Claims Writing and Management
There is a tendency for contracting organisations, to prepare documentation alleging entitlements for payment for work done and for extensions of time, which frequently result in disputes under the terms of the construction contract itself.
However, such documents prepared without a careful consideration of the legal principles upon which they may be based are usually a waste of time of both the person who prepares them and the person asked to read and evaluate them.
On the other hand, the form in which entitlements’ documentation are prepared and presented can provide a discipline for the author that prepares it, ensuring that the necessary information and support documentation (evidence) is collected and considered.
In turn, by adhering to this discipline, will more likely persuade the reader/evaluator of the documentation, whether, and to what extent there are, if any, grounds for an extension of time and/or payment.
Monetary entitlements, are usually of many types including payment for extra works or arising due to variated work which might embrace omitted and substituted different work: Managing such contractual matters involves skilled work in not only detecting the variation but also in valuing the same, following skilled analysis of e.g. the rates and prices contained in the construction contract.
The rate applied and the quantities to which it is to be applied will frequently be disputed and a number of disputes will in all probability arise between the contracting parties.
Another type of claim includes the impact of delaying events, some of which delays e.g. may be caused by the contractor (or its subcontractor) or by the owner or its consultant. The causative potency and criticality of such matters needs to be considered and established.
With the demise of the ‘independent’ Engineer and the rise of Dispute Boards only time will tell whether such disputes will increase; it is thought they will.
Depending upon responsibility and the impact of such events, an extension of time may be due or not. If an extension of time for the completion of the works is due, the contracting organisation may be relieved from having to pay delay damages and be entitled to prolongation compensation for the period concerned.
It can be seen from the few examples given that apart from asserting a right to compensation, no exact meaning can be given to the terms ‘entitlement’ or ‘claim’.
It is to be noticed however that the Fidic 2017 Red Book for the first time includes a very wide definition of claim that is not merely contractual (e.g. clause 1.1.6 definition and 20.1)
Legally enforceable entitlements are not only supported by e.g. rights to payment arising under the terms of the contract, but also claims for damages for breach of contract and occasionally under some other head of law, for example for misrepresentation.
The claims writer must be skilled in drafting such claims (the principle thereof and assessing value) from the outset by training as well as by long experience.
Entitlements should be prepared from the outset in compliance with the contract and with the contractual dispute resolution procedures in mind. One reason why is maybe due to the sanction for non-payment being that a dispute board will be the forum for the dispute and possible even arbitration.
Another reason, is that if there is true entitlement to the money and extension of time concerned it will surely succeed if well prepared and presented.
If the matter proceeds to arbitration, and the entitlement is sound in law (on liability and quantum), the debtor (the party liable for the entitlements asserted) will know it will be responsible for paying the legal costs and disbursements of the Creditor in addition to the EOT and sum found to be owed.
This in turn is more likely to result in a negotiated settlement.
There have been many occasions where parties have failed to succeed due to hopelessly prepared documentation asserting entitlements. In such circumstances this is unlikely to result in any negotiated settlement.
Thus, the documentation setting out a parties entitlements should be such as to persuade the Debtor (the paying party) of the probability of success if it (the paying party) does not pay.
Another sound reason why documentation ought to be prepared in compliance with the construction contract and in accordance with the dispute resolution processes mentioned in the contract including dispute boards and arbitration is that if arbitration follows there ought to be a significant saving in both time and money in preparing the Claimant’s detailed statement of case or Defence.
In particular, the author of the documentation proving entitlements should have at the forefront of his/her mind that if there is arbitration the Claimant will be required to set out most of the material necessary to establish its right to payment and/or payment in schedule form.
Therefore, whether or not the claim is originally prepared as a schedule, it is usually prudent to assemble the material in such a way that it can be easily translated into a schedule.
In all cases the ground in law relied on should be stated. If it is made under a clause of the contract, give its number. If it is made under an implied term, set out the term and the reasons for the implication.
If the entitlement is based upon a breach of contract state the term of which it is alleged there is a breach, the facts relied on as constituting the breach and the factual consequences of the breach.
If it is a variation, describe it and refer to the relevant order. In all cases refer to relevant documents. The loss or other monetary claim should be stated, showing how it is calculated and why it was caused by the ground relied upon. Where the claim is made under various alternatives in law, say so.