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CONSTRUCTION

CLAIMS
PRESENTED BY : JANICE KONG & FELIX
LAU

WHAT IS CONSTRUCTION
CLAIM?
A claim is a demand for damages rightfully or allegedly due to the
aggrieved party
If there is any breach of contract by one party that causes actual
damages, a claim for damages can be made under common law or
under clause 74 of Contract Act.

However,
There is a limit for the right to claim for specific matter ONLY
Contractor must also follow the conditions & procedure laid in the
contract

TYPES OF CLAIMS
1. Contractual claims (PAM 2006)
This type of claim arises from the contract itself.
Ex:
. Clause 11.6 & 11.7 (variation works)
. Clause 23.1 extension of time.
. Clause 24.1 enables the contractor to pursue his entitlement to
loss and expense caused by matters affecting the regular
progress of the works.
. Clause 24.1(a) also preserves the right of contractor to seek his
entitlement under common law.

LOSS AND / OR EXPENSE CLAIM


14 relevant events under Clause 24.3 and no more. Any events or
matters not in the list do not entitle the Contractor to loss and/or
expense
3.1 The term Loss and/or expense includes:
i) direct damages arising naturally or directly from the breach itself.
ii) indirect or consequential damages. Applies only if employer are
aware in that the said damages were likely to result from the breach
at the time of contract.
3.2 The contractor may claim for loss and/or expense if :
i)

The regular progress of the works has been or is likely to be


materially affected by any of the relevant matters expressly
referred to in clause 24.3.

ii)

The contractor has incurred or is likely to incur loss and/or


expense which could not be reimbursed under any other
provision in the contract, refer to clause 24.1.

3.3 Conditions For Loss And Expense Entitlement.


i)

Contractor to make a written formal application.

ii)

The loss and/or expense must be caused by the relevant


events under clause 24.3.

iii) The regular progress of works has been materially affected


by the relevant event.
iv) The contractor has taken reasonable steps to mitigate
(prevent) the delay.
v)

The contractor has actually incurred loss and/or expense.

vi) That the loss and/or expense cannot be reimbursed under


other provisions under the contract e.g. clauses 1.4, 11.6,
11.7.

RELEVANT EVENTS LISTED


UNDER CLAUSE 24.1
a) late issue of AI
b) delay in giving site possession
c) suspension of works by employer
d) delay by employers licenses
e) delay to supply materials by employer
f) opening up for inspection and testing
g) act of prevention or breach by employer
h) discovery of antiquities
i) appointment of a replacement consultant
j) dispute with neighbours
k) execution of works under provisional quantity
l) failure to give entry and exit
m) Suspension of works for non-payment and withdrawal of supervision
n) Suspension of work by an Appropriate Authority.
Any event not listed are NOT VALID for claims e.g. the effect of inflation.

CLAIM PROCEDURE

(CLAUSE 24.1A & B)

Step 1
1. Written notice of intention to claim for loss and/or expense
2. Initial estimate of his claim, duly supported by all necessary calculations shall be stated
3. Such notice must be given within 28 Days from the date of AI (or the start of the
occurrence of relevant event, whichever, is earlier).
4. The written notice shall be a condition precedent to any entitlement to loss and/or
expense.

Step 2
i)

Contractor shall submit a formal application for claim.

ii)

Formal application shall include complete particulars of his claim for loss and/or
expense, together with all necessary evidence and calculation to substantiate his
claims.

iii) This formal application shall be submitted after the 28 Days of completion of the
relevant matters.
iv) Failure to submit within 28 days or any extended date agreed; it is deemed the
contractor has waived his right to claim.

Contractors Common Law Rights upon rejection of his claims


i)

Contractor may be able to pursue his claim under common law


for damages.

ii)

He can only do this, provided he has satisfied the condition


precedent under clause 24.1(a) regarding written notice.

Contractors entitlement To EOT and Loss and/or Expense


Entitlement to recover loss and/or expense is separate from
entitlement to EOT
1) When EOT is granted there is no automatic right to money is
conferred
2) 2) Where an EOT granted under relevant event in clause 23.8 but
the relevant event is not listed in clause 24.3, and then Contractor
is not entitled to loss and expense.
3) Conversely, when loss and/or expense is granted there may be
no automatic right to EOT.

