Contractual Advice for a Client - Essay Example

Contractual advice Dear Client, This has reference to your query on whether a claim for extension of time exists. Under the JCT contract you have entered into, if the contractor does not complete the work by the specified date of completion, then you must be paid the pre-agreed liquidated damages.1 But if it is delayed due to certain kinds of events he will be released from this obligation and an extension of time will be granted.2. Firstly, one of the reasons for seeking extension of time is the contention that the architect’s condemnation of the brickwork caused delays. From a legal standpoint, the architect is simply the administrator of the contract on behalf of the employer and may not modify or supplement the terms of the contract3, neither does he have the power to create new liabilities and obligations in the parties. Consequently, the architect is considered your employee and delays resulting from his/her side may be attributed to you rather than to the contractor. In this instance, since it is the architect who has required fresh obligations on the part of the contractor which may not have been a part of the original contract; therefore this particular extension of time of two days may have to be allowed. Further, this extension of time will also allow for financial recovery by the contractor. The contractor may be entitled to claim additional costs or loss and expense, because architect caused delays are the responsibility of the employer. I would thus conclude that the delay of time of 2 days caused by the architect requirements will have to be allowed and the contractor may also be entitled to loss and expense. Another cause of delay to the work on the ground floor is the freezing temperatures for three days. Under the JCT contract, it is only unusual or non typical weather conditions that can be grounds for extension of time. A contractor is expected to allow within the contract, some allowance for adverse weather conditions.4 Since the work was taken up in the months of January and February, where adverse weather conditions such as freezing temperatures have been known to occur, some provision should have been made by the contractor in the original contract. The weather records for the past five years or so must be compared to the weather patterns subsisting this year near this particular site and the contractor may be entitled to this extension only if the freezing temperatures are unusual or non typical, as compared to the weather records of previous years. I would also like to clarify that even if the extension is granted, “entitlement to an EOT does not automatically lead to entitlement to compensation and vice versa.”5 While it may be necessary to grant an extension of time, some causal factors of delay, i.e, for example, the adverse weather, will not allow the facility for financial recovery.6 Therefore, in this case, the contractor may not be eligible for loss and expense. In reference to the delays of 1 week caused by the Building Inspector’s disapproval of the installation of two piles, this extension may need to be allowed, but there may be some liability from the contractor. A contractor is required to comply with Building Regulations, therefore a failure to comply will be his liability. If the contractor has built in accordance with the contractual design but in contravention of building regulations, he will be liable whether or not he was aware that the design violated building regulations.7 On this basis, I conclude overall, that while the extension of time may have to be allowed, it does not appear that the contractor will be able to claim further loss and expense, except to the extent that delay has been caused by the architect’s requirements. You may be able to recover liquidated damages for the contractor’s delays, especially if you can show proven losses resulting from the failure to complete on time8. Since it is vital that the school is completed by August 1st, there may be a cause to demonstrate such losses. Under JCT 98, you can send a notification to the contractor of your intent to recover liquidated damages9, which could possibly function as a spur to get the current pending work completed sooner by making up for lost time. The architect may issue a certificate of non completion and even assuming the further extension of two weeks requested is granted, you can still give notification of your intent to recover liquidated damages and the agreed figure will then be recoverable even if you suffer no losses. Dear Contractor: This has reference to your query on the delays caused by the sub contractor’s insolvency. The subcontractor may be liable to the client as well as to you. The delay that may be caused by the sub contractor’s insolvency and the need to replace those services is especially relevant because of the possibility of liquidated damages being levied on you by the employer. Under contract law, the principles of negligence may be applicable, in accepting the contract without having the wherewithal to adequately complete the necessary responsibilities. Since the sub-contractors has entered into a contract you, he might have provided written warranties, which will be actionable under law and damages may be owed in negligence by the sub contractor10. The subcontractor may be liable for your damages11 because he has in effect, breached the contract. In considering the extent to which the sub contractor may have to fairly and reasonably compensate you for breach of the contract, factors to be taken into consideration