Clac 040 - Claims, Disputes

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\~ THE AMERICAN UNIVERSITY IN CAIRO oJ-l')UJL, ~..;---4~1 ~ 4 1

School of Sciences and ;Engineering fsJ..lz.ll9 a....,~J '4,l.S'
Engineering and Science Services -4<,.Wlg 4-w~I ..:..L<i...::1-1
Professional Program.
Contractual & ~egal Aspects in the Construction Industry
Claims & Disputes in the Construction Industry
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Instructor:
DR. SHERIF EL-HAGGAN
Partner: Contract Administration & Arbitration Bureau (CAB)
Fellow/Tutor, Chartered Institute of Arbitrators, London
Reviewer/Tutor, FIDIC Contracts Committee
Panel of ..A.r!:;itrators, Ministry of Justice, Egypt
Arbitrator, Coiro Regional Centre for International Commercial Arbitration
Vice President, Arbitration Comrirttee, Egyptian Notional Committee of the !CC in Paris
AUC New Cairo • AUC Avenue • P.O. Box 74 • New Cairo 11835, Egypt• tel 20.2.2615.2669/2675 • fax 20.2.2797.4973
AUC Tahrir Square • 113 Kasr El Ami Street• P.O. Box 2511 • Cairo 11511, Egypt
tel 20.2.2797.5321/5628 • fax 20.2.2792.3352/2795.7565
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·"Claims Should Not/-~ e Made Or.t

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Taken Personal/>~ r~j-f y Are Simply

The Means A\,fC(lpl;)/e /r/o The Parties
To The Jf~f ~Pfo
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Be Able To
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Ac/just Th~ ·0~11/ractua/ $ Economic
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Re/atlonsh/p(Between Them To Meet

Changing Conditions,,
Dr. Sherif EL-Haggan - CLAC 040

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CONTENTS
INTRODUCTION: DEFINITION & CLASSIFICATION ................................................................................ 4

DEFINITION .................................................................................•..................•..................................................... 5
CLASSIFICATION AND LEGAL BASIS OF CLAIMS ..................................................................................................... 5
CHAPTER 1: GENERATION OF CLAIMS ...................................................................................................... 8
GENERAL ............................................................................................................................................................. 8
GERMINATION ..................................................................................................................................................... 9
CLASSIFICATION BY SUBJECT .............................................................................................................................. 9
NOTIFICATION .............................................•................................•.....................•..........•.................................... l 0
ESTABLISHMENT ................................................................................................................................................ 12
EXAMINATION ................................................................................................................................................... 12
CHAPTER 2: CLAIMS CONCERNING THE EXISTENCE,.6:YicoNTRACT ....................................... 13
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GENERAL ............................................................................. .£'. ............J.............................................................. 13
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RECOGNITION OF AV ALID CONTRACT ................................{.-( 1, .............................................................. 15
CAPACITY ............................................................;r•'"'"\· .....J'..... l,;1.......~............................................................. 16
AGENCY ...........................................................i~.,."'.... ...{-..... 1L..::.::..... t, ........................................................... 16
INTENTION TO CREATE LEGAL RELATIONS ... l·r··,=·t .... ... t ..··l1..t···· ............................................................. l7
1
AGREEMENT .......................................,,:.'1••• J. ........ J........
1
CONSIDERATION ...........................................;.... ..., •.•.•... 4......../..... .............................................................. 17
!.....,(.../_................................................................. 18
OFFER AND ACCEPTANCE .......................... j;..... ,.;(
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............ , ...... , ..7··· ............................................................... .
18
OFFERS ........................................ ):'.: .. "i,,:;. ... ;.....H. .:......... +...)k: ...................................................................... 18
REVOCATION ······························t•··1··
I I ·, n/ l ' ,, 18
·········,·····1.,.,·· .,.• ..... ···~.,···············································································
ACCEPTANCE ............................ 1t ............ .J ..... :.... l. .... .................................................................................... 19
COUNTER-OFFERS ..................•. ,..... , ............1.... +···t,t....................................................................................... 20
ACCEPTANCE SUBJECT TO COr-fDI'Tit>N ······+··:-r· .............................................................................................. 20
CERTAINTY ............................. J.......\.,_.,.::l .. t;;,,(................................................................................................. 21
FORMALITIES .......................... t·:. .;. _
....J. .........................................................................................................21
LETTERS OF INTENT ..................\(...... '..✓- 2 ............................................................................................................22
THE CONTRACT MUST BE LEGAL'-AND POSSIBLE ............................................................................................... 22
CASE 2.1 CLAIM BASED ON PROVISION CONTAINED IN COVERING LETTER TO TENDER .......... 23
CASE 2.2 CLAIM BASED ON QUALIFIED ACCEPTANCE ..................................................................... 26
CASE 2.3 CLAIM ARISING OUT OF LETTER OF INTENT...................................................................... 31
CASE 2. 4 CLAIM BASED ON DEFECT IN FORMAL AGREEMENT ....................................................... 35
CHAPTER 3: CLAIMS ARISING FROM DOCUMENTATION .................................................................. 39
GENERAL ........................................................................................................................................................ 39
CONTRACT I POLICY .................................................................................................................................... 39
ERRORS AND DISCREPANCIES .................................................................................................................. 39
AD HOC CONDITIONS .................................................................................................................................. 40
CHAPTER 3 - APPENDIX ..................................................................................................................................... 41
CASE 3. 1: CLAIM IN RESPECT OF ERRORS IN BILL OF QUANTITIES ............................................... 44
CHAPTER 4: CLAIMS ARISING IN CONNECTION WITH EXECUSION OF THE WORK ................. 50
CONTRACTOR TO SATISFY HIMSELF ...................................................................................................... 50
WORK TO BE TO THE SATISFACTION OF ENGINEER ............................................................................ 50
DAMAGE TO THE WORKS ........................................................................................................................... 51
ISSUE OF FURTHER DRAWINGS AND INSTRUCTIONS ......................................................................... 51
NOMINATED SUB-CONTRACTS ................................................................................................................. 51
DEFECTS ......................................................................................................................................................... 51

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CHAPTER 5: CLAIMS CONCERNING PAYMENT PROVISIONS............................................................ 52

GENERAL ........................................................................................................................................................ 52
VALUATION OF CONTRACT WORK .......................................................................................................... 52
VALUATION OF VARIED WORK ................................................................................................................ 52
CASE 5. 1 CLAIM FOR ADJUSTMENT IN RESPECT OF INCREASED QUANTITIES ............................ 54
CASE 5.2 CLAIM IN RESPECT OF EXTRA TIME FOR EXTRA WORK.................................................. 59
CHAPTER 6: CLAIMS CONCERNING TIME ............................................................................................... 62
GENERAL ........................................................................................................................................................ 62
EVALUATION OF DELAY CLAIMS ............................................................................................................. 63
DISRUPTION .................................................................................................................................................. 71
CASE 6. 1 CLAIMS ARISING OUT OF DELAYS ........................................................................................ 73
CASE 6.2 CLAIM FOR DELAY ARISING OUT OF ERROR IN DESIGN.................................................. 82
CHAPTER 7: CLAIMS ARISING FROM DEFAULT, DETERMINATION ............................................... 89
LIQUIDATED DAMAGES .............................................................................................................................. 89
DETERMINATION (FORFEITURE) .............................................................................................................. 90
FRUSTRATION ............................................................................................................................................... 90
wA~;';~~s~l;iiMFOii"iECOV"ii"iiY/jF LJii"CiiiJATED}~Eii""WRONGL·;;r,roucTED:::::::::::::::::~ (
CHAPTER 8: PRESENTATION OF A CLAIM- ................ J~....,!!t..... J.............................................................. 95 '·
PRESENTATION OF A CLAIM ·························::.:::\·······f/.·;{r·(·.L.)..............................................................95

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INTRODUCTION: DEFINITION & CLASSIFICATION
Too many of us in the construction industry know from our own experience that claims
occur, they cause budgetary difficulties to employers. They cause financial difficulties,
restriction of cash flow, loss of liquidity to contractors. It was said that " ... it would be
-----
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·- to the benefit of the whole industry if the impact gf claims was reduced".
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What causes them? Are they avoidable or unavoidable? It has been said that 'Claims
are a/act of life' and 'Claims are here to stay'. If they are unavoidable, then at least
we should equip ourselves to deal with them efficiently and expeditiously and
minimise the cost in terms of both money and staff,.,,,..,,t,t
resources. So far as avoidability is
concerned, this must lie primarily in the produ,efion\ of the design and the contract
documents. The counterpart is of course a prop,rJ¥, p~epared tender on the part of the
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contractor. In addition to proper docull,l.ent~tion/ ariq tendering, administration of
the contract during construction m~s{b~,,~r~pef~}.'.., ob~erved by both sides.
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We should recongnise the eco,n~bfo ,cJ~aJtJgektoAhe employer that risks should
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be shared and not all thru~t' up.0nl the! conta;ctoi,:t,/ Contract conditions have changed
over the years in this matte/ of~no;ca~lfig dsits,,,~nd it is no longer appropriate to apply
the mental attitude of ha,lf ~ cent'.urf a;go·;(when the contractor was expected to take
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all nsks) to the s1tuat10n t~ day. ,/1- ! )

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f If the burden of claims \s r9t1lced, then employers and contractors must benefit
significantly. Not only are th;re the direct and obvious benefits of saving money and
staff resources, there are also the side-effect benefits on the work itself as regards
quality, efficiency, and, not least, the climate in which it is carried out.
We should recognise that in the nature of the construction industry some events and
situations are unavoidable and unforeseeable. Therefore there is no reason why
claims should arouse such emotions and irrational antipathy for engineers or
employers. There is no necessity for engineers to feel personally insulted that a
contractor should presume to enter a claim. Also, there is no necessity for contractors
to regard engineers as being of questionable legitimacy if they say 'No' to a badly
constructed or ill-founded claim.
The engineer would be wise to encourage the contractor to keep him informed of
anything which is happening or has happened involving the possibility of additional
CLAC 040 - Dr. Sherif EL-Haggan

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expense. In some cases work in hand may be concerned or affected and the engineer
may be able to take remedial action (if he or the employer is at fault) of avoiding or
mitigating action (if the cause is one for which the employer has accepted the risk).
Justification or lack of it should not be confused with whether a contractor may
claim; to attempt to do that would be to prejudge the issue.
Definition
A claim is defined in The Oxford Companion to Law as a general term for the assertion
of a right to money, property, or to a remedy. A counterclaim is defined as an
assertion made by a respondent wliich can be examined and disposed of in an action
originally initiated by the claimant party. It is not necessarily a defence, but a
substantive claim against the claimant which could have grounded an independent
action. For the purposes of this material, i.e. CLAC 040, both claims and counterclaims
will be referred to as claims. Claims in cons;;ri~tidr contracts may be defined as .(
follows: l
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1. a demand, a request or applicc);tiQh/ f0r, something or notification of
presumed entitlement to wJ;ifcfi\, I I( · ·
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11. a contrac~or c~nsiders, .i'J(e~~e_ve? (br :Joptepds (rightly or wrongly at that
stage) he lS entitle~,,\Jpt;n re~pept pr 1rh'.1cp
111. agreement has not,-yet qeeµ,xeacp.~d. H . ./
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c1assification and lega(b~sis o~ cfaipi§1 ,. .
Essentially, other than clafmJ ungef. stitJt~ry law, claims in construction contracts may
be based on any one of fo~ I~·g'fil!
$cf one non-legal concepts. They, therefore, must be
categorised on that basis i~ acc9rdance with the following five categories:
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(a) The. first category relates to a claim under the contract based on the grounds that
··· ·-should-=-a·c·ertainc·event·occur;-:theRa·claimantwouldbe,entitled=to=a-.remedy.-------~ ... ( __
specified under a particular provision of the contract. Such an event may be one
of two types:
First, it may be a specified event under the contract, which may or may not
oc~ur, where ln certain defined circumstances the employer or the contractor is
entitled to claim a designated remedy. For example, the contractor is entitled to
claim an additional payment under the Red Book for tests in accordance with the
provisions of sub-clause 36.4.
Secondly. the specified event may be a breach of a particular stipulation in the
contract entitling a claimant to a designated remedy if the provisions of such
stipulation are not, or only partially, complied with. For instance, it is stipulated
.,._ in the Red Book that failure by the contractor to complete the works on a
CLAC 040 - Dr. Sherif f:L-Haggan

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specified date would entitle the employer to deduct liquidated damages at a

specified rate.
If the claim is successful, the particular provision in the contract would apply and I
the remedy could be in the form of a payment of a sum of money, an extension of

time, or a combination of the two.
(b) The second category relates to a claim arising out of the contract based on the
grounds that a term of the contract had been breached but where the remedy is
not designated. If the claim is valid, the remedy lies under the provisions of the
applicable law of the contract. Generally, the remedy would be sought through
arbitration or litigation unless the claim is settled amicably. The remedy in this .
case may extend to consequential damages. Furthermore, if the breach is of a
serious nature, the party against whom the bre.a04 is committed may consider it to
be repudiation of the contract by the party i.1-lbre~~h.
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~ e third category relates to a cla'.91",."';d~ ~/la~ of tort of the applicable law of

~t~e contract, based on the grourn;ls of a\ s]jeci:fJq legal
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rule or principle. If the
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claim is successful, the remedy/li~S'1in gep.er~l.Jn ~ 'just and equitable' award

depending upon the partipiil~r1~ifj6_µinstaicef~(the case and the provisions of the
applicable law of the cohtrabd !f · ! !
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The fourth category 4e1-1icts a plaim!wliere no contract exists between the parties,
jfjP or, if one existed, is !deJmed tb bb ~~id. It is based on the principle that an
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individual has the ri4ht b.9 Raid a reasonable remuneration for work done. This
is referred to in some,legatsystems as quantum meruit or 'as much as one bas
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earned'. If the claim is"successful, payment is assessed on the basis of a '

reasonable recompense of the cost of the work carried out by the contractor and
may include an element of profit.
(e) Finally there is the ex gratia claim (out of kindness) where there is no legal basis
but rather some commercial sense in making a settlement.
In the remaining part of this material, only the first two types of claim are considered
in detail, i.e. those which are made under the contract. However, an effort will be made
to deal briefly with the other categories in an attempt to link CLAC 040 with Egyptian
laws.
Claims will very often arise in a construction contract because it is perhaps the only
contract where the price of the end result is defined before the process of
'production' even starts. Accordingly, in the competitive atmosphere of tendering

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which accompanies such a contract, little or no margins are left for future unknowns in
a long and complex period of construction. Furthermore, as the rates and prices have to
be based on certain assumptions which are, in tum, based on the provisions of the
Conditions of Contract any change between what was assumed and what actually
happens may form a seed for a claim.
Based on the above, claims fall into three main categories:
Contractual Claims
These claims concern matters which have a basis in the contract itself wher~ particular
provision can be quoted as giving rise to entitlement and are dealt with. under the
contract by the engineer.
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Extra-contractual Claims ,'
These are claims having no basis in the contra,lt JiiiJ.t ~here entitlement stems from the
law. Claims of this type must in principte·bi;;, p~rs~~d fri\arbitration or in litigation.
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CHAPTER 1: GENERATION OF CLAIMS
General
Germination
Notification
Presentation
Establishment
Examination
General
The contract is drawn to define what is required topbe,. pone in return for what payment;
the duties and responsibilities to be undertaken/by e~ch party and what is to haPIBW,
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--:,-Should th~ail to _!ionor them. In so far as ~fa.y~ef~ition of the requirement is not

complete, the contract gives the lngll\eef f;,tfrtai9 powers (and corresponding
responsibilities) to supply further irµon.natt01} rnlM)als,p to vary the work to be done.
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Risks are allocated between th~,.,p;aryiet apdJh~ tiwe if stipulated in which the whole is
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to be completed.
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The contract i~ drawn in th.~,(light l?f.

bvt,i! ;nd circumstance~ i~ prospect and (apart
from the drawmgs) wordJ art usedjto •~xpress them. Generally 1t 1s the words used that
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matter - not those which 1t1igfit'li1v~,,l5een or could have been or even should have been
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used. Courts are inclined \o taJ.s;e; the words used at their face value, to assume that if
used they were intended, th;'f'the same word has the same meaning throughout and that
if different words are used then different things are meant.
There are, however, two kinds of problem that can and do arise. The first is where one
party or the other contends that although the words, taken literally, seem to apply to the
events or circumstances encountered, these were not th~ events and circumstances
within the contemplation of the parties at the outset. The other is where events and
circumstances arise which clearly have to be dealt with but the contract contains no
words to indicate what should happen, who should do what or, more usually, who
should bear the cost.
An example of the first is to be found in the clauses of the Standard Forms
authorising variations. The wording appears to be so wide that an engineer could
require almost anything to be done as a variation. But is that the case? Was that what

9
the parties intended or, if they did not, is that what the words now require? There are
cases to indicate that words will not always be applied literally.
The second is to be found in the practice that has developed of implying a term to
supply the deficiency. Originally the courts would not permit this but gradually they
have and even now the matter is in the course of development. From a hard 'no go'
position the courts would now write in a term which in their opinion had been
'impliedly agreed' between the parties but not expressed_- From this developed the
maxim thatthe implication had to be necessary, not merely reasonable; something
necessary for business efficiency.
Germination
Early recognition of~ claim or potential claim m~y·ll\ake it possible to deal with it in
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i t s embryo stage and so avoid the massive docu~rfent ttjat might otherwise land on one's
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desk at a later stage of the job, together with qll th.~ :tiroblems that then go with it. Of
course, with the best will i; the wopta;::~1;hi$· skci· state· of affairs cannot alwaysbe
avoided. There will probably alwaylb~ (/·,
intl-altadtl~"lsiu\ations
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compounded of physical
difficulties, documents defectiyel ir,i tye jse4s4 th:~{ tl).ey do not cater properly for the
event in question, and diffisr6itiJs{ofll'P~rs6n~li~.,o~
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rarely appear suddenly with,6up ~onie p,ii6,r \\}aiw:i11g which it is up to us to recognise.
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Claims situations tend t1 opcur~, ~ndj intrude into the routine which is. much more
concerned with getting ihe 1wo:t)<./,.completed and paying some money on account.
Claims arise from events \put it)~ not always possible upon the happening of a given
'-.;..· .,I
event to recognise at once~·1fiat a claim has been born to identify its grounds and
evaluate it. It may perhaps aid recognition if one could categorise the seemingly (
unrelated matters which are the sub}ect of claims.
Classification by Subject
Claims may also be classified according to their subject-matter. The categories need to
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be basic, logical and generally applicable. It is submitted that the following, or any
combination of them, meet those requirements:
I. Concerning the existence or applicability of the contract.
II. Concerning contract documentation.
III. Concerning the execution of the work.
IV. Concerning payment.
V. Concerning prolongation (delay and disruption).
VI. Concerning default determination, forfeiture, etc.

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Notification
General
If some event occurs which gives rise to cost or expense beyond what was expected,
then, it is likely to be the contractor who first appreciates the possibility. It is therefore
not unreasonable to expect him to take the initiative and· inform the engineer. If that is
right then it is unfair and unreasonable to complain if the contractor gives such notice;
it is wrong to condemn him for being 'claims conscious' or on that evidence alone to
suspect his motives.
Earthworks
If troubles arise in connection with earthworks and material being excavated is found
to be unsuitable for constructing embankments as e:x:}?,ected and specified, it may not be
immediately apparent to the contractor that-/he\ should notify the engineer's
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representative that some action under Clause 17
~t,,th1 ICE Conditions is warranted. It
may not be immediately apparent to the ~E.,gin,eri~•iep,esentative that there is anything
more than inclement weather causing tr~uble ~r iliat wliat he thought was ineptitude on
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the part of the contractor's staff coutl~qssi~lt b4 '~!'d~kign' fault in seeking to use this
material at all. The main preocctipa#o~ ,1•'qf ~o~ sides
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is
to get the job built; difficulties
are an~'?!~ risk of the c9fi~~4~ indpsfry i~d it may well be some time before
the contractor realises the fµl)r''imtli~~t\tm~ qtAhe situation and thinks in terms of a
'claim' and therefore the 'ef~ssi1i oJ al t;9tice under such as Clause 12 of the ICE
Conditions. In such circurp~t*nces fh~n lfas the event causing the claim happened?
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In one sense it has 'happei\ed' whertthe excavation in question started, but in terms of a
claim it cannot be said tc:f"hav~ happened until one side or the other (usually the
contractor) has become aware of the situation or could reasonably be expected to have
become aware of it as being something possibly warranting a claim. In this case one is
referring to physical circumstances which are making themselves apparent in the
course of the work. More plant, more men, lack of progress, different methods; any or
all of these can call. attention to the fact that there is trouble and should be alerting
someone to correlate these with the contractor's liability under the contract and from
that to a view that there may be an entitlement to additional payment.
Delay
Delay in construction contracts is not an uncommon occurrence. Failure to issue a
drawing after it has been requested, failure to nominate a sub-contractor by the
required date, the impact of a variation order altering work actually in progress - all
these are relatively obvious. But it must not be forgotten that it is necessary to translate
instances of delay into term; of (a)~hose responsibility theY are~nd (b) their impact
on the work, before one can determine whether a claim is likely to be involved or not.
CL.,4.C 040 - Dr. Sherif EL-Haggan

11
If the delay in question has been caused by the employer, then it may well give rise to
an entitlement. If such delay lies on the critical path then the contractor could be
entitled to an extension of time as well. If, however, it has been caused by such as
exceptionally inclement e8;ther, then the contractor may be entitled to an extension of
time but to no payment. 'Then again it is not unusual to find one cause overlapping
anot er and the problem en arises as to which supervenes. The matter is one which
requires constant attention by both sid~s. Each must be aware of the rights and
liabilities of the other.
ICE 5 is reasonable in requiring .,'notice in writ!.,ng ... as soon as reasonably possible

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after the events giving rise to the claim'. JCT
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80 (Clause 26.1.1) requires that '... the
contractor's application shall be made as soon as it has become, or should reasonably
have become apparent ... that the regular progress ... has been ... affected.' [Compare
with FIDIC 4th ' Edition, 1987 (The Red Book~&(·F,DIC Construction 1st Edition, (
1999 (New Red Book)]. l ··• .· .· ,
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Thus, the conditions of cont~ac~ al~ s,.~rtrtf 1ec9ifuis9 th~t ~ claim situat_ion does. not
occur at~ clearly defined pomt m tune and11s~notta\w~ys mstantly recogmsed. Notices
of intention to claim are amongst4h1lma:~y ~ttjer hptic¢s required from the contractor.
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Engineers should encour/,ei,AJnc~~:~ oq .Jla.illi"'{ That is not the same thing as

encouraging the making of ~p~cio~s ~~Ir f01:l.fided claims, but whenever there is the
possibility of a claim the Jngineer htu$t ~~. . informed if they are to take remedial action
{if that is possible and thJi ·fablt lie~ Jitb''''them
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or their employer, or if it is a matter of
design), or they may be 1bl~ ~tc(t~~"'avoiding action in such as the case of unsuitable
ground conditions where itis'no.t,-the contractor's responsibility.
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to claim. The general case is that he would be.
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Time limits
Some contracts contain provisions to the effect that all claims must be submitted by
such and such a date (sometimes the end of the maintenance period) otherwise they
will not be admitted. There seems to be some doubt about whether such clauses are
legally enforceable. If they are included, the contractor would be wise to comply with
them if possible.
For claims not based on provisions within the contract, i.e. for damages in breach,
there is no time,Iimit on notification beyond that imposed by the Law. 111., (Discuss
with lawyers attending)

12
It is, however, clearly in everybody's interests that claims be dealt with sooner rather
than later. With the passage of time facts become more difficult to establish and their
effect on work long completed more so. As a generalisation it may be said that a
contractor can legally recover only what he can rov~\ ::fhis is certainly the case in
arbitration and litigation and is presumably the policy' ehind ICE Clause 52(4 )(e)
which spells out the danger which a contractor runs by reason of delay: 'If the
contractor fails to comply with any of the provisions of the Clause in respect of any
claims ... he shall be entitled to payment in respect thereof only to the extent that the
Engineer has not been prevented from or substantially prejudiced by such failure in
investigating the said claim'. Further, the contractor can presumably make good use of
any monies to which he is entitled; also an employer will not feel kindly disposed
towards a contractor who delays informing him that he may be liable to make further
and possibly substantial payments at some unknown future date.
Establishment //'"·'\
It is for the contractor to state the reason why hf c~,nsipers himself entitled, and to how
much. Should a dispute ever get to arbitratiop qi~nt.{~ere is no question but that the
claimant must prepare his points of clainf'3.!1,dlst~te the1iamount he is seeking. There is
no difference in initiating a claim, q6r shoµ* tl)brf bk, for the contractor is the only
Uf
one who can kn?w the effect o~,,~ir¢h1fsfanpe~ fb 9im and certainly no one else can
know the financial consequen~es.j
/'
f 1/J
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_/ ,/ / ii /1 l l ,)v
Although it is undoubted}y _the qasd ''that fdt1/is for the contractor to state why he
~" ,.j ", ' )
considers himself entitleq! ahd to lqupt~ _,conditions of contract where appropriate in

I .,
support of his contentions! l .,,..., l, i ~
j
'I ·""-,r i' ! ..,/
Claims usually arise from\evenJJI ~~

circumstances where one party is alleged to
have done something to the"~defriment of the other, or has failed to do something he
has undertaken to do. The Conditions of Contract attempt to anticipate such
events and circumstances in one or other of their clauses and it is one (or more) of
these that needs to be quoted in support of any claim.
Examination
It is necessary to be objective, to attempt to prove or disprove factually the assertions
or allegations made. It is necessary to check facts, starting with the documents which
constitute the contract. One is entitled to assume nothing. Check the facts. It is often
possible to reach agreement between the two sides as to certain facts (weather,
number of men, working or idle plant, hours worked, etc.).

