Discussion No 10 - RICS 2014, Session 1 APC Candidates

Friday 21st February 2014 – 8.00am to 12.00pm

Topic: Contract Practice (T017)

General

1. Guidelines published by RICS

a) APC requirements & competencies guide – for 22 faculties (Feb 2012)
b) Candidate’s guide – for different routes (2006)
c) QS & construction pathway guide (Apr 2009)

2. Mandatory(Common), Core and Optional Competencies (Specific to pathway)

3. Levels
Level 1 – Knowledge and understanding
Level 2 – Application of knowledge and understanding or strong theoretical knowledge of
procedures (if candidate has no experience)
Level 3 – Reasoned advice and demonstrate detailed dept of understanding
Ex: Procurement methods / Holistic approach – not expected to have experience in all fields

Contract Practice (T017) & Contract Administration (T016)

Introduction

1. Contract Practice – Core – Level 3 / Contract Administration – Optional – Level 2

2. Important section, comparatively highest no of APC questions from this section
3. You should be thorough with at least one Std form – This discussion will be based on FIDIC –
4th Edition – 1987 (if your contract is bespoke and not based on any std form)

Syllabus

1. Principles of contract law

What is a contract – a legally binding agreement with specific terms made between two or
more parties in which there is a promise to do something in return for a valuable benefit
known as consideration.

Contract can be in writing or oral (purchasing goods, using public transport)

Elements/Principles of a contract – Offer, Acceptance (Unconditional – can be oral, in writing

or implied by conduct), Consideration (Valuable benefit – distinguish gifts from contracts),
Capacity, Intention to create legal binding, Legality, Good faith & fair deal (Article 246 of
Federal Law No 5 / 1985)

Employer’s point of view;

Benefits – Building
Rights – Deduction of LD
Obligation – Provide access, timely nomination of NSC
Liabilities – Make payments

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 Construction Contract Documents;

a) Should address following important areas;

 Responsibilities of each party
 Contract management procedures
 Scope of work, standards, spec, quality
 Time frame, EOT provisions
 Payment mechanism (interim & final)
 Dispute resolution mechanism
 Mechanism for dealing with changes
 Mechanism for handling default and termination

b) Contents;
Vol 1 – Contract Agreement, Form of Tender, Instructions to Tenderers, CoC, App to
Tender
Vol 2 – Specification
Vol 3 – BOQ
Vol 4 – Drawings

c) Key differences between Tender and Contract – Contract Ag, Tender Add, PTC added

d) Priority – FIDIC 4th Edition – 1987;

 Contract Agreement
 LOA
 Tender
 Part II of CoC
 Part I of CoC
 Any other documents (Spec/Drw/BOQ etc)

2. Legislation

Court structure (Court of First Instance, Court of Appeal – Points on facts and law, Court of
Cassation - Dubai / Federal Supreme Court – AD – points of law only)

Important law provisions (CPC – Law no 11 of 1992 Articles 203-219 for Arbitration, Federal
law No 5 of 1985 for Contract law, Labour law Federal Law no 8 of 1980, Environmental law)
Common law (judge made, case law, precedence) – UK, Australia, Hong Kong vs Civil law
(legislature, no precedence) – UAE, Egypt, France, Germany

3. Current case law – keep reading recent publications (Not really applicable to UAE context)

4. Standard forms of main and sub contracts

a. Types of Standard forms of contracts (FIDIC, NEC/ECC, JCT, ICE, IChemE, PPC 2000 /
TPC 2005)

b. Types of FIDIC forms of contracts (1987, 1999, Rainbow edition – Red, Yellow, Silver,
Green, White)

c. Differences between FIDIC 1987 & 1999 (Engineer impartial, DAB provision, Fit for
purpose, Termination for convenience, Employer’s claims, VE, Late payment, AP, Off site
materials, Payment due date, Force majeure)

d. Differences between your contract and FIDIC (PB compulsory, Cl 44 /53 notice period,
condition precedence, AP, Price fluctuations disallowed, Cl 67 – rules changes – DIAC /

