How to deal with conflicts in contract documents

A Claims Class student recently contacted me for some advice regarding conflicts in contract documents. The Engineer always instructed the Contractor to go by the most stringent of the conflicting documents. The student asked if this was the correct approach. This is often the default position of engineers or contract administrators. I disagree with such an approach, so I thought that it would make a useful blog topic.

The first place to try and resolve conflicts in documents is the contract. This will enable you to see if there is an order of priority of documents included. If, for example, the specification is deemed to be a higher priority than the drawings, then we should generally follow the specification. However, this is a simplistic approach and is not always appropriate. Let’s look at a few examples.

Contract documents should be regarded as being mutually complimentary. But, there are two categories of problems that may arise when interpreting the contract documents. First, there may be inconsistencies and conflicts that occur within a document or between documents. Second, there may be omissions in the documents where the subject matter is covered either inadequately or not at all.

Conflicts in Contract Documents 

Sometimes we have conflicts in the same document or set of documents. One contract clause may say one thing and another something else. Furthermore, the specification may contain contradictory information in different places. In this case, we must adopt the accepted interpretation that the specific should control the general. This approach assumes that the general applies unless specifically contradicted. Here, it is a matter of a clause that goes right to the point versus one that generally discusses a particular circumstance or requirement.

Inconsistencies in Contract Documents

Drawings are sometimes created inconsistently. When this happens, the more detailed drawing should usually prevail over the general drawing. Similarly, a large scale drawing will take precedence over one drawn at a smaller scale. If the drawings are of equal detail, the most current of the two drawings should usually take precedence. The trade for which the drawing is prepared should also be considered. For example, plumbing details indicated on the plumbing drawings should prevail over deviations from or omissions of that work in drawings made for other trades. It is not uncommon for the drawings to indicate one thing, and the specifications, another. This may be dealt with in the contract by stating the order of precedence.

Omissions from Documents

No set of contract documents has ever been 'complete', and it is unlikely that one ever will be. The law typically requires that the documents be ‘reasonably complete'. They should also be competently done as is the norm for the profession. Therefore, omissions must be judged against that standard.

The first place to look for something omitted from either the drawings or the specifications is elsewhere in the contract documents. Thus, apparent omissions from the drawings may be covered by text in the specifications, and omissions or ambiguities in the specifications may be covered by details in the drawings. This is consistent with the viewpoint that the contract documents are complementary.

One additional point that may be important in individual cases is that the courts will tend to construe an ambiguous provision against the party who was responsible for drafting it. Thus, if the Contractor’s interpretation of a drawing or a part of the agreement or specification is reasonable, the Contractor’s interpretation may prevail over the Employer’s (as the party who caused the item to be drafted). This is based on the rationale that the party who drafted the item could have had it any way it wanted and if it did not draft a clear provision or produce a clear drawing, the other party should not be made to suffer unreasonably.

Dealing with Omissions

One of the ways that courts deal with omissions in documents is to infer that certain terms are included, though not explicitly stated. The attitude of courts (and their willingness to do this) has varied among jurisdictions and according to the types of documents involved. Courts are usually quite willing to find certain terms implicit in construction contract documents. However, express terms and conditions will preclude a court from inferring different terms and conditions.

Another method that the courts use to fill in gaps in the contract documents is to find implicit terms and conditions according to custom and usage in the industry. This could cover many items. It might even be used to decide which of the parties was responsible for a particular contractual event. Thus, who bore the risk of that event occurring or not occurring, as the case may be.

Conclusion

It is therefore important for the Engineer to examine all the documents before deciding on conflicts and omissions in the contract documents. They should also judge each case on its own merits.

If you need any help with any of the issues discussed, you can sign-up to one of our courses here.

 


FIDIC 2017 Employer's risk events and new claim terms

FIDIC 2017 - 15 Top Tips For Successful Construction Projects

The FIDIC 2017 red, yellow and silver forms of contract were introduced seven years ago. Similar to previous new editions, they have taken time to gain traction within the industry. However, they are becoming more widely used. We anticipate that within the next few years, they will have become the “go to” forms of contract, gradually replacing the old editions in many regions internationally. 

