Fundamentals of Construction Contracts - English, ver. 2021

Fundamentals of
Construction Contracts
Prepared by:
Mohamed Maged, MBA, PGDIP, CCP, PMP
Profile:
https://luqmanacademy.com/profile/8
Ver. 2021 (50 Topics with examples)

Instructor: Engineer/ Mohamed Maged
Contract | Project Control Manager, MBA, PGDIP in Construction Law, B.Sc. of
Civil engineering, with experience in MENA region of (construction, infrastructure,
and roads) Mega projects, in professions of Contract administration, Procurement,
Tender estimating, Cost control, Planning & Claim analysis.
Certificates & Memberships:
MBA, PgDip, CCP, PMP, ACIArb, AIA Fellow, SCE-Consultant ,FIDIC Contracts Consultant
M.M. Organized four Annual Conferences of Planning and Project Management (Anniversary of
Facebook Page: Prof.Planner)- American University in Cairo, 2014, 2015 & Online 2017, 2019.
SlideShare: www.slideshare.net/MohamedMaged8/
YouTube Channel: https://www.youtube.com/ArabPlanners
Twitter: https://twitter.com/magedkom
(related FB groups: Best Advice for Planners/ Cost/ Contract – Public groups)

CONTRACT FUNDAMENTALS
• Section One – Basics of Contract (3Ts)
• SectionTwo –Tender Stage (5Ts)
• SectionThree – Awarding Stage (10Ts)
• Section Four – Core Functions (5Ts)
• Section Five – Change/ Claims (7Ts)
• Section Six – Liabilities (7Ts)
• Section Seven – Contract Closing (5Ts)
• Section Eight – Admin. andTech. (2Ts)
• Section Nine – Disputes (5Ts)
• SectionTen – Professional Certificates (1T)

Section One – Basics of Contract (3)
1- Contract Formation
2- International Legal Systems
3- Procurement procedure
Section Two – Tender Stage (5)
4- Tender Types and Stages
5- Tender Submittal and Evaluation
6- Selection Bases
7- Tender Stage Liabilities
8- Misconduct in Tenders
Section Three – Awarding Stage (10)
9- Drafting and Negotiation
10- Cases of Acceptance
11- Unjust Enrichment
12- Letter of Intent
13- Types of Construction Contracts
14- International Contract
15- Standard Forms
16- Administrative Contracts
17- Administrative Authority
18- Power and Good Faith
Section Four – Core Functions (5)
19- Documents and Precedence
20- Implied Terms and Statutes
21- Prime Obligations
22- Roles and Responsibilities
23- Risk-Sharing and Allocation
Section Five – Change/ Claims (7)
24- Assignment
25- Change Mechanism
26- Differing Site Conditions
27- Extension Of Time
28- Claims Submittal
29- Concurrent Delay
30- Prevention Principle
Section Six – Liabilities (6)
31- Privity and Communication
32- Statute of limitation
33- Damages and Quantum
34- Liquidated Damages
35- Tort and Negligence
36- Burden of Proof
Section Seven – Contract Closing (6)
37- Taking Over
38- Decennial Liability Insurance
39- Frustration
40- Repudiation
41- Default Termination
42- Convenience Termination
Section Eight – Admin. and Tech. (2)
43- BIM and Technology in Contract
Management
44- The Importance of Contract
Administration
Section Nine – Disputes (5)
45- Alternative Dispute Resolution
46- Adjudication
47- Arbitration
48- Lawsuits and Litigation
49- Confidentiality and Enforcement
Section Ten – Professional Certificates
50- Professional Certificates
10
Sec.s
ppmconference.net @magedkom ArabPlanners @profplanner
Admin &
Disputes
Contract
Closing
Liabilities
Change/
Claims
Core
Functions
Contract
Award
Tender
Stage

Section One – Basics of Contract
• Contract Formation
• International Legal Systems
• Procurement Procedure
3/50
Topics

T1
1- Contract formation essentials (Offer, Acceptance, Legal
purpose, Competent parties and Consideration)
Jayaar Impex Ltd v Toaken Group Ltd 1996
-A contract was created with the agreement initially made by telephone.
- The seller's, T, provided a form of contract for "IGPA Spot conditions to apply"
but the buyers, J, failed to sign, date and return the form.
- The only reference to the IGPA terms had been in the written contract, no
mention had been made on the telephone.
- J alleged that T did a breach. The issue was referred to arbitration and the
question arose whether or not T's form of contract was binding on J.
- Held, that it could not be said that J intended to accept T's form of
contract whatever it provided in spite of the telephone agreements. The
written contract was never accepted by J, the contract was concluded
orally and it was wrong for T subsequently to attempt to substitute a
contract which was fundamentally different. The court would not
accept that J had agreed to amend their agreement to accept T's form of
contract.
Conclusion: Oral terms agreed by conduct while no agreement to
the counter offer of T.

C2
National Building Specification, National Construction Contracts and Law Report (2018)
RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH And Co KG (2010)
Lord Clarke stated: “the moral was to reach an agreement before work began.
The court was not to impose binding contracts that the parties had not reached;
all would depend upon the circumstances. It was unrealistic to suppose that the
parties had not intended to create legal relations”.
Since the parties did not sign an agreement but only LOI, the facts determine if a
contract is legally concluded and what terms are incorporated.

T2
2- International Legal systems
Civil law: Codified written statutes.
Common law: Judicial precedent (Doctrine of stare decisis).
Law itself is classified to public (criminal), and private
(commercial, civil …etc.)

