Contracts and Dispute Resolution - Report Example

Contracts & Dispute Resolution: Report al Affiliation ` Contracts & Dispute Resolution: Report Executive Summary This report gives insight into the contact and dispute resolution issue which arose between the employer and the contractor. This is done by reviewing the validity of the claims the issue of adjudication and the way forward following the decision of the employer to neglect the notice of adjudication based on the existing laws which govern the undertakings. On the basis of the JCT contact clauses and the relevant case laws, the main issue is identified to be the amount of time which was to be added to the original completion time as a result of the delays experienced by the contractor. The findings of the report indicate that despite the administrator having the legal mandate to decide on the time to be added to the contractor, right kind of procedures must be followed. The administrator failed to consider the contactor’s schedule and scope of work when adding time. As such the claims for damages that the employer is raising are not valid. The Validity of the Claim To understand the main issue, it is imperative to look at whether the claims are valid or not. Under Clause 2.4 of the JTC contract, it is the duty of the contractor to do his work diligently in order to complete it before or after the relevant date of completion indicated in the contract. In the hypermarket construction contract, the bad weather is an excusable delay, while the general delays are inexcusable since they come from the side of the contractor. Clause 2.29 gives a list of relevant events that may allow the contractor to ask for an extension of time to be able to meet their contractual obligations. Two types of delays are recognized by the JCT. They are excusable and the inexcusable delays. Excusable delays result from the fault of the employer, his agents and natural events like adverse weather conditions (Telford & Ramsey, 2007). On the other hand, the inexcusable ones are those that result from the failure on the side of the contractor and his agents. The contractor is entitled to an extension in the time required to complete the task at hand if the delays are excusable (Chappell, 2007). These two occur at the same time, thus resulting in concurrent delays. Such issues may share the same start or finish date, or overlap in some way. The latter is the situation here. It is quite evident that the contractor is entitled to an extension due to the bad weather condition and not on the general delays. However, the CA must also consider the second issue in case of concurrent delays. Wells v. Army and Navy Co-operative Society (1903) gives a direction in dealing with concurrent delays like the one that is arising here. In this particular case, the judge concluded that the fact that a delay is as a result of the fault or action of the contractor do not deny him the right to claim an extension to be able to complete his contractual obligations. The implication of this is that the contract administrator needs to consider all the causes of the delay and factor them in when deciding to grant the extension and the amount of time that will be given to the contractor so that the work can be completed. The defendant, who happens to be the employer here, may point out that the general delays could have still affected the completion time even without the adverse weather and thus he was justified to only add a limited duration of time. However, this can be answered by considering the case of Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) where Judge Dyson stated that even in instances when one event is relevant to the contract and the other is not, the contractor is still given the right to seek and have an extension. The implication of this is that even if the hypermarket CA argues that the general delay should not be factored in deciding the time extensions, the court may still decide that the contractor is entitled to the time requested (Knowles, 2012). Having established that the hypermarket contactor had the right to get an extension to finish his contractual obligation, the next issue left is the amount of time that the CA should add. In standard contracts used like the one that was in place in this case, the responsibility of making decisions on granting the extension in time is clearly spelled out. In the contract that involved the building of the hypermarket, the administrator had this obligation owing to the fact that it was a JCT contract. Under Clause 2.27 of the JCT, the contractor should serve the notice of delay to the administrator when they realize that the work will not be completed as agreed. The contractor obliged by this requirement when it informed the CA employed by the employer who is to decide on the time to allocate for the extension. It is worth noting that the skills of the persons charged with the responsibility of deciding on the extension may vary (Chappell, 2007). As the contractor, it will be important to have in mind that there is no standard procedure that has been laid down to be followed in making decisions in regard to the extension. In most instances, the courts have taken a general view on the matter. The best case that gives some direction on the issue is that of City Inn Ltd v. Shepherd Construction (2007). In this particular lawsuit, Lord Drummond concluded that Clause 25 requires the contract administrators to exercise good judgment in deciding when the extension is needed and the amount of time that will be required for the contracted party to complete his obligations. The CA must ensure that he makes fair and reasonable determination in doing so. Having looked at the delay issues that were raised by the contractor, the hypermarket CA decided to give an extension that the employer argues was appropriate. However, the time given still causes a conflict as there is no common point of convergence as to whether the given time was enough or not as per the requirement of Clause 25 (Chappell, 2007). The case of Balfour Beatty Building Ltd v. Chestermount Properties Ltd (1993) gives a direction on what amount of time can be considered to be reasonable. In this case, Coleman made an observation that the underlying goal was arrived at a duration of time within which a particular contract will work. Clause 2.9 of JCT requires the contractor’s work program to be considered when deciding on the amount of time to be added. The contract administrator will have to consider the schedule and program of the person tasked with the responsibility of building the hypermarket. When doing so, the CA must look at the non-contractor risk events, which in this case included