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 DIFC / ADCCAC, Cl 52.3 % - adjustment of Site and general OH due to Variations, Boycott
Israel, Decennial liability)

e. Why Std forms are good? (Balance risk allocation, time tested for possible flaws, familiar
by all parties, less disputes, legal costs minimized, ready to use)

5. Roles and responsibilities of parties – general knowledge / RIBA plan of work

Construction is team work – Employer, PM, Engineer, QS, Contractor, Subcontractors
QS – Cost managers of construction, economic consultant to project team

6. Assignment / Novation
.
Assignment –Mechanism to transfer rights by one party to a third party (Liabilities / burdens
cannot be assigned). Generally does not require the consent of other party (Construction
contracts usually require)

Ex: assignment of collateral warranties to end users by developer

Novation – Mechanism to transfer all rights and liabilities by one party to a third party who
will replace the original party in the contract. Requires the agreement of all three parties
involved.

Ex: Novating de-watering contract from piling contractor to building contractor

Question – How do you ensure the continuity of the dewatering subcontractor appointed by
the piling works contractor following the completion of the piling works?

7. Letter of Intent - Definition and Purpose

An expression in writing of a party’s present intention to enter into a contract at a future date
(Enable obtaining approvals, arrangement of resources and contacting suppliers, getting
contractor on board, anticipated delay in finalizing the contract)

8. Performance security – bonds, Parent Company Guarantee

PB – Provided by bank or financial institution, usually 10%, Clause 10.1 - issued within 28
days upon receipt of LOA, Clause 10.2 - returned within 14 days after DLC
For the Emp to recover losses in the event of a breach of contract by the Contractor

Unconditional and on demand – The Emp does not require any proof of the Contractor’s
default to claim his entitlement

PCG – Provided by parent company, Instances – local branch / Unincorporated or JV

Liability limited to its subsidiary’s liability under the contract - should it be capped? Yes
Parent Company will assume the obligations of its subsidiary under the contract

Other types of bonds - Retention Bond / Advance Payment Bond

9. Insurances

Type Clause Amount Validity

Until date of issue of
Full replacement cost + 15% TOC (Insurance for
Clause
Works (professional fees + cost of outstanding works Cl
21.1
demolishing + removing debris) 49 & 50)
Emp – Property ins
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 Clause Until any works are
Third party liability Amount stated in App to Tender
23.1 carried out
Until any persons are
Clause
Workmen compensation Sum sufficient to cover liability employed on the
24.1
Works
Clause Sum sufficient to provide Until any works are
Contractor’s equipment
21.1 replacement at Site carried out

a. Professional indemnity insurance – Professionals have a duty to exercise reasonable skill,

care and diligence in the performance of his obligations.
Requirements to establish a claim under negligence - Duty of care owed, Breach of that
duty occurred, Breach caused injured party to suffer loss.
RICS guidelines available. Run-off cover.

b. Remedy if Contractor fails to insure – Clause 25.3 (Emp may take and deduct premium)

c. Emp take third party insurance – harbor / airport construction (liability is more and
disproportionate to contract sum)

d. Umbrella cover – Emp take insurance for Works + third party (large developments),
Include later packages as a schedule, why contractor also take insurance in some
instances? (Deductible – first amount of claim not covered)

e. Cross liability (Clause 23.3) – when insurance under both contractor and employer,
damages to both parties are covered as if they are separately insured (both parties can
seek compensation for their individual losses – culvert slab collapse damaging cables)

f. Subrogation – right of the insurance company to sue whoever is responsible for causing
loss to the insured

g. Administration of insurance claims

 Inform insurance company
 Take police reports + photos
 Prepare incident report
 Loss adjusters visit
 Submit claim with substantiations (quotations etc)

10. Advance payments

Not in FIDIC 4th Edition 1987 but addressed in FIDIC 1999

Why AP – generally there is a negative cash flow for most part of the project, reduce finance
cost to Contractor

Generally against a bond – Need to submit approved wording, contract copy and cash flow
forecast to obtain AP Bond from bank. Specific provisions in the wording - operation clause
and reduction of value

How to certify AP?