T3 3- Procurement procedure
Need/ Project – Feasibility study – Make or buy decision
(Asset management & Outsourcing) – Direct order or
Tender – Award (Agreement & Contracting) –
Implementation (Records, Claims & Relationship
management) – Closeout (Disputes & Lesson learned).
Closing
Post-
Award
Award
Pre-
Award
Make or
Buy
Decision
Business
Case
Need

Section Two – Tender Stage
• Tender Types and Stages
• Tender Submittal and Evaluation
• Selection Bases
• Tender Stage Liabilities
• Misconduct in Tenders
5/50
Topics

T4
4- Tender Types and Stages
Initial Stages: Solicitation (Tendering) – Proposal (Offer) –
Acceptance (LOA).
Types: Open (avoid Bid shopping) - Limited or selective
(Invitation to bid) – Negotiated (not recommended for big
projects) - Two-stage tendering.
Pretender stages: Prequalification - Endorsement and
approval – Evaluation (Eligibility, competence and financial
stability).
Evaluation: Price-based or Quality-based (Criterions &
Numerical scoring) – Shortlist (Invitation to bid)
Open Limited Negotiated

T5
5- Tender Submittal and Evaluation
Tender dossiers shall include all contract documents and
tendering process (Instructions to tenderers - Site visit or
examination - Pre-tender conference (Q&A to be added in
Addenda to contract or pre-award clarifications as Gap filler)-
Finally, contract supersedes all previous negotiations).
Tenderers/bidders submit Tender security or bid bond with
two separate sealed envelops (technical and financial), then
the technical evaluation becomes a prerequisite for the
financial evaluation with a period for protest and appeal.
The financial evaluation normally is compared to Employer/
Engineer or third-party estimate to decide source selection
and acquisition. It’s recommended to reject the very low
prices because it can be due to Misunderstanding or lack of
experience or intentional underbidding where all will cause
troubles in progress of the project later on.

C3- R1
Case and regulations
FP McCann Ltd v Department for Regional Development 2016
A civil engineering contractor was entitled to damages for loss of chance to obtain a public road
construction contract. In considering its tender, the Road Service's Board had breached the Public
Contracts Regulations 2006 reg.30(6) by failing to request clarification on certain items whose quoted
values it considered to be abnormally low, and which contributed to its decision to reject the bid.
30(6) If an offer for a public contract is abnormally low the
contracting authority may reject that offer but only if it
has—(a) requested in writing an explanation of the offer or of
those parts which it considers contribute to the offer being
abnormally low;
(b) taken account of the evidence provided in response to a
request in writing; and
(c) subsequently verified the offer or parts of the offer being
abnormally low with the economic operator.

T6
6- Selection Bases
It can be based on the Least Cost of the technically
approved tenderer/bidder who has the competence and
capability to execute the project. Also, it can be Quality and
Cost based selection based on a certain criteria with points
system (scoring) using weights and ratios.
It’s preferred for consultants to be ‘Quality-based selection’
where the high-quality consultant can extremely enhance
the function of the project. The selection is normally based
on the competence, reputation, management system,
experience, impartiality and quality management.

T7 7- Tender Stage Liabilities
William Lacey (Hounslow) Ltd. v Davis (1957)
-Normally, the expenses of the tender stage is like a gamble as
Judge Barry described in William Lacey (Hounslow) Ltd. v Davis
(1957):
“no implication that will be paid for the work -
sometimes the very considerable amount of work -
involved in arriving at his price: he undertakes this work
as a gamble, and its cost is part of the overhead
expenses of his business which he hopes will be met out
of the profits of such contracts as are made”.

C5 Blackpool and Fylde Aero Club v Blackpool BC 1990
In the Blackpool case, it has been held that the invitation to
tender can also result in a unilateral contract between the invitor
and the tenderers,
as a result of which the invitor must follow its own stated
procedure or be held liable to the tenderers for a breach of that
procedure.
Following this judgement, the cases have
considered the rights of an unsuccessful
tenderer and the damages payable for any
breach of the tender process (It looks similar to
unilateral contract).

T8
(2) Substitution of a listed subcontractor in furtherance of bid shopping or bid peddling
before or after the award of the prime contract is prohibited
and the originally listed subcontractor is entitled to recover monetary damages from
the prime contract bidder who executed a contract with the public entity and the
substituted subcontractor but not from the public entity inviting the bid.
It is the original subcontractor's burden to prove by a preponderance of the evidence
that bid shopping or bid peddling occurred.
Substitution of a listed subcontractor may be made by the prime contractor for the
following reasons:
(a) Refusal of the listed subcontractor to sign a contract with the prime contractor;
(b) Bankruptcy or insolvency of the listed subcontractor;
(c) Inability of the listed subcontractor to perform the requirements of the
proposed contract or the project;
(d) Inability of the listed subcontractor to obtain the necessary license, bonding,
insurance, or other statutory requirements to perform the work detailed in the
contract; or
(e) The listed subcontractor is barred from participating in the project as a result
of a court order or summary judgment.
RCW 39.30.060: Bids on public works
Detrimental reliance and Promissory estoppel
8- Misconduct in Tenders

R3
Bid Rigging
Whenever business contracts are awarded by means of soliciting competitive
bids, coordination among bidders undermines the bidding process and can be
illegal.
Bid rigging can take many forms, but one frequent form is when competitors agree
in advance which firm will win the bid.
For instance, competitors may agree to take turns being the low bidder, or sit out
of a bidding round, or provide unacceptable bids to cover up a bid-rigging
scheme.
Other bid-rigging agreements involve subcontracting part of the main contract to
the losing bidders, or forming a joint venture to submit a single bid.

Section Three – Awarding Stage
• Drafting and Negotiation
• Cases of Acceptance
• Unjust Enrichment
• Letter of Intent
• Types of Construction
Contracts
• International Contract
• Standard Forms
• Administrative Contracts
• Administrative Authority
• Power and Good Faith
10/50
Topics

T9
Obligations Drafting
NEC4 ECC used the
word “shall” only once:
9- Drafting and Negotiation
Pe-award negotiation normally focuses on Battle of forms and
contract amendments.
Main Tips in drafting: Be certain, Remove dispensable
phrases, Distinguish between Shall-Must-May, and Don’t use
passive voice.
In negotiation, Be Integrative to reach Win-win situation as
possible with commitment to Integrity without using power to
impose things because power is transitory and duress causes
intention to revenge.

T10
Tenbey v Stolt Comex Seaway Ltd (2001)
T lodged a minute on October 9, 2000 offering GBP15,000.
S wrote to T on October 10 offering GBP12,000 and lodged the tender on October 19.
T wrote to S on November 17 on other matters.
On January 30, 2001, S lodged a minute of acceptance of the GBP15,000 offer of
October 9.
T lodged a minute of withdrawal of that offer on January 31, 2001
S argued that T's initial offer had been equivalent to judicial tender and would be open
to acceptance at any time until decree was announced (unless expressedly or impliedly
withdrawn).
Held, refusing the motion for decree, that T's offer was governed by the law of
contract and not judicial tender. The refusal and counter offer of October 10 and
the correspondence of November 17 demonstrated that the offer was no longer
available for acceptance on January 30.
10- Cases of Acceptance
Offers may be superseded, expired (obsolete) or revoked.
Acceptance must be mirror image. Otherwise, it’s counteroffer.