13
CHAPTER 2: CLAIMS CONCERNING THE EXISTENCE OF A

CONTRACT
General
Examples
Recognition of a valid contract
Capacity
Agency
Intention to create legal relations
Consideration
Agreement
Offer aµd acceptance
Offers
Revocation ,/_,.,,·•~\
Acceptance (
Counter-offers-· /.' . -·,r--
;t-·· •,;..,
j'
Acceptance subject to condition j
! .lil ,/'J '°'·l
Certainty
,~
/... .,.\
;
1· · : /.
If ·
J
."l.
Formalities '
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jl,/~) f'
Letters of intent l,t) II;/ l
,
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I ,,.
1r· .,../
ti~/
General / / i i,f
li:/
1
Claims are mostly conceJe/ wittl ·e!tiill.~ ents and liabilities arising under, or as a
result of, a contract. It is,/ho\veved a prJfequisite for such claims that the contract has
come into existence and\is I'eg~1lf./'\ialid. The existence of a valid contract may be
disputed. Possible scenari<\l.s incJutle:
(a) An employer issues ~"'le'tter of intent and denies that a binding contract exists.
(b) An employer denies the existence of a variation or supplementary contract to
make add1t10nal payment. ______ - --
( '\
(c) A contractor denies that a variation or supplementary contract is binding.
'Variation' is used in this context to mean the variation of an existing contract by

means of a further contract. This is distinct from a variation 'under the contract' which
leaves the original contract intact.
Definition
A contract is a promise m: ! set of promises for the breach of which the law gives !
remedy, m: the performance of which the law recognizes~! "duty".
A contract is essentially an agreement between two or more parties to do or to refrain

from doing something. In the simplest terms a contract is a mutual exchange of

14
promises. The seller promises to supply goods or services and the buyer promises
to pay. Neither party is forced into the contract by threat or pressure from the other
side, a contract not freely entered into would be voidable. Once in contract,
performance relies upon the willingness of the two sides, failing which the courts will
decide a remedy.
Examples
If a contr~ct is held invalid, entitlements or rights dependent on the contract are lost but
alternative entitlements may arise in quasi-contract or under an implied substitute
contract. Where a variation is held invalid, the original contract will be revived. The
possibilities ~e. best illustrated by some reported cases, mostly concerning building
and civil engineering works. ~-·
-~d
7- ~ l"
f1W/1
-e ,. .,,,//) rtt
11.
,l,,.
1. Courtney & Fairbairn v Tolaini Bros - A bµildin~ contractor entered into
negotiations with a land-owner regarding a propo~~tl J ,.1 ..i;
cfbvelopment. comprising a motel,
,1 .
hotel and filling station. The builder wr9-te--9ff~ritjg to introduce the owner to various
,, 'g ; ,, I
sources of finance, on the basis that if>finanGe iwei:~,forthcoming

J 5 :'•· ;; Ji !
from those sources, he
,j
would be employed to carry out ;ye lo9sy-u9ti?n t,9tk/The letter proposed that the
owner should· / .. , 1 1i ,., ! I ii i
• / .. " {..
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'be prepared to instruct yo"4f quantity ~ticye)101lt6 negotiate fair and reasonable contract··
sums in respect of each of;lh4' three!pr?i~5JJas they arise. (These would incidentally be
based upon agreed estimates ;pf t~e [ne~ cost of work and general overheads with a
margin for profit of 5 %) i'7h. icn. <~
a'.n:f' sure you will agree, is indeed reasonable ... '.
\ /
The owner replied agreeing'to'the terms specified in the letter but, after finance had
been successfully introduced, negotiations as to the net cost of work and general
overheads broke down. The owner employed another contractor to do the work, but
still used the finance introduced by the plaintiffs. The plaintiffs claimed the loss of
--=----
profits which they would have made if they had been employed as builders, but the
Court of Appeal held that there was no binding contract. It was a mere agreement to
agree and the plaintiff therefore had no remedy.
2. Brogden v Metropolitan Railway Co - The defendant railway company had drawr(

up a contract for the supply of coal by the plaintiff. They sent it to the plaintiff, who
filled in blanks in the document, but there was no formal execution of the contract.
Both parties proceeded to act in accordance withlts terms as regaras performance and
payment. A dispute arose and the defendants then denied there was a binding contract.
The House of Lords held that there was a binding contract, which had been complete
CL.AC 040 - Dr. Sherif !EL-Haggan

15
as soon as the first load of coals was supplied and invoiced, and the invoice was paid at
that price.
3. Peter Lind v Mersey Docks and Harbour Board- Lind had submitted two tenders
----
for the construction of a container freight terminal, one at a fixed Qrice, one with a
variation of price clause, both open for 6 months. After 5 months, Lind wrote asking to
increase their fixed price tender, but the Board wrote back that they 'accepted your
tender'. Lind began work but refused to sign a formal contract. After the 6 months
. -
tender validity period had expired, the Board wrote again, this time stating that they
were arranging for a formal contract to be drawn up on the fixed price basis. Lind
continued working but refused to Sign. It was held that there was no binding contract
and Lind were entitled to recover payment on a quantum meruit basis. The first
acceptance did not conclude a contract as it did not specify which tender was accepted.
Cooke J stated 'It se.ems tom~ that an a<::~eptance,,in"Ofder to be unequivocal, must be (,-
unequivocal to the business man as well as to thy'lawyir' The second letter was not a .
;·····f-
valid acceptance as the fixed price offer had all{eapl~ etpired. The starting of work did
not constitute acceptance as mscussion~,were dm~
:ih prl>gress on new rates.
/
1
. .· ·I\ I l·"f )
4. Britis_h ~tee/ ~orporation v ~!fvfaf~Btdfe l,.z'Clfveland Brid!le were contractors
for a bmldmg with a space-fran1e 11rqofi1µ,Damm~. l)hey contacted BSC to supply the
lit 1 ;, J!l ,/
f
/ ll 1·
special cast steel nodes requir~9,,dn~ issu,~d lf~~iv6f intent. As the work was urgent,
BSC started immediately a\Af,;n fa<:itc❖~pleteli''hnd clelivered all 137 nodes while
negotiations on the terms 1r4 cont~a~tlwtt,e1still continuing. Agreement on terms was
never reached. BSC sued for~apprp:kiniately £200,000 as the value of the nodes
supplied, but Cleveland B~idgl:tfJuhtfr-claimed for £800,000 for damages due to late
i .. j .. --- -·
delivery and delivery out o,f sequence. It was held that there was no contract. BSC
were entitled to the £200,0otr(~hich was the figure in the inchoatecontract) on the
::::~e~~~~s!;:~: ~~:~~;~~~~:: ~:~a::s~~~::~;~~ci~~;: : : :::~f:: 1

failed;------ (
An 'inchoate' contract is one where the process leading to agreement has been started
but not completed. It is accordingly not binding in law.
~ Recognition of a Valid Contract

~ The question whether a contract exists is effectively a question whether the court
would recognize the transaction as a contract. The law is not concerned with the name
given by the parties to their transaction: it might be called an agreement, a subcontract,
a guarantee, a supplementary agreement, an insurance policy, and still be a contract. It
,might be called a contract, but be invalid. .
CLAC 040 - Dr. .Sherif !EL-Haggan

16
Except in specific situations, the law does not require any formalities for a binding
contract. Generally, there are just three essential requirements for a binding contract:
i. intention to create legal relations,
ii. consideration and
iii. agreement.
, Capacity
For a contract ·to be binding, the parties must each have the 'capacity' to contract.
There are, for example, legal rules concerning the contracting capacity of drunks,
lunatics and infants.
The capacity to contract is fundamental. Capacity is concerned with the legality whilst
authority is concerned with permission. In business an individual may have the legal
capacity to contract but not the authority of his eiµpf~~fr.
I }'
Agency
/ /) l\
,/''.'~'.\ { 1(
An agent is a person with the power t~lcharige(th11J~galjposition of another person
known as his 'principal'. This p~yveft9/qin~ tle n.~plc~ftal derives from 'authority',
conferred by the principal on ~J:re ~~ent,Wh~r~ an,j ~g_yr1t has authority to enter into a
contract on behalf of his pril}ti_ga.f a;nd!!ccmtrdct·{§rinade by the agent acting within his
authority, the principal is tW~ll}boudd ~j/~e ~dnt;act and, except in certain situations,
# I
the agent drops out of the picrre. r. [ • 1
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• ·
Authority may be eitheJ

' ·~ It,;o; 'apparent'. Actual authority i~ a matter of
,
t'fat~~'
n f "
l
agreement between the prmc1pal and the agent. It may be stated m an express
agreement, or it may be i~prf;d by conduct or the nature of the agent's appointment,
for example, if he is appointed as the principal's solicitor, it does not depend on the
other party's knowledge of its existence or scope, although an agent who did not
disclose he was acting as agent might find himself bound.
Apparent authority, on the other hand, is conferred by the representation of the

principal to the other party either by words or conduct. It cannot be conferred by the · . _'
agent's own representations.
An agent will generally not be liable to the other party in connection with contracts
entered into on behalf of his principal so long as he makes clear that he had done so on
behalf of his principal and does not exceed his actual or apparent authority. If an agent
represents that he has greater authority than he actually or apparently possesses, he,may
.... ,,
be liable to the other party for breach of warranty of authority; this arises by virtue ot?
an implied collateral contract between the agent and the other party.
CLAC 040 - Dr. Sherif !EL-Haggan

17
It is thus of great importance that an engineer or architect inviting or accepting tenders

or ordering work should state clearly that he does so as agent for the employer unless
he intends to contract himself as principal. He should also confirm the extent of his
authority with the employer. This is particularly so in the case of site investigation or
aerial survey, where the contractor might reasonably assume the architect/engineer
(A/E) was contracting directly, or letters of intent, where it may be unclear whether
the employer has authorized work to be started.
An agent may also be appointed to act on behalf of a party during the performance of a
contract, with authority to bind his principal by communications given or received.
Thus, the agent appointed by the contractor under the standard forms of contract binds
the contractor by his words and actions. The architect or engineer appointed under the
.,,,•1~''"''·\.
contract between the employer and contractor ac~'ast~e agent of the employer in (
giving and receiving notices and certain other ftirictfon§. The authority in this case is
, apparent rather than actual; since it deri~Sf.~.[ro~ w,JrJ~resentations made ~~ the
contract between employer and contra,,etor, it qoes inot d~pend on the Cond1t10ns of
~ t. ~ i.:-•-•"'\
,f tf
Engagement between the A/E and the ~r-n;Pltjy~r. i·) j
d I F j'1
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Intention to Create Leg~_.{~J'la~i.()_._: ~~t_· ·

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The first essential reguiremenf for & bipdfngjco~tract is 'intention to create legal
relations'. For example, sdciJI arraAgebJn(s are not legally enforceable.
1
' ·.. • ';~ ;'] !; .,j;
An intention by the parttes to td.eli!ontract to create legal relations
The intention to create 1Jgal:Je'l~tions and to be legally bound by the contents of a
contract must be clearly app·i~ent. A contract can be enforced by a court if the parties
intended their promises to be bi_11~igg'. ,t\s a natural cons~-gt:t~J:J.c;~ C>f !hi~~!~~ court ~UL
provide remedies for the breaking of bi.nding promises - known as breach of contract.
Consideration
A promise is only binding in law if it is given in return for 'good consideration'.
Consideration is the legal word for the money that is paid for the supply of the
goods or services, it is the price for which the promise of the other is bought. In
civil engineering contracts the consideration for the promise made by the contractor
(i.e. his promise to carry out the works) will usually be the promise by the employer to
pay the price.
onsideration commonly comprises a payment of money or a promise to pay money.

but it can comprise some other benefit to the person giving the original promise or a

------------------
18
detriment suffered by the person to whom the promise was given. The law is not
concerned with the sufficiency of consideration.
Agreement
The final essential requirement for a valid contract is agreement. There must be
agreement on all material points and the agreement must be sufficientiy certain.
Agreement is not a mental state but an act and, as an act, is a matter of inference from
conduct. The parties are to be judged, not by what is in their minds, but by what they
have said or written or done.
Offer and Acceptance

Agreement is normally analysed in terms of 'offer and acceptance', although it may
po - ~ - - · 'mu== -~
equally emerge from a course of correspondence oy,,ne~otiation. There are two classes
of contract. The first class of contracts requires_lither cceptance of an offer to be 1 •
communicated to the offeror or agreement to etriepg~ ip. negotiation. In Jegal J,
terminology, these are classified as 'bilater,al'fodiyririUagmatic' contracts. The ., l
second class does not require comm~;ti~ati~n ~f~g~ept~ce. Such contracts are ~~-
variously termed 'unilateral' or.,;.jr j6on1facls,iwtl,e.tlfo offer may be accepted merely
by doing the act required. _/ j / { ,)
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Of:ee·rs
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~ An offer, in order to be cJ,aJle of ~cbk!ce must indicate an intention to be bound.

~ ~n off:r must be distingufshlQJrft,,€l'·!mere 'invitat~on to treat', which cannot
immediately be accepted. For.exapiple, most advertisements would be held to be mere
invitations to treat. Even a\.t~tefuent of a price in reply to an enquiry does not
necessarily constitute an offer.
j R~ocatiolll t
\\An offer may generally be revoked by the offeror at any time before it is accepted. The
rule applies even though the offeror has promised to keep the offer open for a certain ,·_ /
time. If, however, the promise to hold the offer open was supported by consideration
that promise would itself be binding as a contract, and the offeror would he liable in
damages for withdrawal of the offer - normally, the extent of the liability.would be the
difference between the withdrawn offer and the next lowest tender. That approach is
rarely used. Where it is considered important to ensure tenders are not withdrawn
before the expiry of the tender validity period, promises to keep tenders open are
usually required to be supported by 'tender-bonds'. Withdrawal of the offer then leads
to forfeiture of the bond.
CL.AC 040 - Dr. Sherif EL-Haggan

19
The Offer
The basis of contract is agreement. Agreement is composed of an offer and an
acceptance. In order to see whether a contract has been made the law looks to see
whether one party has made an offer to do or refrain from doing something, and, if so,
whether that offer has been accepted by the other party.
r£,
An offer must be distinguished from a mere attempt to negotiate. The J;itter is called
"an invitation to treat". An invitation to tender sent by an employer to a number of
contractors is generally an invitation to treat and not an offer.
Whether or not a civil engineering contractor's tender is an offer depends upon its
terms. The object of making a tender is, of course, to communicate a firm offer to the
employer. If the contractor's offer is definite and unambiguous in its terms it will
-----
~I
constitute an offer.
At the time when the contractor makes his ten1£~

,,,,../'"'.''•\
/
.)
!19
'
~
c)ntract is in existence. The cost

(
~
' of prepari g the tender therefore falls uyon:1.h~ c~~tradpr.
~~t'-- l·.· ... ·.l
.f "l
I r .
1v~i··./ ~
°f~~,1:lit lt any time before it is ~ccepted.
~
:..4 n o~fer may be re:ok~d _b~ th,~,,e £o(yh9
~o:~~ 1
:: :;~v~~=:~_,f It ?:-~eil~v,, ]1)¢ m7
r
clear tenns that penn1t no
t·
1·•.··. Jf lI..r~. l·.·j
.' V
A? ~ffer that is not r~vok5~Joes nttr~~~ifi open indefinitely. If it is not accepted
.
w1thm_a reasonable time ft~~~9fl,~Jb lapse and cannot afte~ards be ac_cepted.

1
There 1s no general rule de.:fimngfhb
' .. , ; length of a "reasonable time". What 1s a
reasonable time has to be ascei:ta1ned
'\;'<l.\t,:..,.,,,...
in each case from all the circumstances. The
partiescan stipulate, if they choose, that an offer should remain open for a prescribed
period of time.
Acceptance
For acceptance of an offer to lead to a binding. contract, the. offer must be open for
acceptance and the offeree must unreservedly assent to the exact terms proposed by the
offeror. If an offer contains alternative offers, the acceptance must state which offer is
accepted; otherwise it is of no effect. To be effective, acceptance must be
comniumcated to the offeror. Acceptance can also be effected by conduct, but not by
mere silence and inaction. ·-c:,.. ~ «
The acceptance
The acceptance of an offer must be unconditional and it must be communicated to the
person who makes the offer. In order to be unconditional the terms of the acceptance
CL.,4.C 040 - Dr. Sherif EL-Haggan

20
must correspond precisely with the terms of the offer. If the person to whom the offer
is made introduces some new term/s that is either contrary to a term of the offer or that
offer and does not bring a binding contract into existence.~- ----------
is not contained in the offer, the acceptance is not unconditional and forms a counter-
The effect of a counter-offer made in this way is to destroy/kill the original offer. The
counter-offer is subject to the same rules about acceptance as the original offer. Thus ·
in one case a building contractor purported to accept an offer from a specialist sub-
contractor in a letter which sought to incorporate the main contractor's standard printed
conditions of contract. As these conditions formed no part of the sub-contractor's
original offer, the purported acceptance was held by the court to be a counter-offer,
and there was therefore no binding contract until that counter-offer had been accepted
by the sub-contractor.
,,1··•·"·••'1<1¾\
In certain circumstances, the conduct of a persorfmay ~mount to acceptance of an

offer. If an employer offers to employ a contra9fofAp specified works on specified 96
terms for a specified price, and the cont;~~tor )1/itfouf"f\lrther ado does the work, the
contractor will be deemed to have acc~pt~d)h~ eajploy¢r's offer by his conduct.
.I . ,iv I . r
f,1"'. i. fiff
,r•LJ / / 1 1 ~ 1,. ./ l
Counter-offers /
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Qualified acceptances, whicµ iq.trbducff llewj t~rrn~/or are not in the same terms as the
tender or are otherwise quaJi:qid in!an:f~ay) ail~ot acceptances at all but are
'counter-offers'. A countef-o,ffer
~~ ,. l~.ml'!m'i' ~~1 /'
kii)ls bfith'~
i"f~
original offer. A contract would arise
I t ~~
should the tenderer accepl thts cqutlter~offer, dtlierinwriting or by conduct, but as a

counter-offer 'kills off th~ orig1~J1 te~der, t ~ y ; could~bsequently ac~~pt
the original tender (should\!he gdntractor decline to accept the counter-offer) without,,•
the express agreement of th~..~~ntractor.
ualified acceptances are to be deprecated as unnecessary, serving no really useful

purpose and potentially dangerous. The conduct of the parties may be taken to indicate
that a contract exists, but what its terms are may not be easy to establish. It will be
necessary to trace backwards each step in the negotiations to see just what offer or
counter-offer or counter-counter-offer has been tacitly accepted by one party or the
other by their subsequent conduct.
Acceptance Subject to Condition

An acceptance which is made 'subject' to anything does not give rise immediately to a
contract, though this may eventuate when the matter to which it is subject occurs. It
may not be open to either party to withdraw after the conditional acceptance. For
example, if an acceptance is made 'subject to pl~nni;g permission being received',
CLAC 040 - Dr. Sherif EL-Hoggan

21
then a contract would arise on the receipt of planning permission. This practice can
give rise to problems, and possibly claims,.and is therefore to be avoided.
Certainty
\
The law also requires that agreement must ~e sufficiently certain. The courts will not
make an c1greement for the parties. On the other qand, the courts will try to give
meaning to a contract if they find the parties intended to be bound. Thus, in Hi/las v
Arcos, an agreement for the supply of softwood goods 'of fair specification' with
prices fixed by reference to the seller's current schedule ofprices was held sufficiently
certain. But in Scammel v Duston, an order for a van with the price to be paid 'on hire
purchase terms over a period of2 years' was held to be so obscure and so incapable
of any definite or precise meaning that the court was unable to attribute to the ·parties
any particular intention; therefore the contract wasJ,nvalid. In particular, a 'mere
agreement to agree' is not binding. // \ (
/ I
,l-~·:·.) ····}··
Certainty of Terms .. l ..{/
r Pr ····.L,,1I
In order to constitute a valid contract Iilie. p. ies a
1
:qiustl\
~,'" "''•·
S(j) express themselves that their

j!,,,-,, · ff
meaning can be determined with a rtf~spnab e ~egr~b of certainty. A purported offer
,·1 I ,. i I r ' ,. · ,r
and acceptance in which the t?m'hf. ?fth_S}'Pf1PfSeff· ~sefeement are left so vague that it is
impossible to determine wh,(J~e· Pf-;i~s a~ee,!'f J~es not constitute a binding contract.
This is not to say that the inblfsion pf ~a~e ior meaningless term will necessarily
.
1nva 1 ate the wh o1e contract/
l"d / '
J' ·Ii
:r' ;lI ,l /.,.J ;I}
'! ' \
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,1
l ·. \..✓./1
rovided that no essential\term isiofu.itted or left uncertain the contract will be binding.
14 ;I'
... · .
The terms essential, howevet;~tct a contract relating to a civil engineering project are
likely to be numerous. One term which is clearly essential to a building or civil
engineering contract is the·price or;,atleast; the,means ofascertainingthe-price; ·The
pitfalls of omitting essential terms and of failure to secure precision are, in most ,/.,
',:•
circumstances, avoided ~ use of one of the standard forms of contract. •""'··
The terms of the contract need not be set out in full in the documents which constitute
the offer and acceptance. Terms contained in some other document, in a set of
standard conditions, for instance, may be incorporated in the contract by reference.
Formalities
Except for certain types of contract where there are specific statutory requirements, it
is not nec~ssary for a contract to be in writing. An oral contract is generally valid,
although difficulties may arise in proving its terms.

--~~--~----- - - -
22
Letters of Intent
A 'letter of intent' per se is not necessarily an acceptance. It can become dangerous if ,,
taken in any way beycrnd1naicafing a n . i n ~
Any 'suggestion' or 'request' to start work or place orders etc. should be viewed with
suspicion; even an 'instruction' to do some such work should not be acted upon unless
accompanied by some undertaking as to payment. This would thus set up a 'mini-
contract' which would be absorbed into the main contract if and when it comes into
existence, or stand on its own feet if not.
Note: It is important to emphasize that the effect of a letter of intent depends on

the wording of the Jetter rather than its heading:,,,,,~,
i.r }
i ~
The!!§£ of qualified acceptances and of letter~ o~ intent £fill lead to problems of

whether or not there is a binding contracJ~..RartJ~uji1y'\;yhen these are considered in the
light of the subsequent conduct ofth pktiJ~ 1jplf~ip.g ~rders, arranging sub-contracts,
7
providing plant, starting work on ~itefby"{helcdntrif1c;ior/or permitting access to or
possession of site, supplying ~p(4iqgsfof,J ot*ef in~o~tion or making payment by the
i ~ yf. ~/
emp1oyer. / / ~ 1f H
J'L _
i , ;,;,,•"
~/; 'fl~
l
I i(~~··~ ~ .,.✓--•'
.l \ . i i l /
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. i ·. l I i 1 .•,
The Contract Must be Le,gal and jPQ~~1ble
Ju f, ~;;;,~
The objectives of a contr~ct 1'1,.Effit·]bf;;}Jwful, o_the~ise it ~s v~id. Also the co~tract must
be capable of performan~e; Bef,~re proceedmg m detail with the preparation of the
tender, the contractor shb:\!1!J.,A5e aware of the legality and physical possibility of
performing the works forming the enterprise.
Insofar as the legality of an enterprise is concerned if constructing a gaming house, or

erecting a private distillery for alcohol in a country which regards these enterprises as
illegal, then in the event of having entered into a contract to construct such enterprises,
) both the employer and contractor have acted contrary to the law and, therefore, no legal
contract exists and neither is in a position to present a legal action against the other.

23
CASE 2.1 CLAIM BASED ON PROVISION CONTAINED IN COVERING

LETTER TO TENDER
Pertinent particulars of contract
Tender dated 1 April 1980 (not referring to covering letter).

Covering letter of same date saying that tender was based on usirig steel ex UK at £ ....
.. .... per tonne.
Other contract documents: Drawings; Specification; Bill of Quantities; Conditions of
Contract- any ofthethree mainFonns maybe assumed in Uiis case as follows:
JCT 63/77 with Clauses 3 IA to F (JCT 80 Clauses 39 and 40) deleted
ICE 4 or ICE 5 - Price Fluctuations not included
GC/Wks 1 Ed. 1 or Ed. 2 - Conditions I IA to 11 F not applicable.
..,,,,~
Development of claim ,/ - \
(
t' . '-{!
/ I
I - ,,., _ ff
Contractor to ArchitecVEngineer t ·{ j ,{. 1 September 1980
• .,. ~••••••••'•,•/~ J ~ // I\
,' ·, ! 1, y
Contract Mo . ....... fior ..................../ ".. at .j,... l1i .... H.s1°
ui -_. Ii
I'
1 f • 3 I
} ;I,/") ,j ! l_/ l
With reference.to Certifica~e1if/}p.(4-f'~nn9lJdeJ{[in./ur statement an item/or 250
tons ofsteel reznforcemenf s7!p}4~ajpnd.fix}d1ftAhe Works at an extra cost of£
10.20 per ton. This item,/ho;y{;eveb lf-4
d~let,ea. In subsequent discussion the
quantity surveyors ~ h q t t~isl~Js not payable as the contract is on a
fixed price basis and cttt11•,ici,".F/uctuation Clause,
We would, however, drfuvyoud attention to the covering letter to our tender in

which we said that our fe.t!;fJ,<;,t.,,,was basea on using steel ex UK and that ifin view
ofthe steel position then obtaining we had to get it elsewhere we would expect to
be reimbursed the e_x_tr_a_c_os~. _~~ ___________________ ----------------------------------------------:-::-:-::-:=-:--:==:::::·--::=-.:-------:::-:-::---- -----------:-::-::-- (
We there ore contend we are entitled to payment of the sum of £3,060 and would
be glad ifyou would include this in the next certi zcate.
As a letter notifying a claim this is reasonably straightforward. The contractor has

evidently included this extra cost in his interim statement as a matter of course and
only when it is deleted does the need to enter a 'claim' arise. It recites the facts of the
matter but does not show how the sum of £3,060 is arrived at (it is something more
than 250 tat £10.20).
ArchitecVEngineer to Contractor 9 September 1980
With reference to your letter dated 1 September 1980, clearly the contract
r!ontains no provision for price fluctuation. • -------

24
I would also point out that the covering letter to your tender was in effect a
qualification, contrary to the requirements of the Invitation to Tender, which
indicated that qualifications would not be permitted.
In any case you give no supporting evidence as to how the £3, 060 is arrived at
nor do you state why it was necessary to obtain steel from elsewhere. ..
The first paragraph is only restating the obvious and the second is confusing policy
with contract. Many authorities adopt a policy of discouraging or prohibiting
qualifications but should a contractor find it necessary to qualify his tender, the matter
cannot simply be ignored. Whether the policy must be followed in each and every case
regardless of the public interest is very much open to question. The third paragraph is.· __
however, quite unnecessary and suggests that after all perhaps the writer is not so sure
------..;.,..:~:----:--:---:-=:---:---:;.:::;...---
of himself as he would wish to appear. .r·
.r•·.,
I.
«'fl t
---Confrdc~torto E~gineer~
~
J~....
-...,
/, /· }
l Fi1 !
11 September 1980
l .,' / ,1,.,_
In reply to your letter of9 Septembe,twi'e1a1e #are}hat it is your Department's

policy to discourage qualified ten4,r~.. hu1 t,~rti•are, rjccasions when a
qualification is unavoidable. ]fl tfzis/c9selwrc9,itldget no firm promise of
delivery from BSC and con:#cld:re,d fhat if;'w¢ w~re,lo meet your requirements as
to date for completion, we/might1wd~l hav~ to ifnp~rt steel. This position did not
become apparent until 4J3 ~6~rs ~e/pfq terdefs were due. As we did not wish to
load our tender against/a ·disk wlJ,ic:h. mjght not eventuate we decided we had no
alternative but to quali}y:~ur t~n~e1 i,,i·· ·
& 'i, t'' ·. 1 • r
j ·•,,,••,,. fi 11/
In fact, BSC were unab~e to m~ef'our requirements and we were obliged to

import from West Germar,,y,, •..-·as we infortmed your Site Representative at the
time. We enclose copj_es of invoices for the materials delivered and the quotations
from BSC on which we based our tender. From these you will see that the nett
difference is £10.20 per ton to which we have added 20 %for overheads and
profit - which we are sure you will agree is very reasonable.
Again a fairly straightforward letter - but now revealing that 20 %·has been added
for over eads and profit - though the letter in question talks of 'extra cost'
without defining what is meant.
Architect/Engineer to Contractor 2 October 1980
I reply to your letter of the 11 September and have to inform you that your claim
is rejected.
Could the man not at least say why? Perhaps he does not know that his decision is in
fact correct. Obviously, if he knew the reason why this is so he should tell the

