This article is about construction delay claims. One of the common mistakes of the owner which can create great damage to the owner. When there is a delay in the construction, some owners make the payment or accept the work without reserving the rights of claim then the common mistake is arising.
Strong Provision About Construction Delay Claims is not Enough!
Keep this fact in mind, even the construction contracts have a strong provision relevant to the delay i.e. a Bill of Quantities (BOQ), payment due upon completion of works in BOQ, completion date of the construction, damages and delay penalty in construction etc. But, If you want to claim for delay damages that may not be enough.
Reservation of Claim is Important for Construction Delay Claims!
Even the delay in construction is caused by the default of the contractor WITHOUT any default of the owner. When the construction work has not met with the BOQ, if the owner agrees to make the payment to the contractor or accepts the work without any reservation, the owner can’t claim for delay. It means the owner accepts the work without claim (Section 597 of CCC).
How to Reservation the Rights of Delay Claims?
In this case, if the owner wants to make the payment and wants to make construction delay claims later. ‘At the time of making the payment or accepting the work’ the owner must make it written with the contractor’s signature signed before 2 witnesses. Also, a clear expression of reserving the right to terminate the contract and claim for damages and delay penalty.
Often use sentence for this situation is ‘the owner reserves all rights to terminate the contract, claim for damages including but not limited to the construction damages, the delay penalty, lawyer and legal fee, other rights and remedies and all expenses in relevance’
It should include the reason why the owner agrees to make the payment which is different from the payment schedule of the contract. It is very useful in construction delay claims.
Think about when you go to Court or Arbitration Institute. How to give a Judge or an Arbitrator a clear understanding of the situation? The delay was caused by the Contractor without your default. You have never accepted that but you needed to make the payment to finish the construction. Also at the time of the payment, you reserved all rights as mentioned.
What happens if the Owner did not Provide Strong Evidence as Mentioned?
If at the time of the payment, the owner has not reserved all rights to claim the damages and penalty delay as said. It means the owner accepts to make the payment which is different from the payment schedule under the construction contract. Also the owner abandons all rights to claim for damages and penalty delay. The owner has no right to claim for the damages and delay penalty. (Civil and Commercial Code (CCC), Section 381 paragraph three and Section 597, Supreme Court Judgment No. 5302/2538, 6697/2540 and 3012/2552). So, A strong provision of the construction contract is not enough for construction delay claims. Circumstances of the parties during the construction will be considered when judgment.
What to do If the Owner Wants to Terminate the Contract when Construction Delays?
In this case, the owner must give the written notice to the contractor by giving the contractor a reasonable period of time to cure the breach of the contract. If not, the termination may not be acceptable by law and the owner may be liable for the contractor’s damage (Section 387 and 605 of CCC and Supreme Judgment No. 6598/2541).
The termination letters should give a clear expression of reservation of all rights to claim for damages and delay penalty, too.
Limitation of Delay Claims!
Delay claim is subject to the default of the owner, provision of the construction contract. Also, construction law and other factors related to law procedure. Importance one is Section 591 of CCC which prescribes that If the delay of the work originates from instruction given by the owner, the contractor is not liable, unless the contractor knew of the impropriety of instructions, and did not give notice of it.
In conclusion, the construction delay claims are not too complicated. You just need to understand it. Exercising a right under the construction contract is always a headache. It is the reason why medium and large construction projects always have a construction consultant and/or legal consultant. You may be interested in reading about construction defect claims. and construction extra work claims.
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