Constructive acceleration demands clear intentions - Construction & Industry - ArabianBusiness.

com

Constructive acceleration demands clear intentions

by Chris Larkin on Saturday, 10 March 2007

The construction industry in this region is arguably the most dynamic in the world. The scale of projects and the speed at which they progress makes working in this sector both exciting and challenging, but it does have its problems. Many projects, particularly in the property and retail sectors, are in competition with each other. As a result, developers are under pressure to launch projects, sell units and deliver them as soon as they can. This pressure is, in part, passed down to contractors by way of short construction periods and imposition of liquidated damages if the work is completed late. Problems arise when projects are poorly planned and are not procured in the most appropriate way. Incomplete design and poorly defined scope often result in the issue of variations during construction which delay and disrupt the works. Even on well-planned projects, changes and other matters beyond the contractor's control arise that affect the progress of the work. Where such events occur that are likely to delay completion, the contractor can request an extension of time. Employers would rather avoid delays to the delivery of a project for the reasons given above and, therefore, will not be keen on extra time being granted, preferring the contractor to mitigate the delays somehow. A situation can arise where the contractor is entitled to an extension of time and has followed the procedures laid down in the contract for giving notice and submitting a claim, but the engineer or employer's representative either rejects the request or postpones making an award. In these circumstances the contractor has a dilemma: it will want to avoid paying liquidated damages but will not want to spend substantial extra amounts of its own money to finish on time. So, does it continue at same rate of progress and finish late, running the risk of being liable for liquidated damages, or does it accelerate the works at its own cost? This is the contractor's decision alone. If the contractor decides to accelerate the works then it might be entitled to recover the additional costs. This is commonly referred to as constructive acceleration' but it is not accepted in all legal systems. In the UK, the doctrine of constructive acceleration is not recognised, albeit the case of Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik (2002) indicated that in certain circumstances such a claim might succeed. Under US law, constructive acceleration is recognised but requires five elements to be satisfied: there must be an excusable delay that entitles the contractor to an extension of time; the contractor must have given a timely notice of the delay and submitted a proper request for an extension of time; the request for an extension of time must have been refused or postponed; the employer must have required (either by coercion or an express or implied instruction) that the works be complied within the original time for completion; and finally, the contractor must actually accelerate performance, incurring additional costs. The position under UAE law is not so clear. Article 246 of the Federal Law No 5 of 1985 (the Civil Code) states that contracts must be performed in a manner consistent with the requirements of good faith. Clearly, this applies to the parties to the contract, namely the employer and the contractor, but also applies to the person who has the power to award extensions of time and certify payments, such as the engineer, for example, under the 4th edition of FIDIC's Red Book. Under the Red Book, the engineer has a duty to determine the extension of time that the contractor is fairly' entitled to. In exercising this duty, the engineer must act impartially within the terms of the contract and have regard to all the circumstances. If the engineer has not exercised this duty properly and has not awarded an extension of time - to which the contractor is fairly entitled - then it could be argued that he has acted contrary to Article 246. Had the employer put pressure on the engineer not to award an extension of time and the engineer bowed to that pressure, then both might be considered to have acted in bad faith. If there was an act of bad faith that resulted in the contractor incurring additional costs, then the defaulting party or parties responsible could be liable to pay compensation. Article 282 of the Civil Code states that: "Any harm done to another shall render the perpetrator, even if he is a minor, liable to make good the harm." This could mean that a claim for constructive acceleration might succeed. The key question, however, is whether the additional cost of acceleration resulted directly from the act of bad faith or whether it resulted from the contractor's decision to accelerate rather than finishing late.
http://www.arabianbusiness.com/9181?tmpl=print&page=[6/9/2009 9:20:55 PM]

Constructive acceleration demands clear intentions - Construction & Industry - ArabianBusiness.com

While the position under UAE law is not clear, all parties should take care. I would advise contractors to comply strictly with the requirements of the contract in respect of submitting notices and claims, and ensure its claims are full and detailed. If your request for an extension of time is rejected or ignored, inform the employer that you maintain your claim. If you then choose to accelerate the works, inform the employer of your intention to claim the cost of the acceleration. Contractors should keep full and detailed records of the measures taken to accelerate the works. My advice for engineers and employer's representatives is always to act in good faith when considering contractor's requests for extensions of time. You should give proper consideration to the contractor's claims, act impartially and resist any pressure from the employer. For employers, do not interfere in the assessment of the contractor's entitlement to an extension of time. If the contractor is entitled to extra time but you still desire the work to be completed by the original completion date then either instruct the contractor to accelerate the works (if permitted by the contract) or enter into a supplemental agreement for the acceleration of the works.
< Previous article A conference trick

http://www.arabianbusiness.com/9181?tmpl=print&page=[6/9/2009 9:20:55 PM]