25
contractor. As it is, there is a risk that the contractor will feel sore, will be wondering
whether it is worth taking the matter to arbitration or whether there is anything else he
can do (eg, look for some weakness in the contract documents to exploit).
-~IC-_-_:-_:-_-_-_-_:-_--_-_--_-r- ---------------------
The use of an unexplained 'No' an be quite a big factor in escalating a matter which
should be rela 1ve y routme m o 'cfaim' in the more formal sense. It tends to suggest
that the A/E/QS does not have any solid reason or at best is not sure of his ground and
so the contractor is inclined to persist. The giving of an explanation may either
convince the contractor into acceptance or provide some specific point on which
further evidence or perhaps caseJaw can be.quoted and help towards resolutio11.
Points of principle
The point here upon which the contractor's claim fajls,,is that the covering letter forms
no part of ffiecontract. It was not referred to in t1J.e"ten4er itself, it was not referred to (
7ii the acceptance and the contractor failed.to p~<Sl(ilpt~e
. 1 - •
latter point before
commencing work. (See Davis Contract9r.s. Lt&vu/ar~'ham UDC 1956 AC 696)
Architects, engineers and quantity su~~or~ cbntrt9nteJ with such a situation when
examining tenders must check wl},et~r}s\lch!f )
~~;!
a lcot~JnJ letter is intended to form part
;!' ~ ,j / ,,,,,, 'f
of the contract and, if so, at le1~s{ tn~u~~_,,thati itlis ipe,9ffically referred to in the
acceptance. / /,,,.,
,'
JI, ,,
I'
I
I ) I.,/
' h ,.,
I
j I .,·
f·1 *P'' 111/
.On the matter of policy reiar,~ng qLa1ifi!s1-·ie~ders, if the lowest tender were, say,
' I ' I "
£50,000 or even £20,000 ~elqw the!ne_xt and the extra cost of steel likely to be
j :i (
'1~,~ .. ,,1i f't~'
involved were, say, £5,00~, to pa~s \over the lowest tender would be to oblige the
employer to incur an addidQ}},~l>{xpenditure of £45,000 (or £15,000 as the case may be)
because of a general policy. Whilst such a policy may be thought to be justified on the
grounds.ofdiscouraging irregular tenders,apositiv:ewaste ofmoney(partkufarly if it (
is public money) cannot be justified where the tender in question is not irregular. To
adhere to a so-called matter of principle because one is unable to distinguish a genuine
from an irregular tender and to have no better means of dealing with the latter if and
when it arises is a confession of weakness and insufficient justification.
CLAC 040 - Dr. Sherif EEL-Haggan

26
CASE 2.2 CLAIM BASED ON QUALIFIED ACCEPTANCE
Invitation to tender for a building project dated November 1977 required completion
within 21 months for a lump-sum on a firm price basis.
Tender dated 11 November 1977 offered to carry out the work for £104,000 but in a
time of 24 months and required the inclusion of price fluctuation provisions.
-=
Conditions of Contract: As at invitation - JCT 63/77 Clauses 3 lA-F deleted; GC/Wks
1 Conditions 1 lA-F not included.
Tender dated 11 November required these clauses included.
Acceptance ./·· I
23 November 1977
l .,. ~~-1 }
/'. l J l
I have to inform you that your tender.,,dq,teq 11/Ndvfmber 1977 is accepted in
the sum of £l!}j,000 less £2,214 in/~spe"'ft~fMr_f.th~etical errors in extensions
and casts tn the Bill of Quantitier{ ~f,f:s qg1ee¥' ~ftat/the time for completion is
to be 24_months but you~./1erJueftJfo~ Jfri1¢' fl,;dctuation provisions to be
included is not agreed as there ls gclnerdl ggr~epfent in the industry that such
clauses should apply, onl/ tqlc~JtrJ.h1 i~I etc,~~~, of two years.
/ /
, . ·l
I' I'''
1
j I )/'
1.· J ·
Further I must point ouf tffat so"1,e~f~9tlr Preliminary Items are grossly
overpriced. These musq bey-e~71cf dJmd the excess distributed over the remaining
BIQ items. \ · .,,_,, !/-"" I
\ ,)1
'\, r',..,,.,,~
Possession of the site is ··hereby given you with effectfrom 14 days after the date
of this letter.
Whoever wrote this letter is very unwise in attempting to deal with errors in the B/Q in
this fashion. The contract is to be on a lump-sum basis and in such case prima facie
the lump-sum of the tender overrides the bill total. Errors in the B/Q should be dealt
with by correspondence before acceptance and the contractor offered the choice of
adhering to, amending or withdrawing his tender.
Although there was a general agreement in the industry that contracts expected to last
two years (later reduced to one year) could be on a firm price basis, this was merely
advisory and in no way binding in any individual case. Again, such a matter should be
dealt with by correspondence before attempting to 'accept'.

~7
It is not clear whether this 'acceptance' has been written by the architect or a non-
professional department of the employer - perhaps the latter as the next letter is
addressed to the employer.
Contractor to Employer 26 November 1977
Thank you/or your letter dated 23 November 1977. We regret, however, that we
are unable to agree to this contract being on a firm price basis at the price
quoted. If the inclusion ofprice fluctuation clauses cannot be agreed to, we
would need to increase our price by £20, 000.
Short and to the point but it would have been better to be quite clear as to whether this
amounted to a fresh offer;
rl"~"¾
Architect to Contractor I" \r. 3 December 1977
/·
f
.J
.
.1
·~
(
With reference to your letter dated 26 Noven/bqrfI fj~ve been instructed to inform
you that your request to increase yow;;,,terzd~r lly'£io~ 000 is not acceptable. It is
therefore intended to revert to your,lbrigt¼a{ !!:l)e~r i~cluding price fluctuation
provision. I am instructed to i~fofml?U fhi{it ttaftefzder is hereby accepted in
the sum of £104,000 less £~1),14/infe,"§pe-ct!ofC'/fitJynetical errors in the BIQ and
subject to a redistribution l f t~1e [e.xq(ssivi Ptii::ijffor preliminaries referred to in
para 2 of my letter datedJ23/Nov~rn~r;,;, 1~7t)Y?fiich letter is now cancelled.
. l l I .i l J t'
The original acceptance w.,!1s po ac~ept'an9e'"at all but a counter-offer because it

introduced terms not in thf o#ginaUteJder. This proposition is generally well
understood but what may ~otb'e'~~ ~~11 understood is that a counter-offer 'kills off the
original offer, which is accqrdj,ngly no longer open ror acceptance. This second
"'m1•M -,, f •
'acceptance' is a further counter-offer for the same reason.
As the original 'acceptance' is now cancelled, the position as to possession of site is

somewhat equivocal.
Contractor to Architect 8 December 1977
Thank you for your letter dated 3 December 1977. It is regretted that we cannot
agree to proceed with this contract on the basis ofyour letter. We note the
'errors' in pricing the Bill of Quantities but would point out that other items are
underpriced which more than offset this reduction. Further, to redistribute the
Preliminary Items as you require would involve us in additional costs offinance.
We are, however, prepared to stand by the offer contained in our letter dated 26
November 1977 to execute the work for the sum of £124,000 on a firm price
basis.
CLA.C 040 - Dr. Sherif EL-Haggan

28
Had the architect taken up the matter of the errors in the B/Q before his first attempt to
accept, the contractor might well have agreed the correction. As to the redistribution of
overpriced preliminaries, the architect is right to bring the matter up because leaving
things as they are would involve making payments on account with insufficient
collateral by way of value received. He is wrong, however, in not taking this to a
conclusion and getting agreement on how they are to be redistributed, again before
attempting to accept. The contractor is right in saying it will cost him more for
additional finance but he makes no effort to meet the architect's point. At least he now .
makes a fresh definitive offer.
Architect to Contractor 14 December 1977
I am instructed to inform you that my client consi,<f.~rs there is a binding contract

with you and you are accordingly requested to_:1Jrod~ed without further delay.
{ i
l Jf
/ /"') l
t¼ { ~·l
The clie~t may c~nsid~r there is a bind!~gJJ~nrra1f butjthere is no indication of ~ow
the architect advised him. In any casr{h;~s lateftlrtt,r cpmpletely begs the quest10n of
what contract, 'on what basis?' -;at tp.e poµit!o~th~fsec~nd 'acceptance' or following the
/ :j J I ,i t :, i[ -'
contractor's last letter? Does tliis ~a(estl Jetterl atnO~IJ,do acceptance of that?
~
l .,
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{
:;
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~1,.,
/ / I !il/l ! k/
After about three weeks frf1;1fthe la;st \~1:1:fr ,jle' contractor starts work on the site,
variations are issued, inte~i111(paym~nt~ made and the work eventually completed. Both
I • • 'i
1. ~ f.,
sides seem to have forgo1en fu.a<the,,J6tter giving possession of site was cancelled,
raising the query 'From wl\at da~y1does the contract period run?' This might have been
important had the employe?·l:itf~~pted to recover liquidated damages. In the event, the
quantity surveyor produced a final account which may be summarised as follows:
£ £ £
Contract sum - 104,000 ---- "·---
Less errors in B/Q
- 2,214 {_,~
Add variation of price 14,141
Variations add 15,078 --
Omit 12,146 -
~
PC sums add 41,222
Omit 38,000 3,222
The contractor disputed this and claimed:

29
£ £ £
Contract sum as tender · 104,000
Add as letter dated

8 December 1977 20,000124,000
Variations as valued by QS 2,932

PC sums ditto 3,222 130,154
Amount of claim 7,973
Points of principle
In situations such as this where there is offer, count~,r:;,offer and counter-counter-offer

etc, involved there can easily be a doubt as to th~iipoint;at which a contract comes into (
.ef a
being, and hence as to its terms. In this case thyle)f idently contract as work was
performed and monies paid. At what po!9,tfan/it ~l sai~ there must have been a
meeting of the minds? / ·'t I 1I ·
·
l 1 ~1
,v,,..., q
' I j''i I i I / j
1 ~ !I/ .er
.r 1 ¢oµnt~r-0µ1ers .. 1
B oth th e ftirst and second 'acceptapoe ,.,) /, w~re andby th e ftirst th e ongma
tender was 'killed off and so .wa~;;iltjtiIJf'itny ~ate 4Pe~ for acceptance. The contractor's
· offer (if offer it were) was \ik.7~ise~i~~rtq. o:f ~y,,the second 'acceptance' but was
effectively~ n thef c9ntracior'$ l{~d· of 8 December. The architect's final letter
of 14 December was anytl!in$ bu!, c;Iear Hut by this time there was no offer on the table
l , .~ \,
f. . ,f
except that by the contractor •f--·8 p~.cember 1977, and by allowing work to proceed
and by making payments the 'I.
employer
•.
tacitly indicated acceptance, if the architect's
letter of 14 December had frot~flready done so. On this basis the contractor would be
entitled to the amount claimed.
The position under the ICE Conditions would be similar except that the 'errors in
extension and cast' would become irrelevant upon remeasurement because under those
conditions (especially the 5th edition) the contract would be on a measure and value
basis and not for a lump sum. Had there been errors in the rates which had been
challenged the position might well be different.
Such situations can be avoided by resolving all matters of errors in B/Q, redistribution
of money in Preliminary Items, or indeed any other matters requiring to be resolved
before a tender is accepted, and then accepting it (original tender as amended or
modified by correspondence) in simple terms without introducing any new matter.

30
It may seem that such situations are so obvious that they cannot have happened in
any well regulated office. The fact is that they have and they do, particularly in those
organisations where contracts are handled by non-professional people. In some cases
they even occur with Local Authorities where a legal department (perhaps more
experienced in conveyancing and local bye-laws etc) requires that tenders be accepted
'subject to contract' but seeks to avoid the delay so caused (it may take two or three
months before a formal contract is produced for signing) by including in the
acceptance 'permission' to start work or giving possession of site. In such
. "•· t,'
circumstances ifJhe contractor does in fact enter upon the site and start work, and is ',':: •.
allowed to do so, then it is probable that despite the proviso in the acceptance there is a -,
'valid' contract which the Authority could not avoid if it attempted to rely upon that
proviso.
. i·
CLAC 040 - Dr. Sherif EEL-Haggan

31
CASE 2.3 CLAIM ARISING OUT OF LETTER OF INTENT
Tender dated 12 June 1978 totalling £2,496,181 for a new oiling jetty at ....... ..
.. ...................... Conditions of Contract ICE 5 (though this is not material to the
matter of the claim).
orrespondence had passed between the engineer and the tenderer following receipt of
the tender, from which it had become apparent that the steel pi!es would require at least
nine months for delivery. AU other matters had resoivedm~ employer was not been
in a position to accept pending negotiation of terms with the prospective users. The
engineer was therefore instructed to send a letter of intent in the following terms.
Letter of intent ,r,.,~~,

4,/"· . \
,l I (
- Engineer to Contractor' / · j'/\J; ·1!/
j
7 August 1978
, ., ~., ~ I r/ "•,\ ..
My clients have instructed me to infotmY,p~ th~~;f?S fl matters concerning your
dated 12 June 1978 for wor~l1:f ,t tf

tender have been satisfactorily reS:<il¥~d;Jt t~~if j,1jtention to a~p__t your tender
1 puJ in! t~e·c,'({htrpct documents together with the
subsequent corresponden~fl li~t.e~ iry(the ·Apfe~¥J':21to this letter.
. • .r _.,,,., 1 I ~ ~ f, 1i~
· v' ..
C
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,t'
1
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•
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1 , ,. /'.
1
~
Ii
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1
,/
~As you are aware, com1·.1·f~1~n is Ir. .e1;ire~ i~/2 ½years but as indicated in your letter
~ " dated 22 June 1 9 78 dqli:Vfry ?~thejstif~l piles will require at least 9 months. As it
may well be another 6-Ww~eKsiftwn now before a_formal contract can be signed it
is suggested that you m'ffglj,twi~h to place an order for the steel piles so as to be able
to take advantage ofthe\s.umfner season of 1979. A list of the pile lengths is
enclosed.
·,
· /...........
-·
- .......---i
-· Sho.uld you wish to set up any part ofyour site organisation such as levelling and .
preparing working area, erecting offices, stores etc, the site can be made available
.... (
to you at any time
Contractor to Engineer 11 August 1978
Thank you for your letter of 7August 1978. We are very pleased to hear that your
clients intend to accept our tender.
We understand that the supply position of the piles is further deteriorating and we
h~ therefafe Taken immediate steps to place an order for them.
CL,4C 040 - Dr. Sherif EEL-Haggan

32
We have some hutting just coming free from another job which we intend to use in
this contract, so we shall be glad to take advantage ofyour suggestion that we might
start some preliminary work in the working area.
-------""~
Two weeks later 1111• An exchange of letters between contractor and supplier set up a
firm contract for the supply and delivery of piles.
Three weeks later 1111• The contractor dispatches by sea hutting sections and materials
for foundations and other preparatory work, some light excavating plant and a small
gang of men to undertake erection. .
~
'<;" '.~::::::::::::::: :::::::=--==,= - - i,
Engineer to Contractor 10 November 1978

"'"""'
The delay in dealing with this matter of a contptt~t ]qr the construction of a jetty at
.................... is very much regretted I am, µo}J{ev.Jr, now instructed by my clients
to inform you that they have been unable to iomplet~ satisfactory negotiations with
the prospective users of this jetty. T~ey71i.qvet1Mrefi. 0·}''.e reluctantly come to the
. h h b .. hi ht i, f •
cone luszon t at t ey cannot proce?u,~it jl i7s1r~Je~ .
i ,i j J fi ! ,.,. f ,l!l
./ I I . I i I f, - ✓. .!
It is understood that you hq,ve ~o.fnertempdw~ryj[z~ts on site. I should be glad ifyou
would arrange to remove/heli spo~ a} AosjU5le and restore the site to its qs
I, 1l,' !. · I j,,..,,
1
original condition. /. j
Contractor to Engineef ·
'
l I
II
' •
i
I
l l , ,l;
.l
i
l
/ 13 November 1978
l -<I I·\ ,,i
l1 1
':...... ,,~ .. .t !1 ·"_,.,.
We have receivedyour l(etter ~} Yo November 1978 and regret to hear that this
project is not to proceed..........,../
,.l ..
We will arrange for the removal of the huts and the restoring of the site as you ·,.. .
'),
request. We will also take steps to cancel the.order for the steel piles.
As soon as we know the cancellation charges for the steel piles and have completed
work at site we will send you our account for this abortive work.
I am in receipt ofyour letter of 13 November 1978 and have referred the matter to
my clients. They note with considerable concern your proposal to render an
account for abortive work and/or cancellation charges in connection with the piles
and instruct me to point out that my letter to you of 7 August 1978 was a letter of
intent only and not a firm acceptance.

33
They are therefore under no contractual obligation to you in this matter. They also
request that you expedite removal ofyour huts from the site as the land is to be sold.
If the contractor did not know before, he knows now that ~ letter of intent is perhaps
better than a letter of no intent, but no more than that. It is not clear from this
correspondence whether the engineer has so advised his clients or whether he himself
is not clear as to the situation. Certainly he has carefully phrased all his letters as being
instructions from his client, but he should have advised them in quite strong terms that
this sort of action is to be deprecated.
The contractor evidently decides he has nothing to lose in making a further attempt.
Contractor to Engineer 25 November 1978
We note the contents ofyour letter of 22 Novemb<p:. )978 with concern and
pf
astonishment. Your letter of intent instructed ~~to ace an order for the piles and (
actually gave a list of lengths/or ordering. Y/iu_,.r,1Jsci gave permission for setting up
huts and levelling and preparing a working brefq,! (
/' "'.' ','\ I..
1½
ilf ..• 1
We have been in touch with the P(z/s;1.PPfets t4y inform US that_ they would be
prepared to cancel our contrap/ vyz*.. fhefJ1,
.,, c :, t
on Rq,ympnt
·~ t r
of a cancellatzon charge of
t; f'
£7,295. Our costs in puttinfTl'h~tsJ o,i slte tin& the p,feparatory work there up to 22
? a i. J( . l ! .1p :r
J.
Nove_m_ber amounted to. ~./". ;_if6 q·l·u. 'tfreJ.lcna~ge'sfor the huts of £1,200 from
subszdiary company, to yhzph Wf mptsf a'1d bur overheads and profit at 30 %. We
estimate the cost of disnfwrftling bruf rf!}@Ving our huts and restoring the site will
cost another. £2,500. { ( i j l ,;
{ .·. \. ,,/i !,;,c,/
We should be glad to h,a_r f!~.,Jz you as soon as possible that your clients will accept
these costs. "¾;;;;fo.,,,,.
/" \
There is Httle that one can cdticise about the contractor's. claim except llerhaps part of. -··· . ( J
---
'liTschargeforthe hutsandthe30%overheads'Con this item. they.were coming free
from another job and would probably have been put into store anyway until this job
materialised.
........... ...
Engineer to Contractor 8 December 1978
I am in receipt ofyour letter of 25 November 1978 and again have referred the
matter to my principals. They wish me to point out that the placing of an order for
steel piles was only a suggestion and not, as you state, an instruction. The .
temporary use of the site was permissive only and you were not formally given
possession. They are not prepared to accept any part of the costs claimed by you.

34
Points of principle
It looks as if the engineer is being pressured by his clients. It is to be hoped that he has
made clear to them that this sort of action is unfair, unbusinesslike and in effect
dishonest, even at the risk that he may lose a client.
What can the contractor do? It is guite certain on the correspondence that a suggestion
was made and he chose to take action. Had the letter of intent said 'you are requested' it
might have been a bit better, though nothing less than 'you are instructed' would really
have been safe. Even then, if it is really necessary to use a letter of this kind, it must be
-
- -
clear not only that the contractor is being required to do something but also that he will
be paid. If the contractor is required to do some work or to enter into some liability
then the letter of intent must be clear and must amount to an offer which is open to the
contractor to accept and thus set up a mini-contrac.t_§hould the main contract
eventuate later, this mini-contract will be absorbed~,arrd. disappear. Should the main
contr~not proc~ed, !hen the mini-contract re°}~i~~ inJits o~ght and can be settled
as such. / Ir l
" '·. _,;'°"'""\, ! j(/ '·•,
In this case, as a'!Orlom hope, the cop.tfacto~ ~ig~ltry ~b prick the employer's
conscience by way of a claim for,.ex,krft~a ~a~m~~J, i~it:mly of his nett costs. By so
doing he is of course admitti~~{~h~hef !J.ds n!o ~o~t~s,fual or legal right and is merely
seeking something more tangibltr-\ttan~~pipht$yJfom the evidence available it would
. th/ ! · 111 , . !h j .,
seem h e sh ould not rate h lS/C ance~ ve,ty;11Hi .,/
, . j e : I i .,
1 f t :1 · ,,)
I ; ! './' 1:
See Turriffv Regalia Kniiin~ ~.Vl~ 9 '

20.
. ,,
1\.,,~,,,,· !!
.
) ;,:J•
f
!)3i:R.
. U I/
\ < ,✓"
.,.,..,.,,,,,,H"'i"'.l

35
CASE 2.4 CLAIM BASED ON DEFECT IN FORMAL AGREEMENT
Pertinent particulars of contract :'
Contract for the construction of an oiling jetty in Singapore.

The documents comprised:
Tender dated 3 June 1980 (note that the wording of the proforma at page 26 ofFIDIC
had been amended to read ' ... at the rates and prices quoted in the Bill of Quantities'
instead of 'for the sum of;
Conditions of Contract: International FIDIC 3rd edition,1977;
Bill of Quantities, which included an item in the Preamble reading as follows:
'Steel reinforcement to be supplied by the employer.
The prices for fixing steeJ reinforcement supplied by the employer shall include
for taking delivery from store, cleaning, cutting, bending and fixing.'
......,,;,•'".~~
_
Background to claim } /' ·.

!, ' '·-
(
l ,/\ i
There were three items in Bill No 5 reading asto1!iow~~,
Item 37 Fixing steel reinforce~-:~\!,

by the Employer .,,, t l 'i .1 i .Ll j
l " . ' '
slpplied~
n J r
im
42.8 tonnes
.
Itern 38 D 1tto 20 d' "" 4 r d 1,-1·l.
mm yim~ ain . i4 H;to. ! ;! ./ I I' 1 I 27 .5 tonnes
Item 39 Ditto 25 mm diam} dndl&itto l ! ](/" 36.3 tonnes
ir --11~, --f a:~i~
l ! r/..~
The material was availabl~ .}\,hen !th~ Bill)w";s prepared but there was a substantial
delay before tenders were{intited. !rnlfad{it was not until tenders were received that it
was found that a larg: Pff bf..J~isl:~tJel. reinforcement had been used on other works
and was no longer avallablt!. T~;
followmg correspondence took place.
'\ ;," 'i'.
Engineer to Tenderer -....,,,, 11 June 1980
; \
With reference to your tender::dated3 June· 1980, · I regret to informyou-that the steel,
0 (
reinforcement for items 37, 38 and 39 of Bil/No 5 is no longer available. Will you
therefore please quote your prices for supplying this material, the item coverage being
similar to that for other items in the Bill where you are supplying reinforcement.
Tenderer to Engineer 19 June 1980
With reference to your letter of 11 June, we confirm that we are able to supply the
necessary reinforcement and our price in substitution for those quoted in Bill No 5 are as
follows:
Jtem37 16mm per tonne$

ltem38 20mm per tonne$
ltem39 25mm per tonne$
This will increase our tender by the sum of$

36
Whether or not such a letter was (or should have been) sent to other tenderers as well is
a separate issue and does not affect the problem here. In view of the wording of the
tender form, the tenderer was ill-advised to refer to 'an increase in his tender'. Nothing
should be introduced which is likely to give rise to ambiguity as to whether the
contract is to be for a lump sum or is for measure and value.
The tender was otherwise satisfactory and was recommended to the employer for
acceptance, which he did in the following terms:
Employer to Contractor 30June 1980
I have to inform you that your tender dated 3 June 1980 in conjunction with the engineer's
letter of 11 June and your letter of 19 June is accepted.
In accordance with Clause 9 of the Conditions you are required to execute a formal
contract. This will be forwarded to you in a few days~""'\..
~
/ . .J\
J'
Clause 9 reads: / ;l) · f
'The contractor shall when called u13,9n,~o li?if6
ehfer into and execute a Contract
Agreement to be prepared and coip:plete~ ~t 11~\co~t of the Employer, in the form
annexed with such modification eys
d
rµ~y
,, ;
~e
,
~eqessacy.'
.f t ¾ C
./'d
,... tt
1
f
,}
I
i
.1
: ~
l f,..
Ml"'~
ti~
l
....
There is no doubt that at this1foibt{th¢(e· is~ tali;~,.e6ntract under which the contractor
has undertaken to supplv tlfo r€inforJ~~t. ! :P,ara 5 of the-Tender says 'Unless and
til a formal Agreement ,1ttrepateci~d ~~"tlfed, this Tender, _!ogether withyour
1
written acceptance thereoi, srn. all cdnstitute'"a binding contract between us.' In preparing
/ r '- l "'
the formal Agreement, hqWeferyftjfet~mce to the letter of acceptance was omitted and
there was no separate refe,renc'€'t6 tli~ correspondence covering the matter,
~ ~ -~-nor was the
B/Q formally amended. The cqntractor did not notice the omission and executed the
Agreement under seal]. ·,,.,,,.,./'
The administration of the contract was handed over to other staff of the employer, and
the contractor's agent was new to the firm. About three months after the work had
started the agent wrote to the resident engineer:
Agent to Resident Engineer 20 October 1980
With reference to items 37, 38 and 39 of Bill No 5, will you please let us know when and
where we can collect the steel reinforcement? We understand from your store staff that no
such steel is available.
Resident Engineer to Agent 23 October 1980
With reference to your letter of 20 October, your attention is drawn to the engineer's letter
of 11 June and your firm's reply of 19 June, in which you undertook to supply the steel in
question.

