CONSTRUCTION CLAIMSCONSTRUCTION CLAIMS

Claims in Construction Contracts are Claims in Construction Contracts are Inevitable Inevitable

Reasons of Claims

The employer and his professional representative who prepare the contract in haste leaving many short comings in their documents and also commit defaults in fulfilling their obligations try to defend their document/action though they very well know that some aspects are indefensible.

How to Tackle Claims

To tackle the problem of claims effectively it is necessary for both sides to have a better understanding of the basis and principles of contract and therefore of the rights and obligations of the two parties.

Understanding

It is necessary for professional representatives of both sides to have an understanding of business side of industry so as to appreciate the circumstances in which the contractor conducts the risks in which he can properly and contractually be expected to undertake and the financial consequences if things go wrong.

If things go wrong by reason of any default on the part of contractor, it must remain his concern; however, if the default lies with the employer or his management team, then the employer must face the financial consequences and settle the claims without any loss of time to avoid any adverse effect on progress of work.

Different Types of Claims

a. Contractual Claimsb. Extra Contractual Claims.c. Quantum Merit Claims.d. Ex – gratia Claims.e. Counter Claims.

Contractual Claims

These are the claims which arise out of the express provision of the particular contract i.e., for extra cost, expense and direct loss specifically provided as a remedy in the contract for breach of contract on the part of the party concerned.

Extra Contractual Claims

These claims are also known as common law claims. These claims are for damages for breach of contract at common law.

Quantum Merit Claims

Provide remedy for a person who has carried out work under the instruction of the owner but no price has been agreed or where original contract has been replaced by a new one and payment is claimed for work done under the substituted contract.

Ex-Gratia Claims

Ex-gratia claim is one where no legal remedy is available to the contractor but arise out of hardship. On the ground of equity or favour the authority concerned may in certain circumstances consider that hardship calls for mercy and moral liability. These claims are also called sympathy claims. Wherever such claims are to be given it will be better if these are given during the currency of the contract so that the money paid helps in improving progress of work.

Counter Claims

The claims raised by the opposite party to counter the claims of the claimant is called as counter claims.

Potential Heads of ClaimsPotential Heads of Claims

1. Late handing over of site.2. Variation in data/information supplied and that actually

encountered during execution.3. Late supply of drawings & required information.4. Disruption/disturbance caused due to untimely

instructions.5. Consequences of delay in decision on progress as

well as cost to the contractor.6. Delay caused and extra expenditure incurred/ loss

suffered on account of non-fulfillment of various other obligations on part of employer as well as contractors.

All participants to make a list of problems at site which have or may lead to claims.

Preparation and Presentation of Claims

Preparation of the claim.a. Burden of Proof.b. Basis of Claim.c. Importance of facts.

Preparation and Presentation of Claims

Preparation of the claim.a. Burden of Proof.b. Basis of Claim.c. Importance of facts.

Burden of Proof

Where the claim situation arise the party attempting to demonstrate that it was prevented from performing or performed in excess of, or that the other side performed contract to contract requirement has the responsibility of proving such a conduct.

The accused party need not usually defend itself against the allegation until some evidence is presented by the party raising claim showing wrongful exercise of lawful authority on the part of the party against whom the claim is raised.

When the party establishes evidence in his favour which is sufficiently strong and would be enough to render a favourble decision unless contradicted and overcome by the other party, the party against whom the claim is raised, either has to come forward with a concrete counter fact to demolish the claim or will have to consider the claim. Therefore the party must bring out concrete evidence while raising the claim which will not be easily demolished by the other party.

Basis of Claim

1. Claimant must ensure that the relevant position of the contract law where the remedy is provided is precisely stated.

2. The party raising claim must also base his claim on a legal theory that is accepted as a reasonable ground of recovery under the law applicable to contract.

3. The party raising the claim should not only show that the owner is responsible for the harm for which relief is being sought, he should also prove that he is free from blame or have not made any contribution to the harm.

Importance of Facts • Claim presentation should have a logical conclusion,

otherwise it must be accepted that some facts are lacking.• Missing fact search documents

1. Various letters2. Memos3. Pictures4. Test reports5. Watch diary6. Site documents7. Suppliers8. Officials and experts etc.

The contractor who raised the claim bear the burden of proof for establishing a claim by providing concrete evidence of cost impact that is effective enough to demonstrate that the claimed cost were incurred as a result of extra work, changes or defaults of owner etc. The proof of expenditure is a pre-requisite for complete claim analysis by the owner.

Claims – Supporting Evidence

1. Site records2. Correspondence3. Record of site meetings4. Site diaries.5. Programmes and progress schedule6. Payments claimed and made.

In a situation where a claim is lost for direct loss and /or expense in respect of a variation it will be necessary that it is supported by the following:

1. Copy of an instruction for variation validly issued and acted upon.2. The date of issue and receipt of instruction relating to variation.3. Brief on the nature of variation.4. The time at which it was necessary to carryout the work pursuant to the

variation instructions.5. Justification that carrying out of the variation instructions certainly affected

progress of work.6. The extent of work which got affected by implementing the variation

instructions.7. Proof that the contractor made a proper and timely application to the

engineer in respect of the direct loss and /or expense.8. Substance supporting particulars and proof of direct loss and /or expenses

suffered or incurred.

DRAFTING OF CLAIM

The claim should be written under the following three headings:

a. Introductionb. Ground of claimc. Substantiation claim

INTRODUCTON

– Brief contract particulars relevant to the claim– Brief description of the situation leading to

claim.– Reference of the relevant correspondences/

notices.

Ground of Claim

– Reference of relevant contract clauses which entitles the contractor for the claim and where the contract clauses do not provide any remedy, reference of the contract law section where the claim can be legally justifiable and admissible.

Substantiation of Claim

In order to substantiate the claim properly the supporting evidence as mentioned above as well as the various details of the expenses of the losses suffered with appropriate proof is desirable.

In order to prove the fact of delay on the part of the employer use of planning technique such as CPM, should also be made.

Providing Damages

Prerequisites to recovery1. Presentation of evidence of an act which

claimed cost were incurred.2. Concrete proof between the act of condition

complained of and the damage incurred.

Negotiating Settlement

1. Preparation before start of Negotiation 2. Timing the negotiation.3. Strategy of negotiation and tactical checklist.4. Communication and bargaining position.