T11
Moorgate Capital Ltd v H.I.G. European Capital Partners
LLP (2019)
Moorgate (Contractor) could have contracted for its services,
but it didn’t. Moorgate unilaterally took a risk that it may not
get paid.
The court also said it ”ought not to be quick to suppose that
commercial parties who are well able to make contracts with
each other expect payment to be made in the absence of a
contract”.
In other words, if you should have had a contract (but didn’t)
then the courts will not make one for you.
In the absence of a clear contract for those services,
Moorgate claimed for quantum meruit on the basis of unjust
enrichment.
11- Unjust Enrichment

T12
12- Letter of Intent
Seven Cases from 1971 to 2010
Historically, the courts’ view was that a letter of intent was not binding that did not
impose any obligations on either party:
“A Letter of Intent will ordinarily have two characteristics, one, it will express an
intention to enter into a contract in future and two, it will itself create no liability in
regard to that future contract.” Turriff Construction Ltd v Regalia Knitting Mills (1971).
Non-binding letters of intent include ‘letters of comfort’The classic example being
Kleinwort Benson Ltd v Malaysia Mining Corporation Bhb [1989]
and documents sent ‘subject to contract’ - all of which provide the basis for further
negotiation without becoming a contract: Sir Robert McAlpine Management Contractors
Ltd v London Demolition (UK) Ltd 1990.
However, the modern LOI can act as an acceptance of the constructor’s tender and create
a contract for the whole works: CJ Sims Ltd v Shaftesbury plc 1993, Ove Arup v Mirant
Asia-Pacific 2003, Felton Construction Ltd v Liverpool 2007, RTS v Molkerei 2010.
Incentives and Limits in Letters of Intent. Are They Worth The Paper They're Written On?
Sarah Fox, Enjoy Legal Learning, 2011 (SCL Hudson Prize)

T13 Contract Type Selection
13- Types of Construction Contracts

T14
14- International Contract
It depends on place of business or habitual residence of the
parties (UNIDROIT, Hague Convention 1964). It mainly
requires good faith and fair dealing to be enforceable.

T15
1- FIDIC: Engineer (Consultant/Supervisor)
administers the contract
15- Standard Forms of Construction Contracts

S8
2- JCT: Architect/CA administers the contract
JCT 2016 – Joint Tribunals Contract
Traditional or conventional: Measurement
• Standard Building Contract With
Approximate Quantities (SBC/AQ)
• Measured Term Contract (MTC)
Traditional or conventional: Cost
reimbursement or cost plus
• Prime Cost Building Contract (PCC)
Design and build
• Major Project Construction Contract
(MP)
• Design and Build Contract (DB)
…………..
NEC Contracts came to the
fore in the 1990’s alongside
two UK Government Reports
being Commissioned:
first by Sir Michael Latham
(Constructing the Team) in
1994,
and thereafter by Sir John
Egan (Rethinking
Construction) in 1998.

June 9, 2021
S5
NEC4 Engineering and Construction Contract
(ECC)
• Option A: Priced contract with activity
schedule
• Option B: Priced contract with bill of
quantities
• Option C: Target contract with activity
schedule
• Option D: Target contract with bill of
quantities
• Option E: Cost reimbursable contract
…………
3- NEC: PM
administers the
contract

T16
16- Administrative Contracts
This applies only in civil law system to provide an exceptional
authority to the governmental entities as the contracts relates to
public utilities.
Conditions in Egyptian Civil Law: Administrative entity, The
project is for a public utility, and there is intention to be
administrative by mentioning exceptional authority as per the
next Q/F17.
It’s under jurisdiction of the Administrative courts according to the
public policy which is mandatory. For example, in Egypt, It’s now
governed by the Egyptian law of administrative contracts no. 182
for year of 2018, previously the law of tenders and auctions no.
89 for year of 1998.
The law addresses the procedure rules while the substantive law
is based on the Judicial precedent similar to the common law.

T17
17- Administrative Authority
There are two main authorities:
1- Imposing penalties and termination subject to warnings.
2- Variation orders for the public interest but not different
character and nature.

T18
18- Power and Good Faith
Overall, power and legitimacy are transitory.
In common law: Contra proferentem rule (contract is
construed against the drafter).
In Civil law: Doubt is construed for the sake of the debtor
(it’s a bit different in case of Adhesion contract: one-sided
and unconscionable).
Good faith and fair dealing are a general presumption that
the parties to a contract shall deal with each other
honestly, fairly, and in good faith without fraud while in
business and marketing there is normally flat out lie or
what is called legally sanctioned lying.

Section Four – Core Functions
• Documents and Precedence
• Implied Terms and Statutes
• Prime Obligations
• Roles and Responsibilities
• Risk-Sharing and Allocation
5/50
Topics

T19
FIDIC Red Book 2017
1.5 Priority of Documents
The documents forming the Contract are to be taken as mutually explanatory of one
another. If there is any conflict, ambiguity or discrepancy, the priority of the documents
shall be in accordance with the following sequence:
(a) the Contract Agreement; (b) the Letter of Acceptance; (c) the Letter of Tender;
(d) the Particular Conditions Part A – Contract Data;
(e) the Particular Conditions Part B – Special Provisions;
(f) these General Conditions; (g) the Specification; (h) the Drawings; (i) the Schedules;
(j) the JV Undertaking (if the Contractor is a JV); and
(k) any other documents forming part of the Contract.
If a Party finds an ambiguity or discrepancy in the documents, that Party
shall promptly give a Notice to the Engineer, describing the ambiguity or
discrepancy. After receiving such Notice, or if the Engineer finds an ambiguity
or discrepancy in the documents, the Engineer shall issue the necessary
clarification or instruction.
CA can issue instructions
with reference to clauses
2.15/ 2.16/ 2.17 in case of
discrepancies.
JCT 2016
PM may give instruction
under clause 17.1 in case
of ambiguity or
inconsistency.
NEC4 ECC
Example of Standard Forms
19- Documents and Precedence