37
Agent to Resident Engineer 27 October 1980
In reply to your letter of 23 October, I have no copies of the letters you quote and they
were not included in the contract documents. As they were not referred to in the Agreement
I had no reason to know of their existence.
I have, however, checked with my Head Office and they have sent me copies of the letters
you refer to but they point out that as they were not included in the Agreement, they
assumed that your people had reverted to the original position and were after all supplying
the steel
As the letters had been referred to in the acceptance and the formal Agreement •
followed a few days later without any further correspondence about this steel, it is a
little difficult to believe that the contractor really thought the employer had chang<;;d his
mind; at the very least he should have queried it. Obviously the m a t t e ~ n
both sides but the question now is what is the true,,. 001).tractual positiop? HerJLwe l,gtve
a contract_under se~l which _:es~111~bly voi~s tp.e pre}r_ious documentation. No douhl, (
ega y, t 1s 1s a 'm1staRe which can be 'rectitj,,ed;;,,puJ 1f agreement can be reached on
t~e matter such re:ourse to law wouli.,,rot
1
/b~,
.,n~c:~ssary. Fin~cially it_ makes no
difference because 1f the contractor Sl:lpphls ftl1: fsteelJhe gets paid for domg so. But
what about the delay arising from this!~fl~aiin ,1~~t)fet been ordered?
A: J 11 ; ~ t, } ,/ '/
,,/' ~
R esz"dent E ngmeer
· A
to gen~/ _)I (.f _ fl(' j. ·. il l !H
I. t;/// 31 0 b 1980
cto er
· to in m~ letter of 2~ Octo .,f:dwas i co[PJrqted in the acceptance and the responsibility/or

supplying the steel zs thu yd\trs.,·:if.J
I
~
The fact is that we have t'no ;r;el, Ji/supply, so that there is no alternative but for you to
arrange supply. \ "',,·.~,M~,r"·~
· . .,,./ .-:;?- "-- =- '--- =
::::=-=-
The responsibility for the defect in the Agreement is being 'dodged' here. Clearly the (
········-·.. ·matter=is=getting-i-atheFinvolvecl=to=be=dealt'with·at=Agent/RE=level=and:::it=would ·seem·· .,.
that they both passed it to 'higher authority', as the next letter we find is from"tb,e
contractor's Head Office. •'
We refer to correspondence between our agent and your RE between 20 and 31 October
(copies attached). We agree the matter is clear up to the date of acceptance but the fact
that the letters of 11 and 19 June were not included in the formal Agreement and that the
letter of acceptance was not referred to creates an entirely different situation.
We note that there is in fact no steel available to be supplied to us so, in accordance with
our telephone discussion, we confirm we have now placed orders for supply. ·
CL.AC 040 - Dr. .Sherif !EL-Haggan

38
The best time for delivery we can get is two months, plus a further month for shipment and
delivery to Singapore. To obtain this we have had to pay all extra $100. 00 per tonne in
excess of the prices on which our quotation of 19 June was based (a total of $10,660 on the
quantities in question). We are, however, more concerned about the delay which will
inevitably occur. We can do a certain amount of re-organisation but there will be at least
six weeks' delay and probably some disruption and loss of productivity which altogether
will involve about $60,000.
We will let you know in due course what our actual costs are, but in the meantime we must
formally notify you of our intention to reclaim such costs. ----
Of course it should not have happened, but it did. The dates are different and the venue
is changed, but the facts are essentially as given here. There is no doubt that both sides
are to blame. Both sides will no doubt endeavour to minimise their own
responsibility. On the evidence here, however, it seems fairly evenly divided. This is
one case where it is probably justified to split tq~.,,,cqsts 50/50 - a course more often
thought to be taken in settling claims than is in fi;i.c'tthe}case.
t .i
/ .Fl,
I l
f .:l
! if: ly"
,f
! K,,
0 .Mo~~ \
1
I ~ t •
Point of principle involved /
•./· "
'1! Ig I!t
\~
I
/' j;/'"\ ~f
//\ Ii ilt
The tender and its acceptance l)ltjs~/'re;fle;ct ~h~ agreerµent reached between the parties,
1 1
.including any coi:responden5~ir{'~~il.hf.fs_in.·.l·efe(~_.d (as was in fact done in this case).
· The Agreement, 1f completpd~ ,,/murt s~µIflai11YIJeflect the complete agreement reached.
1
Neither FIDIC nor ICE gJve/any fnd~c~ti~µ in their Forms of Agreement either that
such correspondence may/ ocfur orj th*t, Ii{ it does, it must be incorporated. Reference
to it in the letter of accejJtang~~,"'~d,,,the inclusion of that in the Agreement gets it in
indirectly. It is better if st\i~h ma!er~ are dealt with more positively. Alternatively, the
\ . . .;,,'
effect of such correspondence/must be reflected by way of actual amendment of the
documents affected (in this case the B/Q).
The employees on each side must check the documents to ensure that they have the
correct information. It may be arguable that reference to the acceptance is not
necessary in the Agreement, if the remaining documents fully cover the obligations of
both sides. Be that as it may, if there has been pertinent correspondence it must be
included one way or another and inclusion of the acceptance (provided this in fact
refers to it) is one way of so doing.

39
CHAPTER 3: CLAIMS ARISING FROM DOCUMENTATION
General
Contract/Policy
Errors and discrepancies
Ad hoc conditions
GENERAL
In preparing and examining claims it is essential to bear in mind that one is concerned
-------------
------
with what the documents say and what they pro~,ide,., for, not with what one thinks
·. . ,~ \
they shou@ have said or what must have been /mtencfed.
· l · ·;.~~:·· ,. •-.::f
(
l l ' l
CONTRACT I POLICY
,,
/~.•~"\
i
ir J(\! "" ",II
Care needs to be taken to distinguisp ,,b~tw~ep pi9hefs of contract and matters of
policy. It may be an employ~r'§! p,,bHfyJto !pfovJ~~,/or price fluctuation in contracts
lasting more than one year pllt if ih fdct th~ teqUisite clause is not incorporated, then
~-...__. ,/i tl' ~ ~r, .,.i'1 n r ./'- · ~ •
clearly it will not be operapivf ni e111-plpyer may shun qualified tenders and certainly
tenderers should make el~.pf •.01.:tq at,01~ qualifications by exploring matters with
ef.D
the engineer in the tendel;i:>~t~-~~ff}Jtaking the qualification by way of an alternative
tender. Clearly, commerqal considerations indicate that action should be taken to get
the tendering period extehd~di(n order to resolve the problem before submitting a
tender but this is not always possible. There may, however, be occasions when a
·qualification····is.unavoidable (receiptofvital . information ..from-a .... supplier~.. or sul:>~ (
· _ contractor only hours before tenders are due). There may be so much money involved
that any public authority which dismissed or ignored such a tender (provided it were
genuine and bona fide) could be open to criticism of misuse of public funds. In this
and other connections care must be taken not to confuse policy and contract. A contract
must be construed solely upon the terms it contains; an employer's policy cannot of
itself amend such terms or introduce additional terms.
ERRORS AND DISCREPANCIES

Having established that there is a contract and what its terms are, there remains the
possibility of errors within the documents comprising it and/or discrepancies between
CL,A,.C 040 - Dr. Sherif !EL-Haggan

40
them. Any such matter may be corrected by agreement between the employer and the
contractor, but in that event by definition there is no claim.
Generally, drawings should be regarded as stating what is required, the
specification stating the quality of workmanship and materials, the conditions of
contract setting out the obligations of the parties and the allocation of risks between
them and the Bill of Quantities determining the amount to be paid.
AD HOC CONDITIONS
Conditions of contract are usually one of the 'standard' Forms (FIDIC, ICE, JCT ...
etc.). In most cases some ~conditions are needed to 'tailor' pattern-drafted
documents to the particular requirements of a given job. Great care is needed in
drafting these to ensure tha~--ti{ey an~(@contractuall~___sound in themselves and also that
th~~~~do not conflict w·~(~~~nd~cf clauses b~.}.·. ~t.rofucing o_r emphasising a specific
pot~. that they alter b 1mpli.eation clauses Whj.ch ;;ife not mtended to be altered. It
iLssential to rememb •r t ~ hoc cla~~,~• nf,{.lo/4;:e read in isolation, but with the
onditions as a whole /' \ I -!1 )
i
/ . . --- ·1
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/,la ! J1 ~ } I ~ (- l .•
./ l ., I ,•• f I "1 1f
il H :f li(,t'• 1 ~ it: ,,,,.1 ....
I ,)' fl '1 1
I :,!./ ~-
/ . /' 1: lit .:•: ~ ..) . ,.
1_) l I Ji•/1 I I/
L_f),; ' i ; I
r,0\ \'N~\j
yet
u

41
Chapter 3 - Appendix
Documentation structured, so far as possible, to make clear:

• requirements and expectations of the employer;
• obligations & risks to be undertaken;
• entitlements to payment/compensation.
Generally:
• Drawings -t what is required
• Specification -t quality of workmanship & materials
• Conditions of contract -t obligations & allocation of risks
• 'Bills of Quantities -t amount to be paid ..
Ad hoc conditions +
ensure that they are; ,./•"'-\
• contractually sound in themselves r.l ,i (
• ·do riot conflicfwitlislandard·c1auses ····· / -/"'i 1
• do not alter by implication clause~);v.:h.i,ch l',r9j iot
'~tended to be altered.
J
r,,. \!
'j ~
u!
·•u . ;,
~~.,.s•"''\
·
fi
Post-contract documents / .I\ ! j · j ,. ) j
1t, ., i ,., , l
1,. s t
• Documents issued afterw~d~ cfanpgt b~ ~eetj;led .fo be included, unless there
is specific machinery fop"suJ;is4qu~nt infofl'd~~tlon
• Becomes part of t~e c2nt~a'ct dnl~lt~the ~~te'nt stipulated: ·{, ,
• Programmes subm1_tt5~: aifter cftufer~~me~t d~ not become a~11 part of the
contract -t do not 1mpoie an ~utqmat1c obhgat10n on the contractor to
comply with the ord~r ot,!t,m}~~..shown.
• A programme may itl}-pose bjncling obligations + Clause 42 (ICE 5 th & ICE
6th ) imposes an obligc:\tion'"dn ,...,~ . ,,.""
the Employer 'to give to the Contractor
possession of so much of the Site as may be required to enable the Contractor
to commence and proceed with the Works in accordance with the
pro·gramme•~----~--: -·--··--·--- -------- C
Precedence of documents
• Attempts to overcome ambiguities or discrepancies by stipulating an order of
~ e t w e e n t l i e contract aocuments.
Generally, orders of precedence of documents are a source of confusion+
serve as an encouragement to careless drafting.
Classification of terms
• Terms are classified as 'conditions' or 'warranties' -t Conditions are the
more significant.
• Breach of condition limited in scope -t injured party may reject specific
goods or work without terminating the contract as a whole.

42
• A warranty is a lesser term + Breach of warranty entitles the aggrieved party

to recover damages. ...
• If the injured party chooses to carry on with the contract + still entitled to
claim damages as for breach of warranty.
Express terms
• Terms derived from statements written in the contract or from express oral
agreements.
• The basic rule is that the words are to be understood in their plain, ordinary
and popular sense.
Implied terms
Additional terms may be implied by law as:
• Standard terms + unless the implication would be contrary to the express
words _,//·'•'"'\
•'j \
,r j
Standard terms implied / ./"1 /
1
• by law, custom & practice ./""'"""\ / •·,
1
J(' '
• by custom or trade usage / :] r,,,•"'\ l
. h e d course o f dea1"'mg,(\
• tirom establ1s :1 / I #"
1
'
~•;1
J ..
/ •' .j1 J'

l
,i· .' Ii jl /
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I.
I
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1 Il R ~ /
i' '
/
Case (fitness for purpose) -,,As~1a, E4gin~elfi,n!JjtEstablishment Co v Lupidine

• pails were\supplied as )he.Jt½' 4utlls,ip1j>i4_g,'bontainers'.
• The sales li~erature stjte~ that fh9
p1i~~.kould be stacked six high and referred
to tests earned out att20f C. I j v·
• Pails purchased to c~nta)J!)t''}v~!,~tproofing compound,
• The full pails were sthcked siihigh for shipping in standard 20 ft containers.
• Some of the containe}s~,~et~ shipped to Kuwait where they stood on the
quayside for several days.
• Temperatures in the containers were estimated to have reached 60 °C.
• The pails failed and the black and sticky waterproofing compound was
released.
Held that 'A reasonable customer would not expect (the p_ails) to be capable of being
stacked six high in all climatic conditions and all temperatttres'. The buyer did not
disclose the destination of the pails beforehand so they could not show reliance on the
sellers as to fitness for the particular purpose. Accordingly, the claim for damages
failed.
A similar term implied for works supplied under a design & construct contract, to the
effect that the works will be fit for the intended purpose + The ·legal position is still
evolving+ preferable to deal with the matter express terms, stating the agreed
intention of the parties.

43
The buyer may waive a condition, entitling him to reject the goods and rescind the
contract, or may elect to treat the breach of the condi_!!3lf's a breach of warranty and
not as a ground for treating the contract as repudiated Right to rescind is lost after a
(i) reasonable opportunity for inspection and/or (ii) a reasonable time+ Remedy is
limited to damages for breach of warranty.
A similar scheme may be observed in most forms of construction contract where the
employer reserves the right for his agent, the engineer, during the construction period
to reject work which does not comply with the ·specification + After substantial
completion, the right is reduced to the power to_order rectification of defective work.
. . .
Co-operation/non-prevention
• A term will be implied ~nto a contract that the parties shall cooperate to
ensure performance
• Construction industry + a term will be impli~d that one party shall not
prevent _the other_ fr~m performance + coy:c'en;i' stipulations ~s. to time for (
completion and hqmdated damages + Intth.~absence of provis10ns for the
a~just11:ent ?f :he time for compl~_!i.~n, l~~pty f l"rm
lose the benefit of the
stipulation If It prevents or ob~ttuct~ per~ormap.ce, for example, by not
providing possession of the site ¢r by i*s1[nl~t1fi]g a~ditional work.
//""~~ tt !;"i'/
,,./1 I r' ;!i i
I
~
1
.~ /'
\ ! l
I'
/ ! f l ,,.... l j Ii /
, ,• ,. ' U 1
Rules of construction
• The object of construptj16n,.crttbe th1:nsloia.fefitten agreement is to obtain
from it the intention of tq~ partie~ 1t~ th~ dgreement.
• A number of rules hafe ~een lridjd~,-rl relating to the process of construing
a contract. I._t.~.-:.-'! t,,...)
Drafting conventions \ . · ,) ·
• Different words presuihe'ito be intended to have different meanings +
guidance to students of non-legal English composition not to repeat words &
expressions.
• Words with capital initial letters refer to words defined in the document.

44
CASE 3.1: CLAIM IN RESPECT OF ERRORS IN BILL OF QUANTITIES

(Civil Engineering Forms and Method of Measurement)
Pertinent particulars
Contract for the construction of a road

Documents comprised Drawings, Specification, ICE 5th Conditions of Contract & B/Q
based on Civil Engineering Standard Method of Measurement
. .
Tender dated 1 May 1979. Tender total=£ 1,728,148

Time for completion 21 months.
Development of claim
(a) In the course of measuring completed work in the ordinary course of events, the
contractor claimed there was an error in the B/Q.,,in that separate items had not been
provided in the Bill for rock excavation. 'Rock')v'~s ~efined in geological terms in the
Specification for fill and embankment purposes/The main B/O item in question read:
, ll.il~
28c Excavate in any material iq'.'cuftinils fW:,re-t\se 380,000 m3 at£ ...
l . · . lI !!I · · !l,,•1
1 . ,·'\ , J )
l
The matter was raised by the c;~npra¢tqr's!Q]S wJth the site QS, who asked the RE
whether 'rock' had been enco,uht¢r¢d h,n·& i~ sb ~bf)tfier any record had been made of
/ / , i, , i ,;v·! ,,:
I :1 ~ 1 1, ~ [( j_
the extent
· / . / l I1:~/1 I i//,
The RE replied that rock fn. (enrts !of th4 ~pecification had been encountered and had
been used as prescribed if ~/4rmi~~thf llfwer part of certain embankments. T~e latter
had been recorded on dr~w1ng~vtjut Jlie former not, as the RE had taken the view that
'any material' meant 'any\mate~iai".
\ /"
~~''"-•····~·•·· ,,"
In view of this the contractor decided that he must enter a claim.~
Contractor to Engineer's Representative 8 August 1979
We draw your attention to the fact that rock (as defined in Specification Clause ... ) has
been encountered, and in fact used as fill in embankment.
Excavation of rock has not, however, been measured and we claim payment for this at £
I. 48 per m3, in respect of 28, 715 m3.
Engineer's Representative to Contractor lOAugust 1979

1
Your attention is drawn to the wording of all the excavation items in the B/Q, of which 28c
is the largestJ. These are all in terms of 'Excavate in any material'. Surely this is quite
clear and can mean nothing less than 'any material' and so must include rock. In any case
no records have been kept of this excavation, no notice having been given that you
intended to claim.

45
Contractor to Engineer's Representative 17 August 1979
We agree that in the ordinary way 'any material' would seem to be clear enough but we
submit that this has to be read as an item in a Bill of Quantities which, according to
Clause 57 of the Conditions 'shall be deemed to have been prepared ... according to the
procedure set forth in the CESMM' The CESMM requires rock to be measured separately.
Clause 57 does contain a provision for not following this procedure but it does stipulate
'except where any statement or general or detailed cfescription .. expressly shows to the
contrary'. In our opinion the use of the words 'any material' are not sufficiently clear as to
amount to an express departure and are ambiguous.
We regret you were not notified about this matter earlier so that you could have checked
our records at the time. They are, however, availabl~Jor your inspection at any time.
,/ \
/ ' (
Engineer's Representative to Quantity Surveyor,",.,.-,, } 22 August 1979
,;-r il / 1-:,
1 ;
..,,......"~ ,f :bl,:: ' ~I
I enclose correspondence with the ,/fdntrpcior lfn which he claims payment for the
excavation of rock. I think this is sel}/.~xpla~athrylan'(l l~ould appreciate your opinion.
,/'ri / / ,~ l i 1/~ / 29 August 1979
Quantity Surveyor to Engine._er.'sJ.Riep/r~sent.ati/ye if ,./
/ .· ./ l · lj .. ! I !!,I"
. I agree that in the normf~ µ~~gel 'atf}11a}eJi&t is wide enough to include rock. The
1
addition gf the words 'for[ re-us~'. iro~ld: however, probably be sufficient to exclude
f
unsuitable soft material b&t this is th admit that the words 'any material' cannot in this
contract be taken literallk. Futlh~~ J:6onsider that the use of this term 'any material' has to
be construed in the cont~~ th~thhe Bill is deemed to have been prepared in accordance
with the CESMM and as tt··general rule this requirement is followed. In my opinion this
means that if in any given case something else is required (and this is quite permissible if
not always advisable); care must be taken to ensure that against tha.t bqckgrpy,71d, agairz_sL: (
the usual expectations, this departure is expressly shown.
In this case, because. as l have indicated, iJ. cannot be taken literally, there is ambiguity. It
would have been a simple matter to put beyond all doubt by saying 'any material, including
rock'. I consider the contractor's claim must be accepted in principle, as an error or
omission from the BIQ in accordance with Clause 55.
Regarding the quantity, it is a pity that the contractor did not give notice earlier. I suggest
you arrange for your inspectors to examine the records and see how far they can
substantiate or correct the contractor's record drawings.
.,,
Finally, it seems to me that the rate claimed is somewhat high. If you agree the claim in
principle I will ask my man on site to look into the rate.

46
This was evidently done as the next letter was:
Engineer's Representative to Contractor 14 September 1979
As discussed, I am prepared to accept your claim for extra payment for rock excavation in
principle, but as you know I have had my inspectors examining your record drawings.
Whilst there is a large measure of agreement, our records of rock levels between chainage
2100 & 2350 do not agree at all with yours.
I have looked at such evidence as is still available and am of the opmzon that no more
than the quantities indicated by our records can be substantiated. I am therefore prepared
to agree a volume of only 22,482 m3. .
Regarding the price, I understand that details ofyour build-up have been examined by the
QS and you have agreed that a certain amount wpS"''fJJ
....
fact got out by ripper. I further "}
understand that a revised rate of£ 1.16 has bee;,:lprovipionally agreed. I am prepared to
approve this rate. / /) j
l ,; i· l
r,.,.,....,.,.\, i' ! l
~l
"•,
\
The contractor was inclined to cavil aythe r~dyce~"'~uavtity but the engineer wrote:
/r ,,t''\ l r: \\ 1 f
Engineer's Representative to Co,it,f'ac{o1f I ! l/'" / 1
21 September 1979
/¥ 1i l I 1,,/ 1 t Jl ~/
/ J]H . I i 1!./
g
I am sorry you consider th~· v_0tu111,e d,,[, 2,~84·1'}''to be understated, but I must point out
If 1
that you failed to notify n/e yo~r ik/lerztiqnl···'to claim before excavation commenced. I
must draw your attention/to flausd 52Y4Jh,yl1ich says:
. 1 ; i ,,
I
•
1
1 ~ i
(b) If the contractor int{ndsi,,tolfilif!rn' any additional payment pursuant to any Clause of
these conditions other fnan Subi'clauses (1) and (2) of this clause he shall give notice in
\. J
writing .. . as soon as rea.§.Qf.lirbly, possible .. . Upon the happening of such events the
contractor shall keep such contemporary records as may be reasonable, necessary to
support any claim.. . ', and
(e) If the contractor fails to comply with any of the provisions of this clause ... then the
contractor shall be entitled to payment in respect thereof only to the extent that the
engineer has not been prevented from or substantially prejudiced by such failure in
investigating the said claim. '
The giving of notice is an important requirement. The question has been asked as to
what is 'reasonably possible'. This must depend on circumstances, but in the present
case it would seem that notice could have been given earlier than in fact it was. If the
contractor neglects to give notice he can hardly complain if the engineer is unable to
establish the facts later. This method is at least better than a sharp cut-off date beyond
which claims will not be accepted at all. It is doubtful if such terms can be enforced
legally. (Comment Q!! FIDIC New Red Book notification provisions).

47
(b) Another matter raised by the contractor was the measurement of working space to
the back of an abutment which was required to be shuttered. '
Contractor to Engineer's Representative 1 November 1979
We would draw your attention to Item 37F in Bill Part 4 for the excavation to the abutment
to Bridge ... According to the Specification Clause ... the back face of this wall is required
to be shuttered, but the projection of the foundation (to which excavation would normally
be measured) is only 150 mm and so is insufficient to provide working space.
We have discussed this matter with your site ·QS, who has refused to measure this
additional excavation (which we had to do) on the grounds that CESMM Class E Note 8
says that 'additional excavation necessary to provide working space shall not be measured'
We are of course aware of this Note but in the terms of B/Q items we are unable to
distinguish between those where working space is required and those where it is not.
We draw your attention to Item 22B in Bill Partj6~·iiz\onnection with the retaining wall (
adjacent to this bridge. The wording is in exa~tljr simtlar terms and the r?quire1r1ent for
back shuttering is the same, but in this case th{ pfdjeqfion of the foundations (600 mm) is
sufficient to provide working space to fir,.,anr;l re,mqy,e thcJ'formwork.
.,,. 'i l /;'i i
// ~ ~ 6:_., ><I<~ ,f
We therefore claim the measurement/of 1;11
the a1clditid~al
,ll ~l/
excavation and back-filling.-
~;//~ I i l I i ~rr / 1
6Jm 3 Excavate for working.ipake{ 1(•·" I 1£3_({5/' £216.55

-/ :,;; r H ! H Tl-•'
/ ./r· :, jj t"? l j ;,)'·'
46 m3 Backfilling with suitab'l
i: :.:
e Iv
l
!\ · tt ~"/
material and comgac(ing 1 I ;.~·.// £2. 40 £110.40 £326.95
r f,
r·
# i
.. i:
i
'.!-
Figures 3.1 and 3.2 illustrat+ th6-.prob ' *Jrr:'
\ . 1I ,.
\ Ji
\ . . /.. ,~/ I
.....--~ I '~/.,,..,.,tV''l I
I
I I
L (
I T
I I
I I
I isomm 6001nm
1
Figure 1 (Abutment) Figure 2 (R Wall)
The B/Q items referred to read as follows:
37F Excavate in material other than top-soil, rock

or artificial hard material for abutment 306 m 3 £3.55 £1,086.30
22B Excavate in material other than topsoil, rock or
artificial hard material for retaining wall 1,414 m 3 £3.55 £5,019.70

48
On the footing that each of these items appeared in separate Bill Parts which were
referable to specific structures and could thus be identified on drawings the need for
working space in the one case but not the other should have been apparent ( see
CESMM para 5.11 ). On this basis it would seem that this claim should be rejected.
Engineer's Representative to Contractor 8 November 1979
It is pointed out that the requirements in each case are clearly shown on drawings and the
CESMM is quite unequivocal about working space not being measured. I must
accordingly reject your claim.
Contractor to Engineer's Representative 23 November 1979
We regret we are unable to accept your decision in connection with our claim for working
space. We appreciate that Note EB says working space shall not be measured, but it must
follow that cases where it is required must be d~~tfhgJ!ished from those where it is not.
When tendering we did in fact examine the .drawings for the retaining wall (which
appeared first) but did not check those for the/aqu(m~·1nt on the assumption that with the
wording of the two items being identic~~)h( re!kui~clmltr must be the same.
· 1ed atu.lth 1>··1 d·1 • ·

Wie cons1·der we have been mis ,,,.,_at ·'1ld.L.t.i
fl 11nq · ,rscriptlon s hould have been given,
·
as required by CESMM para 3..?.~i / / l l I ! ,./ l
// \ l 1.,,) 1 i II //
We still contend that this cqfisti,tut~s an error qr o'jnfssion within the meaning of Clause 55
of the Conditions and we sfzoZf,ld betglqtf"ijyJu \'}y6uld reconsider your decision.
r / l . ! l
I \,./,·
.J.I
I
. Of prmc1p
P omts e mvo re d(\_,,,/1,. Ii //.
. . I .
The CESMM makes a pdjnt of ljr6vity (paras 1.7, 2.5 and 3.3), but it also makes the
point in 2.4 that the objeJt"or>a,.B/Q is 'to provide such information ... as to enable
tenders to be prepared efficiently and accurately' and in 2.5 that '... work should be
itemised ... in sufficient detail for it to be possible to distinguish between different
classes of work and work of the same nature carried out in different locations, or in any
other circumstances which may give rise to different considerations of cost.' Again in
5 .10 '.... additional description may be provided if the nature, location ... or other
special characteristics ... is thought likely to give rise to ... considerations of cost.'
In this case, although Note E8 and para 5.11 suggest that the contractor is not entitled,
it is considered that the principles of the CESMM as set out in the paragraphs quoted
have not been complied with, that there is ambiguity between the two items because
they are in the same words for different circumstances and to a certain extent constitute
a trap for the contractor. It is probable that in the event of arbitration the contra
proferentum rule would be applied and the Bill construed against the Qfil1Y putting it
forward, i.e. the employer. 1111.- Article 151, Egyptian Civil Code
CL.,4.C 040 - Dr. Sherif !EL-Haggan

49
There are many instances of this kind in the CESMM where it says 'separate items are
not required for this or that', or, as in this case, something 'shall not be measured'. In
all such cases it is necessary to ensure that Bill descriptions set out clearly what is
required and that if separate items are not required (for disposal, compaction, working
space etc.) then these are covered expressly in the description of the parent item. It is
both pointless and dangerous to do otherwise. The case of A E Farr Ltd. v Ministry of
Transport (1965, 5 BLR 94) went from arbitration to the House of Lords (via the High
Court and Court of Appeal) on the question of measuring working space: The contract
in question was on ICE 4 and the 1953 Method of Measurement of Civil Engineering
Quantities, but it illustrated the problems of loosely prepared Bills and the status of the
Method of Measurement. In his judgement Lord Guest said he was doubtful if the
Standard Method can properly be considered ~ .c6nttact document. He thought the
l ! 1,(
effect of Clause 57 was that the B/Q shoulqlbe,<re~d
., l:: J1
in the •light of the Standard
Method. Clearly it is in everybody's }!!t~{es(s l?la.J~id having to proceed to these
'i ··. I
lengths. ,
/I· [! •
i l · L"..
! I i:•' u
J
;
1U tl l
I { .l
,1't1,.-i•~
: I ij(i /
1 1(
i ~. 'I .
11,,,/
!I r;r1•'
Hn I/
W~ l/
ll !~/~,,)
; {
l "'
l,/"

---------------------------
50
,,,.-
C~APTER 4: CLAIMS ARISING IN CONNECTION WITH
EXECUSION OF THE WORK
Contractor to satisfy himself

Work to be to the satisfaction of architect/engineer
Damage to the Works
Issue of further drawings and instructions
Nominated sub-contracts
Defects
CONTRACTOR TO SATISFY HIMSELF ,..,.

