Building Contract Claims

Guy Higginbottom is an experienced consultant who spent much of his career working in private practice, including as Group Commercial Director for a large, regional building contractor. He has also held senior positions at global consultancies such as Atkins Réalis (formerly Faithful+Gould), and Arcadis. Guy is also the author of Wiley's 'Design and Build Contracts'.David Chappell is an architect who has worked in both the public and private sectors, as well as acting as contract administrator for a building contractor.

• Preface xviiPart I 11 Introduction 31.1 General Introduction to ‘Claims’ 31.1.1 General 41.1.2 Contractual Claims 41.1.3 Extension of Time and Loss and/or Expense 51.1.4 Variations 61.1.5 Unexpected Problems 61.2 Standard Forms of Contract Considered in This Book 71.2.1 JCT 2016 Contracts 81.2.2 NEC4 Contracts 91.3 Types of Claims by the Contractor 111.3.1 Contractual Claims 111.3.2 Common Law Claims 111.3.3 Quantum meruit Claims [Detailed Text Transferred to 4.5] 121.3.4 Ex gratia Claims 121.4 Types of Claims by the Employer 131.4.1 Delay Damages 131.4.2 Low Performance Damages 131.4.3 Reduction of the Contract Price for Non-CompliantWork 141.4.4 Other Claims 141.5 Structure of This Book 152 General Principles 172.1 Entitlement 172.1.1 Contractual Entitlement 172.1.2 Duty, Breach, Causation and Loss 202.2 The Burden of Proof 212.2.1 The Burden of Proof 212.2.2 Res Ipsa Loquitur – It Speaks for Itself 212.3 Causation 222.4 Categories of Claim 242.4.1 Prolongation 262.4.2 Disruption 282.5 The ‘Knock-on’ Effect 292.6 Damages 322.7 Mitigation [Prev 6.4] 332.7.1 Mitigation of Delay 332.7.2 Mitigation of Costs 342.8 Betterment 362.9 Notices 372.9.1 Requirement for Notice 382.9.2 Time Bar Clauses 392.9.3 Whether a Condition Precedent 412.9.4 Waiving the Requirement for Notice 422.9.5 Essential Elements of a Notice 432.9.6 Giving, Issue and Receipt of Notices 453 Time 473.1 General Points 473.1.1 Time Obligations in Building Contracts 473.1.2 Commencement Obligations 483.1.3 Progress Obligations 493.1.4 Completion Obligations (Including Partial Possession) 533.1.5 Time at Large 563.1.6 Time of the Essence 593.2 Extension of Time Clauses in Building Contracts 603.2.1 Basic Principles 603.2.2 The Prevention Principle 613.2.3 Onerous Clauses 623.2.4 Further Delays During a Period of Culpable Delay 623.3 Critical Path Analysis and Planning Software 633.4 The Society of Construction Law Delay and Disruption Protocol 663.5 Methods of Delay Analysis 673.5.1 Initial Steps: The Programme 673.5.2 Impacted as-Planned 743.5.3 Time Impact Analysis 773.5.4 As-built v As-planned 843.5.5 Collapsed As-built 873.5.5.1 Summary of Delay Analysis Methods 933.6 Float 953.6.1 ‘Financial’ Effects of Using up Float 973.6.2 ‘Time’ Effects of Using up Float 983.7 Concurrency 993.8 Acceleration 1013.8.1 Introduction 1013.8.2 Acceleration by Agreement or Instruction 1023.8.3 Unilateral Acceleration 1053.8.4 Constructive Acceleration 1053.9 Sectional Completion 1083.9.1 Where There Is a Single Date for Completion 1083.9.2 Dependent Sections 1093.10 ‘Milestone’ or Key Dates 1123.11 Foreshortened Programme 1133.11.1 Contractor’s Obligation to Complete 1133.11.2 If the Contractor Could Have Completed Earlier 1143.11.3 Late Information 1154 Financial Compensation: Recovery of Direct Loss and/or Expense or Additional Costs 1194.1 Definition 1194.1.1 