We have received a claim from a dry-lining contractor for disruption and prolongation costs on a project under a JCT98 Without Quantities form. The subcontract agreement is a DOM 1, up to and including amendment nine. Under the contract we know we must confirm levels of payment each month, as the Construction Act states, but how much time do we have to assess and agree the value of the claim? In my view this is not a claim for works carried out and therefore not covered by the act. If this is so, then the claim would only need to be settled by the time set out in the contract for agreement of the final account, namely six months.
It is correct that under section 109 of the Construction Act you are entitled to confirm the sum of interim payments with your subcontractor and, by way of DOM 1, interim payments are due at intervals not exceeding one month.
However, in relation to the disruption and prolongation claim, there is no set period in which you have to assess and agree its value. Claims of this kind are always difficult to evaluate because of the complexities in assessing consequential losses. Therefore, you must consider whether you have all the information required to assess the claim. Has the subcontractor substantiated it?
The definition of "construction contracts" at section 104 of the Construction Act is quite broad and I do not agree that the claim is not for works under the contract. Occasionally, where there is a diligent quantity surveyor, the sums claimed will be included in the interim payments. However, generally they will be dealt with by adjusting the final account.
Also, remember adjudication. Parties to a construction contract can give notice at any time of their intention to refer a dispute to adjudication, so that is another option available for the subcontractor in seeking its claim.
Whiteboard jumble
We are working on a scheme for a 1000-pupil school let under the JCT98 design-and-build contract. As part of the fit-out, the school is to get interactive whiteboards, which have definite guidelines for fixing heights. Details of the height of the boards and the dado trunking were issued to the contractor by the employer's agent, but the contractor submitted a drawing for comment that did not comply. The lack of co-ordination over the height was not picked up by the employer's agent during the period agreed for comments to be returned. In fact, the error was not noticed until the boards were positioned (at the wrong height). There is now an argument over responsibility for the error.
The contractor's primary obligation is to carry out the works referred to in the employer's requirements and the contractor's proposals. The contractor is also required to exercise reasonable skill and care in designing the works.
If guidelines for the fitting of whiteboards in schools were readily available to the contractor at the contract date, it should have had regard
to such guidelines in preparing the design. This would be the case if the guidelines were referred to in the employer's requirements but is probably the case in any event if such guidelines were generally available to those involved in the design and construction of teaching accommodation.
If the employer issued a change instruction the contractor would have to comply with it. If supplementary provision 2 applied, the contractor ought to have followed the employer's requirements for the submission of drawings. Supplementary provision 2 expressly states that the giving or lack of any comments from the employer does not detract from the liabilities or obligations of the contractor unless the comments so state.
In the circumstances the employer should issue an instruction under clause 8.4 requiring the contractor to make good the non-complying work at its own cost.
Ifs and buts
Can a letter of intent be held as a binding form of contract? The effect of a letter of intent will always depend on the facts of each case and the construction of the particular letter. A letter of intent ordinarily expresses an intention to enter into a contract in the future. Such an intention, provided it is honestly held, usually creates no binding contract. However, it is common for letters of intent to include words authorising works to be carried out. This may affect what is sometimes called an “if” contract under which A asks B to carry out certain works on the basis that, if they do so, they will receive appropriate payment. Such an “if” contract must contain the necessary terms (such as price and scope of work) if it is to be held as a binding contract. If there is no “if” contract and no formal contract is eventually entered in to (contrary to what was intended in the letter of intent) the law will normally impose an obligation on the party who made the request to pay a reasonable sum (on a quantum meruit basis) for the work done.Postscript
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