The term "claim" often carries a negative connotation among those involved on a project. It is commonly misunderstood and associated with blame. Regrettably, claims, although a legitimate contractual entitlement, face a level of disdain that is often unwarranted. If claims were truly detrimental, why would numerous contracts include provisions for them?
I have witnessed the immediate anger that surfaces on the Employer's face at the mere mention of the word. People scurry for cover, ducking under desks, fearful that the accusatory finger of blame will be directed at them for decisions made long ago. Yet, at its core, the term "claim" simply signifies, the formal request for something deemed rightfully owed.
Author: Carl Simms, Associate Director, Blackburn, UK
According to Jaeger and Hök:
“[…] claims are nothing more than the crystallisation of an anticipated, not yet specified, part of the Contract Price.”[1]
FIDIC 2017: A new Claims regime
The 2017 editions of introduced a new regime for FIDIC Claims under Sub-Clause 20. Sub-Clause 20.1 [Claims] governs the entitlement of certain Claims arising between the Parties and categorises them as:
“(a) if the Employer considers that the Employer is entitled to any additional payment from the Contractor (or reduction in the Contract Price) and/or to an extension of the DNP;
(b) if the Contractor considers that the Contractor is entitled to any additional payment from the Employer and/or to EOT; or
(c) if either Party considers that he/she is entitled to another entitlement or relief against the other Party. Such other entitlement or relief may be of any kind whatsoever (including in connection with any certificate, determination, instruction, Notice, opinion or valuation of the Engineer) except to the extent that it involves any entitlement referred to in sub-paragraphs (a) and/or (b) above.”
The initial two types (a) and (b) are distinguished by the claimant's identity and the entitlement sought. The third type (c) serves as a comprehensive category encompassing any other entitlement. Accurately classifying a Claim holds significance as it could lead to a lengthier procedure and the potential loss of contractual rights.
Fully detailed Claim
Under Sub-Clause 20.2.4 [Fully detailed Claim], based on the premise that a valid Notice of Claim (Sub-Clause 20.2.1) has been issued, a fully detailed Claim must be served to the Engineer within either:
- 84 days after the claiming Party became aware, or should have become aware, of the event or circumstance giving rise to the Claim,
or
- such other period (if any) as may be proposed by the claiming Party and agreed by the Engineer.
A “fully detailed Claim” means a submission which includes:
“(a) a detailed description of the event or circumstance giving rise to the Claim;
(b) a statement of the contractual and/or other legal basis of the Claim;
(c) all contemporary records on which the claiming Party relies; and
(d) detailed supporting particulars of the amount of additional payment claimed (or amount of reduction of the Contract Price in the case of the Employer as the claiming Party), and/or EOT claimed (in the case of the Contractor) or extension of the DNP claimed (in the case of the Employer).
Producing a Claim
A Claim could be for additional time, money, or both, dependant on the contractual remedies and relief sought. The claiming Party bears the burden of proof, needing to demonstrate, on the balance of probabilities, the veracity of the event and its impact on the project.[2] Consequently, the opposing party must be convinced, based on the evidence provided, that the occurrence of the event was more likely than not.
There are four fundamentals to be considered as part of a good Claim: (1) cause (explained what happened); (2) effect (explain what effect the cause had on the project in terms or time, money or both); (3) entitlement (demonstrate entitlement under the contract or at law); and (4) substantiation (the claim narrative, delay analysis and additional costs all need to be substantiated with evidence).
There are also four themes to remember when compiling a Claim: (1) ensure that the reader’s / decision maker’s job is made as easy as possible when assessing the claim; (2) the claim submission should be a stand-alone document; (3) assume that the person who will assess the claim has no prior knowledge of the project or circumstances; and (4) remove any irrelevant information from the document.
Generally, and dependant on the nature of the dispute, a good Claim submission will include details such as:
- Executive Summary
- Introduction
- Contract Particulars
- Express terms of the Contract[3]
- Details of the Claim
- Details of extension of the Time for Completion
- Details of Additional Payment
- Statement of Claim
- Appendices
- Schedules
- Tables
If a Claim has a continuing effect the initial submission is considered as interim.[4]
What should I do once I have completed my Claim?
After the claim has been prepared, it is now ready for submission to the Engineer. It is crucial that any submission adheres to the precise provisions outlined in the Contract, or as agreed by the Engineer.[5] Failure to comply may restrict or result in a loss of entitlement.
Regarding continuing Claims, after submitting the first interim fully detailed Claim the claiming Party is obligated to submit further interim fully detailed Claims at monthly intervals with a final fully detailed Claim submitted within 28 days after the end of the effects resulting from the event or circumstance.[6]
What happens next?
After receiving a fully detailed Claim either under Sub-Clause 20.2.4 [Fully detailed Claim], or an interim or final fully detailed Claim (as the case may be) under Sub-Clause 20.2.6 [Claims of continuing effect], the Engineer proceeds under Sub-Clause 3.7 [Agreement or Determination] to agree or determine the additional payment (if any) and/or the extension (if any) of Time for Completion to which the claiming Party is entitled under the Contract.[7]
The Engineer has 42 days from receipt of a fully detailed Claim to provide the Determination.[8]
In cases where the Claim has a continuing effect in respect of this first interim fully detailed Claim, the Engineer shall response on the contractual or other legal basis of the Claim, by giving a Notice to the claiming Party, within the time limit for agreement under Sub-Clause 3.7.3 [Time limits].
The next bridges to cross
If either Party disagrees with the Engineer’s determination, provisions are provided under Sub-Clause 3.7.5 [Dissatisfaction with the Engineer’s determination] and Sub-Clause 21 [Disputes and Arbitration].
Conclusion
While the term "claim" may evoke apprehension and scepticism, its incorporation within FIDIC 2017 (and the 1999) editions signifies a commitment to fairness, accountability, and contractual integrity. By reframing claims as instruments for constructive dialogue and resolution, project stakeholders can act appropriately knowing that the benefit is to positively advance the project.
Irrespective, of actions or reactions, during the whole process it is imperative to maintain a positive dialogue with the other Party and the Engineer.
If you would like to discuss the content of this article, or have any further enquiries, please don't hesitate to reach out to Carl directly: carl.simms@diales.com.
[1] 7 Axel-Volkmar Jaeger and Götz-Sebastian Hök, FIDIC – A guide for Practitioners (Springer 2010), p 365.
[2] Miller v The Minister of Pensions (1947) 2 ALL ER 372
[3] Those being specifically relied upon when making the Claim.
[4] Sub-Clause 20.2.6 [Claims of continuing effect] (a)
[5] Sub-Clause 20.2.4 [Fully detailed Claim] (i) or (ii)
[6] Sub-Clause 20.2.6 [Claims of continuing effect] (c) and (d)
[7] Sub-Clause 20.2.5 [Agreement or determination of the Claim], (a) and (b)
[8] Sub-Clause 3.7.3 [Time limits]