 LOA issued or Contract Agreement signed
 Performance security, if required is given as per approved wording from an approved
institution to the Employer
 AP Bond, if required is given as above
 Contractor has sufficiently mobilized to the Site
 Contractor has applied for AP

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11. Interim valuations and payment provisions

Clause 60.1 – at the end of each month submit monthly statement in respect of;
 Value of Permanent Works executed
 Any other items in BOQ (Contractor’s Equipment, Temp Works, dayworks etc)
 MOS (% and list as stated in App to Tender)
 Price fluctuations (under Clause 70
 Any other sum (claims under Clause 53)

Clause 60.2 – within 28 days of receipt of statement, deliver Interim Payment Certificate to
Emp subject to;
 Retention – at % and subject to limit stated in App Tender
 Deductions other than LDs – Eng’s OT (rate of progress – Clause 46.1), Cost of
insurance effected by Emp (Clause 25.3), Payment to NSC (Clause 59.5)

Issuing IPC is subject to min amount of IPC – as stated in App to Tender and performance
security provided and approved by the Emp

Clause 60.10 – within 28 days of the receipt of IPC, Emp to pay subject to Clause 47 (LD)
Interest for late payments at the rate stated in App to Tender

12. Material on/off site

 As per list in App to Tender

 Invoices and delivery orders (physically verify quantity)
 Approved MIR
 Quantity not exceeding the requirement and intended to be used in the project
 % of invoice value as stated in App to Tender

Material off-site
 The Contract should allow material off-site payments
 Vesting certificate – undertaking materials are sole property of the Emp
 Insurance – as Contract insurance policies do not cover off-site materials
 Clearly marked and separated from other materials
 Factory inspection certificate

13. Fluctuations – Not applicable in UAE but need to know how the calculations are done

14. Retention – retention bonds

Retention – to encourage the Contractor to rectify defects / to allow Emp to take remedial
actions and recover cost in case of Contractor’s failure to rectify
Percentage – stated in App to Tender
Limit of Retention Money – stated in App to Tender
Retentions are not applicable on price fluctuations – Clause 60.2

How retention is released?

One half – upon issue of TOC for whole of the Works or Section or part of the Permanent
Works (such proportion having regard to relative value of such Section or part)
Other half – upon expiration of DLP (or expiration of the latest DLP) less cost of any work
remaining pursuant to Clause 49 & 50

Retention bond – bond submitted by the Contractor in order to allow early release of
retention if the Contract allows (either monthly or upon issue of TOC)
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15. Change procedures

Changes to the Works and not to the Contract

Why changes – The Emp may change his mind, Unavailability of specified materials,
unforeseen site conditions, changes in Authority requirements etc

Be familiar with the procedure in your company

Contractor shall only do instructed changes as per Clause 51 (Exception – Clause 40.3,
suspension of part of the Works can be considered omitted)

16. Valuing change – variations / compensation events

Be familiar with procedure in Clause 52
Variations (Clause 51.1) vs varied work (Facilities given to other contractors – Clause 31.2)

17. Extension of time

Why EOT – Avoid liability for LD / Avoid Time at Large situation

Clause 44.1 – ground for EOT

 amount or nature of extra or additional works
 any cause of delay referred to in these conditions (6.4 (drawings) / 12.2
(unforeseeable obstruction) / 40.2 (suspension) etc
 exceptionally adverse climatic conditions (frequency / intensity – should not be
reasonably foreseeable for an experienced contractor)
 any delay, impediment or prevention by the Emp (delay in nomination – 59)
 other special circumstances
Eng shall determine fair entitlement (Contractor is duty bound to mitigate)

Clause 44.2 – notices and detailed particulars

 Notice – within 28 days
 Detailed particulars – Within 28 days or as agreed with the Eng
Eng not bound (FIDIC) – but still can
Eng shall not – but an arbitrator or a judge can
Contractor forfeits the right or similar wording (DCA) – nobody can

Clause 44.3 – determination

Interim particulars – when the event has continuing effect, submit at intervals not more than
28 days
Final particulars – within 28 days of the end of effects
Interim determination – without undue delay (included in the next PC)
Overall EOT – on receipt of final particulars, shall not be less than any interim determinations