T20
FIDIC Red Book 2017
1.4 Law and Language
The Contract shall be governed by the law of the
country (or other jurisdiction) stated in the
Contract Data (if not stated, the law of the
Country), excluding any conflict of law rules.
The ruling language of the Contract shall be that
stated in the Contract Data (if not stated, the
language of these Conditions). If there are
versions of any part of the Contract which are
written in more than one language, the version
which is in the ruling language shall prevail.
Applicable law
1.12 This Contract shall be governed
by and construed in accordance
with the law of England.38
_________________________________
[38] Where the Parties do not wish
the law applicable to this Contract
to be the law of England
appropriate amendments should be
made.
JCT 2016
Governing Law implies other terms additional
to the express terms
20- Implied Terms and Statutes

T21
Skill and care or Fitness for purpose
Independent Broadcasting Authority v EMI Electronics Ltd (1980)
By an agreement made on 17 December 1963, and substantially in the model form of general
conditions recommended by the Institution of Mechanical Engineers, the Institution of Electrical
Engineers and the Association of Consulting Engineers for use in connection with home contracts
with erection, EMI agreed to construct a television mast for IBA at Emley Moor, Yorkshire. EMI
employed BICC as their sub-contractors to design and execute the construction of the mast itself.
In the Court of Appeal it was held that there was to be implied into both the main contract
between IBA and EMI and into the sub-contract between EMI and BICC a term that the mast
would be properly designed and reasonably fit for its intended purpose.
Held, that (1) BICC had been negligent in the design of the mast.
EMI were under some contractual liability to IBA extend to the responsibility for a negligent
design.
Lord Scarman: in the absence of any term negativing the obligation, one who contracts to design
an article for a purpose made known to him undertakes that the design is reasonably fit for the
purpose. Such a design obligation is consistent with the statutory law regulating the sale of
goods.
21- Prime Obligations

C16
Due diligence cannot be implied in some cases
Leander Construction Ltd v Mulalley & Co Ltd (2011)
The claimant sub-contractor (L) brought a claim in which it challenged the validity of two withholding
notices issued by the defendant main contractor (M) to the sum of £131K by reason of delays on L's part.
The sub-contract identified a commencement date of September 27, 2010 and a completion date of August 8, 2011.
There were no milestone dates or sectional completion provisions. The withholding notices, and the alleged delays to
which they referred, all arose before the sub-contract completion date of August 8, 2011.
M accepted that the Activity Schedule did not set out dates or periods which were contractually binding but argued
that L had an implied obligation to proceed regularly and diligently with the works, on the basis that L was obliged,
but failed, to carry out the works in accordance with the programme, which was one of the sub-contract documents.
Held, Judgment for claimant.
L did not have the implied obligation argued for. The courts were generally slow to imply terms into a contract,
particularly where, as here, there were already a number of express and implied terms of the sub-contract which M
could exercise considerable control over L's performance such as M could serve a notice to comply and then terminate
L's employment if it failed to proceed with the works "regularly and diligently". Further, the alleged implied term
would cut across the express contractual mechanism in relation to delay and extensions of time.

T22
Grove Developments Ltd v Balfour Beatty Regional
Construction Ltd 2016
The parties' contract was a JCT standard design and build contract amended by a series of amendments. The
parties amended that by agreeing a schedule of 23 valuation and payment dates covering the period from
September 2013 to July 2015. The contract specified a completion date of 22 July 2015.
The works were not completed by that date. In August 2015 the contractor issued an application for a further
interim payment. The developer asserted that the contractor had no further entitlement to interim payments.
The issues were whether the contractor was able to recover interim payments after the contractual completion
date under the Housing Grants, Construction and Regeneration Act 1996 s.109, which provided that a party
was entitled to interim payments for "any work" under a construction contract, and the Scheme for
Construction Contracts.
Court agreed with Grove that BB (Contractor) had no contractual right for an Interim Application for
Payment. The parties had entered into a contract, and just because that contract didn’t cover all
payment eventualities didn’t mean the Scheme should come into force.
Interim Payments
22- Roles and Responsibilities

C18
Disruption is against cooperation
The contract between D and W was JCT Standard Form of Building Contract 1998 Edition Private
Without Quantities, incorporating various specific amendments. W began work in the summer of
2004. The completion date was January 23, 2006. However, substantial delays occurred. Extensions of
time were granted by D's architect pursuant to cl.25 of the contract until February 2007 due to design
deficiencies, but practical completion did not take place until July 2008.
Express remedy: There was an extension-of-time clause such as that agreed on in this case and
where delay was caused by two or more effective causes, one of which entitled the contractor to
an extension of time as being a Relevant Event, he would be entitled to a full extension of time.
Also, prolongation costs amounted to an impermissible "global" claim, being a claim which identified
numerous potential or actual causes of delay and/or disruption (one of the reasons of disruption was the
presence of artists and tradesmen who disrupted the work process of the contractor), a total cost on the job,
a net payment from the employer and a claim for the balance between costs and payment which
was attributed without more and by inference to the causes of delay and disruption relied on.
Walter Lilly & Company Limited v Giles Patrick Cyril Mackay,
DMW Devlopments Limited (2012)

T23
Example: Letter of Credit
23- Risk sharing and Allocation

Section Five – Change/ Claims
• Assignment
• Change Mechanism
• Differing Site
Conditions
• Extension Of Time
• Claims Submittal
• Concurrent Delay
• Prevention Principle
7/50
Topics

T24
24- Assignment
Assignment vs Novation
Assignment Novation
Keeps original contract alive Extinguishes and replaces original
contract
Made without consent Needs consent of original parties and
new party
Transfers rights Transfers rights and obligations
Novation is a legal mechanism for transferring contractual rights and
obligations. It requires agreement from all contracting parties.
Assignment is the transfer of ownership of legal property, or another legal
right, from one legal person to another. In everyday life we are very familiar
with the concept of assignment: when we buy a house or a car, the legal title
of those assets is transferred to us.

