Construction Contracts - Trivial Issues

M.Sridhar

N.C.C. Lucknow Region

2nd November 2016

Liquidated Damages and Penalties

• Liquidated Damages are genuinely pre estimated and agreed damages

as per the Terms and conditions of the Contract
• Normally these are stipulated as % contract price per unit of delayed
period with a maximum limit
• Say 0.5 % Contract price per week of delay subject to max 10%
• As per Law damages in case of LDs are not challengeable except cause
and responsibility and quantum of delay
• In case of Penalty the quantum can also be challenged legally
• Whether it is a LD or Penalty – not just the written words but intention
of parties while entering in to contract is seen
No Claim Certificates

• Generally Employers insist No claim certificates while submitting Final

bills or for release of payments
• Any such undertaking or letter / agreement without free will is not
legally valid
• Given under Distress , undue influence to be established
• Final bill submission should be with inclusion of all claims , amounts due
to be received
• Time frame and circumstances in conveying disagreement is important
• The undertaking should not be resulting from a mutual agreement
• Not voluntary and not with free consent
Limitation Act Provisions

• As per Indian Law of Limitation ( Limitation Act 1963 )

• The Limitation period is three years for enforcing a Claim
• 3 Years from cause of action
• Repeated reminders will not turn down limitation
• Silence of Client can not be treated as acceptance
• Positive assertion is important
• Arbitration is only quasi judicial process
• Notice of arbitration is commencement of Arbitration
• This be with in three years
• Again Contract conditions important ( Inclusion of claims in final bill)
Types of delays and Delay Claims

• Excusable , Compensable Delays ( Owner Caused )

• Excusable , Non compensable Delays ( Third Party or
( Force majeure )
• Non Excusable , Non compensable Delays ( Purely
attributable to Contractor ) – LDs to be leviable
• For Substantiating Delay Claims – Cause of delay ,
Responsibility , Impact of delay and Quantification of
damages are four cardinal principles
 Delay Analysis

• Delay Analysis is Vital for delay claims

• Base Line Program is important
• Schedule based delay analysis methods
• As Planned , As built methods
• Collapsed methods – Collapsed As built method
• As Planned Vs As Built
• Windows or Snap shot methods
• Time Impact Analysis for each delay event
 Unconscionable Clauses

• Unfair , one sided terms

• Limitation periods in notifying Delay events , claims extra
items to be taken care of
• Unlimited liability in execution ( Say no limits in Deviation )
• Blanket Ban ( Claims , Exclusions )
• Putting a Legal bar or Restraint not valid
• Section 28 of Contract Act
• Commercial impossibility , Viability
• American / English Law Vs Indian
 Whether Time is essence of contract

• Section – 55 and 56 where time is essence

Or Not
• Not mentioning simple words but by terms of agreement
• What parties understood in entering in to contract
• Contract is not a document but by Intention of Parties
Conduct of Parties
• Implied Contracts
 Breach of Contract

• When Breach then Damages can be claimed

• Section -73 , 74
• Easy to allege a Breach but equally difficult to Prove
• Do not quote this in Letters unnecessarily
• Having Legal implications