Webinar October Payments: Termination With Guest Speaker Karen - - PowerPoint PPT Presentation

Webinar October Payments: Termination With Guest Speaker Karen Gough - 39 Essex Chambers Bill Barton - Barton Legal

The Trials and Tribulations of Termination

KAREN GOUGH

39 ESSEX CHAMBERS

• He has particular expertise in drafting and negotiating specialist

bespoke contracts whether in relation to wind farms, renewable energy such as biomass, office and industrial developments, colleges

• r standard construction projects. As a result, he is experienced in

drafting amendments to and negotiating not only standard forms of contract such as JCT, NEC and ICE, but also the FIDIC Red and Silver books as well as IChemE Burgundy, Red and Yellow books.

Construction Director Bill Barton, billbarton@bartonlegal.com The Trials and Tribulations of Termination

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

• We have also provided you with a handout, this includes:
• 1. A guide on termination across the various contracts;
• 2. The contract process that should be followed to terminate the contract;
• 3. A comparison of the reasons to terminate across the various contracts;
• 4. A discussion on repudiation;
• 5. Case law that relates to termination.

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

• We have also created example termination notices, that can be accessed after

the webinar:

• These can be used as a template for a termination notice you may send.
• Please note, these are examples only. Barton Legal do not accept any

responsibility for any attempted terminations that use these templates.

The Trials and Tribulations of Termination: Under the NEC & JCT Forms of Contract

• Karen Gough practises internationally as counsel, attorney-at-law,

arbitrator, adjudicator and ADR neutral. She has specialised, for more than 30 years, in complex construction, engineering, professional negligence and general commercial disputes whether resolved by litigation, arbitration or ADR. She represents a wide range of clients including governments, government agencies, local authorities, educational institutions, contractors, sub-contractors, and major commercial organisations. Karen is dual qualified in the Caribbean and is an expert in FIDIC and recognised as such.

KAREN GOUGH, Barrister, Attorney-at-law, Chartered Arbitrator, Past President of the CIArb. karen.gough@39essex.com The Trials and Tribulations of Termination: Under the FIDIC Forms of Contract

• Is termination inevitable?
• Is there another option?
• Suspension;
• direct renegotiation;
• dispute avoidance under clause 21?
• Termination by agreement;
• Employer’s termination for convenience?

The Trials and Tribulations of Termination: Under the FIDIC Forms of Contract

EMPLOYER’S TERMINATION CLAUSE 15

NOTICE TO CORRECT: S-C 15.1

• 2017 Forms: Engineer or Employer’s right to issue a notice to correct…
• And
• Prescribed contents of Notice to Correct: describe failure and sub-clause
• f GCOC breached, specify [reasonable] time within which it must be

remedied.

• Contractor MUST respond immediately specifying measures to be taken to

remedy the failure and the date they will be started.

• The time specified in the Notice to Correct does not imply any extension of

the Time for Completion. [Notices substantially intended to refer to Contractor default, therefore probably no entitlement to money or costs.]

EMPLOYER’S TERMINATION CLAUSE 15

S-C15.2: Termination for Contractor’s default:

• Grounds (a) – (e) (some changes of substance from 1999) see:

(a) Contractor’s failure to comply with (i) Notice to correct [S-C 15.1]; (ii) an Agreement or final and binding Determination under S-C 3.7; or (iii) DAAB Decision, binding or final and binding [S-C 21.4].

• AND such failure constitutes a material breach of the

Contractor’s obligations under the Contract.

EMPLOYER’S TERMINATION CLAUSE 15

…/S-C15.2: Requirements/form of Employer’s Notice under S-C 15.2.1: Either:

• Notice of Intention to Terminate the Contract: grounds (a) – (e); or
• Notice of Termination (immediate) in respect of grounds (f) – (h):

(f) Subcontracts the whole of the works without required agreement; (g) Bankruptcy or insolvency… [NB position regarding JVs joint and several liability, so partners must cover insolvent member]; (h) On reasonable evidence of fraud, corruption… in relation to the works.

EMPLOYER’S TERMINATION CLAUSE 15

Consequences of Employer’s notice: S-C 15.2.2:

• Unless the Contractor remedies the matters specified in the Notice of Intention to

Terminate within 14 days, the Employer may terminate.

• In respect of Notices in respect of S-C 15.2.1(f)-(h), the termination is effective

immediately.

• 2017 Forms have more detailed provisions for action after termination (S-C 15.2.3)

and completion of the works (S-C15.2.4) which, as in the 1999 Forms, includes the release of the contractor’s equipment and temporary works at or near the site, or their sale if the Contractor is indebted to the Employer.

EMPLOYER’S TERMINATION CLAUSE 15

Valuation after termination: S-C 15.3

• Engineer/Employer to agree or determine value of the works/sums due to the

contractor (S-C 3.7);

• The date of termination is the date for the commencement of time limits under

clause S-C 3.7.3. Payment after Termination: S-C 15.4

• Emphasises the Employer’s right to withhold payment until all claims/costs of

completion/loss and damages, including delay damages between the Date for Taking Over the Works and the Date of Termination (if later).

EMPLOYER’S TERMINATION CLAUSE 15

Termination for Employer’s Convenience: S-C 15.5 1999 Forms recap: By notice at any time, effective 28 days after the notice or the return of the performance security.