Interim / final / detailed particulars – delay schedules, mitigation measures, minutes of

meeting, daily site diaries, progress reports, time impacted programme, correspondence

Climatic conditions – Contractual entitlement only for EOT and no cost – why?, beyond control
of both parties, loss lies where it falls (Contractor – prolongation cost, Emp – revenue loss)
Delays – Contractor, Employer and Neutral

Solitary delay vs Concurrent delay – Out of above three types, two or more delays happen at
the same time or effect felt at the same time – not addressed in FIDIC.
True concurrency – delay happens at the same time
Sequential concurrency – delay happens sequentially but the effect felt at the same time
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 SCL delay and disruption protocol – provide guidance says for concurrent delays;
 Contractor’s delay should not reduced EOT due
 However, compensation only to the extent that Contractor can separate loss that flows
from the Emp risk event
 Check Prof Sam’s analysis of arguments (why contractor should be compensated)

Critical path – longest path in a programme which will establish minimum overall project
duration (programme is a network of logically sequenced construction activities), delays to CP
activities delay overall completion unless subsequent activities are compressed (work OT,
airfreight materials, revised methods of construction, additional equipment)

Mitigation vs acceleration – mitigation contractual duty, not paid for whereas acceleration is
done upon instruction from Emp/Eng except in the case of constructive acceleration (working
OT, additional labour, equipment, advancing materials delivery, changing methods of
construction)

Free Float – difference between early start and late start of an activity (float available for an
activity without affecting succeeding activity), who owns the float? (External pipeline –
Contractor delay procurement, Emp delay drawings)
Project Float – if CP ends before contractual completion date of a project

Milestone – a section in a project that has to be completed on a particular date

Causal link – but for the event giving rise to the claim, the contractor wouldn’t have suffered
the loss (loss should be naturally and directly arising from the breach)

Type of programmes;
 Programme submitted pursuant to Clause 14.1
 Revised programmes submitted pursuant to Clause 14.2 (recovery programmes – 46.1)
 As-built programme

Delay analysis methods – As planed impacted, As planed as built, Collapse as built, Time slice
analysis

18. Claims, loss and expense

Claim – a legitimate request for additional compensation of time or costs on account of a

change or breach of the terms of Contract.

Clause 53.1 – notice

 Within 28 days after the event
 Pursuant to the Contract or otherwise (under law – extra-contractual, exgratia,
quantum merit)

Clause 53.2 – contemporary records

 Contractor to keep contemporary records (Eng shall inspect and instruct the
Contractor to keep any additional records)
 Ex: idle time of resources, abortive works / protective measures, demobilization and
remobilizations records, photos, minutes of meetings, site diaries, resource utilization
patterns, correspondence, news & articles

Clause 53.3 - substantiation

 Detailed particulars of amount claimed - Within 28 days or as agreed with the Eng
 Interim account - when the event has continuing effect

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  Further interim accounts – accumulated amount of claim at intervals as agreed with
Eng
 Final account - within 28 days of the end of effects

Clause 53.4 – failure of Contractor to comply

 Entitlement will be limited to the amount that can be verified from the contemporary
records

Clause 53.5
 Contractor entitled be paid under interim PC
 If particulars insufficient to substantiate whole claim, then such part substantiated

Types of claims
 Contractual claims – arising out of expressed provisions of the Contract (Additional
payment under Clause 53)
 Claims at law – breach of implied terms of the Contract (Decennial liability)
 Quantum meruit claims (Ex: Work done based on LOI)
 Ex gratia claims – out of kindness to maintain relationships (Ex: Due to substantial
pricing errors, Exceptional price fluctuations)

Structure of a claim
 Facts – Contemporary records, witness statement, other evidence (news)
 Legal basis – Contractual and legal provisions
 Liability – Emp liability to provide relief
 Quantum – Amount of EOT and/or additional payment

Headings of a loss and expense claim

 Delay cost due to each delay event derived from contemporary records (idling
resources, demobilizing and remobilizing costs etc)
 Loss of productivity / disruption costs (measured mile approach)
 Prolonged site overheads (staff, office, utilities, plant, transport, insurance, bonds)
 Under-recovery of head office overheads (formula – Hudson, Emden, Eichleay etc)
 Additional finance charges due to longer duration
 Finance charges due to late release of retentions
 Subcontractor’s claims
 Escalation claims (Late procurement)
 Loss of profit