may include “such as may be reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.”12 At the time of making the contract, the sub contractor would have been aware if his financial situation was tenuous or falling far too short to successfully complete the requirements of the contract, therefore he would have been aware of the consequences of a possible breach and will be liable. Since you will also have to pay liquidated damages to the client, you are legally entitled to recover liquidated damages from the sub contractor only the extent that you are similarly penalized by the employer. In this instance, the delays and increase in price have been caused, but much will depend upon the manner in which the employer chooses to respond to the situation. If the employer allows you the necessary time to secure the services of another subcontractor and agrees to pay the extra amounts, then you may not have grounds to seek liquidated damages from the sub contractor.13 If you do not secure an extension, then it is also likely that the employer would withhold the retention monies to compensate for the damages/losses that are being sustained. In this case, you will also have the option to withhold the retention monies that are due to the sub contractor as well. Your sub contractor’s contract will generally allow you to retain half of the amounts due as retention monies, the release of which will be contingent upon the issue of a certificate that remedies any existing defects. In this instance, since the sub contractor is insolvent, he will be unable to issue the certificate because he cannot complete the construction as planned. The resultant damages may be compensated only through a retention by you, of the monies still owing to the sub contractor. Since the sub contractor, at the time of signing the contract was aware that monies would be retained until defects were made good, he may also not have much cause of action in disputing any such retention of monies. Dear Client, In respect to the warped flooring, the contractor and the designer may be held to be responsible for faulty construction and resultant damages. The designer/architect may be liable due to the reasonable standards of skill and care required of professionals like designers14 while the contractor may also be liable for the construction defects because he is responsible for the sub contractors’ workmanship and quality of materials supplied. The retention monies available in this case can be applied for the purpose for which they were designed, i.e, to function as protection in the event of contractor default. Since the construction of the ICT Room is still within the Defects Liability Period, this means that the monies need to be released only upon the issue of a Completion certificate after this period is completed satisfactorily, with no contractor defaults becoming apparent. In this case, as you have pointed out, the development of warping in the raised floor in the ICT room poses a danger to children. It is a direct result of a defect in construction, and the contractor will be liable for damages arising out of such warped floors, since they will be responsible under the law for negligent work15. In those cases where the Completion Certificate has not been issued, the retention monies will constitute an accruing debt and can be attached to redress any deficiencies that arise in the Defects Liability period after the completion of the contract. The retention monies are in effect, monies that are owed to the contractor in the future,; the extent to which they can be applied will depend on the circumstances of the case. Retention monies can be attached only on those cross claims which exist at the date of attachment and not those which may exist in the future16. Applying this in your case, the warping of the floor which presently exists can be attached, but not other possible defects which may arise as a result of the warped flooring in the future. I would also like to point out that such attachment of retention monies may not be possible in those cases where it is likely to cause injustice. In this instance, the designer/architect is also partly responsible for damages and the contractor cannot be held fully liable. Since the architect is considered to be the administrator of the employer, part of the liability may also rest upon you. As a result, the courts may not allow all the balance of retention monies to be attached, since this may result in an injustice to the contractor. However, some part of the retention monies can certainly be withheld from the contractor in view of the defects in construction, since he is now not eligible for the issue of the completion certificate. Bibliography * Barnes, Peter, 2006. “The JCT05 standard building sub-contract” Blackwell Publishing * Chappell, David, 2000. “Understanding JCT Standard Building Contracts”, Taylor and Francis at pp 80 * Kedah Kelang Papan Sdn Bhd v Hansol Sdn Bhd (1988) 1 ML 434 * Knocke, Jens, 1993. “Post construction liability and Insurance”, Taylor and Francis at pp 347 * Knowles, Roger, 2005. “150 contractual problems and their solutions”, Blackwell Publishing at pp 156 * Murdoch, John, 2000. “Construction contracts: Law and Management” Taylor and Francis at pp 280 * Patrington and Son v Tameside Metropolitan Borough Council(1985); cited in Chappell, David, 2002. “Parris’s Standard form of building contract: JCT 80” Blackwell Publishing * Powell-Smith, Vincent, Sims, John and Dancaster,Christopher,2000. “Contract documentation for Contractors” Blackwell Publishing at pp 145 Read More