Effect of compliance with AI.


1) It is interesting to note that Clause 23.8(g) provides that contractor is entitled
to EOT for compliance with AI under : i) Clause 1.4 for discrepancy in contract
documents ii) Clause 11.2 for variation works iii) Clause 21.4 for suspension
of works by employer or fire.
2) But under Clause 24.3(c) contractor entitled to loss and/or expense for
compliance with clause 21.4 only;
3) The explanation is that On discovery of discrepancy under clause 1.4,
architect to issue an architect instruction under clause 11.2 to put right the
discrepancy. On execution of variation works contractor are paid under
clause 11.6 for variation and for additional expenses under clause 11.7 which
he could not be reimbursed under clause 11.6.
Headings Of Claim
4) Extra preliminaries due to elongation of time
5) Head office overheads
6) Loss of profit and loss of anticipated profit
7) Interest and financial charges
8) Loss of productivity due to disruption
9) Additional cost for acceleration of works
10) Inflationary cost of materials and labour
11) Cost of preparing claim

General Principles of Reimbursement


Generally, compensation should be on the principle of the loss lies
where it falls
where the loss arises from contractors default, the loss of both
parties is wholly borne by him, or
where the loss arises from employers default, the Employer should
compensate the contractor, or
when both parties are not at fault, when the faults arises from a
neutral event. Then each party shall carry their own burden or
loss.
Loss and/or Expense Claim is Exhaustive
Loss and/or expense claim under clause 24.1 is meant to be
exhaustive in nature
It does not allow contractor to make up for any shortfall for any claims
under clauses 11.6 and 11.7.

2. Extra-contractual Claim
(common law claim)
This include :
1. claims for breach of contract claims arising outside the
expressed term of contract.
2. claims for implied contract claim for work done based on a
Letter of Intent.
3. claim under tort claim for negligence, e.g. Architect refusing to
issue Interim Certificate with valid reasons.
4. claim under quantum merit claim for a reasonable sum for work
done where there is no contract or where the contract is silence
on how the work is to be paid.

RESTRICTIONS TO CLAIM
1) VERY tedious! Contractors needs to prove damages
with sufficient evidence and some damages are difficult to
quantify.
2) Claims cannot be made immediately upon occurrence.
Claim must go through arbitration or litigation only after
practical completion or after determination of contractors
employment.

3. EX-GRATIA CLAIMS
1) A LAST RESORT!
2) NO legal basis. NOT legally binding but for which some moral
obligation is felt.
3) It is premised on grounds of undue hardship.
4) Payment is discretionary. Usually made on goodwill basis or
on moral grounds or generosity.
5) Such ex-gratia payment is usually made to settle a claim on a
compromise basis and without prejudice (admitting) to liability,
thus avoiding lengthy and costing litigation process.

PAYMENT OF LOSS
AND/OR EXPENSE
Any lost and/or expense ascertained and
approved shall include in payment
certificates and Contract Sum adjusted
accordingly.
Lost and/or expense payment shall not be
subject to retention.
QS should find out the actual lost and not
estimate.

Claim for reimbursement for loss and/or


expense is specific contractual right under
clause 24.0.
This right under clause 24.0 is additional to any
rights or remedies which contractor possesses
at law, particularly to damages for breach of
contract.
These right and remedies are expressly stated
to be unaffected, especially the right to claim
for breach of contract under common law.

EXPLANATORY NOTES
ON TERMS
Materially Affected refers to works or
progress affected in a substantial extent.
Disruption Of Works refers to the low
productivity due to the disturbance or
interruptions.
Regular Progress refers to the speed of
progress which are directly related to the
completion date.

ACT OF PREVENTION OR BREACH


OF CONTRACT BY EMPLOYER
Employer interferes with or obstructs the issue of payment
certificates by architect.
Employer deliberately pays the contractor late.
Employer interferes with the granting EOT.
Employer personally deducts the amount due in interim
certificate by architect.

PROBLEMS WITH
CONTRACTUAL CLAIMS
Standardizing meaning in the construction industry.
Problem with proving loss.
Problem with Quantifying effects of cause into monetary
terms.

QUESTIONS!
1. Which of the following claim is harder to pursue? WHY?