Termination and Dispute Resolution Flashcards
What is termination
Termination refers to the ending of the contractors employment
Names reasons the client may terminate
-Contractor breach of obligations
-Unforeseeable event prevents completion or causes >13 weeks delay to planned completion
-Bankruptcy of the other party
-Discharge from a contract by court
-Deferment of start >13 weeks or suspension of work by PM due to contractor default
Reasons contractor may terminate contract
- > 11 week client delay in making payment
-Bankruptcy of the other party
-Discharge from a contract by court
-Deferment of start >13 weeks or suspension of work by PM due to client default
What are the different termination routes
- P1 Employer may complete the works and may use any plant/material to which he has title to. The client may complete the works itself or through another contractor
- P2 Employer may instruct Contractor to leave site, remove any equipment/Plant/Materials and assign all sub-contracts and contracts for supply of materials
- P3 Employer may use contractors’ equipment to complete the works, and contractor to remove from site when so instructed by PM
- P4 Contractor leaves working areas and removes equipment
o All termination will follow a P1
o If the contractor terminates its P1 followed by P4
o If the client terminates its P1, followed by either P2, P3 or P4
What are the different payment methods following termination
- A1
o Amount due, assessed as for normal payments
o The defined cost for plant and materials for which the client has title to paid for by the client
o Other reasonably incurred defined cost
o Any amount retained by the client, minus any un-repaid balance of an advanced payment - A2: Forecast defined cost of removing the equipment
- A3: A deduction of forecast additional cost to the client of completing the whole of the works
- A4: The direct fee percentage applied to any excess of the total of the prices at the contract date over the PWDD
Payment due on termination is A1, plus one or more of A2, A3, A4- depends on the reason for termination
If the contractor defaults and termination occurs what happens to the sub-contractors
If the client wishes to proceed with the works any subcontractors are assigned to the client
If the contractor is the terminating party what happens to the subcontractors
If the contractor is the terminating party, it should ensure provisions are in place regarding termination of subcontracts, and termination provisions in the main contract should be mirrored in the subcontracts
Notification procedure for termination
-Notice to PM and other parties of the intention, giving reasons
-PM issues termination certificate to both parties if reason complies with contract
-PM certifies final amount due to, or recoverable from contractor within 13 weeks of termination, with payment made within a subsequent 3 week period
3 types of insolvency
-Liquidation
-Administration
-Company Voluntary Arrangement
What is the Pari Passu Principle
o On winding up a company’s property should be used to satisfy the company’s liabilities
o All debts other than preferential debts are to be treated equally- paid in equal portions between them
o Payment can be withheld if contractor becomes insolvent after the latest date for a pay-less notice, but before the final date for payment
o A trust fund arrangement (project bank account) will circumvent the Pari passu rule
What is a dispute
Conflict, disagreement or difference which direct negotiations have failed to resolve
Requires 3rd party external resistance
Civil Procedure Riles- Pre-Action Protocols
o Encourage early exchange of information between parties about the prospective legal claim
o Encourage parties to avoid litigation by pursing alternative dispute resolution (ADR) methods
o Where litigation is inevitable, to facilitate efficient mangement of proceedings
Dispute resolution methods x4
-Adjudication
-Mediation
-Arbitration
-Litigation
Characteristics of Mediation
o Non- adjudicatory
o A 3rd party neutral facilitates negotiations and resolution of a dispute between the parties. Mediator only controls the process, and the disputants control the outcomes
o Conciliation
Mediator facilitates communication and provides no recommendations
o Mini-Trial
Proceedings before a panel, agreement evidenced in a supplemental agreement
Characteristics of Adjudication
o Non-judicial dispute resolution procedure that leads to a decision by an independent person that is temporarily binding, but which may be subsequently reviewed by means of arbitration, litigation or by agreement
o Courts generally uphold adjudicators decisions
o Intermediate dispute resolution process
o The adjudicator must be a person stated in the contract, who is reasonably knowledgeable in the subject matter. Or the services of an independent must be enlisted
