Author name: CMGuide

1. The Readers of this journal must be very familiar with the phase “pay when paid”. From time to time, it has been raised by main contractors as a defence for not paying its sub-contractors. A classic “pay when paid” clause is found in clause 11(b) of the Standard Form of Sub-Contract for use when the sub-contractor is nominated under the Standard Form of Building Contract drawn up by The Hong Kong Institute of Architects, The Royal Institution of Chartered Surveyors (Hong Kong Branch) and The Society of Builders, Hong Kong (commonly known as the “Green Form”). …

Pay When Paid: What does it mean?Read More »

By Dr. Chandana Jayalath

A contractor’s overheads are normally covered by the income of the business as a whole and, where the completion of one contract is delayed, the contractor may claim to have suffered a loss arising from the diminution of the income from the contract and hence, the turnover of the business; but the general running costs of his business continue to be expended. Were it not for the delay, the contractor’s workforce would have had the opportunity of being employed on another contract, with the result that it would have contributed towards the overhead costs during the overrun period. Also, if he can show that the staff, who would otherwise have been gainfully employed, had to devote time to dealing with the disruption or delay, he may have a claim for that too. …

Recovery of Unabsorbed Head Office Overheads in a Contract ProlongationRead More »

By Dr. Chandana Jayalath

Whenever variations are ordered that omit work, and particularly if such omissions are substantial in nature, contractors often argue that they should be entitled to claim the loss of profit that they would have earned on such works. …

Claims for Loss of Profit on Omitted WorksRead More »

By Dr. Chandana Jayalath

Termination occurs when the employer instructs a contractor to permanently stop the performance of work and leave the site. Construction contracts specify each party’s rights, obligations, and remedies for termination. Termination on construction projects often results in claims and disputes; therefore, the decision to proceed with this option should not be taken lightly. …

Termination Claims in NutshellRead More »

By Dr. Chandana Jayalath

The term good faith, bona fide in Latin, is used in many areas of the law but has special significance in law related to construction. It is expected that the parties to a contract will act in good faith and fair deal at all times. To meet this test, it is honesty that comes first in the conduct of the transactions in achieving a reasonable commercial standard of fair dealing in the trade. These standards are usually set out in form of specifications taken for granted in the industry. Accordingly, good faith incorporates both subjective elements by requiring honesty and objective elements by requiring adherence to standards. Although good faith and fair deal go together, it is bad faith, more easily recognizable so that a party may contest in a lawsuit when only a bad faith prevails. According to Lord Justice Bingham, good faith is in essence a principle of fair and open dealing where the parties should not deceive each other. …

Good Faith and Fair Dealing; What Does It Really Mean in Construction Contracts?Read More »

By Dr. Chandana Jayalath
Sub letting reduces dependency on directly employed labour. It results non-wage cost of employment such as redundancy payment and offsets the risk associated with the responsibility by transferring them. Sub letting is necessary when to employ specialists of proven reliability and repute to face technical complexity involved in a project. There are two distinctly different modes of sub letting that everyone is known to; domestic and nominated. …

Pros and Cons in Subletting, Designation, Assignment, Nomination and Novation in Construction ContractsRead More »

By: Dr. Chandana Jayalath

Losses can be recovered under two limbs namely the losses arise naturally, according to the usual course of things, as the result of the breach (first limb); or the losses that were contemplated by the parties, at the time the parties made the contract, as being the probable result of the breach (second limb). Consequential loss in construction contracts is equated with the second limb, as they are often be specified clearly in writing, such as payments to consultants during penalty period. …

Dealing with Consequential LossesRead More »

By Sachin Kerur and George Varma

The UAE construction sector is a continually developing market with complex transactions becoming increasingly prevalent. The evolution of the construction sector has highlighted the need for more robust construction contracts that deal with all the relevant risk issues for a project. …

Standard Form Construction Contracts – Friend or Foe?Read More »

By Sachin Kerur and William Marshall

In Part 1 of this two part subcontracting series, we detailed some tips and traps with respect to subcontracting, and considered the criticality of successful subcontractor performance to the timely and on budget delivery of projects. In Part 2 below, we examine the risks of pro-forma subcontracts and back-to-back drafting and briefly touch on the benefits of bespoke drafted subcontracts. …

Successful subcontracting – Part 2Read More »