The first important point in this connection i,s··~~e \equirement that the contractor
i . £
satisfies himself about what he is undertaking;'io 1cfp. /ICE 5 Clause 11 spells out that
he is 'deemed to have inspected and examin'd !hi~ ~lte and its surroundings and to
have satisfied himself before submitti~g hi$ ¥nJ.~F.1as fflo the nature of the ground and
subsoil (so far as is practical ,rnf ~ayin~ ltak~d iifto account any information in
connection therewith which may ;h~ve!1beenjp~ovt~e<;J/by or on behalf of the Employer)
l. i ! If .i t . i, /
the form and nature of the/S1!$.Y't~e f;:X.1en, ~n~)hature of the work ... the means of
communication with and a,Cc¥s's to lth~ 1•si~e anJt''ln general to have obtained for himself
th
all necessary information Js risld cbntingencies and all other circumstances .
/ l( l l 1
,.,,
Obtaining information's~ faf'"1:1s':Jst,pf~cticable' is perhaps somewhat vague, but if a

contractor requires more ib,.forny1fion and considers there is insufficient time in the
period allowed for tenderirig';,·fie must at least ask for an extension of the tendering
period. On the other hand he is not entitled to base his tender solely upon information
provided by the employer. He must make his own enquiries, consult the Geological
Survey, ask 'Soils' experts if need be, and if he does not, he carries the risk (subject in
the case of ICE and FIDIC to the provisions of Clause 12).
WORK TO BE TO THE SATISFACTION OF ENGINEER

Work has to be to the satisfaction of the engineer, but just how much that entails may
be very much a matter of construction of the contract documents taken as a
whole. With a good, comprehensive specification ICE Clause 13 should present
little difficulty in practice, but if the specification provides that the work is to be
done in the sequence or manner in which the engineer instructs then this could
give him very wide powers indeed.

51
DAMAGE TO THE WORKS

During construction the contractor is responsible for making good any damage to the
Works. Just how far this extends will depend upon the actual contract, but in the case
of the Portland jetty Messrs Farr found that 'damage from any cause whatsoever'
included negligent navigation of one of the employer's (the Admiralty) vessels (Farr
v Admiralty, 1953, 1 WLR 965).
ISSUE OF FURTHER DRAWINGS AND INSTRUCTIONS

The engineer is empowered to issue further drawings and instructions 'from time to
time' during the course of the work. It was held in the case of Neodox v Swinton &
Pendlebury that this means that he cannot expect all the information on Day 1. It
was further held that such details or instructions should be given within a time
reasonable in all the circumstances including the ,,C~l}..venience of the engineer. The
opinion has been expressed that this will have ~ppUc<ltion to ICE Clause 7 but as the (
.... .. . l ...... I ···-···· ························· .
judge pointed out what is reasonable will dep~htj,,•"µp<.6n many things. One point not ,l , • ,/
drawn out in that case was whether th~,.cot;ttnfct9( w·~ entitled to complete within
the contract time, whether he had s91Smitt~d j a jpr.pgt'.flillme and what would have
been the effect if he had. Jn ~¥(1veht jan! ~dgi1Aeer who delays issuing further
drawings and instructions is pµfttig
hfs . em~lqyetjlat pisk.
f
.r ,1ii. i.(
H
/: .,,1•·
ilj,/
· '1 · 11,,,
f.!< .. ~ti , .. >
l ~: . . . ;, ll'
NOMINATED SUB-CONT°RA!cist l 1,,,/'

} I 1 l ! 1
Nomi~ate~ sub-contracts po'b vert ;cpn~Hierable problems; the machinery for their
operation m both JCT and\ ·,✓ l
IC~ I 1~1 cumbersome (though necessary) and the
·!,"
provisions are very oner\ms onihl(employer. Careful consideration should be given

to whether there is n\,.t ~v'6etter alternative. The best course is to specify the
1,,,,..,.-.flf~l'I""
requirement and include it in the B/Q in the ordinary way and leave the contractor to
···:·-c::,·=-,:=:=-:.:,:,fu==-·,·l,,fi,.,,n. . , the. obligation, and this can. be_done in very many.cases ... The alternative ~!'_···
0
(
separate··· cH:rect contract n:iay overcome some problems but substifiite ·others
(difficulty of co~ordination and control, and the effect of delay).
DEFECTS
The contractor is obligated to supply materials and workmanship as required by the
drawings/specification/Bill of Quantities. 'Defects', in the sense used in -maintenance
clauses, means materials and/or workmanship not so complying. The contractor is
therefore technically in breach and is entitled to remedy such breach until the end of
the maintenance or defects liability period. His liability may continue well beyond the
end of such period but he will no longer have the right to remedy such defects (though
it may be in the employer's interest to invite him or allow him to do so).

52
CHAPTER 5: CLAIMS CONCERNING PAYMENT PROVISIONS
General
Valuation of contract work
Valuation of varied work
GENERAL
All claims concern payment in some respect, but the matters being considered here
concern more directly what the 'payment' clauses of a contract may mean.
VALUATION OF CONTRACT WORK ,,,~....,

This applies only in respect of 'measure and val~'}()}tracts such as ICE Clause 56(1).
1
The main problem us~ally cen~res on v.. ari. ati~Ii$·Y·:'····.·.f~e quantities as such. There is a
school of thought which considers thytrth,e tat~~ m. ,he B/Q apply to whatever the
qu~ntity in the ~vent. Legal a~vice }~)~~tl~r ·~1 l;in;erable ~d that th~ contractor is
1
ent1t~ed _to take 1~to account, ··1.n t. #.•

. . 1/.·•·~ss·,·e•·:.·•· ·.•.s ..tl'•g. •. . .·}. . 18[•.·.P. . •. ••r•'. . ~e·•. ·{Jlie. qu~tlty stated m ~he B/Q. If
that IS nght then It follows t,efr:Ahp~t~~.,a,~ ItJJJant1ty differ, s_o~e adjustment of
the rate (up_ or do:'7n) shoi1?,/o\1~~1~(t, i~x~ht that t?e quantities of themselves
affect the pnce. This propo/J!}on hJ~ if factJ,dln spelt out m ICE 5 Clause 56(2)
f:>l Ii d L/"
The clause contains no tip:esrol~ 7~low which it does not apply, though clearly with
only small _diff:rences it\fHl(~ M&e difficult, if not impossibl~, to demonstrate a .
consequential difference &;f pn9e. It should also be noted that adjustment may be up
or down, which should b~·"'';ufficient to deter a contractor from putting forward
frivolous claims.
VALUATION OF VARIED WORK

Standard forms of contract make some reference to the applicability of B/Q prices to
'similar' work but differ in the extent to which they explain similarity.
ICE 4 makes no reference to similarity but ICE 5 has been amended to read:
'52(1) The value ... shall be ascertained ... where work is of similar character and
executed under similar conditionyl,!g work priced in the B/Q it shall be valued at
such rates and prices contained therein as shall be applicable ... '
In principle then these clauses can only mean in practice that dissimilarity must
include not only physical characteristics (quality of concrete, type of timber etc., and
the obvious conditions of execution) but also matters of timing and sequence - how

53
the work can be executed in relation to what is going on concurrently and what this
may entail in terms of output and other costs.
One of the factors of dissimilarity is the time taken to do the varied work compared
with the time originally required to do a similar amount (generally value) of contract
work. Consider a situation where an engi eer issues variation orders involving a net
additional amount of work, which requires disproportionate time for execution. Take
the case of a contract valued at £100,000 to be completed in ten months, variations of
net additional value of £20,000 require an additional four months. What, if anything, is
the contractor entitled to over and above the B/Q prices? Assuming that static or
identifiable items of overheads are included in Preliminaries and that these have
been appropriately adjusted, there remain other more general overhead costs which can
only have been reflected in prices for measured work. Put another way they may be
said to be a function of turnover. To simplify the matter for the purpose of illustration,
it may be argued that the original contract was bas~,d..,on a turnover of £100,000 +10 =
£10,000 per month. The varied work should th$}(6foff carry overheadsfor £20,000 + (
10,000 = 2 months, leaving two months o.f ttmr.:efa~~l
overheads not being recouped.
Another of the factors of dissimil~ty)~) tji'f

;f4'~tf conditions and circumstances
:c:;::~~r =
on the components of the cost or pn(le',c,:_i¥<:>i l'~~emffat these costs are labour, plant
!~i:::c~~ ~ttJl~ ~ii!h_u~b!~~: n!::~~f:! :!:':

costs, i.e. overheads. Whetl)~i;1tfie~~; ll>~.in~ , edJton site or at Head Office makes no
difference; if they ha:e b7.f~/affedt~dl7a1~/?bnl(ared with the basis of the B/Q prices,
i;{]
In the case of ICE such i~~•
then they fall to be adiuste@t . L\Y
6$Jlly must be picked up under Clause 52(1) because
Clause 52(2) deals with tli~) ~1~~qu~ntial effect on the pr~ces for other items rather
1
than the components ofth}1tertfs which are themselves varied. ICE Clause 5 2(2) says:
'Providedthat·iftlieiiafiife~orafifount of· anyvariation°relativetotheccnature or=amount=

00 0
.. (
of the whole of the contract work or to any part thereof shall be such that ... any rate or
price ... for any item of work is by reason of such variation rendered unreasonable or
inapplicable ... the engineer shall fix such rate or price as in the circumstances he shall
think reasonable and proper.' ·
In the building and construction industry cash flow is vital to the contractor and delay
in paying him for the work he does naturally results in his being short of working
capital, having to borrow capital to pay wages and hire charges and locking up m
plant capital which he would have invested elsewhere.
Under all standard forms of contract, the contractor is entitled to interim payments in
connection with variations and delays. Should the engineer fail to include monies in
respect of these without good reason, he would be in danger of putting his employer in
breach of the relevant clause.
Or. Sherif EL-Haggan - CLAC 040

54
CASE 5.1 CLAIM FOR AIDJUSTMENT IN RESPECT OF INCREASED

QUANTITIES

The contract was for the construction of a length of road improvement consisting of cut and
fill with a surplus of excavated material for disposal.
The documents comprised:

Drawings, Specification, Conditions of Contract
ICE 5, Bill of Quantities.
Tender dated 13 February 1976.
Tender total £1,244,767
Acceptance dated 23 April 1976.
Time for completion 2 years .l(f';)
Price fluctuation based on NEDO formula included/·•···.·•.·.•.:.•. (;:.• . }·•.;·,··4·
..·.,
t,··1···'1
The B/Q, which was based on CESMM, i'*"r tit~1b1ng:
Preamble / £) ··•1 I./ j _I

The volume of fill and com~cJof' e.,J-..em1, · ·, .enfs has been measured to the
P,rofiles shown on the Drawj.11.g~J 1fb.e J~qa~rti~n· ~his requirement has been shown in
terms of the same quantiiy( wl'tho~ j~Y •j
aJ!,o ance for bullring upon excavation or
recompaction.
Bill Items
Excavate top-soil, maximum depth not exceeding 0.25m

10,400 m 3
and set aside for re-use
Excavate material other than top-soil and rock in cuttings

254,800 m 3
for re-use
Excavate material other than top-soil and rock in cuttings

101,200 m 3
and disposal in tip provided by the contractor
Filling and compaction of selected excavated material other

254,800 m 3
than top-soil or rock to form embankments
Events leading to claim

There was a little more excavation in the cuttings than originally estimated (though there was
no variation affecting the excavation, the volume of the embankments remaining the same).
About three weeks before completion of excavation the contractor's agent wrote to the RE:

55
Contractor's agent to RE 20 September 1977

The excavation for this road is now almost complete and we estimate that there are
roughly 15,000 m3 of excavation remaining. It is clear, however, that our existing tip is
almost full and will not take the whole quantity. We shall therefore have to locate another
tip but our present enquiries indicate that nothing is available within a distance of 7-8
miles (our present tip is about 1 mile away).
Should this prove to be the case, we shall have to claim the additional cost of haulage.
RE to Agent 23 September ,._1977

.,,... ..
Your problem concerning disposal of excavated material is noted but this is a matter
entirely for yourselves as no variation is involved requiring additional excavation. The bill
item is quite clear that disposal of surplus excavated material is to a tfp to be provided by-
the contractor.
No claim for additional cost can be entertained. 6?) · (

The RE's reaction to the contractor's preliminary / ~ i s a little overdone. Disposal is ?f
course a matt~r f?r the c?ntractor b~t t~1'·:~ ffl?~I.t,~~ve aske~ ~e contract?r for his
~e8:sons for thi~g he might be entltle·•.~
. . .:;.,;:tp··.·.·. .·.·.;.e.-x1f·l.·•·.? ayp;i· · .:·•.·.·•.:.·e.ht. To dismiss the. claim before
it is formulated is premature and to J5rr·ai· (pf:ti V:~s:•jyour problem' will not help
1 hi&'fr t<1 ff
relationships. .
l
About two months later, in th"ttiif:~}, ~ ~y with the engineer's QS) a statement
e~
for an interim payment the c°ftr.~tor'sQ·. . . ~vt:~_:.·· u,h'the matter:
,','.:
.(··
,<.)·. \';)
ij 1· .....1 t"
.
Contractor's QS (CQS): }/ '.') !/
I now have the final exct(!
•ilw.l'l ·;,y; s: the part we measured about two weeks ago. The
total of 'Excavate for di~ei~ff~ 06, 146 - an_ i~crease of 4, 946m3 on the B/Q quantity.
I
Have you got your figureli.@if//an you agree this item?
.... -····.Engineer's.Q§(~QS): (
Yes, that tallies precisely with mine, so we shall be able to include that in this month's
interim.
CQS:
Good! but at what price? We wrote to the RE on 20 September saying we would have to
look for a new tip because of the extra quantity of excavation in cuttings. We eventually
found one but it was nearly ten miles away compared with the one mile to our original tip.
So, we shall be looking for an increased rate.
EQS:
But why? As the RE said in his reply, there has been no variation, why should you expect
us to pay for the additional haul?
CQS:
We consider we are entitled under Clause 56(2).
Dr. Sherif !EL-Haggan - CL.AC 040

56
EQS:
Yes, I see that covers the point in principle but surely you cannot expect it to apply to such
a marginal increase; why, it is under 5%. It is difficult to accept that allowances for
bulking and compaction on a total of some 350,000 m3 could be estimated within such fine
limits.
CQS:
I take your point but you will agree that there is no lower 'threshold' stated in the clause.
EQS:
No, but I have always thought there ought to be. I do not see how adjustment of rate can be
justified for such small margins.
CQS:
Is that not our problem? We have to persuade you, we have to produce the evidence, and in
this case I think we can. I am quite prepared to show you all our acres, including those we
used when tendering. ;(!?;
You will remember that we had the contract for Jfz·t···.·.tJ!r.:.r;·;•.+ous stretch of this road, so we had
had some experience of what bulking an·. d·.·...c·. ··om1{.Pa.·.i}.C{1fJ.'J·:•7··..:n.· this stuff would be. Also, we can
show you from our records that we ):11er1, tiJPpingiin1he original tip until t~e day we
.
completed the embankments . a.·. n··.d.· · tha·t.·.· j,·,111···.
•· •·fo•··•m•·· .•. ·:/•e~h,··e·
:.)J )}l
. ··x·.·...Ji•j~. a·_y·. . r1{ had to go to the new hp.
EQS. ,·J f .·.•· · ::[)~··
·!•······t•····Pl
.•··•.
j .
Well, /remain to be convincel?' ttl',J,m, /')';}t your figures.
c;./1,;~
we negotiated for ~h.ftj~igin ··z·}·t½,.'i),J"w":'
an old quarry) we were given precise
profiles we would have t<p .w rk to. W~ re:<t!coned this had a volume of 137,000 m3• We used
the figures for bulking ~f·:••.:.~. · · ·•d.·.~,;1·h·,,~d[°,~ the previous contract, 20% on excavation with 90%
recompaction of the stu.fJJ..f'f!t~_el~o~ when put in er:zbankments. In the tip we did not have
to compact to your road '!ipe9.ifjtlation and we considered we should allow only 5 per cent,
ie 95% of the loose volume"Wnen tipped. Here are our original tender figures:
Quantities in B/Q Excavate Excavate

and fill and dispose
254,800 101,200
Allow for bulking 20% 50,960 20,240
Total quantity 'in the loose' to be transported 305,760 121,440
Assuming recompaction to be 90%, 305,760 becomes 275,184
Less total required in embankments 254,800
Surplus (compacted) 20,384
Which, in the loose would be x 10/9 22,649
Total volume to be transported to tip 144,089
Allowing 5% compaction in tip this would become 136,885

57
As you see, this fitted in almost precisely. Certainly, in view of our previous experience
with this material, we saw no reason at that stage to pay a deposit or retaining fee on
an additional tip, just in case. There could equally well have been a small reduction.
So we consider we are entitled to rely on the quantity given in the BIQ, together with
Clause 56(2) taking up the effect of a change.
EQS:
I agree that your allowances for bulking and compaction seem reasonqble but with such a
small difference I still contend that an underestimation of bulking of even 2. 5 0% would
· have led to the same situation. That would have given you about I 45,000 m3 to dispose of
instead of 135,000 m3. .
CQS:
Maybe so, but had that been the case, had there been no increase in the B/Q quantity, the
extra haulage would have been to our account. As it is, the situation arises solely out of the
additional quantity we had to dig. If you look at tJ:t'l:t}cord drawings of the earthworks,
the embankment had reached Chainage 215~/:1JYiJ.tl workout the qyqrJtity required to
(
complete you will see it is about ~' 000 m3. Alsd,.t{~p.u./!.ook at our _driver's log sheets, you
can ~ee they, started at the new tip the~~ft~;rrhed Chamage 2158.
;~~~, I will accept that ~~.d. .

.tt·. 0~J 1a
reasonable rate for the add.if)y . :.'.:··kt_•··:..·
~
.·.,m. ·.;.•.·•;*.;. . /Jt ;f;J.,.f..Jgineer provided we
,.·.·.'.JC<r J,h·:·'.·. . .........
u t ::.·.:.:.•. i_:.:\
·....·i...•t..........
d,1
I•••' .
't·o·:·•.•
.·. .
Uv
can agree a
..... Vf:· V
C ••
CQS· /:
and their locations, you will see , tz,; hi drawing where we intended to place them,
in~luding those being t~.:f;f.. ~
.:. .
ti,}t ese fifJ'!'r~s show ~n average haul ofjust under on.e
i.•••.t.•!!,!•··o·.·
.•/ ....
mile. In fact we worked oi{J;!'fj!Jt1 of one mile m our pnce.
Now, ifyou look at Spence tJ.eddes, you will see that he gives an average difference of 0. 07
hours per kilometer, which I have translated into 0.113 hours per mile. The mileage to the
new was
·tip ·9. 7, ·whichyou can checkifyou=wtsJc We·were using6;;;;ton•lorries-and•onthe · .... (
basis that these will carry 3.42 m3 of material in the solid, the additional cost will be:
The 0. 98 hours is the extra time required (round trip) for a distance of 8. 7 miles.
The £4.33 is the running rate per hour for a 6-ton truck. You will see from our tender
. 3
figures that we allowed 25% for site overheads and 6% for HO overheads. For 4,946 m
we therefore claim £8,111.44.
The engineer's QS agreed that the basis of the figures was reasonable and asked the
contractor's QS to send in a letter setting out the main points discussed and the amount
claimed. He then reported the substance of the foregoing discussion to the RE and engineer,
Dr. Sherif !EL-Haggan - CLAC 040

58
confirming his agreement with the contractor's view of his entitlement under Clause 56(2) and
indicating that he had examined the figures and was satisfied that the additional rate of£ 1.64
per m3 for the additional quantity was reasonable.
I The claim was accepted and payment made in the next certificate.
Points of principle involved
The contractor is entitled to rely on the quantities stated in the Bill and base his arrangements
( and prices) on the basis of them.
There is indeed no 'threshold' stateg. in Clause 56(2), the policy of the clause apparently being
that it is the difference that is :fundamental, not the size of it. Of course it will always be much
more difficult to make a case for an increase or decrease of price where only a small
)
corroborat10n reasonably reqwred. ~ ,·o}}t\

difference _of quantity is invd~ved and it will be nec9~~to seek and provide any necessary·:.·
Nor does the amount of the increase or d9w~1,~I d~pefJ·:~pj'n the original price; whether it be
high or low, the clause entitles the cf $i{fo J VfJ1H1
the resultant additional cost. Of
course components of the price °?a'.f ye. tlsed i
a::,p~opfiite but one cannot deny an increase
any defic1enc1es m bis ong1tce. If(1:t [; .

t( ,n !;:;] .~
:,-·/ ... ,.r'
y
___
) ,/
.. /
~ \..,,;,.,""'?'

59
~~-- .
/
t.... CASE 5.2 CLAIM IN RESPECT OF EXTRA TIME FOR EXTRA WORK
The contract was for the construction of an office block. The documents comprised:
Drawings (no Specification), Bill of Quantities, Conditions of Contract (JCT 63/77).

Tender dated 8 May 1978 in the sum of £542,144.
Acceptance dated 16 June 1978.
Possession of site: 1 July 1978.
Time for completion 2 years.
Due date for completion 30 June 1980 (extended by 27 weeks to 5 January 1981).
Development of the claim r

Work progressed much as usual but there were ,,,:i;athe more variations than normal.
............. ,\ .r:--~~------=----:----,.....,,,...,-:--:-,-.,,,.-,'
T~~y numbered 243 and involved !he ad~ition off,7:5·~.~71 and the om~s~ion of £12,1~0,
(
g1vmg a net extra of £63,031 (mcludmg th{ OJ!ll~b:nent of Prov1s10nal Sums but
~xcluding the adjustment of PC Sum.·•.s•./-

mcrease.
..
f'J" ,w~.iI.·~. c.·•·.~.•:•·;' I>'
(:~. ~.·.· •.·e. ·,· •:·• ·it•: ; was in any case only a small
·.·.·.·.•.:.o·:·•.:,•.·.;••••·•··. . ·•·.·.· ..
·. .
/(:"'l . , '·/i' ,·.· •. . . .
~v
Contractor to QS 7May1981
We. are in receipt ofyour draft accountwhigl:i maybe J~!]lilrnarised as_fi?JJows:___ .. (

Contract Sum
Adjustment of PC Sums
asB/Q 128,774
as accounts 131,286 2,512
544,656
Adjustment of Provisional Sums
asB/Q
as measured
Variations:
add 74,344
omit 12,140 £607,687

60
We note that included in the variation account is an adjustment for certain

Preliminary Items which have been varied on a time basis except for insurances
which have been adjusted proportionate to value. The amount you have included is
very much less than we asked for but we accept the arguments which your site man
has put forward and therefore agree the figures as stated.
We must, however, point out that no allowance has been made in respect of general
overheads which we incurred over the delay period of twenty-seven weeks.
Overheads wer~d-in...0uqender at 22%, i.e. £119,272 for a contract period
of 104 weeks ~ 7 per week.I For twenty-sevenweelEswe therefore require a
further 30,969 (27 x t;17f7)~ch we claim under Clause 24 of the Conditions of
Contract.
The contractor was right of course to put his claim in writing, though it is rather a pity
this was not brought up with the site QS during th~,.p~paration of the account. Perhaps
it was the fact that the adjustment of Prelimirnµ•ies)fell short of what the contractor
hoped for that led him to cast around for som.~tlpr~J'further. However, to pursue the
::::~;: correspondence would be s01trprt1d and the QS therefore called a
First, attempt was made to .e.s. t.!f ltf.~¢·•. µ/9.;d·••.:.itp/•:~A;he 22%. The Contract Sum was
tt.·•···. [J/
:J.·
;::t;::;:::llows: A··'·•.·.·'.{) ~.·I 49,187

PC Sums :/ }2V, <1?!? /
Attendance (sums)
1
</( ·i':f,JJo
Profit 2.5% {?ti ~/1 <-B,219 128,774
Provisional Sums \' . ,. ,,) 40,000
Measured work ,,;;.,;,.,,' 324.183 542,144
From the build-up of the tender it was apparent that the overhead rate was indeed
22% and that this had been included in the sumfor measured work (£324,183).
The overhead element in the tender was therefore (22/122) x 324,183 = £58,459 (not.
£119,272 as claimed), which over 104 weeks = £562.1 per week. Overheads could
therefore be regarded as a function of turnover.
Next, it was pointed out that the extra work under variation orders and all the work
in connection with Provisional Sums was being paid for at BIQ prices or prices
analogous thereto. This must include the 22% for overheads. The problem therefore
boiled down to a question of whether the turnover for the work as executed differed
from that envisaged by the contract. At the risk of some slight oversimplification (ie,
ignoring Preliminaries and PC Sums), one could say that the turnover was originally
expected to be 364,183 + 104 = 3,501.76 per week. (324,183 + 104 would give
3, 117.14.)