T25 Blue Circle Industries Plc v Holland Dredging Co (UK)
Ltd (1987)
Is it a permitted unilateral change/ omission?
- B invited H to tender for dredging works at Larne Lough on the
terms of the ICE conditions 5th Edition.
- In discussions, it was reached to use the dredged material to
form an island.
- H failed to form the island properly- it merely broke the surface at
low water.
- B commenced proceedings claiming
damages for negligence, breach of
collateral warranty and misrepresentation.
- The court held that the work is wholly
outside the original scope (Not similar
character and nature), it could not be ordered
as a variation and it must be a separate
agreement.
25- Change Mechanism

S13
FIDIC RED BOOK 2017: CONSTRUCTION CONTRACT 2ND ED
12.3 Valuation of the Works
… Any item of work which is identified in the Bill of Quantities or other
Schedule, but for which no rate or price is specified, shall be deemed to
be included in other rates and prices in the Bill of Quantities or other
Schedule(s).
A new rate or price shall be appropriate for an item of work if:
(a) the item is not identified …, or is not executed under similar
conditions, …;
(b) (i) the measured quantity of the item is changed by …%; and/or
(c) the work is instructed under Clause 13 [Variations and Adjustments]
and sub-paragraph (a) or (b) above applies.

T26 Henry Boot Construction Ltd v Alstom Combined
Cycles Ltd (2000)
4.35m
3.35m
Valuation was done under the ICE Standard Conditions of Contract Clause 52(1)(b). The
arbitrator had held it unreasonable to use the contract price, which contained a mistake,
as the basis for the valuation and had accordingly carried out a fair valuation of his own
under Clause 52(1).
Held that the basis for valuation under cl.52 could not be displaced on the ground that
the rates or prices in a bill of quantities had been inserted by mistake.
If, however, work carried out pursuant to a variation to a contract differed significantly
from the work covered by the bill of quantities, it would be open to the engineer to carry
out a valuation of his own. The words "so far as may be reasonable" had been inserted in
cl.52 to cater for that eventuality.
The rates or prices contained in a bill of quantities were not subject to rectification.
To hold otherwise would lead to uncertainty and disturb the basis of competitive
tendering. In the instant case, the arbitrator should have disregarded HBC's mistake and
carried out a valuation on the basis of the price which HBC had quoted in the contract.
You may also check FIDIC 2017 for Construction clause ………….
26- Differing Site Conditions

T27
Judge Jackson J stated that: “The prevention principle [says] that the employer cannot hold
the contractor to a specified completion date, if the employer has by act or omission
prevented the contractor from completing by that date. Instead, time becomes at large
and the obligation to complete by the specified date is replaced by an implied obligation
to complete within a reasonable time.”
Jackson J also derived three propositions from a review of authority as follows:
(a)actions by an employer which were perfectly legitimate under a construction contract
might still be characterised as prevention if those actions caused delay beyond the
contractual completion date;
(b)acts of prevention by an employer did not set time at large if the contract provided for
extension of time in respect of those events;
(c) in so far as an extension of time clause was ambiguous, it should be construed in favour
of the contractor.
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd
(2007)
27- Extension of Time
Reasonable Time or EOT

Contractual Entitlement. Typically, construction contracts contain provisions entitling
the contractor to an extension of time on the occurrence of a particular event provided
the progress of the works or time for completion is delayed as a consequence.
Contractual Compliance. Generally within an extension of time clause, the contractor
will be obligated to submit notice(s) and detailed particulars within a specified time frame.
Demonstration of Causation. The contractor must demonstrate the cause and effect relationship between
an impact that was not its responsibility and the effects the impact will have on its ultimate project cost or
ability to complete the project as originally contracted. The element of causation is often the most difficult
to demonstrate of the three elements.
Demonstration of Quantum. The contractor must demonstrate that the cost or schedule impacts that have
been or will be realized as a result of the change are reasonable and supportable.
28- Claim Submittal
Main Elements
Global Claim: Walter Lilly & Company Limited v Giles Patrick Cyril Mackay, DMW
Devlopments Limited (2012) in F22/50
T28

T29
Concurrency relieves the contractor from the DDs according to De Beers UK Ltd
(formerly Diamond Trading Co Ltd) v Atos Origin IT Services UK Ltd (2010) Mr
Justice Edwards-Stuart Stated that: “The general rule in construction and engineering
cases is that where there is concurrent delay to completion caused by matters for
which both employer and contractor are responsible, the contractor is entitled to an
extension of time but he cannot recover in respect of the loss caused by the delay”.
However, if the difference can be split, the quantum can include prolongation cost as
per Arcadis UK Ltd v. May and Baker Ltd (t/a Sanofi) (2013).
De Beers UK Ltd (formerly Diamond Trading Co Ltd) v Atos Origin IT
Services UK Ltd (2010)
Arcadis UK Ltd v May and Baker Ltd (t/a Sanofi) (2013)
29- Concurrent delay

C25-26 Scottish Case - Dominant Cause of Delay
Having regard to the approach adopted by the Lord Ordinary, it could not be said that he had
failed to properly interpret cl.25 and to apply the proper rules of causation in considering the
application thereof.
In the event that two causes were operative, one being a relevant event and the other some event
for which the contractor was responsible, and neither could be described as dominant, it would
be open to the decision maker to apportion the subsequent delay in the completion of the works
as between both events, and the claim for an extension would not necessarily fail.
City Inn Ltd v Shepherd Construction Ltd (2010)
Mirant Asia- Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners
International Ltd (2007)
The dismantling and re-erection of the steelworks had not caused any overall additional delay to the project,
since the project manager had used the additional time to reassess and reorganise the site and the project.
In particular, the lengthening delay to civil works was arrested and reversed. That had been the dominant cause
of the increasing delay to the project, and it had continued long after completion of the remedial works to the
foundations.
Primarily on the basis of the finding that O had not been responsible for any critical delays in the project, all of
M's claims were rejected.

