INTRODUCTION OF CONSTRUCTION CLAIMS

•What are Claims•Types of Claims•Objectives of Claims•Points to be considered before proceeding•Notices of Claims•Interference by the Employer•Claims against Consultants•Construction Contracts•Documents relating to claims •Procedures of Claims

WHAT ARE CLAIMS?

CLAIMS

PAYMENT CLAIMS

TIME CLAIMS

COST CLAIMS

Consideration & normal, therefore excluded from this topic

The definition of a claim in a dictionary is an assertion of a right to something.

Claim is the demand for something supposed to be due

TYPES OF COST CLAIMS•Loss / expenses (Damages)

•Additional payment under specific provisions of the contract

•Variations

•Disruption

•Prolongation

TYPES OF CLAIMS

CONTRACTUAL

COMMON LAW/EX-CONTRACTUAL

EX-GRATIA

CONTRACTUAL CLAIMSWhere the contract provides for the event or circumstances being complained of . Clearly this should be the first line of consideration as it is pointless to look elsewhere and rely upon common law rights when express provision exists. Further, contractual matters are usually within the powers of the Architect/Engineer to settle. (SFBC Cl 11(6), 24 & 34(3)

EX-CONTRACTUAL / COMMON LAW CLAIMS

• Where the contract does not make express provision and therefore grounds outside the contract have to be sought - i.e. in common law.

• Such claims are usually outside the Architect's /Engineer's power and require specific authority from the Employer for them to examine the claims and make appropriate recommendations.

EX-GRATIA CLAIMS• By definition such claims have no grounds

upon which either side could successfully sue the other at law.

• Their only basis is that a loss has been made and that something more tangible than sympathy is being sought, but anything paid will be an 'act of grace' with, at best, some possible acknowledgement of morale obligation.

• These claims should not be resorted to if contractual or extra-contractual claims exist.

• Ex-gratia claims are sympathy claims

CAUSES OF CLAIMS•Late payments•Changes in

conditions•Delay /

interference•Acceleration•Errors / omissions

in design / document

•Suspension of the work

•Variations•Rejection of "or

similar" substitutions

•Unclear responsibilities of the contractor / employer

•Failure in pre-contract planning

OBJECTIVES OF CLAIMSObjectives of time claims• To extend the contract completion time• To reduce the amount of L. D. liable to pay to

the Employer• To prepare for the claims for the cost claims

(remember this is not automatically)Objectives of cost claims• To reimburse the loss & expenses incurred• To compensate the extra preliminaries due to

delay by the faults of the Architect, etc.Objectives of ex-gratia claims • To ask for sympathy in compensation, which has

no contractual grounds for the claims, for the best efforts the contractor has put.

POINTS TO BE CONSIDERED BEFORE PROCEEDING

• Claims should be well planned at the beginning of the contract rather than at the end of the contract

• Check the contractual grounds before claim -contractual justification, i.e. identify the contract condition(s)

• The event giving rise to the claim should be actually occurred

• True cause(s) of the claim should be identified• Surrounding circumstance relating to the claim

should be recorded• A good claim should be well organised and

presented in a concise way • Understand the attitude of the Employer to

claims

NOTICES OF CLAIMS A contractor MUST GIVE NOTICE of his intention

to claim extension of time or additional payment - for whatever reason; and the notice must be given as soon as it becomes apparent or within the time limited set out in the contract.

Failing to do this may • prejudice (not necessarily invalidating the claim)

the establishment of claims • affect the ability of the

Architect/Engineer/Quantity Surveyor to consider and evaluate them properly

• damage or seriously impair credibility of such claims.

PURPOSES OF THE NOTICES OF CLAIMS

• Proper notice will enable the pros and cons of entitlement to be discussed,

• The setting up of records (if necessary without prejudice to liability in the first place) required to establish the quantum of the claim.

• In some cases it may enable the Architect/Engineer to take action to reduce or mitigate potential loss by issuing a variation order - which would not be possible if notices were delayed until work was complete or the claim itself presented.

• If the Contractor has not submitted a written claims at all, there would be no consideration and the claim procedure would not even commence.

NOTICES OF CLAIMSIs giving notice of claim a condition precedent

to the contractor's entitlement of claims ?No in most cases.Crosby v. Portland UDC"Provided that the contractor shall not be

entitled to recover any extra cost unless he gives written notice of his intention to claim to the Engineer within twenty-eight days of the Engineer's order"

The claim was rejected as the contractor has not given notice within the specified period.

HOW CAN NOTICES OF CLAIMS BE PRECEDENT TO CLAIM ?

To be a condition precedent to claim, two elements must be presented:

The precise time within which the notice was to be served should be stated

It was expressly stated that the rights of claims are forfeited unless notice was served within that time.

INTERFERENCE BY THE EMPLOYER

Architect should act: fairlyimpartially

Contractor can claim interest on the undercertified amount

Employer influenced the Architect to undercertify the payment

INTERFERENCE BY THE EMPLOYER

Employer influenced the Architect not to issue EOT even if the grounds are valid

Contractor accelerated the program

Contractor later recognized Employer's interference

Recover the acceleration costs

Rescind the contract + quantum meruitOR

CLAIMS AGAINST CONSULTANTS

Sutcliffe V. Thackrah (1974)

Consultants have duty of care owed to the contractor

'Negligence' is the label given to certain courses of conduct which fall below a standard acceptable to the community. The criterion is the model conduct of a 'reasonable man'.

