CONSTRUCTION CLAIMS

Claims in Construction Contracts are

Inevitable

Reasons of Claims
The employer and his professional representative
who prepare the contract in haste leaving many
short comings in their documents and also commit
defaults in fulfilling their obligations try to defend
their document/action though they very well know
that some aspects are indefensible.

How to Tackle Claims

To tackle the problem of claims effectively it is
necessary for both sides to have a better
understanding of the basis and principles of
contract and therefore of the rights and
obligations of the two parties.

Understanding
It is necessary for professional representatives of
both sides to have an understanding of business
side of industry so as to appreciate the
circumstances in which the contractor conducts the
risks in which he can properly and contractually be
expected to undertake and the financial
consequences if things go wrong.

If things go wrong by reason of any default on the

part of contractor, it must remain his concern;
however, if the default lies with the employer or his
management team, then the employer must face
the financial consequences and settle the claims
without any loss of time to avoid any adverse effect
on progress of work.

Different Types of Claims

a.
b.
c.
d.
e.

Contractual Claims
Extra Contractual Claims.
Quantum Merit Claims.
Ex gratia Claims.
Counter Claims.

Contractual Claims
These are the claims which arise out of
the express provision of the particular
contract i.e., for extra cost, expense and
direct loss specifically provided as a
remedy in the contract for breach of
contract on the part of the party
concerned.

Extra Contractual Claims

These claims are also known as common
law claims. These claims are for
damages for breach of contract at
common law.

Quantum Merit Claims

Provide remedy for a person who has
carried out work under the instruction of
the owner but no price has been agreed
or where original contract has been
replaced by a new one and payment is
claimed for work done under the
substituted contract.

Ex-Gratia Claims
Ex-gratia claim is one where no legal remedy is
available to the contractor but arise out of
hardship. On the ground of equity or favour the
authority concerned may in certain circumstances
consider that hardship calls for mercy and moral
liability. These claims are also called sympathy
claims. Wherever such claims are to be given it
will be better if these are given during the
currency of the contract so that the money paid
helps in improving progress of work.

Counter Claims
The claims raised by the opposite party to
counter the claims of the claimant is called
as counter claims.

Potential Heads of Claims

1.
2.
3.
4.
5.
6.

Late handing over of site.

Variation in data/information supplied and that actually
encountered during execution.
Late supply of drawings & required information.
Disruption/disturbance caused due to untimely
instructions.
Consequences of delay in decision on progress as
well as cost to the contractor.
Delay caused and extra expenditure incurred/ loss
suffered on account of non-fulfillment of various other
obligations on part of employer as well as contractors.

All participants to make a list of problems

at site which have or may lead to claims.

Preparation and Presentation of Claims

Preparation of the claim.
a. Burden of Proof.
b. Basis of Claim.
c. Importance of facts.

Preparation and Presentation of Claims

Preparation of the claim.
a. Burden of Proof.
b. Basis of Claim.
c. Importance of facts.

Burden of Proof
Where the claim situation arise the party attempting to
demonstrate that it was prevented from performing or
performed in excess of, or that the other side performed
contract to contract requirement has the responsibility of
proving such a conduct.
The accused party need not usually defend itself against
the allegation until some evidence is presented by the
party raising claim showing wrongful exercise of lawful
authority on the part of the party against whom the claim
is raised.

When the party establishes evidence in his favour

which is sufficiently strong and would be enough to
render a favourble decision unless contradicted
and overcome by the other party, the party against
whom the claim is raised, either has to come
forward with a concrete counter fact to demolish
the claim or will have to consider the claim.
Therefore the party must bring out concrete
evidence while raising the claim which will not be
easily demolished by the other party.

Basis of Claim
1.

2.

3.

Claimant must ensure that the relevant position of the

contract law where the remedy is provided is precisely
stated.
The party raising claim must also base his claim on a
legal theory that is accepted as a reasonable ground
of recovery under the law applicable to contract.
The party raising the claim should not only show that
the owner is responsible for the harm for which relief
is being sought, he should also prove that he is free
from blame or have not made any contribution to the
harm.

Importance of Facts

Claim presentation should have a logical conclusion,

otherwise it must be accepted that some facts are lacking.
Missing fact search documents
1. Various letters
2. Memos
3. Pictures
4. Test reports
5. Watch diary
6. Site documents
7. Suppliers
8. Officials and experts etc.

The contractor who raised the claim bear the

burden of proof for establishing a claim by
providing concrete evidence of cost impact that is
effective enough to demonstrate that the claimed
cost were incurred as a result of extra work,
changes or defaults of owner etc. The proof of
expenditure is a pre-requisite for complete claim
analysis by the owner.

Claims Supporting Evidence

1.
2.
3.
4.
5.
6.

Site records
Correspondence
Record of site meetings
Site diaries.
Programmes and progress schedule
Payments claimed and made.

In a situation where a claim is lost for direct loss and /or expense in
respect of a variation it will be necessary that it is supported by the
following:
1.
2.
3.
4.
5.
6.
7.
8.

Copy of an instruction for variation validly issued and acted upon.

The date of issue and receipt of instruction relating to variation.
Brief on the nature of variation.
The time at which it was necessary to carryout the work pursuant to the
variation instructions.
Justification that carrying out of the variation instructions certainly affected
progress of work.
The extent of work which got affected by implementing the variation
instructions.
Proof that the contractor made a proper and timely application to the
engineer in respect of the direct loss and /or expense.
Substance supporting particulars and proof of direct loss and /or expenses
suffered or incurred.

DRAFTING OF CLAIM
The claim should be written under the following three
headings:
a. Introduction
b. Ground of claim
c. Substantiation claim

INTRODUCTON

Brief contract particulars relevant to the claim

Brief description of the situation leading to
claim.
Reference of the relevant correspondences/
notices.

Ground of Claim

Reference of relevant contract clauses which

entitles the contractor for the claim and where
the contract clauses do not provide any
remedy, reference of the contract law section
where the claim can be legally justifiable and
admissible.

Substantiation of Claim
In order to substantiate the claim properly the
supporting evidence as mentioned above as well
as the various details of the expenses of the
losses suffered with appropriate proof is desirable.
In order to prove the fact of delay on the part of
the employer use of planning technique such as
CPM, should also be made.

Providing Damages
Prerequisites to recovery
1. Presentation of evidence of an act which
claimed cost were incurred.
2. Concrete proof between the act of condition
complained of and the damage incurred.

Negotiating Settlement
1.
2.
3.
4.

Preparation before start of Negotiation

Timing the negotiation.
Strategy of negotiation and tactical checklist.
Communication and bargaining position.