61
From this it could be argued that, so far as overheads are concerned, an

economic time for the varied · work and work in connection with Provisional
Sums would be (40,82 7 + 62,204) + 3,502 = 29.5 weeks.
In fact the extra time required for extra work had been put at 21 weeks, so that there
was in fact no case for recovery of additional overheads.
Had there been in fact no Provisional Sums, the economic time for varied work would
have been 62,204 + 3,117 = 19.9, say twenty weeks. In such case there would have
been an under'."recovery of one week which for practical purposes . cQul<i be valued
at the weekly rate of overheads included in the tender (£562).
The claim does not, however, lie under Clause 24 but under Clause 11(6). On the
actual facts of this case, where the additional time required 21 weeks, cf 33 weeks
~::~[~:.: 1~~):~~~:~~l:~~h~:~~~~ta~u~=j~:Wllll ou behalf of the employer (
Points of principle involved ..... ''J\ t f/· ·t

In evaluating variations, consideratioj"1"!fi\b4, ~~:~~ all aspects. .· ·
First,
only 1f_it is
theparamou!1t
work 1s ofin s1m11at'
~erm·.· · · ·.~· ·.·•i·lchataeter
o:~.' . l·,.a.. •l.i,~.o
. :.·.·.:r.·. ·.':.· pj~.•.·.:··•~·.
abd. ·•fmi. ,.'d/materials
r~xlcuted underthatsimilar
_B/.Q prices ~~ply
cond1t10ns
(JCT 63/:7~ in Clau~e 1.1(,J(a)? 1E:r1\~s€ 1:t V
Second; 1t. 1s es~ential m t.~?fuput111~~pQil J:irrlCes that account be taken Qf factors
proportionate to time, oft .ose prodort}onaJd to value and of any that are fixed.
have been affected by the iV;~fat\~n · •1·. .

Fourth, overheads are ve •'1\@~.J) ~osts although they may have been expressed as a
percentage of turnover (wh ·th?r this be in £s per annul),1 for the firm as a whole or
£s per week for a given job). If the varied work is to be no less remunerative than
·c: ·-···the contracrwork·oncwhichits prices·are••based;c•=then,,consideration· must-.·-be=given·····
to this factor also.
It might seem that this should apply both ways - that there should be some negative
adjustment where the value of variations etc gives a higher turnover ratio than was
the case for the contract originally. It is doubtful, however, if this can be read into the
terms of JCT Clause 11 (6).
So far as ICE is concerned, it is considered that such adjustment is allowable under

Clause 52(2) albeit the method involves consideration of rates and prices as a whole
rather than individually. From a purist point of view any such adjustment could of
course be converted into adjustment of measured rates if it was thought there way
any purpose to be served.
It is considered that similar adjustment is available under GC/Wks 1 Condition 9.

. 62
CHAPTER 6: CLAIMS CONCERNING TIME
General
Evaluation of delay claims
Effective duration of delay
Effect of delay on work intended to be done
The costs attributable to delay
The nature of costs/expenses
Disruption
GENERAL ,,-:•'?\
extension of time. Th~ contra~tor m·.,.'..afUP.·:·e.~.•.:.·'· e~·t·;·:.·.•.. i• .• ~d.···•:•'. t.:·i • extension of tim~ in respect of
events sue~ as exceptionally m~_lew.rP\::t•:]'eftlll\ <~}i'lkes an~ the hk~, b~t to no
compensation. For dela~s fo·r··· wcb.
·.x.ifb•·. •?.·.;.·.rf.·mp..·.·.•.·l.o,'.KI,?J/fs
;w···•· ~ re~ponsible he will,
~elay has ~ffected operation}·.·./4~.~pJt~.Fnt·.~b1 Pjth~ be entitled to both e_xtension of
such 1:
time and, 1f he can show corequ~11tl~111o~sl,;0r expense, to compensation also. If
such delay affects operatit~! not o~tte fr~~ical path but he can show consequential
los~ or expense the~ h~J,11 ~,ol·~je&fui extension of time but he may well be
entitled to compensal1onk>~ I)
Claims in respect of del~f~ould therefore be considered as something separate

from extension of time - linked maybe in the sense that both may stem from the
same cause and lie on the critical path - but no more. It should be remembered that
extension of time clauses as such make no provision for payment.
Contractors are entitled to insist on extension of time where such is due, \for the
purpose of: (a) relieving them of liability to liquidated damages in the circurifstances
stipulated in the relevant clause;(b)seffing a new complefiondafe against which they
can e.stimate resources required toacli1eve it but not as a condition precedent for
~cial compensati~:~~~ wh~re a (ontracto_r h~s been dela~ed by late
mstruc11ons, an extension o time m respect of 1t will support his case for
compensation, but that case cannot be negatived or defeated by failure (or omission) to
extend the time. Many contractors seem to feel that without an extension of time they
are precluded from entering a claim, and conversely some engineers seem to think that
if they take no action to extend the time for completion, the contractor will in some
way be prevented from claiming. Both points of view are wrong.
Dr. Sherif EEL-Haggan - CLAC 040

63
EVALUATION OF DELAY CLAIMS
In evaluating delay claims, four aspects must be taken into account:

(a) the effective duration of delay,
(b) the effect of delay on work intended to be done,
(c) the costs attributable to the delay,
(d) the nature of costs/expenses.
Effective duration of delay
Contractors often give notices of delay aggregating considerably more than the period
by which it is apparent that the time for completion will be exceeded. This may be due
in some measure to overestimatio~ but it is o~J"fJlio due to 1tihe fact that some (
delays overlap and some do notJ1e on the cqt~~~l\~ath. We are here concerned to
consider all causes of delay so as to distfn.~i~~ between •those which are the
responsibility of the contractor, t~0$~~'"'\w1fcUC~a~ give entitlement under the
1
Co_nditions of Contract to ~xte. n·s•·.·.~on·.'·.·.· .·'. ·.·b..· }.t·F·•.··.•.··•,·.··.·J ~~.· t.·.:•,.:~o.· ;.·.:·.• ·.~~oor,pensation (incleme~t weather,
. . ·.,.
:::i::c;rt:! ::;i;:~i.h.-.·•.· p.1:,1.s·•.~.•.u·•.·.·•·. •~.·.~ff.:.:.·.:.:.t.';• ntf. b.-.:iJ,

//
The simplest of cases is w',··:··.·.·.r.i.·.l..e al.I +.•·.'·§·v. · V
·····rll;7J., .
tf:,f i, (!.!ti~: :~!~~;.°' both
opped completely by a single cause. In
such a case the period of /l_~~fY wof~d b~ equal to the duration of the cause plus
lll terms of
some allowance for reg~~c~e!)' oper tempo of work.

Frequently, however, diflLarcauses overlap. Where they
give rise to similar
entitlement in terms of extension of time and compensation, there is no· problem.
But·• =individual;,relatively==short · overlapping periods =of"delay =:may- - stem ·=from
different causes, with differing consequences as follows:
(i) Where an initial delay is caused by the contractor, then any cause of delay by
the employer commencing subsequently will be of no effect (if the job is
stopped it c·annot be any more stopped by another. event) unless and until it
continues after the contractor's delay has ceased, [Figure 1, diagrams l(a) to l(d)].
(ii) This situation will not be affected by delay caused by circumstances not the
· responsibility of either contractor or employer if they too commence
subsequently to delay already existing. In Figure l diagrams l(b) to l(d)] The
contractor would be entitled to an extension of time for the period indicated and to
compensation ih the case of diagram l(d).
(iii) Conversely, where the initial delay is caused by the employer or his agents,
then concurrent delay by the contractor will not relieve the employer of liability

64
(though it might reduce the extent of damages). Again the contractor will be entitled to
extension of time from· commencement of the employer's delay to the end of delay
by 'other' causes [Figure 1, diagrams 2(a) to 2(d)]
(iv) Where the initial delay is due to causes for which neither contractor nor
employer is responsible but the contractor is entitled to extension of time only, then
neither the contractor nor the employer can be blamed for any concurrent delay
[ditrams 3(a) to 3(d)] (1) ✓
'1·. 1 ,:,y
""I 2 3
wl
!::::j
1
______
_;,5' ----
.,J_,-~~ ~:~'--\'-"~''''~>~,,~,,~,~-
- - I
a . t
l lJ 1J IJ IJ IJ 1J 1J IJ IJ IJ IJ IJ 1J IJ IJ 1/
- - - -
b
.......... ~ .I LI LI LI LI LI LI ti LI LI LI LI LI ti ti ti ti
• • • D aJ D a • • • • D • • • • •
,,.,.
-- ~
- - - -
d ----....~--~·'• ~ -
•••••• a .mm .I LI ll ll LI LI LI LI LI LI t
Delay responsibility of: \~ \fl' Extension of Time tttS

Contractor
Employer
fJ~ :;:)i Exte11sion of Time+ Potenti~. Claim ~
Neither .. 1/ . . . J~ Q~/v
~ ~ ✓'\
mv"~ rr Figurel
The above refer to individual periods of delay considered separately and a diagram
must be built up for the whole period to show the interaction of causes, so that costs (
arising from them may be properly allocated. Extension of time considerations will
apply only to those on the critical path (or £! path made critical as f! result of delays).
Dr. .Sherif EL-Haggan - CLAC 040

65
The foregoing diagrams illustrate the situation where the job is stopped by a given
. cause. More frequently delays cause a retardation, and to illustrate these graphically it
is necessary to quantify progress, in terms of money if the project is being viewed
overall or in some other unit of output if separate operations are being considered
( cubic metres of excavation, concrete etc.).
This may be done by indicating such quantities on a bar-chart or, more conveniently,
by plotting time horizontally against quantities plotted vertically.
· In Figure ~ the required rate of progress is represented by line O-A. A week's

·. stoppage for, say, exceptionally inclement weather represents nil progress and is
indicated by line B-Bl. Assuming a resumption of work at the former tempo, further
progress would be as Bl-Al. If, however, the reg~lred rate of progress is not being ( I
achieved (say because of circumstances for fhi~~Jthe contractor is responsible),
then the 'programme' would be 0-A bur,
1 ;;I.it progress 0-X. The week's
·/Ill V .
( /! ··>/1 A Al Z X XI
i::t:i /,, .,; • .I. .I.
/
0
Time
Figure 2
The result would be the same if the delay B-Bl were the responsibility of the
employer, except that he would be financially responsible.

66
Figure J_ illustrates the beginning of a comparison between delays and the events and
circumstances in which they are occurring. The required progress is represented by
line O-B and the actual progress by line O-Bl. Along the latter, the period W-Wl,
being horizontal, depicts a complete stoppage and the remainder a retardation. By
superimposing on this other factors such as the numbers of men employed, hours
worked, plant in use or broken down, rainfall and temperature, one can begin to see a
picture of delay in the context of the circumstances in which it is occurring.
Months
2 4 6 8 10 12 14 16 18
B Bl
160 --
•
--
.,
120 Al
80
40L__J~~~~J12Ll__J_filfJ.J).~:==±:=t__-_-.._L-1
OlillE=--L---.L...---.;.l=l~y~j~"'-4!=.1..~
I / i <I
• ..-~~---1------L-----1.-1----1
f ;• I U/iI'
; / I ·J
It.. ~~✓-1 Ibit 1
J
t'
Effect of delay on work mt,e!_;h to be done
,:I' \,L. . ,,
Such a diagram as Figure 3 may well illustrate what happened, but claims are usually
l
....,;.• 'I
,,. concerned to compare what happened with what was intended to happen. So far as
·-------=--------------~
/construction contracts are concerned, this can be by way of comparison with the
"
- ~------ - - · - - - - - - - -
7 original programme. There seems to be some doubt, on the part of architects and
· engineers on the one hand and contractors on the other, as to . the v a I T a i ~
\ . of such programmes. Tnere is, or there is felt to be, an element of 'gamesmansliip'-
15othtn preparmg tliem and in commentmg on them.
\standard Forms of Contract give no real guidance as to the content or purpose of

programmes. This is no doubt due to the diversity of jobs for which they are used and
of the widely differing requirements needed to \ be shown. Where particular
requirements are included in specifications there is usually a little more information,
particularly as to monitoring progress and the purposes which monitoring may be
required to serve.

67
Programmes produced in a short time after acceptance cannot be expected to show

great detail. Their main purpose is to ensure that the contractor understands what is
required technically to comply with the contract but for most other purposes some form
of quantification is needed so that the actual output may be compared with the target
output. This may be by way of quantities shown in successive periods (weeks or
months) along the bar representing a given operation or by way of diagrams where
quantities are plotted vertically against a horizontal time scale.
The contractor is entitled to complete within the time stipulated and generally he will
aim at a time which he considers is the most economic for him, and which allows a
margin of safety for unforeseen overrun. The contractor is responsible for certain
types of delay (ordinary inclement weather, shortage of labour and materials,
delay in obt~ining or b~ea~down of plant and of(,~e,se his own inefficie_ncies), and
generally will have bmlt mto the programme .s~fP!~flement of 'float time' as a
hedge against these risks. This float time is n/tr ·. confused with 'float' as used in l
connection with critical path analysis,.,.~~e if~to indicate 'spare' time along a jfi, .
lll ee t e cntica p~t 1tse:_j' .~ll~~~,
·......
··.···l
··' · · ..
~ l reli~f)
~odn-cdritichal. pat~ _pen1ding hco~·P·•··.•11.;tio1·1 f··.:.,.·.•.c•:· .: o.·.·.·.•.*j·:·····. ·.g.;.·. :~.·,,•!;•'"'r:~k on fandoth er, longer path kor
i.ec~s ~ e1~y on~ cannot ta e
advantage of any float t1mer,~ie1~~I~~'1g~tr
1 1
~i1i✓n~s b~Ilt m a~amst risks he has t~
carry,
the buthas
'float' where delay
been usedocc·
.
uw;d n·•·. : 2offt~ca!P,path
th {rth~bome ?•.· .~lfn·.1
1t w1ll_have
temporarily
·u·,,·····•.·.·.·
.. httle orcnttcal.
or wholly n~. effect until
,.o·.··.·.•.·
..•.•..• . r .
f ,,\ .-t1 ...)

Progress may also be aff~ctecf"bl ·ther events, e.g. the supply of further drawings or
information, the letting 0¥<#2EJ1:i'hated sub-contracts, supply of key materials etc. All
these must be shown on the programme if progress (or lack of it) is to be properly
······-···- · ·-=·monitored:·,,,,,,,.
In examining programmes at the start of a job, an engineer should therefore first be

concerned with the technical requirements of the contract (has the appropriate
time been allowed for striking formwork, are the sequences correct, has prop~r
allowance been made for weather-susceptible operations etc.?). If these are not right
then of course the programme must be suitably amended. Otherwise, comment
must be more in terms of opinion than simple acceptaiwe or rejection./ If ~y
period seems too short/ then perhaps one might enquire what labour korce is
expected to be employed, what plant used and so forth. There is a feeling
amongst engineers that unduly short periods are sometimes shown in programmes
with the intention of establishing grounds for claims (When such periods overrun
the contractor will allegedly find reason to blame the A/E). This may sometimes

68
be the case but it may be defeated by asking for details of labour, plant, methods
etc., or a further breakdown of the offending section of the programme. As
grounds for claim it can also be negatived to some extent, if not entirely, by
expressing the opinion that the times shown appear optimistic.
How correct a forecast the programme proves to be will be a matter of careful

monitoring, the more so when events causing potential or actual delay require to be
taken into account. The fact that delay coincides with an overrun of a period in
the programme may be indicative of cause and effect; but at times it may not, but
only careful and continuous observation will establish the fact.
It is against this background therefore that actual progress must be plotted. It is

the only yardstick available by which the effect or/d"el.ay can be judged. In order to
do this adequately one needs a fair amount .~fdet~iled information: the duration
of operations and the quantities involved, th{ef9\ntlers of men employed, arrival,
. •·. ·.:\ t'··.e·:··. •.'..:·~;.l·.e. .

use and .disposal of plant, particul··.ar·l·•.~(or···: to which inclement weather
6 ···n.··•~.·.·•.•,
actually impeded work, cf allowaricefi.., l>cuiltpn }h,~/programme, the need for and
supply of information, the l:;tt1fg~frjniJiat~ .•rlY1'ontracts etc., etc ..
The costs attributable to

l.\l
,ief 'Ilh1. ., :, ✓
1
.
l . ' •. · ' f ~•
It will be seen therefo/{Jh:!tn rhtfst '·~he duration of the delay is not without
significance, it. is the effeho}l~, de·~ay which requires to ~e d~termined. In the case of
delay from a smgle cause\(e.:g,.,,a stnke) where the whole Job 1s stopped, the effect of
'l<,,n~,...
the delay is simple and obvious. The contractor would be entitled to an extension of
time for the period of the strike, plus a small margin to allow for regaining tempo
Similarly with inclement weather, where the whole job is stopped. In neither of these
cases is the contractor entitled to compensation. If there were a case where the whole
job is stopped by some act or default for which the employer is responsible then the
contractor could be entitled to an extension of time plus the cost he unavoidably
incurred as a result (standing time of labour and plant, including that of any sub-
contractors similarly affected); also the actual cost of his site overheads (staff,
depreciation on hut etc.~ and such maintenance costs as could not be avoided).
If a stoppage of work were caused by the employer to operations on the critical

path, the whole of the work would not necessarily be brought to a standstill. In such a
case the contractor would be entitled to be paid standing time for such labour and plant
as he could not employ on other operations. If the labour and plant could be economically

69
employed, so well and good, but if it could not be, then the contractor would be
entitled to such loss of productivity as he could demonstrate. There could also be
consequential effects on other operations.
If a stoppage of work were caused by the employer to operations on a path

which was not critical then there would be no need for an extension of time but
the contractor would be entitled to compensation for such cost as he was able to
demonstrate (again standing time on labour, plant etc.). In such a case it would be
unlikely that overhead costs would be affected. The possibility of utilising the
labour and plant elsewhere would need to be considered, as in the preceding
paragraph. It must be borne in mind that it is the duty of the injured party to
mitigate the damage so far as possible.
/(.'.?' (:
The more usual case is however one of retardation · rather than actual stoppage
1111~ this c_outd appl)' in ~y of the ~~tio~s mf
irtJl~bove. The!"e !wo-wa)'s ,n-; U:
;t!~~~;o~i::;::;:_;if:~t::.•; :b::~:~~t'.u.:~~
1~d1cated above. Just wht;Jti-.~?[i filmd: 6e empl~yed would ~epend _upon
f_ .~_.·
crrcumstances, but ge~_ ~~jl ~f_:~_i'_·_,.i_(t;~td_._:_
.J ;.··•_frr~~11,·{y be restncted ~o relatively_ s~ple
.. cases w~ere the delay ~/gfiestif~rar;:~,Ofl and the conseq~ential effects mm1maL
(u) Evaluat~g the _lo~s ot~(oduct\fto/ qp·labour and plan~ w~ich has been caused by
· retardation. Th~s is ef~~_:;~ di~ijcult to do as clearly it will depend very much on
f
the records bemg kemf;/,pt: n\y those of the work as done but also comparable
ones of similar work ~t~~c:f'out before the supervening delay occurred. It is also
difficult to avoid comparing the cost as executed (when by defmition the work is
_________. ______ _beit~K-carrie_d_ outJn. circJ.1msJ:ances_ J:>f d.e!~Yl withJhe. Je:ndered_pf:i~e.s (~Yhi£l}_Jll~Y--- (
be underestimated or distorted by a variety of factors).
The nature of costs expenses / Forms of contract
The various Forms of contract differ as to what is payable to the contractor in the
event of delay due to causes for which the employer is responsible.
ICE 5 Clause 1(5) refers to cost which is defined: 'The word "cost" shall be deemed to
include overhead costs whether on or off site.' It does not say direct costs but it must
be construed as meaning those costs which are a direct consequence of the delay.
Generally, it needs to be borne in mind that the clauses and conditions referred to
above are dealing with matters in the nature of breach by the employer and the

- compensation provided is therefore in the nature of damages. The object of damages
is generally to restore the injured party to the position he would have been in but for
the breach. ;~~
In cases such as sub-letting without a_2proval, _failure to produce a programme, failure
---
to insure, etc., there is breach but no effective sanction and no demonstrable loss. ·~
In cases where the contractor is prevented from completing his contract (either wholly,
-=-·-==
as in case of wrongful determination by the employer, or partly, by omitting some
of the work and givin it to others to execute) the measure- of damages will be the
--- ~-----------
loss of profit he would otherwise have earned.
In the general case, however, where the employer is in breach (such as delay in
issuin~ dr~':ings and in~truction~ ), delay by otht;t'.£1Tttractors he may have employed,
delay m g1vmg possess10n of site etc., the l@t:1;tt~c)or suffers loss or expense or he
incurs cost and generally this is construed as l~~isjh~ive of profit on the footing that
his original profit is still intact. It is sqmelimcls i'~_ferr~ to as 'loss of profitability', but
t;~:;~~t
this should be taken to mean that wh;,\he~ {he1~<:;~st/ loss or expense is primary
~a~:
profit
~s :;~
margm
!1~10: f~1;1i~;;~d ~::t o;:r::::\:ir:;i::
which woulkfer-1::119fi'e bf.,lavmlable.
The classification of costfic:,4s/expt~se
1
t,. .
, ·'' , ; . . .
\ Generally the main head~gs.~ti;~k~hic~ extra cost, loss or expense falls in respect
\.-•-.;·•· .. .,,.
of delay etc. are as follows~~;;_>/
(a) Labour - the total amount payable to the men.
(h) Plant - if hired, the hire charge or the cost of sending the plant away and returning
it to the site (whichever is the less), or if owned by the contractor, a depreciation
rate (two-thirds of the long-term hire rates).
(c) Materials - these should not be affected by delay, though storage charges, special
delivery costs and the like could be involved.
(d) Sub-contracts - their component costs would be parallel to those outlined above.
(e) Site overheads - the actual costs of staff; depreciation of all temporary buildings
and equipment, unavoidable costs of servicing accommodation and unavoidable
maintenance.
(f) Head Office overheads - these would be limited to those which have been affected
by the delays. If directors, managers or engineers etc. normally making periodic
visits had to make more visits because of the delay, the cost of these would be
permissible. It would generally not be appropriate to add a blanket percentage to
cover all overheads

71
Much of what has been said in connection with this case as affecting variations
applies equally to costs of delay. The only difference is that with a variation the first
step is the order, whilst with delay the first step is a failure to instruct. In neither case
does the incurring of additional finance (or any other costs) necessarily start at once
,!) and it is a matter of both sides understanding what may result. With delay it is of
course more necessary to make the architect or engineer aware of the potentiality
of delay as he may not be aware of the necessity for any instruction whereas he must · ~
be aware of having issued a variation order. With-variations, direct costs and expense
can include additional labour, plant or materials as well as overheads (which include
inter alia finance costs). With delay there may be dislocation and disruption,
uneconomic output etc., as well as the cost of labour and plant standing idle. It is
therefore important that notice is given in sufficiently explicit terms to provide a ( ·
sensible and meaningful warning _of what may Ji~\~nVJlved and yet put widely-enough
so as not to exclude the less obv10us matters of.ls1teland Head Office overheads and
their respective components. ,/",,.~,,
/ .- !1 _· I
( -:"'~
DISRUPTION //I· f/-~~) -. ' { . './

! J:,:' /
v·
~t" rl
/ J r f ··.. .
1
1
Generally understood to m~1:h1/'osts. 0 , i0~s ane,:e~pense in the nature of uneconomic
working or loss of prod~6~ifity f'Iab1piJ and plant due to work not being carried
out in their planned ol~H!>gical '.Se~ueiices. Labour or plant may be working
unec~nomically or _a~dit\?_•_·_n_1_·•1_ _•~--•_;;."'_-._'f·."~_,_s~ay be incurred (such. as ~vertime or we~ke~d
working or the prov1s10n <\.t ~9,~1 10nal form work and the hke) m order to ma1~tam
a required level of output oi:.Ctfa e of progress. It is more often than not associated
___ with delay but~his need_not_~ecessarily~e_!~~l~-~~=f· --~~-~~-:.=~
~i-~i!~~~---~=!h~~Ea!i.~~ _____ (
·-wfiere wor1.(1s slowea downe1ther··as· a ·resu t-o ·some· mstructwn--.umn·-t e· - - or
lack of some required instruction.
It is a most difficult matter to assess with any prec1s10n and. there are two major
difficulties to be faced in making any assessment. First there is always the possibility
that the contractor's tender was low and so any comparison with cost would
overcompensate. Secondly, there is always the possibility of inefficiency in operation
(~wen with the best contractors) but of course the very problem being investigated
is one of inefficiency imposed upon the contractor.
Regarding the first problem, some indication of general tender level can be obtained
by comparison with other tenders received for the same job - by no means conclusive
but possibly indicative. Close tendering would tend to indicate that the tender was
Dr. Sherif EEL-Haggan - CL.AC 040

72
not unduly low. On the other hand a tender significantly lower than the others
might indicate an underestimation or it might merely mean that the contractor has
seen more efficient and cheaper ways of doing the job or that he has plant or
equipment available he wants to make use of, for which he is prepared to charge low
rates in order to keep his organisation together rather than allow it to disperse. He may
yet make a profit if the plant has in effect paid for itself on previous jobs. The point
here is to try to find the reason for the tender being 'low'. So far as sections of the
work within the whole or different types of work are concerned, experience shows
that there is a greater variability of pricing these than is reflected in the tender total.
There is an even greater variability in prices for B/Q items for similar work. This is
because B/Q rates are indeed the prices the contractor is choosing to put upon the items
and their relationship to cost is more notional than actual. However, this information is
really the starting point from which one is o~.~~~ztto work.
Regarding the second problem, efficiency or 1/{fp{/t on a job is unavoidably a

~
some- ~hat subjective judgment: Ne;·e·. . . .·•·•. :•. e.· s!J~t. ·.·•.•·.1s(u· •.s•··:.·.u.··.~.4lly n~t to be igno~e~. It must be
~
e.•·.·.···1··.·
...
:ecogn~sed, however, that the s1tuat1·i·~.·?~.e. . •. .. m . . ·•.~~,bgbted 1s by defimt10n o~e of

1neffic1ency, so the best one c~1 d{1f'~<>ma1, e t~me/ allowance for any 'bmlt in'
inefficiency one. may co~~id.:·'·/;tf?fii~\~4di._pef1~tly of th~ circ~mstan~es. If the
contractor has given notiyf c;l <lairtt,~as ~1',~Jbul~). the engmeer 1s ent~tle~. under
ICE Clause 52(4)(c): 'W·Q·'.·...· ·~.•t.lfuut 1n. . ,.·.l.ce~gM°t1y adm1ttmg the Employer's bab1hty, the
Engineer may upon rece1pt/ of r,
1n9yee ... instruct the Contractor to keep such
contemporary records .. , t·~t"1ble and may be the material to the claim .. .'
When one speaks, as here;i.ofryebrds,

......:.;,,,,..,,
one automatically thinks of records of hours
of labour and details of plant employed, but less frequently is any record of output
kept. If this were done it might be possible on occasion to obtain something like
unit costs from which one might be able to form a judgment as to what the costs
should have been.
The sad truth is, however, that even if such unit costs were produced, in the vast
majority of cases the contractor would have no records of comparable costs taken
on the job before the onset of retardation or disruption.
The task of assessing the cost of disruption is therefore very much a case of looking
at all factors and considering all the information which might have a bearing
Dr. Sherif EEL-Haggan - CLAC 040

73
CASE 6.1 CLAIMS ARISING OUT OF DELAYS
The contract was for the construction of a small pumping station. The amounts of
earthworks and pipework involved for which firm quantities could not be given were
quite small and it seemed a waste of effort to remeasure the whole when a relatively
few items could be made 'provisional'. It was therefore decided to prepare the contract
on a lump-sum basis but using the ICE Conditions of Contract.
The contract documents comprised:
Drawings, Specification, Bill of Quantities (based on CESMM). · Conditions of

Contract ICE 5 with the following amendments:
The Conditions of ~ontract referred !o. in the.l';;Fe~der shall be !he Conditio~~ of
Contract for use with Works of C1v1l Engineerihg Construct10n (5th Ed1t1on) (
/'~'7~ 1, A_:,··)
commonly known as the 'ICE Conditions of Ciijij,~2ti}dated 1973, modified and added
I
t .c: 11
o as 10 ows: .
Clause I (I) 0) - delete and substitute:
£,., f. . ,;;
under the provis10ns here1nafte:fi;J"l!)~t' 0 , <11/

,,~f ~:,~~ the sum named in the Tender
which sum is ~~bject to ~uch ad··.d·".1.:.t.:.fo9.·:/;.·,.t·. r·.· t.•.·o. •.,,.·.'.·.'10r .d
'.·.·.li.·.l
. .t.
·
. :.•. ·fltl.··.:stfns therefrom as may be made

·.·.e.·.·.·
...
Clause 10 - delete reference t/··•.'TJi~del.;f~t?t;.''J··:.····,dl{f;~der Sum'.

