways; • One party to a contract makes it clear that it has no desire to continue with the contract; • A serious breach may occur by one party making it clear that they have no intention of continuing with the contract.

41. Repudiation of the Contract - 2 • In both cases the other party has a choice to make • affirm the contract and claim for damages, or • rescind the contract. • The innocent party must elect to adopt one remedy or other, not permitted to combine the best elements of the two.

42. Self Assessment Questions - 1 • Would the following buildings be assessed as practical completion? • A house with the cooker outstanding? • A school with a fifteen page long list of painting items to be completed? • How would you define the Date for Practical Completion? • What is your definition of the Date of Practical Completion? How does this differ from the above.

43. Self Assessment Questions - 2 • What reasons do you think could account for the difference between the dates as defined in Q2 and Q3? • The local authority provided that in the event that unauthorised sub-contracting took place the authority could either determine the contract or claim $100.00 liquidated damages. When Feather & Co breached this condition the authority determined the contract and employed another to complete the work. It then sued the Feathers for the additional expense which amounted to $21,000.00. Feather’s counter claimed that only LDs should apply for such a minor breach. What decision do you think the court arrive at?

44. Topic 11 - Claims & DisputesLearning Objectives • Disputes in the context of construction contracts; • Causes of Disputes; • Basis for a Claim; and • Various Dispute Resolution Methods.

45. Course Content • What is a Dispute? • Where do Claims Arise? • Justification for Claims • Dispute Resolution

46. What is Dispute? • A claim is a cause of action based on law. • It is an unresolved conflict. • It can be a contractual claim (I.e. of construction entitlement) or a non-contractual claim (I.e. when a party is in breach or where claims outside the contract terms and conditions). • All unresolved claims lead to disputation. • Most standard forms contain Dispute Resolution clauses.

47. Where do Claims Arise? -1 • Documentation • Tendering: • underbidding; • failure to cost known risks; • obscure contractual obligations; and • check standard forms. • Nomination • Site Possession

48. Where do Claims Arise? - 2 • Site Conditions • Principal Instructions • Breach of Contract

49. Justification for Claims • Programme • Progress Reports • Minutes of Meetings • Diaries

50. Dispute Resolution • Disputes arise as a result of unresolved conflict and/or claims.