SCL Protocol – Evaluation of costs based on the period when the effect is felt and not the
extended period

Expense – additional costs to maintain site facilities etc

Loss – loss of opportunity to make profit elsewhere due to Emp’s delay

19. Dispute avoidance and resolution – under the contract, other mechanisms, pros and cons

Dispute avoidance
 Choose correct procurement path
 Ensure proper coordination between different tender documents and provide timely
and proper answers to tender queries and distribute to all
 Use standard forms as much as possible
 Allow sufficient time to finalize contracts
 Appoint qualified professionals to prepare and administrate contracts

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 Dispute resolution under the contract - as per FIDIC 1987;
 Clause 2.3 – If Contractor questions ER’s communication, he may refer to Eng who
shall confirm, reverse or vary
 Clause 67.1 – Refer to Eng for decision / Eng decision with 84 days / If dissatisfied or
no decision given by Eng within 84 days – notice to commence arbitration within 70
days / arbitration shall commence on or after 56 days from notice unless agreed
otherwise by parties

Other mechanisms;

Advantages of arbitration vs litigation;

 Arbitrators are experts on this field
 Confidentiality (private hearing)
 Speed – 6 months under UAE law
 Flexibility in procedure (place, date and time)
 International enforceability – New York convention – 1959 (UAE joined in 2006)
 Continuity of the same arbitrator(s)

Disadvantages of arbitration vs litigation;

 Cost
 Power of arbitrators (Calling witnesses / disclosure of documents)

Challenge Arbitration Award – Procedural errors / Equal opportunity / Bias (Conflict of Int)

20. Named / Nominated subcontractors

Domestic – Appointed by MC as per his own requirements subject to approval of Eng
Named – Appointed by MC from the list provided by the Employer
Nominated – Appointed by the Emp but contract with MC

Emp obligations towards Nominated SC;

 Selection and appointment of a suitable SC on time
 Nominate another SC if MC raise reasonable objection – Clause 59.2
 Making direct payments to NSC in case of MC’s failure – Clause 59.5
 Appoint another SC if the NSC fails to perform

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21. Sectional completion / Partial possession (Clause 48.2)

Sectional completion – completion of any Section for which separate Time for Completion is
provided in the Contract

Partial possession – occupation or use of any substantial part of the Permanent Works by the
Employer either before or after completion to the satisfaction of the Eng
In both cases, the Contractor may request and Eng shall issue TOC as per Clause 48.1.

Requirements for issuing TOC;

Permanent Works should be substantially completed
Satisfactorily passed any Tests on Completion
Written undertaking from the Contractor to finish any outstanding work during DLP

Substantial completion means – The Emp can take beneficial use of the project for its
intended purpose – Contractor still liable to complete the project in its entirety but entitled to
receive TOC

22. Design portions / Performance specified works

23. Determination

Determination – a valid and enforceable contract comes to an end prematurely before it has
been discharged by performance

How a contract can comes to an end?

 Discharged by performance (Ex: DLC)
 Terminated by mutual agreement
 Terminated by Court Order (Ex: bankruptcy)
 Frustration – parties discharged

Frustration – not possible for the contract to complete without the default of a party (illegal,
impossible to perform, radically different from original bargain)
Ex: Release of performance – Clause 66.1 – parties shall be discharged from the contract
Ex: Govt acquire land, New regulation, Tunnel instead of bridge

Clause 63 – Contractor’s default

Grounds:
1. Insolvent of bankrupt
2. violates Clause 3.1 (Assignment)
3. Eng certifies that; - Default Certificate
 Repudiated the contract (Serious breach of contract)
 Failed to commence pursuant to Clause 41.1 (Commencement of Works)
 Failed to proceed with works pursuant to Clause 46.1 (Rate of Progress)
 Failed to comply with notice issued under Clause 37.4 and 39.1 (Quality)
 Persistently or flagrantly neglecting to comply
 Violated Clause 4.1 (Subcontracting)
Then Emp may after giving 14 days notice terminate the employment of the Contractor