T30
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (2007)
M, the main contractor constructing the new stadium, had entered into a contract with the
defendant sub-contractor (H) entrusting to H the design, supply and installation of various
electronic systems for communication and control of the building.
“The prevention principle [says] that the employer cannot hold the contractor to a specified
completion date, if the employer has by act or omission prevented the contractor from
completing by that date. Instead, time becomes at large and the obligation to complete by the
specified date is replaced by an implied obligation to complete within a reasonable time.”
In the instant case, the fact that three programmes were issued by M under clause 4 did not
prevent M from awarding such extension of time as might be appropriate under clause 11.
Accordingly, the issue of the programmes did not set time at large, as the adjudicator had held.
Urban I (Blonk Street) Ltd v Ayres & Anor (2013)
The judge: In the absence of any express stipulated date, it was an
implied term of the contract completion, and hence the consequential
completion of the contract, was to be within a reasonable time.
30- Prevention Principle

Section Six – Liabilities
• Privity and
Communication
• Statute of limitation
• Damages and Quantum
• Liquidated Damages
• Tort and Negligence
• Burden of Proof
6/50
Topics

T31
FIDIC vs NEC vs JCT
Advance warning added in 8.4 while
claims and variation are managed
under Clauses 20 & 13. However,
the causes that entitle to EOT are
included in Sub-Clause 8.5 EOT for
Completion.
FIDIC 2017
The claims for time are under
Relevant Events (2.29) while the
claims for cost are under Relevant
Matters (4.22). However, the adverse
weather is included only as a
relevant event, not relevant matter.
JCT SBC/XQ 2016
EWN (clause 15) is a tool that parties
use to notify the potential changes/
CEs.
NEC4 ECC
The Valuation is under Sub-Clause
13.3 and the Engineer determination
is under Sub-Clause 3.7 Agreement
or Determination.
The valuation rules depend on
whether measurable work (5.6) or
contractor’s designed portion (5.8),
otherwise dayworks apply (5.7).
Claims for cost or/and time are under
compensation events (section 6). The
contractor submits quotations which
comprise changes to prices and/or
alterations to the accepted programme
(62.2), then PM replies (62.3).
Claims communication and durations
31- Privity and Communication
Example from the Standard Forms

G2
Privity Example in Construction
Construction security and performance documents
RICS guidance note

T32
32- Statute of Limitation
Limitation: A Claimant Must bring An Action Within A Set Period (“Limitation
Period”).
Otherwise, The Action Becomes “Statute Barred” Under The UK Limitation Act
1980.
Why Have Limitation Periods ?
• Protect Defendants From Stale Claims.
• Encourage Claimants To Institute Proceedings Without Unreasonable Delay.
• To Facilitate Closure On Projects Or Issues.
Limitation Periods Vary: The General Rule
• Contract: 6 or 12 Years “Deed”.
• Tort: 6 Years.
• Personal Injury: 3 Years.

T33
Two limbs of the recoverable damaged under a contract
Balfour Beatty Construction (Scotland) Ltd v Scottish Power
Plc 1994
A construction company engaged in the building of a roadway and associated structures
including an aqueduct contracted with the electricity board for the supply of electricity
to operate a concrete batching plant. During the course of building the aqueduct, which
required a continuous pour operation, the batching plant stopped working.
Hadley v Baxendale (1854) applied
Where two parties have made a contract which one of them has broken, the damages which the other
party ought to receive in respect of such breach of contract should be
[1] such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual
course of things, from such breach of contract itself (direct v indirect), or
[2] such as may reasonably be supposed to have been in the contemplation of both parties, at the time
they made the contract, as the probable result of the breach of it (direct v consequential).
Damages recoverable for a breach of contract are:
• under the first limb – those that are the obvious consequence of the breach of the primary obligation,
• under the second limb – those that depend on some greater knowledge of the object of the contract
(lost profit).
33- Damages and Quantum

T34
Waqas Ashraf (2019) $0.00 liquidated damages sum: an artificial unpersuasive interpretation
Relying on Cellulose Acetate, J-Corp claimed that even if the amount of liquidated damages is
significantly lower than the actual loss suffered by the principal, the principal cannot claim general
damages (unLDs) under the common law.
Principles governing liquidated damages clause
1) A liquidated damages clause stipulating liquidated damages sum as $nil or $0.00 as damages for
non-completion does not exclude principals’ right to recover unliquidated damages.
2) To exclude such a right, a clear wording or evidence is required which clearly expresses parties’
intentions to exclude the right to claim unliquidated damages similar to Temloc.
3) The principal cannot opt to recover unliquidated damages if it is a positive dollar value (even $1).
If the liquidated damages sum stipulated under a construction contract is significantly low that it is
out of proportion to the actual loss suffered, the liquidated damages clause will be valid, and the
principal cannot opt to recover unliquidated damages.
Temloc Ltd v Errill Properties Ltd (1988)
Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd (1931)
34- Liquidated Damages
EOT: Liquidated and Un-liquidated damages.

T35
35- Tort and Negligence
D & F Estates Ltd v Church Commissioners for England &
Wales [1989] AC 177 Held:
- The tort of negligence does not extend to pure economic loss.
“…Contractual and tortious duties have different origins and different functions.
Contractual obligations spring from the consent of the parties and the common
law principle that contracts should be enforced. Tortious duties are imposed by
law, as a matter of policy, in specific situations. Sometime a particular set of
facts may give rise to identical contractual and tortious duties, but self-evidently
that is not always the case…” Robinson v P.E. Jones (Contractors) Ltd.
Sharing liability. Contribution: Injured Party Can Elect To Bring An Action
Against One Or All Of The Wrongdoers.
- A Contractor will only be liable in tort for: injury to persons, damage to other
property (not the defect itself) caused by the damaged building.

T36
36- Burden of Proof
A party's duty to produce sufficient evidence to support an allegation or
argument. Plaintiffs in civil cases typically have the burden of proving
their allegations by a preponderance of the evidence. In criminal
cases, the prosecution typically has the burden of proving its
allegations beyond a reasonable doubt.
Preponderance of the Evidence. The standard of proof, commonly
used in civil litigation, that requires the party with the burden of proof to
demonstrate that an allegation or argument is more likely to be true
than false. This standard of proof is less than the clear and convincing
evidence standard often used to prove civil liability and the "beyond a
reasonable doubt" standard commonly used to prove criminal liability.
The burden of proof is often said to consist of two distinct but related
concepts: the burden of production, and the burden of persuasion.