JCT 2016 v NEC4 Contracts – Different Approaches 1204.1.2 JCT 2016 Contracts – ‘Direct Loss and/or Expense’ 1204.1.3 NEC4 – ‘Change in the Prices’ 1214.2 Direct v Indirect 1224.3 Exclusion of Indirect or Consequential Loss 1234.4 The More Common Heads of Loss 1264.4.1 General Principles 1264.4.2 Prolongation Costs 1264.4.2.1 On-site Establishment Costs 1274.4.2.2 Management Personnel Costs 1284.4.2.3 Plant 1294.4.2.4 WinterWorking 1324.4.2.5 Head Office Overheads 1324.4.2.6 Loss of Profit 1374.4.3 Disruption Costs – UneconomicWorking 1384.4.4 Other Costs 1414.4.4.1 Increased Costs 1414.4.4.2 Interest 1434.4.4.3 Financing Charges 1444.4.5 Costs of a Claim 1454.4.6 Sub-Contractor Claims 1474.5 Quantum Meruit Claims 1484.5.1 Circumstances Giving Rise to Quantum Meruit Claims 1484.5.2 Valuation of Quantum Meruit Claims 1494.6 Exclusive Remedy Clauses 1504.7 Claims at Termination of Contractor’s Employment 1514.7.1 Termination Claims Under JCT 2016 Contracts 1514.7.2 Termination Claims Under NEC4 1565 Claims for Variations Under the Contract, Acceleration, Bonus Clauses and Contractor’s Share 1615.1 Definitions and Scope 1615.1.1 Definition of a ‘Variation’ 1625.1.2 Scope of a ‘Variation’ – Contract Documents 1645.1.3 Scope of a Variation – Bills of Quantities 1665.1.4 Other Pricing Documents 1725.2 JCT 2016 Contracts – Definitions of Variations 1725.2.1 Alteration of Design, Quality or Quantity of theWork 1725.2.2 Changes or Restrictions Imposed by the Employer 1755.2.3 Instructions and Other Circumstances Giving Rise to a ‘Variation’ 1785.2.3.1 Corrections to Contract Documents (Resolving Discrepancies, Ambiguities, Inadequacies, etc.) 1795.2.3.2 Instructions 1835.2.3.3 Design Submission Procedure and Contractor’s Designed Portion (‘CDP’) 1915.3 NEC4 Contracts – Definition of ‘Compensation Events’ (Including Variations) 1935.3.1 NEC4 – Compensation Events 1935.3.2 NEC4 – Compensation Event Procedure 1965.4 Valuation Under JCT 2016 Contracts 2035.4.1 The ‘Valuation Rules’ and Their Application 2065.4.1.1 Valuation by Measurement 2075.4.1.2 If theWork Cannot be Measured – Valuation on a Daywork Basis 2125.4.1.3 Valuation of the Contractor’s Design (Including the ‘Contractor’s Designed Portion’) and ‘Provisional Sums’ 2145.4.2 Variation and Acceleration Quotations and Contractor’s Estimates 2175.5 Valuation Under NEC4 Contracts (Including ‘Contractor’s Share’) 2215.5.1 Assessing Changes to the Prices 2235.5.2 Contractor’s Share (Options C and D) and Incentive Payment (Option X22) 2305.6 Acceleration Provisions 2335.6.1 Acceleration Under JCT SBC/Q 2016 and JCT DB 2016 2335.6.2 Acceleration Under NEC4 2345.6.3 Summary of Acceleration Provisions 2345.7 Bonus Clauses 2355.7.1 Contractor’s Share 2365.7.2 Early Completion Bonus 2365.7.3 ‘Budget Incentive’ for Early Contractor Involvement (Option X22) 2365.7.4 Bonus Clauses and Acts of Prevention 2376 Basis for Common Law Claims 2396.1 General 2396.1.1 Authority of Employer or His Representative 2416.1.2 Effect of ‘Final Certificates’ 2426.2 Implied Terms 2436.2.1 General Principles 2436.2.2 Terms Implied (or Imposed) by Statute 2446.2.3 Common Law (Case Law) 2456.2.4 Other Bases for Implied Terms in Building Contracts 2496.3 Variation of the Contract Itself (Not a Variation Under the Terms of the Contract) 2496.4 Omission ofWork to Give it to Others 2506.5 ExtraWork 2536.6 Possession of the Site 2556.6.1 