A Claim is demand for what is due.
In construction, demand can be in form of time and/ or cost and the right to it is usually bestowed by the Contract or implied from Common Law. The entitlement to a Contractor for extra pay arises from the defaults of the Employer or his agent i.e. Consultant in most cases. Hence claims carry with them an accusation of someone guilty of non-performance or as a result of events outside the control of any party.
In Uganda, it’s a shame that claims haven’t been accorded the due respect/ attention they deserve. Many contractors/employers lose quite good sums of money only because claim clauses weren’t captured in the contract. These clauses ensure that the Contractor is paid an amount that would reasonably have been included at the time the tender had the changed work been envisaged earlier.
In their absence, Common Law Principle of Restitution provides that the plaintiff is entitled to be placed so far as money can do it in the same position as would have been, had the contract been performed.
Claim clauses in the contract provide for re-imbursement of damages for minor breaches of contract by either party without re-course to legal action.
Types of Claims
1. Entitlement under the Contract. Claims provided for under the contract are categorized into 3 segments namely; variations, compensation events (affect the performance of the contract but aren’t a fault of the contractor), and negligence or omissions. Under this, settlement can be done as soon as the event has occurred by making adjustments in the next interim certificate. A claim by the Contractor must show the loss suffered i.e. time and/or cost, was a result of the qualifying event and must demonstrate that there has been compliance with the described procedure. The contractor is required to give reasonable notice when making a claim and this can be provided for in the contract sometimes.
2. Actions of Breach. These arise from breach of contract requiring one party to compensate the other. These can be done through 3rd party and require proof of actual damages, or can be settled even when the contract has been closed.
3. Quantum Meruit Claims. These apply when the contract can’t be used to settle payments. The scenarios include the following;
· If the contract is void
· If the work is based on letter of intent and the contract doesn’t materialize
· If variations exceed scope of the contract
· If the contract doesn’t cover work done in retrospect
· When the price fixing clause fails to operate
It should be noted that there cannot be counter-claims from the Client for delays or deficiencies if these claims arise because there’s no contract between the parties.
Basis of Contract Claims is on contractual entitlements and the rights to money should always be separated from rights to time. Only certain events specified in the contract will qualify. The mere fact that an event cost a contractor more than planned or that there were a lot of variation orders is not enough.
The cause of the loss must be identifiable and related to a clause in the contract, hence the procedure for claiming is that usually, the Contractor should give notice although the precise timing of which varies from one contract to another.
The claims are assessed on grounds that once a Contractor can show that work has been disrupted or delayed by qualifying events and that the correct administration procedures have been followed, the final problem is to assess money. The contractor must prove all the losses in order for the claim to succeed.
Common claims include;
· Prolongation i.e. of delay of works
· Disruption; where the progress of the project is hampered without affecting the duration
· Offsite overheads and profits i.e. indirect overheads that have been built into the unit rates of a project
· Financing charges. Cost capital and usually arises when talking about cost claims.
· Preparation costs. Costs of preparing the claim and naturally aren’t claimable under the normal circumstances of a contract but when the contract fails and the issue/ case is taken to court, these costs are evoked.