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THE QUANTIFICATION OF TERMINATION CLAIMS FOR CONTRACTOR DEFAULT

International Construction Law Review

THE QUANTIFICATION OF TERMINATION CLAIMS FOR CONTRACTOR DEFAULT

DR Franco Mastrandrea

LLB (Hons), MSc, PhD, FRICS, FCIArb, Barrister

INTRODUCTION

A decision to terminate for contractor default should not be taken lightly, as it is likely to have significant consequences for both contracting parties. In the majority of cases where the works are incomplete, a decision will need to be taken whether, and if so how, the works are to be taken to completion, in which case the completion arrangements are likely come under scrutiny.
Whether further payments should be made to the original contractor is likely to be a relevant consideration, as will a proper resolution of the completion accounts between the employer and the original and the completion contractors, the quantification of which will need to address the notional value of the works to the original contractor and the costs incurred and losses suffered by the employer.
This article proposes to explore these topics.

TAKING STOCK

The termination of further performance under a construction contract for contractor default may result from the exercise of a common law power to do so (such as acceptance by an employer of repudiation by a contractor), or by way of the exercise of an express contractual power to terminate.
Clause 8.4 of the JCT Standard Form of Building Contract With Quantities 2016 sets out a list of matters of “default” by the contractor. The 2017 FIDIC Red Book Conditions provides its own list of such matters at sub-clause 15.2. These may not in all cases be matters that amount to repudiation at common law.1
1 As was recognised in, for example, Perar BV v General Surety and Guarantee Co Ltd (CA) (1994) 66 BLR 72; (1994) 43 Con LR 110, determination of the contract pursuant to the terms of the contract on an insolvency did not involve a default by the contractor.
Cf. Tower Housing Association Ltd v Technical & General Guarantee Co Ltd (QBD) (1998) 87 BLR 74 (at paragraph 84G).
Pt 3] The Quantification of Termination Claims

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