May 28, 2023
Formulation of a Balanced Construction Contract Part 2
This is the second in a two-part series. The previous post examined what an equitable contract is. This post will look at a case study of how an equitable contract was achieved on a Public Sector project in India. To briefly recap the previous post, there are two ways in which Employers formulate contracts: The Employer ‘de-risks’ itself by allocating maximum risks to the Contractor. This is normally found in bespoke contracts. Risks are allocated equitably based on certain principles which have been best illustrated in works of Max Abrahamson and Nael Bunni. Standard contracts like FIDIC are based on this. I propose a third way, which is, that each and every clause should be ‘war gamed’ for maximum contingencies and the clause should be formulated: to be in the best interests of the project, cater for maximum contingencies without leading to disputes. This should be done in consultation with prospective bidders. Case Study We will now examine one Directed Acceleration clause that…
May 22, 2023
Formulation of a Balanced Construction Contract Part 1
This is the first in a two-part series. This post will focus on equitable contracting. A contract is invariably drafted by the Employer (with or without the assistance of a Consultant). So an Employer would normally look at including contract clauses which will assist in achieving the following : Timely completion of the project – achieved through incentives (a bonus clause) and penalties (Liquidated Damages). Quality – through a Quality Assurance (QA) mechanism, putting clauses for testing and defect rectification. Protection (shield) from Contractor claims– by putting exclusion clauses and having clear clauses about the Contractor’s entitlements. A Contractor would want the following from a contract: A mechanism to ensure timely and correct payments. Timely decision-making by the Employer/Engineer. Fast and fair Dispute Resolution Mechanism (DRM). This list, of course, is not exhaustive and just gives three important ingredients. A lopsided imbalanced contract will always tilt…
April 25, 2023
Legal and Contractual Interpretation of Construction Contract Time Bar Clauses Part 3
This is the third in a three-part series. In the previous posts, the time bar clauses of FIDIC and Indian construction contracts were compared, the differences between FIDIC and Indian contracts were examined, as well as how Common Law has evolved to favour the implementation of these clauses. In this post, we shall examine the treatment of time bar clauses in India. Contractual Time barring of claims is a relatively recent inclusion in Indian contracts. CPWD has no such clause and NHAI EPC contracts has these time bar provisions for EOT, change in law, Force Majeure, and Termination due to Authority’s default. Some state agencies have copied these clauses in a distorted fashion to be all-encompassing for all claims, including variations with a reduced time frame. Leading Indian Cases Chandigarh Constr Co. v State of Punjab - SCI ruled that such condition precedent cannot be considered as a statutory bar for the claim. Though the clause indicates that if such a claim is not made, it…
April 15, 2023
Legal and Contractual Interpretation of Construction Contract Time Bar Clauses Part 2
This is the second in a three-part series. In the previous post, the time bar clauses of FIDIC and Indian construction contracts were compared. Making timely notice and/or submission of a detailed claim as per the time limit given in the contract as a condition precedent to entitlement to claim. This post will consider the fine-line differences between the time bar clause of FIDIC Sub-Clause 20.1 (Contractor’s Claim) (1999 Edition) and Sub-Clause 20.2 (Notice of Claim) (2017 Edition) and Indian contracts. Additionally, we shall examine the validity of time bar clauses under Common law keeping in view the Prevention Principle and good faith clauses. FIDIC vs. Indian Construction Contracts FIDIC Sub-Clause 20.2 (Notice of Claim) (2017) lays down time bars for notices and a detailed claim pertaining to EOT and/or additional costs (and loss of profit in some cases) for all types of excusable and/or compensable delays and/or disruption, but not for variations. Claims for variations…
April 5, 2023
Legal and Contractual Interpretation of Construction Contract Time Bar Clauses
Over the next few posts, we shall examine how the legal and contractual interpretation of certain construction contract clauses in India is a bit different as compared to the UK and other common law countries; despite India being a Common Law jurisdiction and following the UK in most legal judgments. Issue 1- Time Barring of Claims According to the 1999 Edition of the FIDIC Red Book Sub-Clause 20.1 (Contractor’s Claims): “If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim.” Sub-Clause 20.2 (Appointment of the Dispute Adjudication Board) of the 2017 edition of the FIDIC Red Book lays a further time bar on the claim: “….If within this time limit (84 days) the claiming Party fails to submit the statement under sub-paragraph (b) above (detailed claim), the Notice of…