General Position 2556.6.2 Sufficient Possession 2556.6.3 Failure to Give Possession 2566.6.4 Deferring Possession and Suspension by the Employer 2576.7 Incorrect Information 2586.7.1 Basis of Claim 2586.7.2 Provision of Correct Information 2587 Global Claims 2637.1 General Points 2637.2 Basic Principles of Global Claims 2637.3 The Current Position 2657.4 Summary 2678 Employer Claims Against the Contractor 2698.1 General 2698.2 Delay Damages (Liquidated damages) for Late Completion 2708.2.1 The Meaning and Purpose of Liquidated Damages 2708.2.2 Liquidated Damages Clauses Must be Clear and Unambiguous 2728.2.3 ‘Liquidated Damages’ or a ‘Penalty’ 2738.2.4 The Sum Expressed as Liquidated Damages and its Calculation 2768.2.5 Liquidated Damages as the Only Remedy 2798.2.6 Where There Is Partial Possession 2808.2.7 Maximum Recovery – Including a Damages ‘cap’ 2828.3 Procedures for Deducting Liquidated Damages for Late Completion 2848.3.1 General Points 2848.3.2 Liquidated Damages Under JCT 2016 Contracts 2848.3.3 Liquidated Damages Under NEC4 2868.3.4 Damages for Late Completion Summary 2888.4 Defences to Liquidated Damages for Late Completion 2888.4.1 By Agreement 2888.4.2 Deficiencies in the Building Contract 2918.4.3 Employer Failing to Observe the Contract Terms 2918.4.4 Time Has Been Extended 2928.4.5 Time Is at Large 2928.4.6 The Contract Is Terminated 2938.4.7 The Stipulated Sum Is Actually a Penalty 2948.5 Defects: Reduction/Abatement of the Contract Price 2958.5.1 General Points 2958.5.2 Abatement/Reduction of the Contract Price 2958.5.3 Abatement Under JCT 2016 Contracts 2968.5.4 Abatement Under NEC4 2978.5.5 Costs of Rectifying DefectiveWork 2988.6 Employer Claims for Other Breaches of Contract 3008.6.1 Liquidated Damages for Failing to Construct theWork to a Specified Area (m2 or ft2) 3008.6.2 Other Damages and Costs Payable Under NEC4 3019 Duties of the Employer’s Representative 3039.1 Employer’s Representatives (Architects’, Contract Administrator’s and Project Manager’s) Powers and Liability to the Contractor 3039.1.1 General Points 3039.1.2 Employer’s Representative(s) – General Duties 3059.1.3 Employer’s Representative(s) – Relevant Duties 3069.1.4 The Relevance of the Building Contract’s Terms 3079.1.5 Agency 3089.1.6 Employer’s Representative’s Authority, Exercising Discretion, and Making Decisions 3099.1.7 Employer’s Representative and the Contractor 3119.1.8 The Employer’s Representative’s Duties - Extensions of Time 3119.1.9 Extension of Time Decisions and Time Limits 3159.1.10 Loss and Expense Decisions and Time Limits 3179.1.11 Employer’s Liability for Breaches by the Employer’s Representative 3189.2 Quantity Surveyor ’s Role 3199.2.1 Valuation ofWork 3239.2.2 Direct Loss and/or Expense 3239.2.3 Quantity Surveyor’s Duty 3249.2.4 Duty to the Employer 3259.2.5 Quantity Surveyor’s Liability to Others 3269.2.6 Quantity Surveyor Functions Under JCT 2016 Contracts 3269.2.7 Quantity Surveyor Functions Under NEC4 3299.2.8 Commercial Settlements 33010 Preparation and Substantiation of Claims 33310.1 Preparing a Claim 33310.1.1 Introduction 33310.1.2 General Principles 33410.1.3 Requests for Further Information 33510.1.4 Setting Out the Claim 33710.1.5 Likely Content of a Claim 33910.2 Types of Evidence Required to Support a Claim 34010.2.1 Introduction 34010.2.2 The Explanation (or Narrative) 34410.2.3 Time Records (Programmes and Similar Documents) 