Proving Money and Extension of Time Entitlements
The obligation to pay for work done by contractors and subcontractors is fundamental in the construction industry as cash flow is ‘king’ and it is a very common source of disputes worldwide. Bahrain is no different.
Despite this, the Fidic 2017 terms [Red Book] deals with the topic of ‘payment’ in short terms, in clause 14.7.
In Bahrain (as well as in other GCC countries), payment is dealt with briefly: Part III of the Bahrain Civil Code includes the following provisions:
In the absence of a custom or an agreement to the contrary, the price is payable upon the contractor’s delivery of the works.
(a) When the works consist of several parts or if the consideration is fixed on a unit price basis, the contractor may be paid for the amount of work actually completed after the inspection and acceptance thereof, provided that the completed part shall be a substantial part or adequately significant part of the entire works unless otherwise agreed upon.
(b) Upon payment of the consideration, it shall be presumed that the completed part has been inspected and accepted unless he proves that the payment is made on account of or if the custom otherwise provides.
When the price has not been fixed in advance, it must be calculated according to the value of the work and the expenses of the contractor.
An obligation to pay by instalments or on account at specified stages or intervals will under the vast majority of formal construction contracts arise from the express terms of the contract.
Clearly the terms of the Contract are of importance according to the Civil Code in Bahrain and this would include the right to periodic payments permitted by the parties agreement: e.g. clause 14.3 FIDIC 2017 [Red Book]
The analysis of the sum claimed as due in interim payments (and in the draft final statement), prepared by contracting organisations will be varied, and will probably also be controversial, requiring very careful preparation, with attention to detail.
Categorisation and valuation of the individual payment items are normally listed in the terms of construction contract itself including variations: e.g. Fidic 2017 [Red Book], e.g. clauses 12 to 14 inclusive.
Many disputes have arisen under the “Termination” provisions in construction contracts including payment and quantum disputes, and no doubt will continue to do so under e.g. the new Fidic 2017 [red Book] clause16.2.
The position of subcontractors in Bahrain, concerning payment, is elevated compared to other GGC countries (and the UK) in that the Civil Code also includes the following in its Part III:
(a) A sub-contractor and workmen working for a contractor in the execution of a contract have a direct right of action against the employer but only to the extent of such sums as are due by the employer to the main contractor on the date that action is commenced.
(b) Workmen of a sub-contractor likewise have the same right of action against the main contractor and the employer to the extent of the claims in question.
The rights of a sub-contractor and workmen provided for in the preceding Article have priority over those of a person to whom the main contractor has assigned sums due to him by the employer. In case of plurality, they shall recover their rights in proportion to the debt owed to each of them.
Unlike the GCC countries many common law jurisdictions (including the United Kingdom of Great Britain and Northern Ireland) have introduced contractual referees (termed adjudicators) who are required to determine disputes on a temporary basis between rival parties to a construction contract, which disputes can then be finally resolved in courts or in arbitrations as the construction contract provides. There does not appear to be any appetite for such a procedure in the GCC.
Extension of Time Entitlements
In relation to the time for completion of the works, Part III of the Bahraini Civil Code also provides:
(a) The contractor shall perform the work according to the conditions set forth in the contract agreement and for the agreed period of time. If there are no such conditions or if there is no agreement on the period of completion, he shall perform the work according to the recognised practices and within the reasonable period required by the nature of the work subject always to the prevailing professional practices.
(b) He shall bring at his expense all the items required for completion of the work including labour, materials and supplies unless the agreement or professional practices otherwise require.
(a) If, in the course of execution, it is established that the contractor is performing the work in a manner that is defective or contrary to the agreement, the employer may formally give him notice by registered mail to alter, within a reasonable period fixed by him, the manner in which he is performing the work. If after the expiration of such a period the contractor fails to adopt the proper manner of working, the employer may either demand revocation of the contract or the hand-over of the works to another contractor at the cost of the first contractor if the nature of the work so requires.
(b) Immediate revocation of the contract may be demanded without it being necessary to grant any delay, when rectification of the defective manner of performance is impossible.
(c) In all cases, a judge may reject the demand for revocation if the defect in execution or violation of the contract is not likely to undermine to a great extent the value of the work or its fitness for the intended use without prejudice to the right to compensation if there are grounds therefor.
If the contractor delays in proceeding with the execution of the work or completion thereof so as to render impossible to properly execute it as required within the agreed period of time or if he pursues an avenue indicating his intention not to perform his obligation or does any act that is likely to make impossible the performance of such obligation, the employer may request the revocation of the contract without waiting for the date of actual hand-over.
Obligations of main contractors and subcontractors as to completing the works on time will, under the vast majority of formal construction contracts, such as Fidic 2017, arise from the express terms of the contract:
Clause 8.2 of the Fidic 2017 contract [Red Book] deals with ‘Time for Completion’ and makes clear that it is the whole of the works that needs to be completed. Even the definition of the said term makes plain that the Time for Completion may be extended under clause 8.5.
Specific grounds for the granting of an extension of time to the contractor, in emphatic terms, are stated in e.g. clause 8.5 of Fidic 2017, including the usual suspects of: (a) variations….and (e) any delay impediment or prevention caused by or attributable to the Employer, its personnel or its other contractors on Site.
Prevention and cooperation
The common thread uniting all the obligations of the Employer is to be found in two correlative and generalised terms, which may be implied if not expressed, and are as follows:
One, sometimes called the ‘prevention’ principle, is to the effect that neither party shall do anything to hinder the other from performing the contract.
The negative prevention principle has been formulated as follows:
“There is an implied contract by each party that he will not do anything to prevent the other party from performing a contract or to delay him in performing it. I agree that generally such a term is by law imported into every contract.”
This principle is sometimes referred to by saying that a party cannot take advantage of its own wrong in enforcing a contract.
“It is a principle very well established at common law that no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself.”
The other term is, if necessary, an implied positive obligation to do anything which may be necessary to enable the other to perform its obligations. The positive duty has been stated as follows:
“Where in a written contract it appears that both parties have agreed that something should be done which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing though there may be no express words to that effect.”
“I can think of no term that can properly be implied other than one based on the necessity for co-operation … The law can enforce co-operation only in a limited degree—to the extent that it is necessary to make the contract workable.”
Important obligations and responsibilities of the Employer are likely to include:
(i) where the contract documentation requires it, to nominate and appoint a Certifier and/or Quantity Surveyors (or more often, in practice, to replace those already appointed if required for good cause, as, for example, if they should die or retire);
(ii) where the contract documentation requires it, to nominate Sub-contractors or suppliers ready to contract in suitable terms with the Main Contractor; and
Possession of the site
(i) not actively to misrepresent the physical state of the site;
(ii) to give an adequate degree of undisturbed possession of the site;
(iii) to secure undisturbed possession as against other Contractors or persons employed by the Employer; and
(iv) to give the Contractor a good title to quiet possession of the site as against third persons.
Information and instructions
(i) to give all necessary information required by the Contractor in good time; and
(ii) to meet special obligations with regard to timing and content of variation instructions (changes).
Scope of work
(i) to permit the Contractor to carry out the whole of the work.