HENRY HATHAWAY writes that records are the building blocks of any claim, whether you are attempting to defend or advance a claim.
Claims in construction elicit several responses, usually negative. It is easy to understand why original budgets are exceeded and then expectations are not met by any party under a contract. It provides for a tense environment, and, usually, many of these issues come to the forefront at the final account stage.
There is also normally a repeating trend in these scenarios. The contractor will feel aggrieved that despite what they had contemplated at the time of contract, events occurred outside of their control, which led to delays, and they simply seek to assert their rights to be put back into the position had the original agreement been sought.
From the employing parties’ position, they may consider that many of the claims are perhaps exaggerated and that any claims for time/loss expense are nothing more than an attempt to profit from circumstances that ought to have been known, throwing many of the cost budgets into disarray.
Some standard form contracts or indeed negotiated contracts attempt to bring about a duty of good faith dealing or mutual trust and cooperation between the parties. These provisions and intentions are to be admired. It is, however, important to note that in many instances, contracting parties have competing interests and quite separate agendas. It is this tension that fuels disputes.
An example of such a dispute at its simplest is that of an employing party seeking to have costs reduced and exit on pre-estimated budgets. Conversely, contracting parties seek to maximise their returns. At its most basic, this is the simple competing interest. This becomes more complicated and layered, but the principle holds.
If we take the RIAI standard form as an example of most contracts, it is split generally into two main components. First, the Recitals and specific parts of the agreement in which it sets out what is to be undertaken, and secondly, the terms (either standard or amended) which regulate the conduct of how the parties are to reach the outcome of the specified agreement.
The programme
In the writer’s experience, whether acting on behalf of an employing party or a contracting party, every claim in construction will invariably start with and end with a programme of works and the application of the terms of the contract as to how that programme is to be impacted. This is an important point, as it used to be considered (and in some cases, still is) that any act of prevention by the employing party would give rise to a delay. If a party is seeking to assert a right to bring about a claim, then it must discharge its burden of proof on balance. It is incredibly difficult to retrospectively demonstrate what is now apparent if there are no baselines in place to measure against, remembering the fact that a party is seeking to demonstrate that a change occurred either through a valid variation or a breach. There must be something to measure against, and the more comprehensive the intention of the parties has been recorded at the time of contract, then the more persuasive the evidence will be. It provides for an opportunity to select more robust and reliable delay analysis methods and, where fully evidenced, leads to a powerful submission correctly measuring changes in duration, sequence and effort. In many circumstances, the proper emphasisis is not given to the programme. It represents potential contemporaneous evidence when supported and goes far beyond the mere organisation of activities.
Comply with the contract
Most conditions of contracts are now heavily modified to provide for time bars and condition precedents in making a claim for delay or expense. These are recorded as being clauses setting out the procedure and timeline for making any such claim, and if not met or complied with, then will mean that despite the circumstances or validity of a claim, the contracting party will not be able to advance a claim, simply because they are time-barred from doing so.
Because of this, any party who seeks to incorporate such a clause needs to be aware that careful drafting is a must. Given the severity of the outcome if not complied with, contracting parties are reminded to note such restrictions to making a claim and also to inform their employees.
Secondly, a party must comply with any notice provisions. Failure to apply any or all of the requirements under a contract could simply end a claim before it commences as a matter of procedure. It is of great importance that site teams or organisations understand the mechanics of notice provisions and the conditions under a contract throughout, and not just at a point of dispute. This is simply a learning and knowledge outcome before application of the said clauses is required.
Causation
For reasons unknown, this element of a claim is often forgotten about or not applied. In general, principles of legal claims and construction being no different, the first starting point is to demonstrate that there has been a breach or an event giving rise to a claim. Liability needs to be demonstrated for a claim (time or quantum), loss must be demonstrated, and there must be a direct causal link between the two.
In simple terms, causation is the relationship between the cause and effect. A breach or event may trigger a series of issues or events and is called the chain of causation. There must be an unbroken link between the breach and the loss alleged. If this chain is broken, or there is some intervening event, then the claim will struggle. This concept is critical and operates as a defence to those against whom claims are submitted. What is important to note is that it is a vital ingredient and is formed from being a question of fact decided on a common-sense basis.
Records and presentation of a claim
Everything will depend upon the facts and circumstances. It is common for claims to be presented as merely the difference between the original contract date for completion and the date when completion actually took place. Simply apply costs. Construction has many varied and interconnected interactions and coordination issues. Claims for disruption, for example, and also where there are areas of concurrency are fertile grounds to deepen disputes when the theory ought to be to avoid them. The approaches to claims in terms of quality vary immensely. The point to prove or disprove the basis of entitlement on the merits, evidence and presentation of a submission is deeply important. At one point, the headline and substantive part of a claim would be presented with the narrative. This generally was a highly emotive piece and pointed towards repetitive claims, not evidenced and poorly established. A common phrase would be, “factors outside of our control”. The writer has never read, drafted or applied a clause, which gave a basis of entitlement under such a heading. It is an objective test. Perhaps circumstances were outside of the control of a party, but under the original agreement, it matters only who bore the risk. Indeed, what are the factors to begin with, how were they measured, and how did the rate of change occur?
Max Abrahamson, the famous Irish lawyer, set out his mantra:
“A party to a dispute, particularly if there is an arbitration, will learn three lessons and often too late: The importance of records, the importance of records and the importance of records.”
Records are the building blocks of any claim, whether you are in a position to defend or advance a claim. However, the ethos in these articles is not to support disputes, rather, it is to attempt to avoid them. If a party descends into a dispute without the proper records or procedure, then they most likely will face an uphill battle. If, alternatively, they have a robust system and mechanism with the required tests available to them, then it must be the case that they can perform better in any negotiations. Conversely, those who are the employing party can review any such claims and test both the liability and quantum questions quite early on.
Be aware and alive to the merits and surrounding circumstances.
Henry Hathaway is a solicitor who practises in Ireland, England and Wales and specialises in construction law. He is a qualified civil engineer and spent 12 years working in the industry. He advises on contract formation and provides practical advice when entering construction contracts, and regularly provides training and seminar days to companies to assist knowledge and application in order to assist them in avoiding disputes in construction. If you require further information in relation to contract formation or would like to discuss training and development in this area, contact henry.hathaway@hathawaysolicitors.ie
This is one in a series of articles by Henry Hathaway for Irish Construction News, Click Here to read other articles
Disclaimer: This content is provided for information purposes only and does not constitute legal advice. It is provided to present information to the broader construction industry and provide awareness. Independent legal advice should always be sought prior to application, and no solicitor/client relationship is formed, and no duty of care nor liability arises from any of the contents of this article.