Before you start a project under FIDIC 2017, you might want to arm yourself with some practical knowledge. In this guide, we provide an introduction to the current FIDIC contracts. Read on, to discover our 15 FIDIC 2017 tips to help you with your contract administration and management. 

The 2017 editions of FIDIC have 71% more pages and 64% more words than the previous editions. That’s a lot of changes to get your head around!

Obviously then, the new contracts are more complicated. Good contract administration demands that users become familiar with the extra content. 

FIDIC realised that project participants were not following what was essentially advice in 1999, so the 2017 editions contain more procedures. Many of the new procedures include new obligations for the parties and the engineer. 

Use the form below to access our top 15 FIDIC 2017 tips for ensuring project success with the FIDIC 2017 contracts...

 


FIDIC 2017 Employer's risk events and new claim terms

The Importance of Correctly Identifying Claims

For contractors, it is their responsibility to identify situations in which there is an entitlement to a claim for additional time or payment. On the employers side, identifying these situations early means they can take steps to avoid claims and make provisions for the additional costs. Consequently, it is essential for good management of projects that we are able to look at what is happening on the project and identify claims as early as possible.

So, what should we be looking for? The most frequent causes of claims are as follows:

Payment for Additional or Changed Work

On a remeasureable contract, the work is valued against agreed rates. The contractor will be paid for the work actually carried out, including any variations to the original scope of work. However, we must consider circumstances resulting in abortive work, rework or additional mobilisation of resources. The remeasurement does not compensate for these.

On a lump sum contract, a single price for the work is agreed in advance. Variation will need to be evaluated separately in order to calculate the change to the contract price. Sometimes a variation is formally acknowledged so a claim does not have to be made, but frequently, changes are introduced by instruction without acknowledgement of a variation. Consequently, submit the required notices and follow up with a claim for additional payment.

Extensions of Time

If a delay affects the agreed time of completion, contractors need to consider an extension of time. Monitoring of actual progress against planned progress is essential. As is identifying events which may have an effect on the time of completion. In either case, we must check whether the event leading to the delay is something for which the contract allows an extension of time for. If so, submit the necessary notices and follow up with a claim.

The contractor should submit extension of time claims based on when they are entitled to an extension of time. Not when they need an extension of time to avoid delay damages. Hence, identifying claims early is essential.

Prolongation Costs

Circumstances giving rise to an extension of time will often carry an entitlement to claim for additional costs of loss and expense. Submit claims for prolongation costs either with the extension of time claim or as an associated, separate claim. Put them forward as soon as possible and don't leave them until the end of the project.

Acceleration Costs

Circumstances giving rise to an extension of time will usually carry an entitlement to claim for additional costs of loss and expense. This arises from the extended period for which the contractor is obliged to maintain time-related site resources and head office overheads.

The engineer will often attempt to pressure the contractor into undertaking acceleration measures without agreeing to the increased cost. In such a case, the contractor must make their position clear. Agree the acceleration measures and the nature of the costs before undertaking any acceleration measures. Otherwise, it may prove difficult to have a subsequent claim agreed.

Disruption Delay and Costs

Disruption occurs when an event for which the employer is responsible causes the contractor to work less efficiently. This may manifest itself in the requirement for additional resources or time in order to achieve a target. The latter situation would cause delay, which could also affect the time of completion. In this situation, an extension of time would be warranted. Identifying claims like these as they occur will give the claim a greater chance of success.

When to Submit the Claim

When a claim situation has been identified, the contractor needs to submit the claim within the time period specified by the contract. This is not usually an onerous task, provided that the contractor has sufficiently qualified and experienced resources available to prepare the claim.

Don't leave claims until the end of the project and don't comprise consolidated claims for more than one event. The longer you leave a claim the less likely it is that it will be accepted.

If you're looking to know more about whether to submit your claim, check out this article. If you want to develop your understanding further, take a look at some of the courses we offer here.


Construction Claims, Contract Admin

Will Your Contract Admin Stand Up to Future Claims?

Good contract admin (or administration) is key to any successful project.  If a claim is to succeed, it must contain certain essential elements: Cause, effect, entitlement and substantiation.