34610.2.4 Cost Records 34710.2.5 Correspondence and Similar Documents 34910.2.6 Photographs, Time-Lapse Video 35010.2.7 Other Records (Site Meetings, Site Diaries, Labour Returns) 35010.2.8 A Scott Schedule 352Part II 35511 Extensions of Time Under JCT 2016 Contracts 35711.1 Introduction 35711.1.1 Definitions and Interpretation 35711.1.2 The Contractor’s Obligation to Notify a Delay to Progress 35911.2 The Contractor’s Notifications 35911.2.1 The Notice 35911.2.2 Particulars of the Delay(s) Expected Effects 36211.2.3 Updates: Material Change in Estimated Delay 36311.3 Fixing a New Completion Date 36311.3.1 Introduction 36311.3.2 Fixing a New Completion Date During the Course of theWork 36511.3.3 Fixing a New Completion Date After the Completion Date Has Passed 37211.3.4 Other Conditions for Extensions of Time 37311.4 Relevant Events – Grounds for Extensions of Time 37511.4.1 Variations or Changes 37511.4.2 Instructions 37511.4.3 Deferment of Possession 37511.4.4 Antiquities 37811.4.5 Inaccurate Approximate Quantities 37911.4.6 Contractor’s Suspension for Nonpayment 37911.4.7 Impediment, Prevention or Default by the Employer 38011.4.7.1 Late Provision of Information 38111.4.7.2 Work Not Forming Part of the Contract 38311.4.7.3 Provision of Materials or Goods by the Employer 38311.4.7.4 Failure to Give Access, Ingress or Egress 38511.4.7.5 Compliance or Non-compliance with CDM Regulations 2015 38511.4.8 Statutory Undertaker’sWork 38611.4.9 Exceptionally AdverseWeather Conditions 38711.4.10 Loss or Damage Occasioned by One or More of the Specified Perils 38811.4.11 Civil Commotion or the Use or Threat of Terrorism 38911.4.12 Strikes, Lock Out etc. 38911.4.13 New Legislation After the Base Date 39011.4.14 Delay in Receiving the Necessary Permissions (JCT DB 2016 only) 39011.4.15 Insolvency of a ‘Named Specialist’ (JCT SBC/Q 2016 only) 39111.4.16 ‘Named Sub-Contractors’ (JCT IC 2016 Only) 39211.4.17 Force Majeure 39412 Loss and/or Expense under Jct 2016 Contracts 39712.1 Introduction 39712.1.1 General Points 39712.1.2 No Relationship Between Relevant Matters and Relevant Events 40012.2 The Contractor’s Application and Assessment 40212.2.1 The Key Loss and Expense Clause 40212.2.2 Commentary on the Key Loss and Expense Clause 40312.2.3 Content of the Contractor’s Application 40612.2.4 Timing of the Contractor’s Notification (‘Relevant Matters’) 40712.2.5 Meaning of Loss and Expense 41112.2.6 Reimbursement Under Other Conditions of the Contract 41112.2.7 Quotations and Estimates for Loss and Expense and Acceleration 41312.2.8 Effect on Regular Progress 41512.2.9 Provision of Further Information 41612.2.10 ‘Form and Manner’ of Requested Information 41912.3 Ascertainment by the Employer or His Representative 41912.3.1 Criteria for Ascertaining Loss and Expense 41912.3.2 Ascertainment 42112.3.3 Timing, Content and Detail of the Ascertainment 42312.3.4 Matters within the Employer’s or His Representative’s Knowledge 42512.4 The ‘Relevant Matters’ 42712.4.1 Deferment of Possession 42712.4.2 Variations or Changes 42812.4.3 Other Circumstances Giving Risk to a Variation (or change) 42912.4.4 Instructions 42912.4.5 Antiquities 43112.4.6 Contractor Suspending Performance of His Obligations 43212.4.7 Inaccurate Approximate Quantities 43212.4.8 Delay in Receiving Permissions (JCT DB 2016 only) 43312.4.9 Impediment, Prevention or Default by the Employer 43312.4.10 