Section Seven – Contract Closing
• Taking Over
• Decennial Liability
Insurance
• Frustration
• Repudiation
• Default Termination
• Convenience
Termination
6/50
Topics

T37
Whether Discain is entitled to payment for incomplete work?
What the contract which I have found provided for was payment on installation of
the steelwork for every four balconies. That did not require that the installation
had to be complete in every detail before there was any right to payment.
Under the doctrine of substantial performance, illustrated by the well-known case
of Hoenig v. Isaacs [1952] 2 All ER 176 , if a party to a contract has substantially
performed his obligations under the contract, he is entitled to payment, although
exposed to a claim for damages in relation to those respects in which his
performance of his obligations is less than complete.
Which means the builder “D” is entitled the payment before all work is complete
based on the doctrine of substantial performance. However, since it was found
that D's work was defective to a certain extent, O was entitled to recover the cost
of remedial works in respect of the relevant items.
Discain Project Services Limited v Opecprime Developments
Limited (2001)
Doctrine of substantial performance
37- Taking Over

T38
Common Law and U.S. law (for example) generally have no
direct counterpart to "decennial liability" of the sort required in
France and some other civil law countries. Approximately half of
the states, however, have long statutes of repose that can create
risk of liability for latent defects discovered many years after
substantial completion of a construction project.
USA: Construction & Engineering Law
Douglas Oles & Alix K. Town(2019)
38- Decennial Liability Insurance
In UK, the grounds of negligence and latent defects can lead to the limitation periods of the
liability in tort according to Sections 14A&14B of the Limitation Act 1980 as amended by Latent
Damage Act 1986 whether six years from the cause of action or fifteen years from the date that
the damages claimed are alleged to be attributed.

T39
“..frustration occurs whenever the law recognizes that without
default of either party a contractual obligation has become
incapable of being performed because the circumstances in
which performance is called for would render it a thing radically
different from that which was undertaken by the contract...It was
not this that I promised to do.”
Davis Contractors v Fareham Urban DC (1956, per Lord Radcliffe at 729)
Destruction of the music hall - Taylor v Caldwell (1863)
Illegality due to war - Denny, Mott and Dickson v James Fraser (1944)
Frustration in Common Law is similar to
“Force majeure” in Civil Law:
39- Frustration

T40
An absolute refusal to carry out the work or abandonment of the work before it is substantially
completed, without any lawful excuse, is a repudiation.
Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (2006)
On Wembley stadium, the main contractor (Multiplex) and its steelwork
subcontractor (Cleveland Bridge) suffered months of issues before the
subcontractor left the project. It was common ground that one party was in
repudiatory breach but the issue was which party.
Multiplex blamed CB for allocating insufficient resources to the project, slow
design and fabrication of steelwork, fabrication errors, late and out of sequence
deliveries, delaying the arch lift, low erection rates despite having a large
number of men on site.
CB blamed Multiplex for late and inadequate design information, numerous
and substantial design changes and refusal to make proper payment for
variations, acceleration, disruption or delay costs.
Mr Justice Jackson stated that: “the subcontractor was not entitled to treat the
subcontract as at an end, and the subcontractor was in repudiatory breach of
contract by giving notice that it would stop work and by then stopping work”.
Wembley Stadium
40- Repudiation
A repudiatory breach of contract is one that is so serious. It entitles the
innocent party to terminate the contract .

C39 Profit lost
Hadley v Baxendale (1854)
The crank shaft of the steam engine used by H in their mills had broken, rendering the mill unworkable.
H contracted with B for B to deliver the broken shaft to an engineering firm to be used as the model for
a new one. B were unaware that the mill was unworkable without a new shaft.
B delivered the shaft seven days after receiving it. H claimed B's negligence caused the mill to be
inoperable for an additional five days and sought damages covering the resulting loss of profits and
payment of wages.
B argued that the damages sought were too remote. H were awarded damages by the jury in excess of
the amount paid into court.
H contended that they were entitled to the damages awarded as they were not only the natural
consequence of B's negligence but were the losses actually sustained.
Damages recoverable for a breach of contract:
The damages resulting from the breach would be the amount as might have been reasonably
contemplated as flowing from such a breach in those circumstances.
If those circumstances were unknown to the party alleged to have breached the contract, that party could
only be supposed to have contemplated the amount of damages arising generally from such a breach.
In the instant case, the jury ought to have been directed that they were not entitled to award damages
for profits lost to H through the mill being inoperable and a new trial would be ordered.

T41
A Termination for Cause is the term used for a Termination for
Default. The contract mechanism normally includes notices
including warning period. This may entitle a party to terminate in
such cases. This express contract remedy avoids uncertainty of
frustration and repudiation.
41- Default Termination
It covers wide range of trigger events such as:
o contractor default
o non-payment or prevention by employer
o beyond reasonable control of either party
o insolvency of either party
- Consequences can be the loss lies where it falls.

T42
42- Convenience Termination
A ‘termination for convenience’ or ‘at will’ clause allows the
employer, if it was not in breach of any payment obligations,
to terminate the contract immediately, whereupon its liability
to the contractor would be limited to the price of any work
completed and not paid for, plus additional specified costs
which may include the lost profits based on the contract
terms.
Comau UK Ltd v Lotus Lightweight Structures Ltd [2014]

Section Eight – Administration and Tech.
• BIM and Technology in Contract Management
• The Importance of Contract Administration
2/50
Topics

T43
43- BIM and Technology in Contract Management
Paper-based Contracts: Printed onto paper, Wet-signed, Archived
in drawers or boxes, Impossible to interrogate, and Not data
driven.
Electronic Contracts: Created electronically, Negotiated as
paper-based contract, Shared and sent using email, Signed using
electronic signing protocol, Stored (on cloud) as a single
document.
Digital Contracts: Created using logic of Q&A and common
clause bank, Negotiated, shared and sent using digital platform,
Signed digitally e.g. Cyber Notary, Stored with other contract
documents in digital shared platform, Updates become part of
contract data, Digital asset during use/end and demolition phase.
Smart Contracts: Also known as intelligent contracts, Contract
created, negotiated and agreed in spoken language, Contract
translated into computer code, Capable of self-execution (at
least in part) with minimal human intervention, Updates
automatically (live contract with recorded history).

