Construction Contracts Issues - Essay Example

Construction Contracts Construction Contracts The general portion of both the NEC3 and the FIDIC both provide definitions of contractual terms to provide clarity to all parties involved. They also detail timeframes, dates, and monetary terminology to be used in contract writing. However, the FIDIC provides a greater range of contractual terminology than the NEC3. In terms of risk assessment, the NEC3 details the risks the Employer must assume and the FIDIC provides clarity in the form of risk prevention. Both the NEC3 and the FIDIC clarify the obligations of both the Employer and the Contractor and specify how long the insurance must be maintained. NEC3 General Definitions In the NEC3, this section defines all the terms that can or will be used to negotiate the contract. The NEC3 defines the Accepted Program as the one that supersedes all existing programs and is the Program identified in the Contract Data currently accepted by the Project Manager. Completion is defined as the period when the Contractor has finished all tasks as specified must be completed by the Completion Date according to the Works Information and has corrected Defects that can prevent the Employer from using the works or Others from doing their work. Completion Date is defined as the date on the Contract for completed works and the Contact Date is the date the contract was created. A Defect is any part of the Works that does not coincide with the Works Information or any part of the Works designed by the Contractor that does not comply with applicable laws or the design accepted by the Project Manager. The NEC3 defines the Fee as the sum of the amounts calculated by applying the subcontracted fee percentage to the Defined Cost of subcontracted work and the direct fee percentage to the Defined Cost of other work. Others are considered to be any people or organizations that are not the Employer, Project Manager, Supervisor, Adjudicator, or Contractor or an employee Subcontractor or supplier to the Contractor and NEC3 considers Parties to mean The Employer and the Contractor. Subcontractors are considered to be any person(s) or organizations that have a contractual agreement with the Contractor to perform duties that may include installing or constructing parts of the Works, providing services needed to enable the contractor to Provide the Works, or supply the Plant and Materials fabricated specifically for the Works. Risks: Employer & Contractor The NEC3 determines that the Employer Risks include, among other things: 1. Claims, proceedings, compensation and costs payable due to use of the Site by or for the purpose of the works, negligence, breach of legal obligations or interference of the legal right by the Employer or by any person(s) working for him with the exception of the Contractor or, a fault of the Employer or his design. 2. Loss or damage to Plant and Materials provided to the Contractor by the Employer, or Others at the Employers bequest before the Contractor has taken possession of them. 3. Any additional risks to the Employer as stated in the Contract Data. From the contract’s Start Date until the issuance of the Defects Certificate, all risks not assumed by the Employer are carried by the Contractor. Insurance The Contractor must submit to the Project Manager certificates for acceptance which state that the insurance required for this circumstance is in force Before the starting date and on each renewal of the insurance policy and the defects date. The certificates are signed by the Contractor’s insurer and insurance worker. A reason for not accepting the certificates is that they do not comply with the contract. Insurance policies must include a waiver by the insurers of their subrogation rights against directors and other employees of every insured except where there is fraud. The Parties must comply with the terms and conditions of the insurance policies. Any amount not recovered from an insurer is borne by the Employer for events which are at his risk and by the Contractor for events which are at his risk. The Employer may Insure a risk which this contract requires the Contractor to Insure if the Contractor does not submit a required certificate. The cost for this insurance to the Employer is paid by the Contractor. NEC3 In sum, the General terms of the NEC3 provide clarity for any lay person seeking to enter into a contract in which construction must be completed. These terms are meant to inform all about what designations they will hold in the context of the contract and what these terms designate to be their obligations. The section of the NEC3 regarding Risk explains what parties assume what risks and how they are to be defined within the letter of the contract. NEC3 also details whom is responsible for providing insurance coverage, who all should be covered by the insurance, who should pay the costs of this insurance, and how long it must remain in effect throughout the duration of the contract. FIDIC General Provisions: Definitions In the FIDIC, this section defines all the terms that can or will be used to negotiate the contract. The FIDIC defines Contract as the document that contains the