In other words:

  1. What happened that gave rise to the claim.
  2. The dates that various events occurred.
  3. The effect of delays on the time for completion
  4. In the case of incurred costs: Are they appropriate? Are they calculated correctly?
  5. Does the contract contain entitlement to compensation?
  6. Is every statement or fact in the claim substantiated?

We should also remember that the onus is on the claimant to prove that the claim is just. It is not the respondent’s job to do this when reviewing the claim.

To achieve this, the contractor’s contract administration systems must be able to support future claims. If they are not, it will be difficult or impossible to prepare a claim that fulfils these criteria.

Contract Administration: Things to Consider

Some things to consider in this respect are as follows:

  1. Is your record keeping adequate and can the records be easily retrieved?
  2. Are important and formal records drafted so that they may be understood by a person not familiar with the project?
  3. Are notices that are required by the contract given within the prescribed time frames? Do they contain the correct information?
  4. Has a baseline programme been established? Is it prepared in line with good practice?
  5. Are revised programmes prepared when circumstances dictate?
  6. Are progress updates accurate? It is difficult to subsequently claim a delay if progress has been reported showing no delay.
  7. Do monthly reports adequately record the events, and may they be understood by a person not familiar with the project?
  8. Are daily records of resources deployed to the project being maintained and submitted to the engineer on a regular basis?
  9. Do you have adequate and properly qualified and experienced resources to create and maintain efficient contract administration?
  10. Do you have adequate and properly qualified and experienced resources to prepare your claims?

If you can answer yes, to all these questions, there is a good chance of success for your claims. If not, then you may need to reconsider your approach.

For more help with these subjects, why not consider joining one of our e-courses?


FIDIC 2017: What You Need to Know Now

It is now 5 years since the FIDIC 2017 editions of the Red, Yellow and Silver Books were published. As anticipated, it’s taking the industry some time to get on board and adopt these latest editions on projects.

Change Can Be Uncomfortable....But it's Inevitable

Nobody likes change. Employers and engineers are no different. It can be uncomfortable and it takes time and effort to take effect. But, as time moves on more and more projects will move to the FIDIC 2017 editions and it's critical that project teams understand these contracts.

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Justice - Avoiding Disputes and Claims

How To Avoid Disputes From the Outset

Hewitt Decipher Partnership recently presented a webinar on international arbitration. Panel members included a barrister, an arbitrator and a solicitor. They were joined by HDP employees who provide expert advice to legal professionals working on construction disputes. The aim was to look at how to avoid claims.

Whilst these professionals earn fees from disputes, the overwhelming consensus was that the best way to deal with disputes is to not have them in the first place.

So, what can we do to avoid disputes right from the start of the project?

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Increases in Material & Other Costs

The consultancy side of our business has recently received enquiries along the lines of the following. “We have come to the end of our project and are facing a huge loss due to increases in the cost of materials and shipping and because of measures that we have had to adopt to control COVID-19. What can we do?”

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interim claims

Interim Claims

How To Deal With Them

One of our Claims Class students asked for some advice on interim claims. It is a topic that often crops up, so I thought that readers of this blog might also benefit from some practical advice.

The principles discussed here are appropriate to many forms of construction contracts. However, for the purpose of this article I shall use the 1999 FIDIC contracts as an example.

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FIDIC 2017 Notices

A guide to the requirements, content and composition of notices under the FIDIC 2017 Red, Yellow and Silver books

Some of the biggest mistakes that contractors make when it comes to claims under FIDIC 2017 relate to notices. Such failures include failure to:

  • Give notices when obliged to do so by the contract.
  • Give notices within the time frames specified in the contract.
  • Properly identify communications as notices.
  • Record the necessary information within notices.
  • Cite the contractual clause under which the notice is given.
  • Address and/or copy the notice to the correct party.
  • Deliver to the notice to the place specified in the contract.
  • Deliver to the notice by the means of communication specified in the contract.

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Claims class student online training

Claims Class Helps Student Secure US$1 Million

This month I am going to allow myself to pat myself on the back, because of a success story from a recent Claims Class student.

A gentleman from an African country contacted me to discuss enrolling on one of our claims courses. He had found out about Claims Class after purchasing a copy of my Book FIDIC 1999 Notices. This is what he told me.

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