!'I1
§:.
·,·1! ·,:•.·,,
1.·..
.
Clause 52(1) - i~ line 3 after{'~11nc~i:1eJ\£L~d:i~'1d shall taken into account in arriving at ?e
the Contrac~ Pnce by way o. ~_.}.:.t!
Tender Sum. \ >.... ,· 1
f. t.l. J.i;bfJd
or sub- traction from (as the case may be) the
\'.!: .•.·::;~;;
Clause 55(1) - in line 1 after 'q'iifutities' add 'designated Provisional'.
Clause 55(2) ;;in=line ·1,after ·'any error or•disruption'"add'or-inquantity\-=·---,, ---
Clause 56(1) - delete and substitute: 'in respect of any items or quantities designated
'Provisional' in the Bill of Quantities the Engineer shall ascertain and determine by
ad.measurement the value in accordance with the Contract of the work actually executed
in accordance with the Contract. The value so ascertained shall be included in the
Contract Price in substitution for the amount annexed to such quantities and included in
the Tender Sum.'
Clause 56(2) - in line 1 after the word 'item' add 'designated Provisional'.
Clause 58 - add the following as sub-clause (2) and renumber remaining sub-clauses: '(2)
Provisional as applied to items and quantities in the Bill of Quantities means those items
and/or quantities so designated which shall be used for the execution of such work may
be ordered or approved by the Engineer.'

74
Clause 60(3) - line 3, after 'detail' delete rest of line and substitute: 'all those additions to
and deductions from the Tender Sum due to be made in accordance with the Contract'.
Tender dated 1 May 1979 in the sum of £148,486. Acceptance dated 1 June 1979.
Time for completion 15 months.
Possession of site given 1 September 1979.
Liquidated damages were set in the Tender at £500 per week.
Events giving rise to claims
The employer could not get possession of part of the site and then in November 1979
there was a spell of very bad weather which affect~~ the earthworks rather badly and
about the same time there was delay in resisting ~(gas )nain. There was a succession of
variation orders,. not gr~a~ in valu~ but taking ely long t!me to ~arry out ( due /rtJ.~!f
pa~ly to delay m obtammg spe~tal va~~es 8/1:?(Y~lh.gs~. Certam bendi.ng sch.edu~es
which the contractor needed by mi~-Apr,t1$8~Wtre.~t m fact fo~hcommg until m1d-
May. There was a week of excep.t1?~.-~IJ,:y·~~tlan
. J.<1il
,;:"''Y1µdy weather m July 1980 and the
1
Contractor to Engineer / ) F,~ } )JV

work was not finally comple·t·e·····d."'.irr.·.·'..·.·.2. .•·. r.• 1. ·~.·.M·J
. . ·.• a· .·•·· l. :·9·.•· ·•.·. ~•ri( /
19 July 1979
JO,. J:en we may expect to be allowed to start

work on this project. /Yl ✓ l'i)
We shall be glad ifyou·fo··.'.··.'.•·.o.·zd le!.!u·•.• .•.•~.·.·• .•.
V
Even in a letter as simpl'I, ,;,;d};tkous as this it is preferable to use the terms in the
contract. What is being asR~.~J0(, an order to commence under Clause 41 or possession
of site under Clause 42? There was some delay in replying but eventually the engineer
wrote:
Engineer to Contractor 15 August 1979
I refer to your letter dated 19 July and have to inform you that the site will be
available for you on 1 September 1979.
Similar remarks to those above apply to this letter also. Is the engineer acting under
Clause 41 where he is given powers to give an order to commence or under Clause 42
where it is the employer who should be giving possession of site? Work started in
September and one is left to wonder what, in the absence of an order to commence, is
the due date for completion. From this point of view one may perhaps argue that in the
circumstances the engineer's letter of 15 August amounted to an order to commence - a
rather sloppy way of starting a job, if one may say so.

75
Contractor to Engineer 9 January 1980
As you know, there was a three months' delay in giving possession of site and
thereafter work on site was held up for three weeks for exceptionally inclement
weather in November and December. Then the work was stopped completely for the
whole of December because of delay ill resisting the gas main. In accordance with
Clause 44 we request an extension of time of 19 weeks and reserve our rights to
claim for the additional cost.
Taking the facts as they appear, the delay because of the inclement weather and the
Statutory Undertakers overlap. But from when does the time run? According to Clause
43, time begins to run from 'Date for commencement notified under Clause 41'. Maybe
the engineer was wearing two hats, but to delay g1ving an order under Clause 41
because of difficulty in complying with Clause 42 is not acting properly. We have not
heard the last of this, as we shall see. ;f;?\
The tail-end of para 2 of the contractor's letter 9f'.9;J.~uary is not satisfactory. Whether
C
.::::rie~!~:•;~::i::e:~~~:,;t:5mt~rp~~r· In any case nse one
why
1
1
A number of small but time-co·.·n. ,,.-~uni.·;.'~.·.
wrote: / J (c.il ''ci I'.' r--/
..·.la~io.ri.ls:..w.:~/e issued and then the contractor
.·.•.·.·.i.:;·V··,ar.•
Contractor to Engineer/( (':'l~,l [7' V 18 March 1980
As we informed the
::n:::::;~edules for .,1}'/
,_ ,f I .I 1. ..,
Rlfq{ the_ l9~t1Pr~gress meeting, we urgently require the steel
the roof Unless we get these very soon we shall
Engineer to Contractor 1 April 1980

(
The delay in issuing the bending schedules is regretted. There has been? some
difficulty in accommodating the steel in certain columns and beams. It is expected
that revised drawings and schedules will be ready in mid-May.
In fact the drawings and schedules were not issued until the end of May 1980, and
there was some further delay in obtaining the necessary steel. The contractor took no
action regarding extension of time. Work continued and was delayed for a further week
of exceptionally wet and windy weather in July 1980. In November the engineer wrote:
Your attention is drawn to the lack ofprogress on this job and in accordance with
Clause 46 of the Conditions I must request you to take such steps as are
necessary to expedite progress.

76
The contractor reacted characteristically. Clause 46 notices are always resented, the
more so when it is believed they are unwarranted.
We were astonished to receive your letter of 3 November invoking Clause 46. You
are aware of the delays which have occurred. Our request dated 9 January 1980 for
extension of time has not been granted. Since then there have been delays of five
weeks because of non-issue of the revised bending schedules (and consequent two
weeks' delay in getting steel) and another week for exceptionally inclement weather
in July, not to mention the many variations involving extra work for which we
require an extra twelve weeks. We formally request an extension of time of 39
weeks.
/"p'\ .
The contractor was remiss in. not giving n~tje~I}r1gressively and. in allowing his
request of January 1980 to be ignored. Notwi1nsrap~ng that the engmeer could have
taken action under Clause 44(2) an.~~ieef\s~.ul~\ have done so if he wished_ to
1
operate Clause 46 because that clau~e;~l?~fls~w~tYAp~:words: 'If for any reason which
1
does no~ entitle the contract_or. ·t·'·?". ·:.1an/·:···•.~1f.e11•.·.s. . }b
:.:p·A·}~.m.".el.. Failure to ext_end the time for
. ~om_plet10n at the proper ti/··.e. .!t;·a···~~~.".l5o , ar .. 11eVthe employer's nghts to recover
hqmdated damages. l ;/' !' ·lbr
·1 • ,.
r \,.l ..·~ 1. . .. ·bJ /

Engineer to Contractol!·r·'.;,r,. •. t······.:.•.•.·•j•·.l 20 November 1980
I hereby extend the tilhe~.fo(~~11J:pletion by 24 weeks to 18 May 1981 in respect of
delay notified to date. \: ,;)
...~~~-~;;;,:~~✓
We cannot accept your extension of time of only 24 weeks. Will you please let us
know how you arrive at this.
Engineer to Contractor 1 December 1980
I have allowed 6 weeks for delay due to inclement weather and resisting the gas
main, 5 weeks in respect of late issue of bending schedules, 2 weeks for delay in
delivery of steel, 1 week for inclement weather in July 1980 and 10 weeks for extra
work.
Contractor to Engineer 15 December 1980
We consider your allowance for some of the delays are somewhat short but we are
most concerned with your failure to recognise the initial delay in possession of the

77
site. We submit herewith our claim for compensation in respect of the extension of
time to which we consider ourselves entitled and we should be glad of an early
payment on account.
CLA™ ~sp
Increased costs and extended overheads for 3 months due
to late possession of site 4,500.00
24 weeks' delay consequent upon extension of time as per

letter of 1 December 1980 at £ 342 per week 8,208.00
£12,708.00
· /rt(·:\ ( f
This i~.; quite. usele~s and it is the sort Qf t~ffl/~.~·!¥ft ca1Jses so mu.Qh irritation in
connection with clatms. One only draw the c.torrclu4wn that the contractor does not
know where his entitlement lies and hasrn0 idia.h6w·,t\) formulate a claim. He gets the
1
sort of answer he deserves and might )iav~ ex ec ~A

/ \ II
1
I
j
.
Engineer to Contractor
41(1
/4;) /·/ i(::: );
p/ . 13 December 1980
It is accepted that three fhqnthsl e{Jfp~ed: b een acceptance and your being given
possession of the site, q.u:···.·.tlhat d()···.e. .:.·i¥. . ' ~P('.,: ecessarily give grounds for claim. You do
not quote any Clause {1.~fuppo~,t:~ot!t'l"contentions, nor do you give any details of
how the amount is arriy~f,~!,./] f\,.)
r•·••·•· ···•·j V
As for the extension o~,if,~e( I must point out that 4 are in respect of inclement
weather and 2 weeks are in respect of delay obtaining delivery of materials. The
........ extrawork has in any case been_paidfor_bywayofratesandprices in or based on (
the B/Q. Since September delay has been solely your responsibiltiy.
If you would reconsider the matter in the light of the above comment perhaps it
would facilitate matters if a meeting were arranged to discuss matters:
Nothing happens until the end of March 1981 when the following appears on the file:
Note of meeting held on 27 March 1981

The matter of the extension of time was discussed. The contractor pointed out that the
difficulty was that under Clause 42 delay in possession of site had to be reckoned from
Date of Commencement. In this case no such date had been given. The engineer
replied that in simple fact that was so but effectively Date for Commencement was
given with possession of site.

78 ·
Contractor: Agreed, but from that it follows that the Date for Commencement was not
given in a reasonable time as required by Clause 41.
Engineer: Well, you cannot expect an order to commence with the acceptance.
Contractor: Perhaps not, but certainly in less than three months.

Engineer: But what difference can it make? You have price fluctuation and you had
no overheads on site.
Contractor: In fact we had an agent and a foreman standing by with nothing to do for
eight weeks.----------,.
After further discussion it ·was agreed that the contractor had a valid claim under
Clause 41 on grounds that an order to commence was not given in a reasonable time
- and was thus entitled to be paid the cost of staff st~dipg by:
,l,(,i::',\;: _-_'\
8 weeks agent at £127.50 per week // ,~ } 1,020.00
8 weeks foreman at £97.50 per week ~ [\/~(] 780.00 £1,800.00
The contractor's claim to a percenta!(e'adilAioD.JO.verheads was refused because the

ite1?s of Head Office overhea·d···.··9. . fsY•1.··.a.l. ~.·.·g·:·.·e.a.l.t{b•··.~.:\.m·,1y?lved ~ould not
claim for profit was also re~sedj_op:tp.e':gr~umds!~2-a: as this was basically a ~la1m for
?e
identifie_d. His
damages m breach, profit .Vf·,..•as notl.·a. n.;f)i·a····.··b•··.fet ~J:"this was extra-contractual, it would
have to be put to the empl<t'eyfor api,ro aL_I ,·
1
Turning next to the twen1'.-.:£·•. . . q.•.:·•·f•1ur .w·Jk.'.$1 de~: .
' ·\.4'j !'
(a) Weather, first period - 1ihi~-di~ {at rank for compensation at all.
-------- -- \~;,·_,_,!!!'./:::__ _ _ _ _ _ _ _ _ _ _ __
(b) Diversion of gas main - this was four weeks late being completed and the job was
stopped in consequence but it overlapped the period of inclement weather when work
was stopped anyway. The net effect was therefore three weeks.
The contractor considered this should be four but the engineer pointed out that the
commencement of this work was itself held up by the weather. The contractor
reluctantly agreed and said that he had to pay the men minimum wages and there were
also his site overheads for which he had allowed 15 % in his tender.
He had on site eight tradesmen plus seventeen labourers (some with plus rates). Their
normal pay ranged up to £136 per week for tradesmen and £120 per week for
labourers. He was actually paying them £110 and£ 90 per week respectively.
The engineer considered he could pay only the minimum guarantee and offered £96.50
and. £82.50 respectively. This was eventually accepted: · ·

79
8 tradesmen 3 weeks at£ 96.50 = 2,316.00

17 labourers 3 weeks at £82.50 = 4,207.50 £6,523.50
Regarding overheads, the contractor produced the build up of his tender, which
certainly showed an addition of 15 % for overheads - but to direct costs, not as a
content. The tender should be analysed as follows:
Contract Sum 148,486

5% profit 7,071 141,415
8.50% Head Office overheads 11,079 130,336
1.5% site oncosts . 9 £113,336
The constituents of the £17,000 were almost aU.(ttiii}-related and were therefore the
(
'·
equivalent of.£261.54 per week. At this rate, 3 ~f:J#i'fould cost £784.62
. g.·.1f.·•.~
~::h:~:~i:~:i:::i:7:oru;!eb~.~!:v. ~fi.t.l.ij~.1.~1~:h:t::t.::to:::~:~:.:
. 1 h
inc ement weat er.
/ij / . { I .
./'J ,::;"fr~::\: ki iijlj ..://
I./ ,····r; : !()V
The engineer said that thesiC)utd ~kil~roiitompensation, being a contractor's risk.
The contractor said this 4idht noh:n:~ll~lfe so but in this case they had arisen as a
direct cons~quence of t~~. ·,1e~~J
i~}ie. ben~ing schedules. The engineer e:entually
accepted this but asked fha~:p1st:s flowed m any case. The contractor claimed the
1.011owmg:
.c: . \ <,.·. ;/·/
em.,,
,
· 3 ·- - - - - - , - - - - -·······-
carpenters· ...........-..............................................................................................
- - - - - - - ···----·-· ~
-1
....-...............(
··
all required for constructing the roof
2 steel fixers of the pumping station for whom no
alternative work could be found.
5 labourers
These men's wages were normally about £140, £135, and £120 respectively. He had
had to pay them £120, £110 and £95.
The engineer offered LI 00, f 96 and L85, subject to a check on what the Working
Ru es la· own. For the time being the claim would be included at:

80
8 weeks for 3 carpenters at £100 2,400

8 weeks for 2 steel fixers at £90 1,440
8 weeks for 5 labourers at £85 3,400 £7,240
Again there would be no addition for site overheads (because other work was in fact
proceeding) or for profit as the claim fell under Clause 7 in respect of which payment
was due at 'cost'- see Clause 1(5).
In addition the contractor had to buy some part of this steel from stockists rather than
wait for delivery from the mills. This involved:
13.78 tonnes 12 mm diam at 20% premium 53.54 737.78

17 .22 tonnes 16 mm diam at 47.93 825.35
21.10 tonnes 25 mm diam at rl"rJ'"~"\
47.05 992.76
/\' ] ...
i1.i.:/·
l ·1/ £2,sss.s9
j .
--~~~d) E~tr~ work. Work was sfll proc;x~~ sf t,•t~d not be finalised but perhaps
the prmciples could be agreed. · •'· ·
~~---~< 11 ,,J... I·:·, r.,
1
•..•···.\r~. · .; ·. •· . •. ·. ·
ginee~: Surely ~ne m~st .1(a i ...witJi.jf}fJ?•e111tril~liat_the ext~a work was bei_ng paid
'. ·; •· ; . . ·. r~. .•··.<{j
r~~J. J
for at Bill rates (mcludm(:~l~Justr~it-"~.f,l tt,s:Hnunanes) which themselves mcluded
overheads. /.?/·1
1···.··./ I:>
I,/
I•
1 '
Contractor: Agreed, but~ ~f

;ale"there has been a large number of small variations
taking a disproportionate tun¢ to,;!xecute.
'-~..:.;,;,..,/
Engineer: How do you arrive at that conclusion?
Contractor: The value of extra work, based mainly on actual measurement and partly
on estimate, will amount to £12,450 for which you have allowed ten weeks. This
represents a turnover of fl,245 per week. Our original contract turnover was:
Gross (£148,486) - £2,284.40 per week or
Direct costs (£13,336) - £743.63 per week.
One could therefore say that the extra work was sufficient to carry overheads for:
12,450 + 2,284.4 = 5.45 weeks.
Therefore we are entitled ( on the basis of similarity of conditions which is stipulated in

Clause 52) to 10 - 5.45 = 4.55 weeks of site overheads plus HO overheads and profit
on those site overheads.

81
Engineer: As this is in respect of extra works and had we calculated new rates to take
account of that attenuation, then I must agree we would have added these.
The claim was therefore accepted in principle as follows, but this would have to be
recalculated when the work was finally measured:
4. 5 5 weeks site overheads at £261.54 1,190.00

Add 8.50% HeadOfficeoverheads .101.15 1,291.15
Add 5% profit 64.56
£1,355.71
,,,n""'-'I~
<'''!' ,-
.l
-1;
>\ (
··:·c.:/
l·f 1 r:1
Notice of delays should be given in di>[n'\i,ivi~Iffii,enever possible those on the
· I·.t·.·fu.·.· .••.·.''\
critical involved path should. .b· .·.·. · 'e·1. di•·.s1</
time. 11··•1···
.• I :J,s~. · .
g.·.·,·. s·..:·1.h]!d·•··.·. ·.:. . ·g_,,J.\,
.
J..'{l·y, these
I Jo··.··.n . nsion of
. : affect the exte.
/,/~ : , )t.:, '.' 13·· .'1 ..
Notice of claims should be/ijt_e~ ~:~jii,i i f.~~s and not in euphemisms ;uch as
'we reserve our rights'. Fm,.fhtr, tTh.~Y,l~gtiidLquote the Condition of Contract being
relied upon in justificatioi~ij the~;~,u~e quantified as early as possible.
Whilst delay due t~ incl ~~~~ellller may gi~e entitlement to extension of ~e, it
does not normally give el1tle,m;it to compensation/Where, however, events which do
give such entitlement (su2tf;,;?s delay in issue of drawings and instructions) push the
work into a period of inclement weather which would otherwise have caused no extra (
. . cosrthen theextra'cosfattribufab].e:·:m•such inclement weather period may ·also --rank·
for compensation.
The principle of similarity of character and similarity of conditions referred to in

Clause 52 must include all conditions.

82
CASE 6.2 CLAIM FOR DELAY ARISING OUT OF ERROR IN DESIGN
The contract is for the construction of road works for a housing estate, including one
road-bridge and one footbridge. Contract documents comprise:
• Drawings; Conditions of Contract JCT 63/77.
• Bills of Quantities based on SMM 6 ~
• Tender dated 5 March 1979 in the sum of £2,428,977.
• Time for completion 2 years.
• Acceptance dated 2 April 1979. Possession of site 17 April 1979.
~
C omment /.C','i
~(/.·:::•,:;)·.,.
The choice of JCT Conditions of Contract ang/;~6 is not perhaps the best for the
purpose but they can function quite adefi~fteJy ~iye11lthat the necessary amendments
1
are made_to the SMM to accommodfe~j1. '· f~r!ofJite:ms not normally covered, ~hich
may reqmre a method of me:,'.u.{rr.t.t(d. t.·•.'( dr. .1.,rY

Background to case ff !),~, l)'
~In-th-e-ab_s_e_n_c_e_o_f_a_s_p_e_c1-.fitJatfon, t~el3/d.jc6ntains a provision calling for a programme
to be submitted a~er accrpt~5,~·~ T:~jl the contractor does, _showing completion in~
months. The architect qv~r1e9
1
'1,ls'
but the contractor said he had men and plant
~ n d was in a po1sJ!.i9.n' to complete in that time although the contract period
would remain at two years.
Events leading to claim
Work started normally and excavation and road formation were in progress when an
error in the design of the footbridge was found and it was necessary to issue revised
drawings.
Architect to Contractor 4 July 1979
I regret to inform you that an error in the design of the footbridge has been found
and the drawings already issued to 'you must not be worked to. Revised drawings
will be issued in about three weeks.
The contractor acknowledges, and six weeks later revised drawings are ready.'

83
Architect to Contractor 16 August 1979

Herewith revised set of drawings for the footbridge. Please mark all existing
drawings as superceded. The quantities remain unaltered and the weight of steel
reinforcement remains the same.
Contractor to Architect 20 August 1979
We acknowledge receipt of revised drawings for thefootl;widge. Although the design

appears to be much the same and the quantities remain unaltered, we consider that
this bridge will take a b o u ~ e r to construct.
Will you please extend the time for completion to allow for this and also the six
weeks' dela in issuing the drawings. -
Architect to Contractor ,./"'.\ 29 August 1979 (

It is rwt intended to extend the time for co./ik,6) at this stage. In any case, it is
doubtful if _this is necessary as Y,f~\oft1mJ.th~ws completion. within eighteen
months, so zt would appear to be U1!f?'1fJt;.~~sa ,t<p_;ex.tend
~ c t o r to Architect . . .,.f(I (·t'../,.Ji.if '.;:·'·I{ A 3 September I 979

1r;,) i?.: r·.e· ,. . .:.i
We must protest at yow/i~tter 0/i~?pluiJ~l We were about to start work on this
:~~;;:::;ne:~r;::~~~f \j~d
~ridge w~en_your instri~fibn oft}tt~~..~tks recei":ed an~ we ~ave had plan~ ~landing
this extenszon of time m order to facilitate our
There is no reply to this letter and the job continues. In the course of the next few
... ~~~:::::;:~ !~:~t::coa:;e~:~a;::~:r~~a;~:-~!::::~~~~:;~~)'a:~~~ent weat..h_._.e.r.............. ( 1
Contractor to Architect 20 March 1980
We hereby give notice that over the winter period up to the beginning of this month
we have suffered exce ·
,.,.------
~
our agent.
inclement weather which has delayed work by three
weeks. Y o u ~ a s also kept records and has agreed this period with
--------.:----....,.,
There have also been a number of variations for which we will require six weeks'
--
- ~
----------
extension of time.. and there was three weeks' delay by the Electricity Board. This,
~_:_:__.;__..,_~.-
plus the eight weeks we originally requested in connection with the footbridge, will
make fourteen weeks in aU

84
Architect to Contractor 26 March 1980
Even accepting the total delay is as much as you claim, this is still less than the six
months which, a~ding to your programme, you expected to save.*
We therefore do not propose formally to extend the time.
Contractor to Architect 1 April 1980
We must again protest at your failure to extend the time for completion.
We need your formal extension of time because of claims we intend to submit in
connection with the footbridge and extended because of varied work
-
3,\ '(\M....r"'
1
In one sense the architect is correct in not extending thl for completion because it
) .
seems that the actual time required will not ,.,.oyerrun the contract period. As, 0
therefore, /" > \

t?ere seems no likelihood of liquidated da¢.8,;.gf.• sl•.being recoverable, extension of
time is not needed.
•
.
.,r. :j (
i?. .< >,
I<<<< I 1
/ . ., ;, . ·
, \ ri ··: :·.:•·
~I : •. ·. .
......,,
.
t, ; . j
n the other hand, there is ofteo/'al.fp,l~1n1w·:rit1 at10ns such as this where later
1
;:~der an extension .o· .•.··. .f· .•. t.Jli/:·n•.· ·e./·o· •:··.::·J· · .·.• .s.·• .· .s·'.· • .· •.• a· · I:.J 1.·. ···.!t~h.,t!n all the circumstances are taken
mto / ? ·i[, •j )i;/
1
account, so well and go~f •ilut it t'lill;:f~rs Jssible that some will be overlooked.
Wh _Q
}'.Y!!Y ' 3m
d contractors peF,sist ' asl\.1.u:g /. . 1i<I /)
li;!:i..:' ,/:'JI
10r extens10n •
Q_f time
. m . order to provi'de !! basis
.
ff
for !! claim? In none #ie:'."Fp*-pl of Contract in common use do the extension of
time clauses make any piovisi9n"'ror payment.
\ '1,.,.,,..,,,r·./'" .
Architect to Contractor 9April 1980
I am at a loss to understand your letter of 1 April. Work on the footbridge is now

nearing completion so clearly this will provide no grounds for claim. There remains
other contract work to be done and there is every indication that you will complete
within the contract tiJ.I.herefore fTiere is nO reason why, you should seek to claim
extended overheads.
Contractor to Architect 14 April 1980
Our tender was based on our being able to complete the work in eighteen months.
This we shall not be able to do. We are aware that we shall in all probability
complete well within the contract time for completion, yet the fact remains that we
have been delayed and require compensation.
We enclose herewith our claim.