Claim for damages against the consultants

CLAIMS FOR PROFESSIONAL NEGLIGENCE

For a successful claim, the contractor suing in negligence must prove three points to maintain a successful claim:

• The consultant was under a duty of care to the contractor

• There had been a breach of that duty

• As a result the contractor has suffered damage

DUTY OF CAREYou must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour.

Neighbour - persons who are so closely and directly affected by your act that you ought reasonably have them in contemplation as being so affected when you are directing your mind to the acts or omissions which are called in question.

STANDARD OF CAREA reasonable man would use or show in the circumstances of the particular case under consideration.So, the injury must have been reasonably foreseeable, and the effect must be the direct result of the defendant's act.The test of foreseeablility is applied much more positively by the courts when the source of the liability is active misconduct than when is failure to act.

FORESEEABILITY OF CARETherefore,

•The damage or harm to the plaintiff was reasonably foreseeable by the defendant

•The relationship between them was sufficiently proximate to give rise to a duty

• It is just and reasonable to impose such a duty (which includes considerations of public policy)

BREACH OF DUTY

•When there is a greater risk of injury, more precautions will be expected.

•If reasonable precautions are taken against the risk of harm, the duty of care will be discharged, and no action will lie.

DAMAGES• Merely exposing someone to danger is not

an actionable wrong, there must be some actual detriment as a result of the exposure.

• The damages are subject to the test of remoteness of damage. The problem of 'proximate cause' involves two factors; the factual question of whether the defendant's breach of duty and the plaintiff's injury constitute a cause-and-effect relationship, and where to draw the line in a consequential sequence of events which result in injury.

CONCLUSION OF NEGLIGENCEIn laying down the limits of liability for negligent conduct, the courts have developed certain concepts which form the basic ingredients of actionable negligence. These elements are :

a duty, legally recognized, not to expose others to unreasonable risks,

conduct which falls below the accepted standard, or breach of that duty,

material injury resulting from the sub-standard conduct,

a reasonably close connection between the conduct and the injury ( the question of 'remoteness of damage') and

the absence of conduct by the plaintiff which caused his injuries

CONSTRUCTION CONTRACTSIn the forthcoming lectures, the following forms of contract will be referred to :

• Agreement & Schedule of Conditions of Building Contract for use in the Hong Kong Special Administrative Region (Private Edition - with or without quantities) - Second amendments published in July 1999

• Sub-contract for use where the Sub-contractor is nominated under the Standard Form of Building Contract for Hong Kong - Second amendments published in February 2000

TIME & COST CLAIMS IN SFBC(HK)CLAUSEEVEN

T

TIME BORNE BY

COSTBORNE BY

CLAUSE

Force majeureForce majeure EmployerEmployer 23(a)23(a) ContractorContractor 2424Inclement weatherInclement weather EmployerEmployer

EmployerEmployerEmployerEmployer

EmployerEmployer

EmployerEmployer

EmployerEmployer

23(b)23(b)ContractorContractor

2424Fire, lightning, etc.Fire, lightning, etc. 23(c)23(c)

ContractorContractor

EmployerEmployer

ContractorContractor

ContractorContractor24242424

1111

2424

2424

24(1)(d)24(1)(d)

Civil commotionCivil commotion 23(d)23(d)

A. I. A. I. 23(e)23(e)

Late instructionsLate instructions 23(f)23(f)EmployerEmployer

24(1)(a)24(1)(a)NSC delayNSC delay EmployerEmployer 23(g)23(g)Employer's workerEmployer's worker

EmployerEmployer23(h)23(h) EmployerEmployer

Opening upOpening upEmployerEmployer

23(i)23(i) EmployerEmployer 24(1)(b)24(1)(b)Labor & materialsLabor & materialsAntiquitiesAntiquities

23(j)23(j)23(k)23(k)

EmployerEmployerEmployerEmployer 34(3)34(3)EmployerEmployer

PostponementPostponement EmployerEmployerEmployerEmployer

24(1)(e)24(1)(e)23(e)23(e)

DiscrepancyDiscrepancy EmployerEmployer 23(e)23(e) EmployerEmployer 24(1)(c)24(1)(c)

………………..

DOCUMENTS RELATING TO CLAIMS

Pre-tender documents• Contract bills• Schedules of work• Specification• Contract drawings• Programs• Method statementsPost-tender documents• Instructions /

variations• Further drawings• Levels & setting out

information

• Correspondence• Minutes of meetings• Site diaries /Daily

report• Progress photos &

chart• Materials delivery

schedules• Invoices • Payroll sheet• Plant records• Scaffolding records• Daywork schedule

PROCEDURES OF CLAIM• Notices of claims• Establishing the Claims• Examining the claims• Evaluating the Claims• Negotiating and settling the claims

ESTABLISHING CLAIMSEstablishing a claim simply means making the other party being convinced that the claim is valid and that the integral parts are claimable and correctly valued.

The establishing procedure shall consist of two steps :-Establishing the validity of the grounds of

claim.Proofing the effects of such disruption /

disturbance of regular progress of the works by substantiating the accurate and factual documentation of performance, records, correspondence, inspection reports, photographs programmes, etc.

EXAMINING, EVALUATING NEGOTIATING

& SETTLING CLAIMS

•Early settlement / evaluation of claims are preferred as the facts are fresh in the parties' minds

•Details to be discussed in Lecture 6