There are several routes under NEC for the Employer/Client to pursue the Contractor for consequential loss. One being Cl25.3 (missing a Key Date), others being late payments (interest) etc. In an unamended contract does the Employer have any route to pursue consequential loss for the Contractor reaching Completion after the Completion Date (in delay by many months) ? Assuming X7 is not present in the contract. The NEC guidance notes state this would constitute “damages at large” and can be pursued under English Law. The guidance notes suggest this is a breach of contract, but no reference is made to the main contract clause. I assume it’s a breach of contract under Cl.11.2.(2) "Completion is when the Contractor has;
- Done all the work which the Works Information states he is to do by the Completion Date.
In addition, Cl30.1 states:
- …the Contractor does the work so that Completion is on, or before, the Completion Date
example: Contractor failed to resource correctly under an Option A contract, they reach Completion 4 months after the Completion Date and as a result the Employer incurs cost of a delay to a follow on trade (piling rig). Could it be argued that under Cl25.2 the Contractor has failed to provide a “service” and therefore the PM can assess the direct consequential loss to the Employer and deduct from the final assessment due?
Would welcome any response on this, thanks.
The breach is of Cl 30.1. If you have X7, that is the remedy for the breach, but in this case you don’t have X7. That therefore means you don’t have a remedy under the contract.
If you seek a remedy for the Cl30.1 breach (and you don’t have to, its up to you), it will have to be external to the contract. The W-clause doesn’t apply, because its not a contract dispute. You can either come to a commercial deal, or you can go legal. In that action, you can seek whatever losses you can demonstrate.
Thanks Andy, much appreciated.
Just remember, that if you want to progress a legal claim for losses, you will have to actually incurred them and they will have to have been reasonable and mitigated as much as possible.
If the consequential loss results in delay to the overall completion and thus penalities are applied by the Client, then only after they are applied and paid, can your progress a claim for loss.
In progressing that claim, you will have to demonstrate that having penalties applied was cheaper than paying acceleration costs to a piling contractor, or any other subcontractor, which by payment would have recovered the time at a cost cheaper than 4 months of penalties.
It is a messy exercise and you will have to pay out a lot of money before you can even start a loss claim.
If the costs are excessive, the subcontractor may just fold and restart as someone else, ensuring you cannot recover the loss.
If you go down the road of making deductions or “contra charges” so you withhold money without the contractual right, you run the risk of the subcontractor running (and winning) an adjudication to be paid in full, long before you get to start a legal claim for loss.
Best to see how you can recover the programme as best you can (as cheaply as possible) and try to convince the subbie to pay for it, on the promise of another contract down the road (and see if he swallows it).
There is a big lesson to be learned for whoever drafted the subcontract.