Refusal of a Bank to honour Performance Bonds (Guarantees)

If you ever experience a Bank refusing to pay under the terms and/or conditions of an irrevocable Performance Bond or Guarantee and need advice or assistance, contact me. You may be quite surprised how relatively simple it is to rectify such circumstances!

Claims and claims!

It seems that many Employers and their authorised representatives as well as some Contractor's engineering management & staff attempt to interpret a written contract in their own manner, i.e. not particularly well versed in (i) the language of the contract and (ii) its intention.

On many occasions, not long after joining projects, I have heard the term "contractor's claims" being used. Upon questioning the use of this term, I discovered that what was being referred to was actually the Contractor's monthly interim "application" for payment and pointed out therefore that the use of the term "claim" in that context was not only misleading but incorrect.

However, under most Forms of Contract and certainly in the FIDIC forms, the term "Contractor's Claims" has an unequivocal and express meaning. It's simply that, where the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment under any Clause of the Conditions, he gives notice to the Employer, describing the event or circumstance giving rise to the "Claim" and thereafter complies with the procedures to be followed.

So, to clarify for those out there, a Contractor's normal monthly application for payment for Work executed and completed in accordance with the Contract is not a "contractor's claim"

Forgivable & Unforgivable!

Several years ago now, I was asked to assist a European Contractor executing two major contracts in the Middle East.

The company were facing several problems on these projects, contractually and not surprisingly as a consequence, commercially. I hasten to add that this was the company's first venture overseas.

After my initial visit to undertake a review of the situation, I was asked to return to their head office and report to the President of the company.

I explained to him that what they had done, perhaps somewhat naively was to enter into not one but two agreements drafted in legalised English. And as English was not their Mother tongue, they were not able to properly comprehend their obligations at the time of the tenders. I further explained that such actions, could, under the circumstances, be considered forgivable.

But however, what was plainly unforgivable, was the fact that they had not sought proper and appropriate advice prior to entering into those contracts.

So the phrase "Look before you leap" is as valid and appropriate today as it should have been to that Contractor those many years ago!

"Approval" or Review of Contractor's documentation -A bone of contention!

With many years of experience in the construction industry, I have often been asked to give an opinion on this subject.

Let me concentrate on an EPC contract. This is meant to be a one-stop shop for the Employer (or Owner) to approach a Contractor to undertake the Engineering (Design), Procurement and Construction of a project. Thus the intention is that the Employer having satisfied himself that the Contractor (by pre-qualification) has the required resources, management, supervision, labour and plant & equipment to undertake the project on time, to the quality specified and for the (usually) Lump-Sum price quoted.

Thereafter, it should be the intention (FIDIC's own opinion) that the Contractor should be given freedom to carry out the work in his chosen manner, provided the end result meets the performance criteria specified by the Employer. Furthermore, FIDIC considers that the EPC Contract is not suitable for use if the Employer intends to supervise closely or control the Contractor's work, or to review most of the construction documents.

But, too often, I have experienced the scenario whereby the Employer or his representative not only requires to review the Contractor's documents but also "approve".

Such circumstances can lead to huge and unreasonable delays to the Contractor's programme for the Works, for if the Employer, in his review process, not only takes an unreasonable period to undertake such a review but then decides the Contractor's documentation does not comply with the provisions of the Contract.

It is now that we find ourselves in the position whereby we have to look at certain facts. The Contractor by signing an EPC Contract is undertaking to deliver the project in full compliance with the Employer's Requirements. A clause is usually included in such contracts to the effect that the Contractor is responsible and/or liable in the event that any of the works do not comply.

However, it is not unusual to see a clause in such contracts that says, despite the fact that the Employer may review or approve the Contractor's documents, he will not be responsible or liable for having done so.

So we have the situation that the Contractor holds full responsibility and liability as is intended in an EPC contract but the Employer takes no responsibility and/or liability!

In my opinion, Contractors should not enter into Contracts where this is the case unless in negotiations such clauses are amended to reflect the intentions of an EPC Contract as outlined above. However, in cases where such clauses do exist, I have even advised Contractors to ignore such provisions and to clearly and unequivocally confirm to the Employer that they intend to proceed regardless for they as the EPC Contractor are fully responsible and/or liable but will not give consideration to such demands when they have an absolute obligation to complete the works on time.

Cost savings!

Because of the nature of my work, It's not always necessary for me to travel to the location where the construction is being undertaken. With modern communication, phone, fax, courier services and most common of all these days email, it's possible to provide advice and assistance in this manner. I'm currently providing such advice & assistance to a major European Cement Plant Contractor on their projects in North Africa, the Middle East and SE Asia.

The contract documents were delivered to me by courier, I was able to familiarise myself with several issues and send feedback by way of e-mail. It's an ongoing service and is working very well.

The reason for this post is to bring your attention to the fact that your costs can be considerably cut. No time lost for me, travelling thousands of kilometres across the world, no hotel and associated costs usually payable by you - all unnecessary but you receive the same standard of professional advice & assistance regardless! So please bear this in mind?

Having contractual difficulties with Owners (Employers),Consultants or Contractors?

Whatever those difficulties are, I can advise and assist with a view to their satisfactory resolution.