Disputes in construction contracts can feel as predictable as night following day and while we may not be able to halt the passage of time, it is possible for the prudent contractor to protect itself with ‘insurance’ against the (almost!) inevitable dispute by understanding the essence of a good claim which is likely to withstand scrutiny and provide for agreement and settlement in short order. So, what makes a good claim?
As contract specialist who involved in reviewing of several claims, will tell you, a good claim consists of cause and effect, entitlement and good records. The cause of a claim will be an event or circumstance which has had an impact on the project, while the effect, for most popular contract forms, must be shown to have had a critical impact on the time for completion of the project. While it is true that not all events or circumstances will provide an automatic extension of time, as most contractors will understand, project programmes are dynamic creatures and it is therefore important to treat all ‘events or circumstances’ as potential ‘claims-in-waiting’.
A claim-in-waiting needs a defined effect, entitlement and impeccable records to ensure the best possible outcome when submitted to the employer/project manager. While effect and entitlement can be developed at a later stage, ensuring that impeccable records are available is something that every contractor can do from the first day of a project. Impeccable records will come in many guises for successful claims but the most important are:
- complete set of (signed!) contract documents, including any commencement notice;
- a baseline programme that has been accepted by the client and updated with progress and changes on a regular basis;
- a complete set of instructions (including issued for construction drawings) from the client/project manager;
- a complete record of all correspondence (letters and emails) with the client/project manager keeping the other party to the contract informed and responding to letters from the client/project manager;
- complete minutes of progress and other meetings; and
- a complete set of commercial records including payment applications, cash flow schedules, variation submissions and the like.
Entitlement to time and/or money from events or circumstances occurring under the contract is provided by the contract. It arises from those express clauses in the contract that provide time and/or costs as a remedy for an event or circumstance having an effect on the time for completion and/or the contract price. For example, a variation to the contract is likely, regardless of the form of contract, to have express contractual provisions detailing, among other things, the way in which the variation may affect the time for completion and/or the contract price.
Entitlement provides the solid foundation from which a successful claim is prepared. To demonstrate the effect of an event or circumstance which has occurred requires both records and entitlement. Records provide the contract programmes previously approved/accepted by the employer/project manager, together with the applicable updates, to demonstrate the effect of the event or circumstance on the remainder of the project activities and entitlement provides the contractual road map for granting time and/or money.
One final important element of a successful claim is presentation of the facts in a coherent, logical and factual story. A well written chronology will present the contractor’s view of what happened and how seemingly extraneous pieces of correspondence played their part in the overall event/circumstance that resulted in the cause of the claim. So, the answer to the question “What makes a good claim?” is, cause, effect, entitlement, records and a good story!