85
STATEMENT OF CLAIM
1. Delay because of redesign offootbridge
We were about to start work on this bridge when instructions were received not to proceed.
We had on site certain items ofplant which were required only for this bridge. We expected
instructions within three weeks and therefore considered it better to retain plant on site in
case we could not get it later when required.
JR compressor 250fr £207 per week x 6 == 1,242.00

Crane 3-5 tonne crawler £246 per week x 6 = 1,476.00
Concrete mixer 14/10 £64 per week x 6 = 384.00
£3,102.00
Add overheads 12. 5% 387.75
(
£3,489.75-
Add profit 5%
2. Extra work /'.~

,r
/l: {,,
"-:• I : .'
'.' f ·. .
. "
i' I
174.49
£3,664.24
site overheads for this period()

f :I
L.·...
L . .
Ir .
Overheads were included i1i§.~f,.Ji!l(e~~ 12.50%. /
Tender Sum £2,428,997
~~
x 12(:50%,i,,
y; .C·" ,:: •;·:·.
3'03,624.63 ~
This spread ove'r~f'i-..q{§P,·· .62 per week.
Therefore six weeks' overheads £23,355.72
3. Delay by Electricity Board
This delay arose through the failure of the Board to move their cable from the route of the
main spine road. This caused nine weeks' delay (of which your Clerk of Works has
records) when very little work could be done at all and we· estimate delay to the job as a
whole at six weeks.
6 weeks' overheads at £3,892.62 per week 23,355.72

Add profit at 5% 1,167.79
£24,523.51
I'
f-..
The architect is highly incensed at receiving this claim and sends it to the quantity
surveyor with the following letter.

86
Architect to Quantity Surveyor 25 April 1980
I enclose a claim from the contractor totalling some £51,543.47 which I consider
quite preposterous.
He is claiming for delay allegedly arising out of an error in the design of the
footbridge. The location of the reinforcement had been wrongly shown. There was
no difference in the quantities, or in the design of the bridge itself, so there was no
variation. In any case the bridge was completed long before other work on the
contract.
He is also claiming for additional overheads on extra work. You will know the value
of these. If these are being paid at BIQ rates or similar I do not see what else he can
claim.
~-t"ll~J''.'.I\
Then he is claiming for the delay in moving tif;"elgjtric cable. This is correct so far
as the facts are concerned and to assess thJ.:eifn.¢~ve delay at six weeks is, I think,
not unreasonable. But I do not see,1htJ~ h{~¥1gs,i.fy overheads w!zen he planned
to do the job in six iiitffilhs less thatz . (fz¢.doif1Ir ~Pf1 .erlio This was for two years and
1 1
'-- he mu"s-rlfe presumed tohave. _r:_,.( ~-;w

_ :_:e1t.in_·._n_·.·_ is1_lJn. ~4_e_;. r_·.11ve eadsfor this period.
,,,,.,, , rJ 1J. ·1 r: ~r ·.. l
viously a hasty letter, it j(b,eh~r_t~ ~sk f~r ~~£ment and advice before giving an
opinion, unless one is suref_o:fone'~,_-.-.'~---,o'vn _ •_·• ·_a.[ !::Phis letter reveals three commonly held
misconceptions. /r>/ .·) J--===----------~
I
~~~:::::::::===:...--1·7·· .1 l/
. ·~Regarding the footbridgefii-41j,il)th; architect says it could not have been on the
critical path. N everthelesstther~Y'was delay on this item of work and the contractor says
he had plant standing idle'•. in'·consequence. The architect was warned of this in the
letter of 3 September: Although that was not in explicit terms it would be difficult to
argue that it was not a notice. If therefore plant was in fact standing idle in
consequence, and if the contractor acted reasonably in the circumstances in not
removing it, then the employer would be liable to pay. There is no need for extension
of time, either in itself or to validate a claim. Whether the rates claimed are reasonable
is another matter.
e second misconception concerns additional overheads for extra work. Certainly

B/Q rates, one way or another, contain provision for site overheads. If they are all
contained in the Preliminaries, then adjustment of these as part of the valuation process
under Clause 11 may well suffice. Overheads may, however, be included in the rates
and price. Then, on the basis that similarity of character and of conditions is an
·, essential term of the contract, if the extra work is of small value relative to the time
required to do it the contractor may well be entitled to something extra. Site overheads

87
are generally related to turnover, so that if turnover in relation to variations is less than
tbat for contract works generally, some adjustment is called for.
The third misconception concerns the 'spare' time beyond the end the contractor's
programme to the contract date for completion. Some argue, as the architect here is
arguing, that the contractor will have or should have allowed overheads for the whole
period. But this is to ignore the terms of Clause 23 of the Conditions which says: 'and
who shall complete the same on or before the Date for Completion ... '. If a contractor
sees a way of completing the work more quickly then he economises not only on direct
costs but also on overheads, particularly site overheads. Presumably this saving is
reflected in his tender (and so he got the job and his competitors lost it). If delay occurs
then the criterion is the same in all case~dig !h~contractor.suffer dam~ge? If he did
he is entitled to compensation. If a job goes on beyond the contract date then clearly
additional site overheads are being incurred. But if a contractor has planned and
tendered on the basis of doing it in a shorter time1,,tlie~ equally clearly any extension of
his overheads represents damage (assuming the ..delay-to be the fault of the employer).· -
C
t .•'1 I .
l l J I..
In this case the quantity surveyor repo,siis,.fotiofi: J
Quantity Surveyor to Archite/1 to: ,.~j 20May1980
r v11·•:/.••· ·,.· ;r/

Regarding the contrac_tor's g·. l·a···'.z.·~J: f.••.'.:.•·.jt·
,,, 1
· ,:)it/'
1. Whether or not th~re w.f/£n 'e~tdJ, i~ ,Jes~n, it seems to me quite clear that in
terms of the working dra~ifzfs ~f ~~sd,ed'"there w~ an 'a1lerazion or modification of "
the design 'within the me1~{ryg~pJ a;Jduse 1_1 (2). I cannot think it is your intention to
hold the contractor responszble£or the design.
\~~;1,~I~~.;
· :/
The items ofplant were in/act on site/your CIW has records). As he was expecting _ ( ;
···--···--···· ......... 'revised instructiorrsc.in three weeks; I think irreasonablethlit he-retained~tlieJiliint
on site.
He has charged day work rates which are unacceptable and I have informed him he
is entitled to no more than depreciation rates. This he is prepared to accept, except
for the crane which he hire. I have therefore agreed to accept the hire charge for
this item. This would/all under Clause 24(/)(a).
2. Regarding the extra work, the value is almost exactly £100,000. At the contract
rate of turnover, this should have taken no more than 3.21 weeks. He has claimed
six weeks which your C/W considers reasonable. In that case he would in my
opinion be entitled under Clause 11 (4) to 2. 79 weeks of additional site overheads.
He has, however, calculated them incorrectly. The 12.50% is right but this was
added to his direct costs, it was not the overhead content.
i I
Dr. Sherif EL-Haggan - CL.AC 040
88
The Contract Sum needs to be analyzed as follows:
£ 2,428,977
£ 115,666 less 5% profit
£ 2,313,311
£ 161,394 less 7½% HO overheads
£ 2,151,917
£ 239,103 less 12½% site on costs+ 78 weeks= 3,065.42
£ 1.912.814 Direct costs
2. 79 weeks at £3,065.42 8,552.52

,l' "~,f.t:.I:~'•~\
/ ~
In the same manner as he applied HO overhead/if],:) J
I
his tender, the same method should be a!~!:ed!h:(i~;;.J, 7½% 641.44
tf>,:\
.l ,: : ' < i·~1.•·
·. ·.·•·. 11 )"l·;:IJ 9,193.96
Similarly with profit /1 //y.··. : l/\]/:4 5% 459.66
l
/ ·' r/ J . .j
"II! '/ •...,•· '. ·· 11
·.,.1
.·.·. ·'.'1•..···,·,,/
/
i
\~,
/
,:?fl I · 1•·.:
"
!
· .. ·
1 ,.,
.:.;
,,-J t
M · , ,•
· 1i'l / :r £9.653.66
./ / I '
4
3. Delay by Electricity Bodrd/

,'
I) ·
l !,l'I
~ i P/
fi ,,,,,,
1 1
The contractor producedlhi~ progra'fi/ ttfyou at the outset showing completion in
eighteen months. He has .sat}sjj,ef, ~pJ by a sight of his original papers that he has
based his tender on this. rfthere/pf~ he was delayed beyond this period for a cause
which is the responsibilit},;,<z.f,..tHe employer (as in this case) then he is entitled to
compensation as a matter of damage under Clause 24(l)(d). Site overheads were
undoubtedly involved, but he could produce no evidence of any expenditure in the
nature of HO overhead. He would not be entitled to profit.
Site overheads for a period of 6 weeks at £3,065.42 £18.392.52

89
CHAPTER 7: CLAIMS ARISING FROM DEFAULT, DETERMINATION
Liquidated damages
Determination (forfeiture)
Frustration
War clauses
LIQUIDATED DAMAGES
Claims in this area usually concern the wrongful ,,.~,!:!duction of liquidated damages
and are usually incidental to other claims. They,1:pf~~~ht two practical problems: (
/':,;.,x~J
(a) . 011l··.·.d.•
th~ period to which ~hey ap~ly or s1:z
of entitlement to extension of time. / ·.·. .
a{~i1{~h
I' j[., J
in turn is more aproblem
r. t'\ ! .· i l ·.1
· amount; w h eth er }P?
(b) their ✓~1: l .• f:
· fa;ct1t.-tu@y 1:areJf~(a'/ genume
· ·
pre-estimate o f th e
employer's probable loss
and not at the date of brefc.~/
ct~7.querr~~oiJ. J •
e[~~t•'~alculated at the date of tender
[ )
1 r:
... J I t/
Subject to these two poiJ~s<f~y.t;~ i,dothing esoteric about the recovery of liquidated
damages. They are recov~r,b1.f)Recovecy does not depend upon being able to prove
actual damage. There is ~,;;.,·question of having to have a corresponding bonus for
earlier completion; that is a quite separate matter. If liquidated damages by their nature
or amount are wliolly unreasoiiaole then fney becotneiii fact a penalty and.tlie)' not will
be recoverable. They will be set aside and actual damages will be recoverable.
Liquidated damages should not be calculated on a rule-of-thumb formula but some

attempt should be made to assess the probable actual loss. This may include
continuing fmance costs arising out of lack of use of the facility; continuing
supervision costs and loss of actual income or profit, if such were to apply, all
assessed at the time of making the contract. In this connection the loss must be that
sufferable by the employer which, in the case of a local or central government
authority, would include the foregoing but would not include loss of benefit by the
public (e.g., cost benefit from a road improvement).

90
So far as the time is concerned, there must be a date from which they can run. The
Engineer must have given any extension of time that is due and be satisfied that the
contractor is entitled to no more. In some contracts he is required to certify that this is
the case and failure to do so could invalidate the recovery of liquidated damages.
DETERMINATION (FORFEITURE)
There are relatively few claims in this field because determination is infrequent and
because the contract conditions dealing with it spell out what is to be done. Such
cases as there have been are mainly concerned with wrongful determination, and
this usually involves litigation. The word 'determination' in its ordinary meaning
connotes 'bring to an end' but in construction contracts the Standard Forms
endeavour to avoid this by saying 'expel the J26fitractor [from the site] without
::::::::ilities under the I~ (\Cr('r 63).

thereby avoiding the Con-tract or relea~ihg : tte Contractor from any of his
l I'\ ·I
/
,,.li r IArJ
j' ,,l / i
In this context frustration mpanffe 'r~th~f. niqrJ ~an one party being prevented by
the other. ICE 5 puts the n/~tt,e' ; in tdh'~d~ te$ns·:./'In the event of the Contract being
.f :, 1 r:·· ~ r ,<: !
frustrated whether by w~r pr an~ !oti~r supervening event which may occur
independently of the wifl. ·• df .... tp.e lpa}ti;~, (Clause 64). Frustration is very rare in
construct10n contracts. ,·. · !j i,,,/
. l·· \,,,
'\·,:._.',, ,·;;
<;:,:,;;,1:-f'J/'v
WAR CLAUSES
Like determination clauses, these should cause no difficulty if the terms of the clause
are followed carefully.

91
CASE 7.l CLAIM FOR RECOVERY OF LIQUIDATED DAMAGES
? Pertinent particulars of contract
The contract was for the construction of a length of motorway and was based on
contract on ICE 4 Conditions of Contract. Time for completion was 2 years.
Tender dated 22 January 1972

Order to commence given 13 March 1972
Date for completion 12 March 1974
Date of actual completion 29 August 1974
Liquidated damages £1,400 per week.
1
Events giving rise to claim ~fl~~'.•.•~~ ~l
--~- . /,vi
~ .\
l:. - -~ -··: "~ C
Various dela!s ~ccu1:e_d during th~ course o~(:m~i"":frk, as -is not unusual, in~lriding
?elay to claim m givmg poss~ssion ,sf'\ t~7.dfw~.''(two weeks); by excepti?~ally
inclement weather (a total of mne ~. t!eks qlaµn . . ~g;;s_i~ allowed); extra and additional
a
work (six weeks claimed, four a\fo';Y~d\j stri\ie)two weeks) and two specific
insta~ces of delay \ one wee~/ij /ao~)c~1ei}'lf'W~lit of drawings or details to be
sup~hed by the engu:ieer. T~~-,t,1Ar1ax.• rt~:,·w€6ty-
four weeks. Sh~rtly a~er the
c~rtificate of comp~et10n h~Jl~~en rnsy~1f!:lieieµgmeer granted ~n extension of!ime _of
s1xt~en we~ks and mforme&;~e e°lploye~i;fcfcontractor accordmgly. Fr?m an mtenm
certificate issued shortly[ t~ereafter; thvemployer deducted £11,200 m respect of
liquidated damages for eif P:tt;Jfst',~jlay.
\.: .. ' :.. n ,I
Engineer to Contractoi(/< ',) 20 September 1974

"\.~,.ti,ffl-/
With reference to the various notifications of delay which you have given from time 1
lo-tiiiie71iifing-thectJurse~ofthe··work,··these totalledcctwenty-one-weeksbutLconsiderc--c (.
0
the periods claimed for exceptionally inclement weather (nine weeks) and additional
work (six weeks) are both overstated and I have reduced them to six weeks andfour
weeks respectively, thus extending the time for completion from 12 March 19 74 to 2
July 1974.
Work was due to be completed by 12 March 1974 whereas it was not in fact
completed under 29 August 1974, a delay of twenty-four weeks. It is therefore
considered you are responsible for eight weeks' delay, liquidated damages for
which amount to. £11,200 at £1,400 per week.
Contractor to Engineer 25 September 1974
With reference to your letter of 20 September, will you please confirm that you
have taken account of the delay caused by the late issue of instructions
Dr. Sherif E=L-Haggan - CLAC 040

92
regarding pile lengths to Bridge No 4 and in the issue of drainage details from
Ch 1100-1300?
Engineer to Contractor 30 September 1974
It is co,ifirmed that these delays did occur and one week has been allowed in each
case.
Contractor to Engineer ·3 October 1974
Thank you for the information contained in your letter of 30 September. We have to
point out, however, that under Clause 8 of the Conditions, no provision is made for
extension of time nor is there any other provision in the contract under which time
for completion may be extended in respect of delays for which the Employer is
responsible. /#'°'.'""\ .
We are advised that in such a case the liquicf.rJ!ei{.dJ.<mages clause is inoperable.

l E 1· j
t" · il
I:
l Ii · ,,,
Engineer to Contractor /1c·":7\ r. !If. /) 14 October 1974
I cannot accept the contentJ.rn /.(tut if y~~ ~tter dated 3 October that the
liquidated damages clause j(i70JJej98le. I !! /
I ,,.,,; I ,,1 I iV
Clause 44 of the Conditibn/of pori'tt-~ctr,r,0?ides that the time for completion may
be exten_ded in case of/ '~/her s_p~9ia(~ircu~stance~ of any_ kind whatsoever'. This
clearly includes delay{c.qused p'J!Jhe" late issue of instructions under Clause 8. If
you insist upon your qq~f~2:tif1;it'\~ould mean. that the extension of time gr~nted
should have_ been [or drlyf~,.~rteen instead ~f sixteen weeks. . Y~~ cannot ~er~ously
be contending this, foKibi-s would have increased your liability for lzquzdated
damages, not reduced it to nil.
Contractor to Engineer 17 October 1974
We are advised that provisions for extension of time are generally for the benefit of
the contractor and that should the employer wish to make provision for extending
the time in the event of his causing delay then express provision must be made, as is
infact the case with Clause 42.
We are further advised that in the event of the employer being responsible for any
delay, however slight, for which no provision is made for extension of time, then
liquidated damages provisions are totally inoperable.
This is of course a matter for the employer in that it is he who deducts liquidated
damages: yet it is extremely important that architects, engineers and quantity surveyors
should be aware of this principle as it affects recommendations they may need to make

. 93
to their employers. This situation still applies in respect of the FIDIC Conditions and
some ad hoc Forms of contract.
In this case, the employer evidently sought legal advice as the deduction for liquidated
damages was restored.

For confirmation of the validity of the contractor's contentions see Hudson's Building
and Engineering Contracts and Building and Engineering Common Forms by I N
Duncan Wallace. See also Peak v McKinney Foundations Ltd (I 970, 1 BLR I I 1).
Whilst the defect on which this case is based has been remedied in ICE 5 (see Clauses
7, 13, 14 and 31) the problem may still be met wJtlr:in ad hoc Conditions of Contract
prepared by individuals or authorities for their'f.c,-wni use (as was case with Peak v (
McK!~ney~, in FIDIC to some extent and _alsj(@Pif~~~ct of delays for which express
provision 1s not made (e.g. supply of m~~lslby e'l)1jJ[@yer).
Care is also necessary to operat1; ~(~{]~iq_;,~~ provisions at the proper time.

T~ere is some do~bt as t_o h,Pf
!ff.~Y'.ek~r9vis~~J/_can be _operated retrospe~tively.
Clearly an extens10n of tnl\e q,annpt Uea~se~sed&'untll the circumstances causmg the
delay have ceased. to ope/at/. If ~~nsi~Ji{f time is not given then, there is a
possibility that the. time. f.•·.°r.·J com.~.1•. e·•.Jio~y·fuay have b~en al~owed to become at
large and once this has ¥~:p~e~~.d ~tis by no means certam that 1t can contractually be
re-established. It can theftfo}:~ lje!..d"ngerous to leave extension of time to a sort of
sweeping-up operation w:1:te1t,,the date of actual completion is known. Apart from
anything else, there is th~ii"'' a danger of balancing one factor against another, but,
whereast~e Conditions.provid~f~! extension in the case of delay, they are._n...o...t....s_o............. (
specific about setting-off time saved.
In the case being considered here, once the date for completion has passed and as the
contract contains no provision for re-establishing the date (ICE 4 had no provisions for
extension of time for delays by the Employer), the date for completion is sa~d to be 'at
< _l_ar_~d the,I.eafter it may not be possible to operate the extension of time provis~s.
.... -..
The contractor is then under obligation to complete in a 'reasonable time', failing which
the employer would be entitled to common law, i.e. unliquidated damages.
Even so it does not follow that the employer could then succeed in recovering the full
amount of his damage, even if he could prove it. It is probable that the amount he
could recover would be limited to the amount he would have recovered as liquidated
damages. This is because the 'breach' lay with the employer when he, through his agent

94
the engineer (or architect), failed to issue drawings or instructions in time. It is an

axiom of English law that a party cannot profit from his own default. If he could claim
unliquidated damages in excess of the liquidated damages provided in the contract, the
employer would be doing just that - hence the limitation.

95
CHAPTER 8: PRESENTATION OF A CLAIM
PRESENTATION OF A CLAIM
The success of a good. case can often tum upon a well presented document. 'Do not
judge a book by its cover' is a well used phrase but often a book with a poor cover is
never opened. Claims need to be produced with top quality print, with graphics well
reproduced and a cover which invites the potential reader to look inside.
It has been said that the three most essential items to successful claims negotiations
are: good records, good .records and good records. ,..~••'t\
-----------,---,.-.,..,..----7;"'t /'·.·',:.; ..<.···.':'}'3
In the vast majority of cases, the burden of ff
vjrl~'•, any given claim rests with the
claimant; he who asserts must prove._g,~~imslpi . ,,Jtf1adequately documented, which
means that appropriate records m_usy~~~e'.blee~.- ~}Jtjthe time the relevant work was
execute~. ~any a contractor;.~/flfmt ~~~ 11?~ ·
ej9fl by reason of _lack ~f proper
substantiatmg documentary JNI~~n;ce.j(V1ta~ a;~n av poraneous supportmg evidence to
; . .· ,· ' . j' ' ,, .. I ! .·U
any claim might include sittf r~.cord~ e@'mprisinw-"'
I.· Tender and contract df?fenifti?~; b} '
2. Daily record of labour:fu\.d pJ~nitsJaff etc.;
3.
1
Materials received an ~is1'S~1; li~
4. Drawings register; \..,,.;...•,/
5. Correspondence and minutes files;
(
·6. Site,instructions;
7. Variation orders;
8. Dayworks;
9. Contract programme;
10. As-built programme;
11. Photographs (dating facility preferable);
12. Agreed measurements of 'covered' works;
13. Delay notifications;
14. Claim notifications;
15. Materials orders and invoices;
16. Cost control;
17. Subcontractors as above.

96
A clairri is basically
.
a document which sets out to persuade. It is essential that. whatever
. ' .
document is produced to support the claim must be of good quality. A poorly typed and
. .
presented document is unlikely to- prpve ·successful· in helping. to achieve an amicable
settlement.
Many claims are .drafted in. such a way tµat it is necessary to read thr9ugh a great deal
of correspondence, site minutes and records to understand th'e case. It is important that
the· claim can be read and understood without reference to other documents.
' '
Correspondence, site minutes and records are usually essential to corroborate the facts
referred to.
It should always be borne in mind that if the disput~. .ls'referred to arbitration it will be
necessary to provide oral evidence from -those iIJ.{Jlf~~ with the prnject. Documentary
evidence such as correspondence records and th.eri1lil<:d will require the evidence of the
person with first ha:nd knowledge of ~p,·1ia4r~ lf~fJ'?red to in the •correspondence. or
the person who kept the records. / I i:;;:;•r ) . II .·! , .
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,, •

\~ THE AMERICAN UNIVERSITY IN CAIRO oJ-l')UJL, ~..;---4~1 ~ 4 1

Contractual & ~egal Aspects in the Construction Industry

Claims & Disputes in the Construction Industry

···:cc:......:c:··· .:.. ~=--~=·------~-----···---=: ........-~··-~---·-·-

·"Claims Should Not/-~ e Made Or.t

Taken Personal/>~ r~j-f y Are Simply

Re/atlonsh/p(Between Them To Meet

Dr. Sherif EL-Haggan - CLAC 040

INTRODUCTION: DEFINITION & CLASSIFICATION ................................................................................ 4

Dr. Sherif EL-Haggan - CLAC 040

CHAPTER 5: CLAIMS CONCERNING PAYMENT PROVISIONS............................................................ 52

PRESENTATION OF A CLAIM ·························::.:::\·······f/.·;{r·(·.L.)..............................................................95

Dr. Sherif EL-Haggan - CLAC 040

INTRODUCTION: DEFINITION & CLASSIFICATION

all nsks) to the s1tuat10n t~ day. ,/1- ! )

CLAC 040 - Dr. Sherif EL-Haggan

CLAC 040 - Dr. Sherif f:L-Haggan

specified date would entitle the employer to deduct liquidated damages at a

the remedy could be in the form of a payment of a sum of money, an extension of

~ e third category relates to a cla'.91",."';d~ ~/la~ of tort of the applicable law of

claim is successful, the remedy/li~S'1in gep.er~l.Jn ~ 'just and equitable' award

earned'. If the claim is"successful, payment is assessed on the basis of a '

CLAC 040 - Dr. Sherif EL-Haggan

Based on the above, claims fall into three main categories:

CLAC 040 - Dr. Sherif EL-Haggan

CHAPTER 1: GENERATION OF CLAIMS

--:,-Should th~ail to _!ionor them. In so far as ~fa.y~ef~ition of the requirement is not

The contract i~ drawn in th.~,(light l?f.

CLAC 040 - Dr. Sherif EL-Haggan

CLAC 040 - Dr. Sherif EL-Haggan

CL.,4.C 040 - Dr. Sherif EL-Haggan

ICE 5 is reasonable in requiring .,'notice in writ!.,ng ... as soon as reasonably possible

Engineers should encour/,ei,AJnc~~:~ oq .Jla.illi"'{ That is not the same thing as

CLAC 040 - Dr. Sherif EL-Haggan

considers himself entitleq! ahd to lqupt~ _,conditions of contract where appropriate in

'I ·""-,r i' ! ..,/

Claims usually arise from\evenJJI ~~

CLAC 040 - Dr. Sherif EL-Haggan

CHAPTER 2: CLAIMS CONCERNING THE EXISTENCE OF A

(c) A contractor denies that a variation or supplementary contract is binding.

'Variation' is used in this context to mean the variation of an existing contract by

A contract is essentially an agreement between two or more parties to do or to refrain

CLAC 040 - Dr. Sherif EL-Haggan

sources of finance, on the basis that if>finanGe iwei:~,forthcoming

2. Brogden v Metropolitan Railway Co - The defendant railway company had drawr(

CL.AC 040 - Dr. Sherif !EL-Haggan

::::~e~~~~s!;:~: ~~:~~;~~~~:: ~:~a::s~~~::~;~~ci~~;: : : :::~f:: 1

~ Recognition of a Valid Contract

CLAC 040 - Dr. .Sherif !EL-Haggan

Authority may be eitheJ

Apparent authority, on the other hand, is conferred by the representation of the

CLAC 040 - Dr. Sherif !EL-Haggan

It is thus of great importance that an engineer or architect inviting or accepting tenders

Intention to Create Leg~_.{~J'la~i.()_._: ~~t_· ·

onsideration commonly comprises a payment of money or a promise to pay money.

CLAC 040 - Dr. Sherif EL-Haggan

Offer and Acceptance

~ An offer, in order to be cJ,aJle of ~cbk!ce must indicate an intention to be bound.

CL.AC 040 - Dr. Sherif EL-Haggan

At the time when the contractor makes his ten1£~

c)ntract is in existence. The cost

w1thm_a reasonable time ft~~~9fl,~Jb lapse and cannot afte~ards be ac_cepted.

CL.,4.C 040 - Dr. Sherif EL-Haggan

::::~e~~~~s!;:~: :;~~~~:: ~:~a::s~~~::~;ci;: : : :::~f:: 1