• Employer must return performance security forthwith and may not terminate to execute the

works himself or by third parties.

• Works valued under S-C 16.3, and paid as provided for in S-C 19.6.

2017 Forms: As above, but Employer also: may not use Contractor’s Documents (unless paid for),

• r Equipment, Temporary Works etc.
• Unless/until Contractor has been paid sums due on termination, the Employer may not continue

the Works.

• Note: no prohibition against termination for Employer or third party to complete works.

BUT CF S-C 13.1(iv) Omissions may not be instructed to give work to others, unless agreed.

EMPLOYER’S TERMINATION CLAUSE 15

Termination for Employer’s convenience: New S-C 15.6:

• The Contractor must submit particulars of the value of the work done (see S-C 18.5

(optional termination)), and additions/deductions of balance due under S-C 14.13 (Final Payment Certificate). Includes loss of profit or other losses and damages.

• The Engineer/Employer’s Representative must determine the sums due under S-C

3.7 and issue a payment certificate, time runs from the date of receipt of the Contractor’s particulars. and New S-C 15.7: Employer must pay within 112 days from date of receipt of Contractor’s submission.

CONTRACTOR’S TERMINATION CLAUSE 16

Termination by Contractor: S-C 16.2 Notice of intention to terminate (14 days): 1999 Forms RECAP: (a) Failure to supply evidence of ability to pay (S-C 2.4) within 42 days of the notice; (b) Failure within 56 days of receipt of Statement… to issue IPC (not S.B.); (c) None payment, 42 days after expiry of time for payment; (d) Employer’s Substantial failure to perform its obligations under the Contract; (e) Failure to comply with provisions for execution of the Contract Agreement (S-C 1.6) or requirements for Assignment (S-C 1.7).

CONTRACTOR’S TERMINATION CLAUSE 16

Termination by Contractor: (2017) S-C 16.2 Notice of intention to terminate (14 days): As for 1999 (a)-(c); [new] (d) failure to comply with binding agreement or final and binding Engineer’s determination (S-C 3.7) or binding OR binding and final DAAB decision (S-C 21.4); AND such failure constitutes a material breach of Employer’s obligations under the Contract; (e) (old s-c (d) revised) Employer substantially fails to perform, and such failure constitutes a material breach of its obligations…; (f) Failure to issue a Notice of the Commencement Date within 84 days of the receipt

• f the Letter of Acceptance.

(g)(i) Failure to execute the Contract Agreement (S-C 1.6).

CONTRACTOR’S TERMINATION CLAUSE 16

Termination by Contractor: S-C 16.2

Notice of termination (immediately effective): 2017 Forms: (g)(ii) Assigns the Agreement without the required agreement. [This came under the “intention to terminate” provisions in 1999 Forms]. (h) A prolonged suspension of the Works (as described in S-C 8.11); or (i) The employer becomes bankrupt or insolvent… (j) [NEW] Employer’s corruption, fraud etc. (reasonable evidence req.d). As in 1999 Forms, the Contractor’s election to terminate is without prejudice to any

• ther rights of remedies.

CONTRACTOR’S TERMINATION CLAUSE 16

Termination by Contractor: S-C 16.2

Notices of termination: 2017 Forms: S-C 16.2.2 [NEW]

• Provides that unless the Employer remedies the matter complained of in the notice

within 14 days, the Contractor may, by issuing a second notice, immediately terminate the Contract. The termination is effective on the date the Employer receives the second notice.

• In respect of a notice under S-C 16.2.2 (g)(ii), (h) or (i) termination is effective from the

date of the receipt of the first/only notice.

• Delays and costs (including profit) incurred during the 14 day notice period, are

recoverable subject to S-C 20.2 notice/provisions.

CONTRACTOR’S TERMINATION CLAUSE 16

Contractor’s obligations after termination: S-C 16.3

• Clarifies that these obligations are confined to terminations under S-C15.5

(Termination for Employer’s Convenience), S-C 16.2 (Contractor’s termination) or S-C18.5 (Optional Termination – exceptional events), at termination the Contractor shall: (a) cease all further work, except as instructed for protection or safety (for which it is entitled to be paid under S-C 20.2); (b) Deliver up Contractor’s Documents, Plant, Materials which have been paid for; and (c) Remove other Goods from the Site, except as necessary for safety, and leave.

CONTRACTOR’S TERMINATION CLAUSE 16

Payment after Termination: S-C 16.4: 1999 Forms:

• The Employer shall promptly:

(a) return the performance security; (b) Pay the Contractor in accordance with S-C 19.6; (c) Pay the Contractor the amount of any loss of profit or other loss or damage consequent on termination. 2017 Forms:

• As for 1999 BUT pay according to S-C 18.6, and pay loss of profit and

damage subject to S-C 20.2 compliance; NB the return of the performance security is now moved to S-C 4.2.3, not S-C 16.4.

The material for this webinar has been prepared solely for the benefit of

• delegates. It is designed only to be an integral part of the presentation and

does not stand on its own. It must not be used for giving advice in any shape

• r form, and it is not a substitute for legal advice.

The author does not accept responsibility for loss howsoever occasioned to any person or persons acting or refraining from action as a result of this material.

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