14 days notice – for the Contractor to prepare for demobilization

Terminate employment – to hold the Contractor liable, otherwise contract conditions cannot
be enforced

Payment after termination? – not due until expiration of DLP

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 Clause 69 – Employer’s default
Grounds:
1. Failure to pay within 28 days after time stated in Cl 60.10 (28 days for IPC)
2. Interfering with or obstructing issue of any PC
3. Becoming bankrupt
4. Notice as to unforeseen economic conditions
Then Contractor may terminate his employment after giving 14 days notice

Outbreak of war (Clause 65.6) – The Emp is entitled to terminate contract

Antecedent breach - a breach committed by either party before termination of the contract or
being discharged from the contract (Clause 65.6 – Outbreak of war & 66.1 – Release from
performance)

24. Final accounts – be familiar with the procedure as per your contract
As per FIDIC 1987;
Draft final statement within 56 days of issuing DLC (Value of work done + any further sums)
If agreed, Final Statement + discharge letter
If dispute exists, Eng issue Interim Payment Certificate, dispute may be administrated under
Clause 67
Final Payment Certificate within 28 days of receipt of FS (the amount finally due + balance)
Final payment within 56 days of receipt of FPC

25. Completion – be familiar with the procedure as per your contract

The Contract shall not be considered as completed until DLC is issued by the Eng

26. LAD – Liquidated (represented by a monetary value), Ascertained (amount stated prior to
commencement of contract)
Liquidated vs Un-liquidated damages
Genuine pre-estimate of the Emp’s potential loss due to Contractor’s breach of contract, Void
if it is not a genuine estimate and Emp will recover un-liquidated damages

Remoteness of Damages – damages which could have been reasonably foreseen at the time
the contract was executed (Ex: Hotel accommodation charges of the tenants)
Penalty vs LAD?

Advantages of LAD provision in the contracts (Ensure Contractor’s performance, Contractor’s

risks are limited, Emp gets automatic right for recovery of damages, No need for proving
actual damage)

27. Defects rectification period (in FIDIC 1987 Clause 49.1 – DLP, FIDIC 1999 – DNP)

Defects can be patent (evident now) or latent (appear after sometime)

Why is it normally 12 months – to cover all climatic seasons to test and reconfirm (Ex: leaks
not found until rain)

Consequences of DLP;
1. Eng to issue DLC, within 28 days upon expiry of DLP – Clause 62.1
2. Other half of retention become due – Clause 60.3
3. Contractor to submit FS within 56 days of issuing DLC – Clause 60.6
4. End of Contractor’s obligation for insurance
5. Performance security release within 14 days of issuing DLC – Clause 10.2

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 Liabilities of Contractor after DLC
1. Extended warranties, if any
2. Unfulfilled obligations pursuant to Clause 62.2, if any
3. Decennial liability pursuant to UAE law
4. Confidentiality undertakings

28. Other Terms

h. Time is of the essence – time limits must be strictly adhered to – failure to do so may
release other party

i. Without prejudice – cannot be used as evidence in the courts / no admission

j. Quasi-contract – Contractor commenced works at site before agreeing the essential terms
of the Contract – obligation to pay if negotiation fails

k. Quantum merit – LOI issue no price agreed, extra works done no mechanism to value in
the contract, contract is void

Entitlement - as much as one deserve / payment of reasonable sum for the work done

Law of restitution / principles of unjust enrichment

l. Contra proferentum rule – ambiguity in a document is construed in the way least

favourable to the person who prepared the document (as he was in the best position to
avoid the harm)

”The contra proferentem rule states, broadly, that where there is doubt about the
meaning of the contract, the words will be construed against the person who put them
forward.”

m. Prevention principle – party cannot benefit from its own breach to the detriment of the
injured party (Ex: no provision for EOT, Emp delay, Contractor liable for LD – this is
against good faith)

n. Repudiatory breach – innocent party is entitled to terminate the contract in addition to

recovering damages (normally you can claim damages for breach of contract and not
entitled to terminate)

