Risk Allocation and Management in Construction Contracts: A Comprehensive Guide, Thesis of Criminal Law

Download Risk Allocation and Management in Construction Contracts: A Comprehensive Guide and more Thesis Criminal Law in PDF only on Docsity! Risk, Risk allocation and Responsibility Dr. Shashwat Bajpai Founder Partner, DRSB Law Chambers, BCL (University of Oxford), Ph.D. (NLUD), MCIArb (UK) Advocate, Supreme Court of India and Delhi High Court Design Related Risks • Insufficient design, and specifications • Design and quantities change • Late issuance of drawings, instructions, permissions, and approvals • Insufficient Survey, design, and specifications normally resulted in time delay, quality shortfalls, rework, and additional costs • Improper plans • Variations Site Related Risks • Unforeseeable Physical Conditions • Delay of full access to the site • Ground settlement Clause (Redacted) - General Obligations The Employer shall provide the Site/area of works and shall pay the Contractor in accordance with the Contract. Clause (Redacted) - Access to and Possession of the Site - The Employer shall grant the Contractor right of access to, and / or possession of, the Site progressively for the completion of Works. Such right and possession may not be exclusive to the Contractor. The Contractor will draw/modify the schedule for completion of Works according to progressive possession/right of such sites. If the Contractor suffers delay from failure on the part of the Employer to grant right of access to, or possession of the Site, the Contractor shall give notice to the Engineer in a period of 28 days of such occurrence. After receipt of such notice the Engineer shall proceed to determine any extension of time to which the Contractor is entitled and shall notify the Contractor accordingly. For any such delay in handing over of site, Contractors will be entitled to only reasonable extension of time and no monetary claims whatsoever shall be paid. Risk Allocation Clause (Redacted) – Site Data i) The Employer shall have made available to the Contractor with the Tender documents such relevant data in Employer’s possession on hydrological and sub-surface conditions. The accuracy or reliability of the data/studies/reports and of any other information supplied at any time by the Employer or Engineer is not warranted with respect to the viability of his design and execution of Works and shall conduct further investigations considered necessary by him at his own cost and any error, discrepancies if found in Employer’s data at any stage will not constitute ground for any claim for extra time and costs Risks related to Construction Process • Protection of works and site • Slow Progress • Accidents and safety issues • Incompetent manpower • Inappropriate construction method • Transportation Problems • Delay in Completion Risk Allocation Extension of Time Clause (Redacted) – Extension of Time The Contractor may apply for an extension of the Time for Completion if the Work is or will be delayed either before or after the Time for Completion by any of the following causes: a. “Force Majeure” referred to in Clause (Redacted) b. The Contractor’s work held up for not being given possession of or access to the Site in accordance with the Contract c. Instruction of the Engineer to suspend the Works and the Contractor not being in default as to reasons of suspension. d. Acts or omissions of other Designated Contractors in executing work not forming part of this Contract and on whose performance, the performance of the Contractor necessarily depends. e. Any act of prevention or Breach of Contract by the Employer and not mentioned in this Clause f. Any order of Court restraining the performance of the Contract in full or in any part thereof g. Any other event or occurrence which, according to the Employer is not due to the Contractor’s failure or fault, and is beyond his control without Employer being responsible for the same. h. An Employer’s Variation Liquidated damages for Delay Clause (Redacted) - Delay In case of delay on the part of the Contractor, the Contractor shall be liable to pay liquidated damages and any other compensation for the damages suffered by the Employer as per clause (Redacted). This is without prejudice to the right of the Employer to rescind the Contract. Failure or delay by the Employer or the Engineer, to hand over to the Contractor the Site necessary for execution of Works, or any part of the Works, or to give necessary notice to commence the Works, or to provide necessary Drawings or instructions or clarifications or to supply any material, plant or machinery, which under the Contract, is the responsibility of the Employer, shall in no way affect or vitiate the Contract or alter the character thereof; or entitle the Contractor to damages or compensation thereof but in any such case, the Engineer shall extend the time period for the completion of the Contract, as in his opinion is / are reasonable. Clause (Redacted) - Suspension of Work - The Engineer may at any time instruct the Contractor to suspend progress of part or all of the Works. During suspension, the Contractor shall protect, store and secure such part or whole of the Works against any deterioration, loss or damage. Clause (Redacted) - Consequences of Suspension - The Contractor shall not be entitled to extra cost (if any), incurred by him, during the period of suspension of Work., if such suspension is a. provided for in the Contract, or b. necessary for proper execution of Works or by reasons of weather condition or by some default on the part of the Contractor, or c. necessary for the safety of Works or any part thereof or d. necessary for the safety of adjoining public or other property or safety of the public or workmen or those who have to be at the site or e. to ensure safety and to avoid disruption of traffic and utilities, as also to permit fast repairs and restoration of any damaged utilities. f. due to instructions of NGT/ EPCA or any other statutory authority on account of high pollution. Risk Allocation Suspension Clause Exceptional Risks • Natural Disasters (Including Covid) • Wars, strikes and revolutions • Exceptionally adverse climatic conditions Risks Allocation Force Majeure Clause (Redacted).1 – Definition of Force Majeure In this Clause, "force majeure " means an event beyond the control of the Employer and the Contractor, which makes it impossible or illegal for a party to perform, including but not limited to: (a) act of God; (b) war, hostilities (whether war be declared or not), invasion, act of foreign enemies, mobilisation, requisition, or embargo; (c) rebellion, revolution, insurrection, or military or usurped power, or civil war; (d) contamination by radio-activity from any nuclear fuel, or from any nuclear waste from the combustion of nuclear fuel, radio-active toxic explosive, or other hazardous properties of any explosive nuclear assembly or nuclear component of such an assembly; (e) riot, commotion or disorder, unless solely restricted to employees of the Contractor or of his Sub- contractors currently or formerly engaged on the Works. If a party considers that it may be affected by Force Majeure, the party shall promptly notify the other party and Engineer of such Force Majeure within 21 days of such occurrence. If neither party issues any notice regarding the event within 21 days of its occurrence, the said event shall be deemed not to have occurred and the Contract shall continue to have effect as such Contractual Risks • Lack of Coordination • Breach of Contract – • Delay notification of risk (Early Warning) • Termination of Contract Risk Allocation Clause(Redacted): Payment after termination After termination under Sub-Clause (Redacted), the Employer shall not be liable to make any further payments to the Contractor until the costs of design, manufacture, execution, completion and remedying of any defects, damages for delay in completion (if any), and all other costs incurred by the Employer, have been established. The Employer shall be entitled to recover from the Contractor the extra costs, if any, of completing the Works after allowing for any sum due to the Contractor under Sub-Clause (Redacted). If there are no such extra costs, the Employer shall pay any balance to the Contractor Insurance in Construction Projects 1. Professional Indemnity Insurance 2. Insurance for Works and Contractor’s Equipment 3. Insurance against injury to Persons and Damage to Property 4. Insurance for Workers THE PURSUIT of a ‘fair & equitable’ allocation of risk • Simplex Infrastructures Ltd. v. National Highways Authority of India (Delhi High Court) • Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378 The following four principles to be borne in mind while allocating risks in construction contracts: Which party can best control the risk and/or its associated consequences? Which party can best foresee the risk? Which party can best bear that risk? Which party ultimately most benefits or suffers when the risk eventuates?