An Employer has terminated for convenience 70% of the way through the project and has issued a final account which has been rejected by the Contractor.
It has subsequently been found during survey works before looking to re-award the scheme that
- Materials installed that are not fit for purpose for the works
- Shortfall in materials stated as purchased but when audited not being present
- Lack of As-Built records
I would normally view these as a defect requiring correction but as the scheme has been officially terminated what recourse do I have? Could I invoke some pull on the material warranties under clause 29C/D/E. I have assumed that Clause 45.1 is unenforceable due to the termination although would happily be proved wrong as surely termination does not entitle the Contractor to walk away from the accrued responsibilities?
As this was an option C could I adjust the EV for the materials purchase activities therefore adjusting the prices?
Additionally as the final account is potentially in dispute could this be included within any submission to an adjudicator therefore altering the disputed final account?
This would be under an NEC3 contract as the Employer (now the Client) under NEC4 can only terminate for a reason identified in the Termination Table.
The amount due on termination in this instance would be amounts A1, A2 and A4, as detailed under clauses 93.1 and 93.2. As it is a Main Option C, then the Project Manager would also calculate a share amount in accordance with clause 93.4.
Although you have stated that certain matters are considered to be Defects, the Contractor’s obligation is to correct Defects by the end of the defects correction period, which commences at Completion. As the contract was terminated before Completion then this leaves the matter a bit open ended, although I presume that the PM would take these ‘defects’ into account when making an assessment under clause 93.4.
It looks like you have an amended contract and not sure how material warranties could help here, unless the supplier also assumed an element of design responsibility by specifying the materials. This might be a difficult matter to prove and may be time consuming and costly to pursue.
As previously stated, the termination procedure under the contract is to be followed to calculate the amount due. I’m not sure what an adjustment to the EV (Earned Value ?) for the materials purchase activities would achieve.
Lastly, I would advise caution with any intention to ‘re-award the scheme’ and suggest you take legal advice if this is your intention.