Construction projects are rarely without any claims. Once a project is commenced, it is common to experience some unexpected events or circumstances which either delay the progress of works or result in increased expenses than what was allowed in the contract/subcontract. On such occasions, there will be claims from the owner’s or the prime contractor’s/subcontractor’s end to seek either relief from certain obligations and/or to compensate for losses and expenses. However, it is not uncommon to see sometimes those claims are not conclusive enough to protect the right of the innocent party. In Archway’s observation, it is becoming increasingly difficult for the contractors/subcontractors to recover on claims under the present circumstances, where the owners seek to impose stringent contractual preconditions on the prime contractors/subcontractors to recover the losses and expenses. Some common limitations on a contractor’s recovery of claims are explained below (indeed there can be many other reasons for the rejections and each case has to be reviewed independently).
The topic of concurrent delay deserves book-long writing. The definition of “concurrent delay” is per se a controversial topic. The concurrent delay has been a contentious and hotly debated issue since the late 18 century. However, from recent cases of courts and tribunals, it is apparent that there is an increased burden on the contractors with respect to concurrent delays when recovering the losses and expenses of the compensable delays. Moreover, the contractors need to carefully comply with provisions of the contract as well as statutory requirements in order to maintain their ability to present concurrent delay as a defense against liquidated damages.
The delay event or the suspension initiated by the owner or his agent is excusable and compensable. In most cases, the losses and expenses include extended on-site overhead costs as well as extended and/or unabsorbed head office overhead costs. However, the recovery of those costs may be limited by several constraints such as:
Under the present circumstances, it can be frequently observed that owners devise increasingly complex ways to channel and limit the claims of their prime contractors. The contractors may similarly seek to circumscribe the claims of their subcontractors. Although courts and tribunals may sometimes tend to take a lenient approach to avoid unjust results towards the contractors/subcontractors, the notice provisions are nevertheless vital to recover the losses and expenses. Unless the contractor is operating in a jurisdiction where notice provisions are not stringently enforced or limited somehow, it is important to comply with the full literal requirement of contractual preconditions or else negotiate a written agreement in this regard in the contractor’s favor.
In most cases, the Contractors’/subcontractors’ failure to follow the contractual requirements of timely claim submissions may preclude them from pursuing otherwise valid claims. Sometimes, the contractor/subcontractor waits until the end of the project to prepare and submit the claims for events or circumstances that occurred earlier which significantly reduces the leverage if the contractor/subcontractor subsequently wishes to negotiate.
It is not uncommon to see that many construction claims do not
establish a proper causal link and that they are nothing more than global or total cost
claims within which the contractor does not attempt to disentangle the impact and the
different costs and causes of delay. The contractors should remember that these claims are
only allowed in exceptional circumstances (with certain criteria fulfilled) and as a last
resort for an equitable remedy.
If you seek for further clarifications or details about this
content or topic please contact ARCHWAY