S15

T44
It’s really a role that is a value contributor to the bottom line of the company
by both managing throughout the life cycle of the contract and paying
attention to key aspects of the contract.
CA ensures the obligations in the contract are carried out effectively,
gathers data, validation, administers change control procedure, maintains
and updates contract baseline (Financials, Assets and Performance),
monitors service levels/claim service, regular reporting, uses CM software for
self monitoring contracts, maintains contingency plan, manages budget &
relationship management.
44- The Importance of Contract Administration

Section Nine – Disputes
• Alternative Dispute
Resolution
• Adjudication
• Arbitration
• Lawsuits and Litigation
• Confidentiality and
Enforcement
5/50
Topics

T45
Request for
Proposal
13.3.3
Contractor’s
Proposal
13.2
DAAB
21.3/4
FIDIC 2017 Phases of Variation/ Claim/ Dispute:
Engineer’s
Instruction
13.3.1
Parties’ Agreement or
Engineer’s Determination
3.7 – 12.3
Arbitration
21.6
Claim
20
45- Alternative Dispute Resolution
Alternative Dispute Resolution ("ADR") refers to any means of settling
disputes outside of the courtroom.
Amicable
Settlement
21.5

T46
NEC Adjudication Option W1 vs DAB Option W3
JCT & NEC Adjudication Dispute Avoidance Board
- JCT starts with Mediation but NEC refers
disputes first to the Senior Representatives.
- A party issues a notice of adjudication (acts
impartially) for any issue not agreed to refer
this dispute to adjudicator, and finally
tribunal which can be arbitration.
- A party doesn’t refer to the tribunal unless it
has been referred to the Adjudicator, via a
notification to be given within 4 weeks of
the Adjudicator’s decision, otherwise it
becomes final and binding.
- The DAB assists the parties in resolving
disputes before they become disputes.
- The DAB acts impartially.
- The DAB visits the Site and inspects the work,
reviews all potential disputes without the
need to be formally referred.
- A party doesn’t refer to the tribunal unless it
has been referred to the DAB within four
weeks from the DAB’s recommendation.
46- Adjudication
In UK, there is Statutory Adjudication in case of
construction contracts under s.108 HGCRA 1996.

T47
47- Arbitration
UK: Arbitration Act 1996
S.1(a) the object of arbitration is to obtain the fair resolution by an
impartial tribunal (experts) without unnecessary delay or expense.
S.7. Separability of arbitration agreement. Unless otherwise agreed by the parties,
an arbitration agreement which forms or was intended to form part of another
agreement (whether or not in writing) shall not be regarded as invalid, non-existent or
ineffective because that other agreement is invalid, or did not come into existence or
has become ineffective, and it shall for that purpose be treated as a distinct agreement.
Some Rules make decision finally binding (no appeals) such as UNCITRAL Model
Law and ICC 2017 Rules (Mangistaumunaigaz Oil Production v United Kingdom
World Trade [1995]) while Arbitration Act 1996 S.69 (not a mandatory provision):
Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon
notice to the other parties and to the tribunal) appeal to the court on a question of law
arising out of an award made in the proceedings.
Arbitration can be institutional (Rules of Institute apply) or Ad-hoc where parties can
agree on: when to start, venue/ seat of arbitration, no. of arbitrators/ appointment
process, arbitrators’ jurisdiction, procedural rules, and substantive law.

R6-S18
Arbitration Rules

T48
48- Lawsuits and Litigation
Item Litigation Arbitration
Governing
Law
Domestic law applies. Also, the Civil Procedure
Rules enable the courts to deal with cases justly
by making up a certain procedural code (Ministry
of Justice).
UK Arbitration Act 1996 includes mandatory and non-
mandatory provisions as per s.4 and schedule s.1. This
allows the parties to agree on the applicable law and
the procedure rules.
Expertise Court judges do not always have the expertise
required to resolve the dispute properly (may use
Expert Witness). There is also a risk of judges’
relocation during the course of the proceedings.
Parties are able to select an arbitrator with the
appropriate ability, experience and availability to
resolve their disputes. It also allows a mix of both
technical and legal arbitrators.
Levels: 1-High Court, 2-Court of Appeal (Wrong (fact* or law); or
Unjust because of irregularity in the proceedings. E.g. M (Children)
[2013]) & 3-Supreme Court (Wrong (point of law) & General public
importance. E.g. Cavendish Square Holding BV (Appellant) v Talal El
Makdessi (Respondent) [2015]). CPR 52.11(3).

T49
49- Confidentiality and Enforcement
Item Litigation Arbitration
Confidentiality Court proceedings are not usually
confidential, and hearings are often open to
business competitors and media.
One of the greatest advantages of arbitration
over litigation is the privacy of the
proceedings from the public gaze.
Enforcement You can ask the court to collect payment
from the debtor if they do not pay you after
receiving the court order. You must pay a
court fee when you ask the court to collect
the payment (Gov.UK, 2020).
Arbitration Act s.66 (1): “An award made by
the tribunal pursuant to an arbitration
agreement may, by leave of the court, be
enforced in the same manner as a judgment or
order of the court to the same effect”.
Most of ADRs are confidential and not binding. However, arbitration is
binding but confidential as well. Where in the institutional arbitrations,
the awards may be published for public.

Section Ten – Professional Certificates
• Professional Certificates
1/50
Topics

T50
Chartered qualification from: CIArb & RICS - UK
Credentials from: NCMA, AACE, CSI & IACCM - US.
Courses from FIDIC, RICS … etc.
Membership: SCL, AIA … etc.
Moreover, LLM or PgCet/ PgDip/ MSc from universities in
Construction/contract law and dispute resolution.
50- Professional Certificates

Follow me @magedkom
Nice to hear from you. You are always
welcome. Let’s stay connected.
Best wishes
+966-(0)580264968
Instructor: Mohamed Maged
www.slideshare.net/MohamedMaged8
www.ted.com/profiles/9735915/about
projectmanagement.com/profile/mmaged
https://www.luqmanacademy.com/profile/8
https://www.facebook.com/MagedThoughts

Fundamentals of Construction Contracts - English, ver. 2021

More Related Content

What's hot (20)

Similar to Fundamentals of Construction Contracts - English, ver. 2021 (20)

More from M Maged Hegazy, LLM, MBA, CCP, P3O (19)

Recently uploaded (20)

Fundamentals of Construction Contracts - English, ver. 2021