Amounts Ascertained to Be Added to the Contract Sum 43412.4.11 Contractor’s Other Rights and Remedies 43513 Claims Under NEC 4 43713.1 Introduction 43713.1.1 Compensation Events 43813.1.2 Compensation Events Procedure 43813.2 Assessing Changes to the Prices 43813.3 Assessing a Delay to the Completion Date and/or a Key Date 43813.4 The Project Manager’s Assessments 44113.4.1 Clause 64 – the Project Manager’s Assessments 44113.5 The Compensation Events 44213.5.1 Project Manager’s Instructions Changing the Scope – Clause 60.1(1) 44313.5.2 The Client’s Failure to Allow Access to and Use of Part of the Site by Whichever is the Later of the Access Date and the Date Shown on the Accepted Programme – Clause 60.1(2) 44313.5.3 The Client Fails to Provide Something by the Date in the Accepted Programme – Clause 60.1(3) 44513.5.4 The Project Manager’s Instruction to StopWork or Not to StartWork or Changing a Key Date – Clause 60.1(4) 44613.5.5 The Failure of the Client or Others24 toWork (a) Within the Times on the Accepted Programme or (b) the Conditions Stated in the Scope or (c) Carrying OutWork on the Site that’s Not in the Scope – Clause 60.1(5) 44613.5.6 The Project Manager or the Supervisor Fails to Respond to a Communication Within the Agreed Period – Clause 60.1(6) 44713.5.7 The Project Manager gives Instructions about an Object of Value, or Historical or Other Interest Found Within the Site – Clause 60.1(7) 44913.5.8 The Project Manager or Supervisor Changes a Decision Previously Communicated to the Contractor – Clause 60.1(8) 44913.5.9 The Project Manager Withholds an ‘acceptance’ for a Reason Not Stated in the Contract – Clause 60.1(9) 45013.5.10 No Defect is Found After the Supervisor Instructs the Contractor to Search – Clause 60.1(10) 45013.5.11 A Test or Inspection Carried Out by the Supervisor Causes Unnecessary Delay – Clause 60.1(11) 45113.5.12 Physical Conditions Encountered by the Contractor Within the Site – Clause 60.1(12) 45213.5.13 A ‘weather measurement’ is Recorded – Clause 60.1(13) 45413.5.14 An event which is ‘Client’s liability’ Occurs – Clause 60(14) 45613.5.15 Taking Over of Part of theWorks is Certified by the Project Manager before Both Completion and the Completion Date – Clause 60.1(15) 45713.5.16 The Client Fails to Provide Materials, Facilities and Samples for Tests in Accordance with the Scope – Clause 60.1(16) 45813.5.17 The Project Manager Notifies a Correction to an Assumption Regarding a Compensation vent – Clause 60.1(17) 45813.5.18 The Client Commits a Breach of the Contract that’s Not a Compensation Event – Clause 60.1(18) 45813.5.19 An Event that Prevents the Contractor Completing theWorks in Accordance with the Contract Occurs – Clause 60.1(19) 45913.5.20 The Contractor is Notified by the Project Manager that a Quotation for a Proposed Instruction is Not Accepted – Clause 60.1(20) 46013.5.21 Additional Compensation Events in Contract Data Part One – Clause 60.1(21) 46113.5.22 Main Options B and D – A Difference Between the Final Quantity ofWork Done and the Quantity for an Item in the Bill of Quantities – Clause 60.4 46213.5.23 Main Options B and D. A Difference Between the Final Total Quantity ofWork Done and the Quantity for an Item in the Bill of Quantities at the Contract Date which Delays Completion or a Key Date – Clause 60.5 46413.5.24 Main Options B and D. Project Manager Corrects Mistakes in the Bill of