Contractual Agreement, the Letter of Acceptance, the Letter of Tender, the Conditions, Specifications, Drawings, Schedules, and any other documentation listed in the Contract Agreement of Letter of Acceptance. The term Party refers to the Employer and the Contractor. FIDIC indicates that the Employer is the person named as employer in the Appendix to Tender and the legal heir in title to this person. The Contractor refers to the person(s) named as contractor in the Letter of Tender accepted by the Employer and the legal successors in title to this person(s). The FIDIC includes the definition for the Engineer, who is the person selected by the Employer to act as the Engineer for the purposes of the Contract and named in the Appendix to Tender, or other person appointed from time to time by the Employer and notified to the Contractor under Sub-Clause 3.4 [Replacement of the Engineer]. Contractor’s Personnel refers to the Contractors Representative and all staff whom the Contractor uses on Site and may include the staff, labour and other employees of the Contractor and of each Subcontractor; and any other persons assisting the Contractor in the implementation of the Works. Employer’s Personnel includes the Engineer, the assistants referred to In Sub-Clause 3.2 [Delegation by the Engineer] and all other staff, labourers, and other employees of the Engineer and of the Employer and any other employees specified to the Contractor by the Employer or the Engineer, as Employers Personnel. Subcontractor: anyone indicated in the Contract as a subcontractor, or selected as a subcontractor, for a part of the Works; and the legal successors in title to each of these persons. This document also delineates the roles of the DAB & FIDIC. The DAB refers to the Dispute Adjudication Board and the person or trio of persons indicated in the Contract or other person(s) appointed under Sub-Clause 20.2 [Appointment of the Dispute Adjudication Board] or Sub-Clause 20.3 [Failure to Agree Dispute Adjudication Board]. FIDIC means the Federation Internationale des Ingénieurs-Conseils, the international federation of consulting engineers. FIDIC defines the Contract Price as the price defined in Sub-Clause 14.1 [The Contract Price], and includes adjustments in accordance with the Contract. Cost refer to all expenses reasonably acquired or expected by the Contractor, whether on or off the Site, including overhead and similar charges, but does not include profit. Risk: Force Majeure The definition of Force Majeure indicates an extraordinary event or circumstance that: (a) is beyond the Partys control, (b) the Party could not have logically prevented before entering into the Contract, (c) when it occurs, the Party could not plausibly have avoided or surmounted, and (d) is not significantly attributable to the other Party Notice of Force Majeure: If a Party has knowledge that they will be unable to perform any of its obligations under the Contract by Force Majeure, notice to the other Party of the event or circumstances comprising the Force Majeure are mandated and they must specify which obligations will be neglected. The notice shall be given within 14days after the Party is made aware or should have become aware, of the relevant event or circumstance constituting Force Majeure Insurance The Contractor is responsible for maintaining insurance against liability for claims, damages, losses and expenses, including legal fees and expenses, as a result of injury, sickness, disease or the death of any person employed by the Contractor or any other of the Contractors Personnel. The Employer and the Engineer shall also be covered under the policy of insurance, however this insurance may exclude losses and claims that may take place due to the actions or disregard of the Employer or of the Employers Personnel. The insurance shall be maintained in full force and effect for the entire duration that the staff is assisting in the execution of the Works, For a Subcontractors employees, the insurance may be held by the Subcontractor, but the Contractor shall be responsible for compliance with this Clause FIDIC In sum, the FIDIC provides clarity of the possible terms that may be used in the context of a contractual agreement. The General Provisions section explains all of these terms, including a wide variety of expressions that may be used. The Risk section explains the concept of Force Majeure and details actions that should be taken if such circumstances apply. The FIDIC also explains the whom is responsible for providing insurance coverage, who all should be covered by the insurance, who should pay the costs of this insurance, and how long it must remain in effect throughout the duration of the contract. T The core clauses of the NEC3 and the FDIC regulations summarily provide definitions for key terms and establish the terms for the language to be used in the contracts, but the FIDIC is clearer and clarifies the use of more terms than the NEC3. Both documents identify possible risks, but the FIDIC explains procedures to minimize potential damages should unexpected circumstances arise. The NEC3 and FIDIC also express who is responsible for maintaining insurance on the project. Read More