3rd EMD Building Works Site

Staff Technical Seminar

Common Interest in
Works Contractual Issues

Simon Li (ACW/M3)
Date: 9, 18 & 25 September 09

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Main Issues to cover :
1. Completion of Works

2. Extension of Time

3. Liquidated Damages

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When the contract is formed?
The acceptance takes effect.
General rule

The acceptance is communicated to the Tenderer.

Postal rule (exception)-
If the acceptance letter is sent to the tenderer by
post, it takes effect when posted.

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District Term Contract -
Type of contract most commonly used in EMD
A Contract under seal
z Articlesof Agreement
z Major advantage -

Longer limitation period for action to be

brought against breach of contract (e.g., latent defects)

12 years instead of 6

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Scheduled completion date of WO :-
Can it go beyond the Contract Completion Date?
Yes.
I/We offer to execute, complete and maintain..any
works as may bedemandedwithin the contract period
(FT clause 1)
Demand should mean to order

Contract period means.within which Surveyor may

issue WO.. (CC1)

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 Employer HK Housing Authority (AA1(1), CC1)
Contract Manager :
z named in AA
z Surveyor referred to in the contract is changed to CM.
(TSCC1)
z Supervising officer (SO) for maintenance works
= Surveyor = CM (G.S1.06)
General conditions of Contract :
z GC of C for Term Contract 1990;
z Gov. of HK - GC of C for Building Works 1993 (for lump
sum contracts, quotations, etc)
General Specification of Materials and Workmanship
for HKHA contracts 1989 edition
(CC herein quoted refers to GC of C for Term Contract 1990)

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Completion of Works (Certifying completion)
Substantial Completion (CC56)
When the works have been substantially completed, the
Contractor may request CM to certify completion.
Conditions:
z the works have passed any final tests prescribed by the
Contract;
z the Contractor gives an undertaking to complete as soon as
practicable any outstanding work or services during the
Maintenance Period. (CC56(1)&(3)).
(including outstanding list and programme for agreement)

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Completion of Works (Certifying completion) (Contd)
CM shall give decision within 21 days of the date of
receipt of such notice.
He shall either:
z certify substantial completion of works; or

z give written instruction specifying all work or

services to be done before such certification.

No further request is permitted.
CM shall certify substantial completion (without request)
if, in CMs opinion, the works have fulfilled the
requirements for substantial completion (CC56(2)).

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Completion of Works (Certifying completion) (Contd)
To what extent before completion is considered
substantial ?
z No definition, so far.
z A widely acceptable view
building is habitable
z Court judgment (HK Court of Final Appeal, Mariner
International Hotels Ltd v Atlas Ltd)
Completion free from patent defects other than ones
to be ignored as trifling.

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Completion of Works (Certifying completion) (Contd)
Considerations include Safety, security, risk, enactment
/regulation.
Some cases to study:-
z Statutory Form 5 (Scaffolding inspection) Form 5 for
inspection (form 5 for Inspection after 14 days O/S).
(SOR GR XXII(a); SC VI(d))
z Plumbing/replumbing works - (PS 14.01), completed works
not yet confirmed as satisfactory by the Water Authority
(WWO 542, 46) Decision for plumbing and replumbing may be
different.
z Fire resisting doors manufacturers undertaking and test
certificate O/S (SOR 08038)

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Extension of Time (CC53, TSCC9)
When cause of delay becomes apparent, within 21 days of
this relevant time Contractor shall as soon as practicable
give CM written notice specifying the cause and the
possible extent of such delay.
If, in CMs opinion, the cause of delay is a special
circumstances (including those listed in CC53(1)(b)), CM
shall within a reasonable time consider whether Contractor
is entitled to EOT.
Causes of delay not entitled to EOT- listed in CC 53(1)(C).

CM within reasonable time after decision shall grant EOT

or notify in writing Contactor of non-entitlement of EOT.

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Extension of Time (CC53, TSCC9) (Contd)
Causes of delay

Delay by EOT
considered
1. Client/CM (substantial extra work ordered) Yes
2. Contractor (poor management ) No
3. Neither party (inclement weather conditions, Yes
acts of God)

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Extension of Time (CC53, TSCC9) (Contd)
Extent of delay
z Basic principles:
1) The effect of delay is at the time when the works are actually
carried out and not when they were programmed to be carried out
even if the contractor is in delay. (Walter Lawrence & Sons v
Commercial Union)

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Extension of Time (CC53, TSCC9) (Contd)
Extent of delay
z Basic principles:
2) When cause of delay not due to Contractor occurs after the
original completion date or revised completion date, net EOT
instead of gross EOT should be added to revise the latest
completion date. (TSCC9) (Balfour Beatty Building Ltd. v Chestermount)

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Extension of Time (CC53, TSCC9) (Contd)
Analysis:
Critical path analysis based on latest revised programme.
z Critical path delay of any activity on the path will
affect the completion date
z Float Within this period, a programmed activity can be
delayed without affecting the completion date.
z Activity not on critical path has a float.
z Cause of day on critical path - Critical delay
z Cause of day not on critical path delay may be
critical/non-critical.

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Extension of Time Critical path Analysis (Contd)

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Extension of Time Critical path Analysis (Contd)

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Extension of Time Critical path Analysis (Contd)

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Extension of Time Critical path Analysis (Contd)

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Extension of Time Critical path Analysis (Contd)

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Liquidated damages for delay (CC55 , TSCC123, 134, 143)
not a penalty (CC55(1))
A pre-assessed monetary compensation to Employer for
breach of contract arising from completion delayed by
Contractor (HA contract)
Unenforceable if extravagant in relation to the greatest
possible loss suffered

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Liquidated damages for delay (Contd)
LD for any works for every day or part of a day of actual
delay
1. Rate per day prescribed in the Appendix to form of tender
= sum per day
2. A sum equal to
10% of the latest estimate of the Works order
_________________________________________
(Time for completion (in day) prescribed in the W.O.
+ any EOT granted )
(Actual delay = date of certified completion date or revised date
of WO completion date plus EOT) (ref: CC 51)

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Liquidated damages for delay
Methods of LD Calculation for different types of WOs
Rate per Rate based on Remarks
day WO estimate

Vacant flat WO 9
Estate WO 9 9 Whichever is the greater
District WO 9 9 Whichever is the greater

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Liquidated damages for delay
Can delay of work be allowed to continue endlessly resulting
in unlimited LD?
Very likely NOT:
The CM has obligation toward the client to mitigate his loss.
Scenario:-
z Delay of works have become too long and CM may have
the work completed by another contractor. (CC 83)
z LD rule is inapplicable (unless there is a certified date).
z CM has to invoke another clause to recover additional
expenses. (CC83, 84)

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Thank You !!

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