Ex: persistent failure by the Emp to pay the Contractor or not providing access to the
Contractor – make it clear that one party has no intention of performing his part of the
bargain

o. Time at large – happens when there is no completion date in the contract or no provision
to extend time for completion when Emp delays the project and time runs beyond

p. Privity of contracts – no rights conferred or obligations imposed on third parties by a

contract, third party cannot sue for damages on a contract to which he is not a party

q. Collateral Warranty – an assurance given by a party to a contract to a third party (end

user) that he has discharged all his obligations in accordance with the contract and if
there is any defect in the product supplied, it will be rectified free of charge during the
warranty period (Also called third party contracts)

Collateral warranty required in order to overcome rule of privity of contracts

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 r. Set-off – three types

Contractual (contract expressly allowed – Ins taken by Emp, OT payment to Eng,

Payments to NSC – 59.5),

Equitable (closely connected – Under same contract but not expressly allowed – Emp
procure materials on Contractor’s behalf),

Legal (not required to be closely connected – may be different projects but the amounts
should be liquidated / known / can be readily ascertained Ex: payment against a PC vs LD
against a separate contract)

s. Negligence – breach of duty to exercise reasonable skill, care and diligence / law of tort
In UAE – 10 years
In UK – 6 years by Limitation Act (RICS requirement for run off cover)

t. Joint & several liability – Defendants are liable for full damages regardless of their
individual share of the liability as claimant may pursue its claims against anyone party

u. Decennial liability – Designer and contractor are jointly liable for the defects threatening
the stability of the building for 10 years from the date of delivery (Articles 880-883 of Civil
Code)

v. LC – guarantee of an automatic payment by the purchaser in advance of receipt of goods

(Applicant, Beneficiary, BOL – Bill of Lading, FOB – Free on Board, CIF – Cost Insurance
Freight, Ex-factory – Price of goods at the factory)

w. Insolvency – Inability to pay debts when they become due

Bankruptcy – a status declared by the Court

What you should do if the Contractor becomes insolvent;

 Inform Emp to temporarily stop any further payments
 Advise Emp to ensure bonds and insurances are in place and in safe custody
 Advise Emp to put site security to ensure nothing is taken away from site
 Take steps to maintain essential services and ensure protection of works
completed
 Issue Default Certificate enabling Emp to Terminate the employment of the
Contractor
 Take photographic evidence, as built drawings
 Take joint measurement of works done, if possible and asses the value of work
done
 Liaise with liquidator as and when necessary

Consequences of LOA;

1. PB, if required, within 28 days

2. Programme & Method Statement pursuant to Clause 14.1 within time stated in App to
Tender
3. Cash flow estimate pursuant to Clause 14.3 within time stated in App to Tender
4. Breakdown of lump sum items pursuant to Clause 57.1 within 28 days
5. Notice to commence by Eng pursuant to Clause 41.1 within time stated in App to Tender
6. Evidence of insurance before commencement

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Consequences of TOC;

1. DLP commences
2. One half of the retention release
3. Contractor’s obligation for Works insurance ceases except for outstanding works
4. Contractor is no longer liable for LD
5. Statement at Completion – within 84 days of issuing TOC – Clause 60.5

Different types of certificates issued by Eng;

1. Interim Payment Certificate

2. Taking Over Certificate
3. Defects Liability Certificate
4. Final Payment Certificate
5. Default Certificate – Clause 63.1

Provisional sums;

1. Defined provisional sums – amount and type of work is mentioned and to be included
within Contractor’s programme and preliminaries
2. Undefined provisional sums – Only amount and no type of works mentioned. It is only a
contingency and not to be allowed within Contractor’s programme or preliminaries.
3. Familiar with provisions in your contract (FIDIC – Clause 58)

Suspension;

1. Engineer may instruct suspension – Clause 40.1 (Is the Contractor entitled for EOT in case
of suspension of Work due to climatic conditions?)
2. Contractor may suspend – Clause 69.4 (in case Emp’s failure to pay)

Contract Administration;

1. Timely and proper discharge of obligations to protect interest of the employer,

2. Securing of rights, and
3. Avoiding liabilities, under the contract or otherwise

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