The Contractor had completed activities to allow the Client to use its asset to its full capacity. However, in the handing over of documentation the Contractors PM & QS left the project. The project is now 12 months down the line and the Client has received all documentation but is trying to penalise the Contractor with the pre agreed LDs due to the paperwork not being complete. To reiterate the asset has been fully operational and only the paperwork remained.
Is the client within his rights to withhold the LD sum or can this be considered a penalty?
@KD191 LDs would normally not apply to any part of the works taken over (see X7) - if your contract has been amended to provide otherwise, you would be looking to challenge the relevant provisions as constituting a penalty.
The key here is the definition of the works (in Italics) as given in Contract Data part 1. If the works includes the paperwork, then LDs could still apply. However partial take over is catered for in X7.3 and the LDs must be reduced and apportioned according to “… the proportion of the benefit to the Client …”. Consequently, (and if the documentation is not in accordance with the Scope), the Contractor would have to pay a proportion of the LDs. The amount may be very small, and the cost of negotiating and agreeing to the amount may be more than the amount payable!