Quantities which are Corrected by the Project Manager – Clause 60.6 46413.5.25 Main Options B and D. Correcting an Inconsistency Between the Bill of Quantities and Another Document When Assessing a Compensation Event – Clause 60.7 46513.5.26 Secondary Option X2.1. The Applicable Law Changes After the Contract Date 46513.5.27 Secondary Option X12.3(6) An Instruction Given by the Core Group to the Partners to Change the Partnering Information 46613.5.28 Secondary Option X14.2 – Delay in Making the Advanced Payment 46613.5.29 Secondary Option X15.2 – The Correction of a Defect for Which it was Not Liable by the Contractor 46713.5.30 Secondary Option Y(UK)2 Y2.5 Suspension of Performance by the Contractor under the Housing Grants, Construction and Regeneration Act 1996 (‘the Act’) 467Part III 46914 Sub-Contract Claims 47114.1 Introduction 47114.1.1 JCT 2016 Sub-Contracts 47214.1.2 NEC4 Sub-Contract 47414.2 Variations Under the Sub-Contracts 47514.2.1 Variations Under the JCT 2016 Sub-Contracts 47514.2.2 NEC4 Sub-Contracts 47714.3 Extensions of Time Under Sub-Contracts 48114.3.1 JCT 2016 Sub-Contracts’ Delay Notifications 48114.3.2 JCT 2016 Sub-Contracts: Fixing Period for Completion 48514.3.3 JCT 2016 Sub-Contracts: Relevant Sub-Contract Events 48814.3.4 NEC4 Sub-Contracts 50614.4 Loss and Expense Under the Sub-Contracts 50714.4.1 JCT 2016 Sub-Contractor’s Application and Main Contractor’s Assessment 50714.4.2 JCT 2016 Relevant Sub-Contract Matters 50814.4.3 Reservation of Rights and Remedies 51014.5 Main Contractor Claims Against Sub-Contractors 51114.5.1 Main Contractor’s Claims 51114.5.2 Delayed Completion by the Sub-Contractor 51214.5.3 Common Heads of Loss and Expense Claimed by the Main Contractor Against the Sub-Contractor 51415 Professional Fee Claims 51715.1 Introduction 51715.1.1 Means of Appointing Professional Consultants 51715.1.2 Consultants’ Core Obligations 51915.1.3 Client’s Core Obligations 52315.1.4 Basis for Consultant’s Fees 52315.1.5 The Basis for Charging for Consultant’s Fees 52515.2 Claims Made by Consultants 52715.2.1 Claims for ‘Variations’ (Additional Services) 52815.2.2 Adjusting the Time (Programme) for the Consultants’ Services 52815.2.3 NEC4 PSC Compensation Events 53015.2.4 Consultant’s Claims for Extensions of Time 53215.2.5 Consultant’s Claims for Additional Fees 53615.2.6 Consultant’s Claims for Common law Damages 53815.3 Client Claims Against Consultants 53815.3.1 Establishing the Standard for the Consultant’s Services 53915.3.2 Common Claims by the Client Against his Representative 53915.3.3 Common Claims by the Client Against a Designer 54015.3.4 Common Claims by the Client Against a Quantity Surveyor 541Appendix A Example of Contractor’s Claim for Reimbursement of Direct Loss and/or Expense Under the JCT 2016 Contracts 543A.1 Introduction 543A.2 Example Particulars 544A.3 Explanation of Costs or Expenditure 546A.4 Loss and Expense for Employer Delay 1 – Details 549A.5 Loss and Expense for Employer Delay 1 – Entitlement and Quantum 550A.6 Loss and Expense for Employer Delay 2 – Details 550A.7 Loss and Expense for Employer Delay 2 – Entitlement and Quantum 550A.8 Observations for Loss and Expense for Employer Delay Claims 1 and 2 555Appendix B Example of Compensation Event Claim Under NEC4 561B.1 Introduction 561B.1.1 Details of the Compensation Event 561B.1.2 Observations on the Compensation Event Assessment 564Index 581