the adverse weather conditions. It is based on this analysis that the CA is supposed to decide on the relevant and appropriate time needed to complete the duty. With this in mind, it is right to conclude that the CA had the responsibility of deciding the amount of time that was to be added. However, this did not deny the hypermarket contractor the right to raise an issue on the duration of time added. Since a dispute on the extension of time has come up, the matter should be referred to arbitration or can be subject to litigation. The opinion of the contractor will be submitted by a delay analyst using techniques that may not be available to the architect or the contract administrator. The experts may disagree with the extensions and go ahead to express their opposing views on the correct time needed. The judge or the adjudication officer is the one who will then go ahead to decide on the correct time that needs to be granted. Notice of Adjudication between Private Developers Ltd and Arcofina Hypermarket Ltd The above named applicant is giving notice about its intention to refer the dispute detailed below for adjudication out of a dispute that arose from a contract with the respondent. a) Brief description of the agreement This was a contract between a developer and a contractor who was to work on a property as per the terms agreed b) Details of the contractual agreement Arcofina Hypermarkets Ltd and Private Developers Ltd entered into a JCT contract on 12/3/2013 in which the latter was to work on a project involving the construction of a substantial out of town hypermarket. The contract contained all the obligations of each of the parties and the agreed completion date. c) Brief Description of the Dispute The respondent, Arcofina Hypermarkets Ltd, has decided that it will deduct an amount from the total figure that was to be paid to the referring part alleging that the latter had delayed in completing the project. This is an allegation that the referring party denies because it had a discussion with the contract administrator engaged by the responding party regarding the time needed for the completion of the project after the delays. d) Details of the dispute This dispute arose when the responding party refused to add a reasonable extension to the contractor to be able to complete the project in time. This is in spite of the fact that the latter had given a notice for extension as per NEC 3rd Clause 61.3.The contract administrator who had been engaged by the employer to oversee the contract agreed give an extension which was not enough for the contractor carry out its contractual obligations within the required timeframe. The employer then ahead to give a notice of its intention to deduct liquidated damages from the agreed pay. e) The remedy sought The employer has decided to deduct the 25,000 per week remedy that had been indicated in the contract. Therefore, referring party would like the adjudicator to decide on whether this sum being sought by the responding party is valid or not on the basis of the fact that the contractor had requested the employer to add more time to cater for the inexcusable delays which were experienced during the course of the project. In addition to this, adjudicator is also asked to award his cost if it deems necessary. Date: 2nd January 2015 Unwillingness to Participate in Adjudication It is quite clear that the hypermarket employer is avoiding adjudication. Even after being issued with the notice for adjudication, it responded by claiming that there is no dispute on the grounds that the contract administrator had properly done his work when assessing the time extension required for the contractor to finish his duty even after the delays. Having received the notice of adjudication, the employer was supposed to make his referrals within seven days. The employer needed to include a statement of his case and all other relevant issues that the adjudicator should consider in the dispute that is in question. A decision would have to be made within 28 days after the referral letter is received. By denying that there is no dispute in the contract in relation to the extension period that the contractor had requested, the employer is demonstrating that he is not willing to participate in the arbitration process. Since the employer has refused to participate in the adjudication, the contractor will have to go ahead and present his case to the adjudication officer who will then go ahead to make a decision on the matter in question, taking into account the matters and the technicalities in that dispute. Even if the employer and the contractor are not able to agree on the adjudication procedure, then one imposed by the Scheme for Construction Contracts Regulation (1998) shall be used. Section 108 of the Act makes the outcome of the adjudication binding to all. According to section 108 (4) of the HGCRA, the decision which will be made by the adjudicator will be binding to all the parties including the employer. This is until it is determined by legal proceedings or arbitration. The employer’s decision to deduct liquidated damages at the rate of $25,000 per week as provided in the contract even after the contactor had sent a notice of adjudication is something that is not valid considering the case of R J Knapman Ltd v Richards and others. This case demonstrates that when the contractor has called for arbitration after the employer has given substantial extension, the damages should not be deducted until the arbitrating officer has carried out a review of the delays. This will also require a review of all the notices and the relevant procedures under the contract (Chappell, 2007). As such, the employee in this instance cannot deduct the said amount from the one that had been agreed on in the contract until the adjudication is completed. Reference List Balfour Beatty Building Ltd v. Chestermount Properties Ltd (1993) City Inn Ltd v. Shepherd Construction (2007) Chappell, D 2007, Understanding JCT Standard Building Contracts, Routledge, New York. Clause 2.9 of JCT Clause 2.4 of JCT Clause 2.29 of JCT Clause 25 of JCT Clause 2.27 of JCT Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd (1999) Housing Grants, Construction and Regeneration Act 1996 Knowles, R, 2012, 200 Contractual Problems and their Solutions. John Wiley & Sons, Ltd, New York. Palmer, K & McKendrick, D 2013, Product Liability in the Construction Industry, Lloyds of London Press, London. R J Knapman Ltd v Richards and others Scheme for Construction Contracts (England and Wales) Regulations 1998 Telford, T & Ramsey, V. 2007, Construction Law Handbook, Thomas Telford, London. Wells v. Army and Navy Co-operative Society (1903) Read More