BE 414 CONTRACT ADMINISTRATION

GROUP ONE ASSIGNMENT

KYAMBOGO UNIVERSITY ABSTRACT

A write up on the common construction claims on
FACULTY OF ENGINEERING construction projects, together with their causes.

Bachelor of Science in Building Economics

 GROUP ONE MEMBERS

NAME REGISTRATION NUMBER

OTIM MICHAEL 16/U/162/EBD/GV
MUMBERE PIOUS 16/U/14984/EBE/PE
IRIGABA GILBERT 16/U/6167/EBE/PE
OKELLO DANIEL NIMARO 16/U/6201/EBE/PE
GIMONO LEAH 16/U/14167/EBE/PE
AGETTA DANIEL 16/U/12248/EBE/PE
WATIBINI NICHOLAS 16/U/6165/EBD/PD
AINOMUGISHA CYNTHIA 16/U/6168/EBE/PE
NABUSHUNU ROBERT 16/U/6152/EBD/PD
NAMIREMBE RAHMAH 16/U/6194/EBE/PE

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Table of Contents
Introduction ................................................................................................................................................... 3

1.1 Common types of claims............................................................................................................... 3

1.2 Major causes of claims .................................................................................................................. 7

References ..................................................................................................................................................... 9

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Introduction
Claims are inevitable in construction projects. In the last few decades in fact, the frequency and severity of
claims and disputes have increased significantly. Construction claims are considered as some of the most
worrying and unpleasant events of a project. Claims appear to affect the completion of construction, cause
delays in delivering projects, and affect overall budget. These claims are undesirable because they require
significant time and resources to resolve, and also cause adversarial relationships among the parties creating
disputes.

During the execution of a project, several issues arise that cannot be resolved among parties involved. Such
issues typically involve contractors requesting for either time extension or reimbursement of an additional
cost, or sometimes both. Such requests by the contractor are referred to as “claims”. (Bhagyashree &
Sudhanshu, 2016).

Construction Claims can be defined as a request by either party to the contract, usually the Contractor, for
compensation for damages caused by failure of the other party to fulfill his part of obligations as specified
in the contract. The compensation is usually in the form of the additional payment or an extension of time
(EOT).

According to Zandelin (2005), Claims are defined as requests for compensation for damages incurred by
any party to a contract. In the construction industry, claims are common and can happen as a result of
several reasons that can contribute to either delaying project or increasing its costs.

1.1 Common types of claims

There are a number of ways to classify construction claims. By determining their relevant legal bases,
construction claims can be classified as follows;

Contractual claims

These are claims that arise from express terms of a contract and form by far the most frequent kind of
claims. Contractual claims concern matters with consideration to the contract itself. This includes any
disagreement on the responsibility or liability of some parts that are not included in the documents (Mohsin,
2012). These claims may arise from each of the following; ground conditions, valuation, variations, late
issue of information, and delay in inspecting finished work

For example, for claims arising from variations, an Architects instruction changing the kind of facing
bricks may affect the time taken for laying the bricks, and may lead to more sorting if there is a higher

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proportion of misshapen bricks or if they are more susceptible to damage in handling. In such a case, the
contractor would be entitled to an increase over the bill rates.

Extra-Contractual claims

These claims are also known as common law claims. They are for damages for breach of contract at
common law. This type of claims has no specific grounds within contract but results from breach of contract
that may be expressed or implied.

For example, when the Employer in some way hindered progress of the Works or if the architect were
negligent in carrying out his duties, resulting in loss to the contractor, the extra work incurred as a result of
defective material supplied by the client, etc.

Quantum Meruit claims

These are the types of claims that provide remedy for a person who has carried out work under the
instruction of the owner but no price has been agreed or where a new one has replaced original contract and
payment is claimed for work done under the substituted contract (Rajesh, 2019)

A claim here arises where no price has been fixed, where there is work done that falls outside the contract
and where there is work done under a void contract.

For example, at the start of a project, the property owner and the contractor may not have specified the
amount of money the contractor will get for completing the construction of a fence. In such a case, if the
contractor goes ahead and executes the work, but the owner refuses to pay, the contractor can claim for the
amount of money spent under a claim for quantum meruit.

In these circumstances, the contractor must demonstrate that the employer requested, either expressly or
impliedly, the work to be done, or freely accepted it.

Ex-Gratia claims

Ex-Gratia claims are claims where no legal remedy is available to the contractor but arise out of hardship.

The contractor considers the Employer to have a moral duty to meet these claims, for example if he has
seriously under-priced an item whose quantity has been increased substantially because of the variation
which will in consequence cause him considerable loss. The Employer is under no obligation to meet such
‘hardship claims’ but may be prepared to do so, on grounds of natural justice or to help the contractor where
otherwise he might be forced into liquidation.

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These claims are also called sympathy claims. Wherever such claims are to be given, it will be better if
these are given in the currency of the current contract so that the money paid helps in improving the progress
of work (Bhagyashree & Sudhanshu, 2016)

Counter claims

These are claims set up in opposition of one party to other claims by other parties i.e. a claim by a party
against another party who has made a claim against them. It should be noted that this is not a defense to a
claim, but rather separate and it proceeds even if the original claim is ended.

For example, on a construction site, a contractor could request the employer to provide fast and secure Wi-
Fi internet connection in the contractor’s site offices so as to ease online communication with the material
suppliers. That implies that the contractor has made a claim for fast and secure internet, siting the reasons.
However, the consultant, can also decide to make his counter-claim by responding negative. He needs to
support his refusal to provide the internet like his inability to foot the bill, etc.

Delay-Related claims

A delay claim on a construction project relates to a period of time for which the project has been extended
or work has not been performed due to circumstances which were not anticipated when the parties entered
into the construction contract.

The most common causes of delays on a project include differing site conditions, changes in requirements
or design, weather, unavailability of labor, etc. such delays will often cause a contractor to incur additional
costs in the performance of the said work like costs of maintaining idle workforce and equipment.

However, for a contractor to claim for delay damages, the delay must be excusable. Categories of excusable
delay involve matters beyond the contractors control i.e. design errors and omissions, owner initiated
changes, etc.

A non-excusable delay is one for which the contractor assumed the risk under the contract. It could have
been prevented but for the acts of the contractor.

Contract Termination claims

When contract termination has occurred before the contractor has begun the work, the contractor may be
entitled to recover the loss of the expected profit, or the difference between the contract price and the
anticipated cost of the work. If the owner has terminated the contract after the contractor has begun the
work, the contractor may be entitled to recover the loss in various ways. If the contractor has completed the

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work in full compliance with the contract prior to termination, she should expect to recover the full contract
price. Recovery and liability under terminated contracts varies widely

Difference in pricing and measuring claims

These types of claims deal with the disagreement regarding measurements at the final stage in the
construction. Also, these claims include the differences in pricing by the contractor and the owner of some
of the materials. Also, the change and the extra work usually create some differences in pricing.

Different site condition claims:

A changed condition refers to some physical aspect of the project or its site that differs materially from the
indicated by the contract documents or that is of an unusual and differs materially from the conditions
ordinarily encountered. Differing site conditions can increase construction costs, and can also delay the
project schedule.

For example, if the contract specifications and geotechnical study informed the contractor that during
excavation, only soft soils will be encountered, but the contractor has encountered hard rocks, the contractor
can be able to submit a claim under the differing site condition clause.

Acceleration claims

Acceleration refers to the owners directing the contractor to accelerate his performance so as complete the
project at an earlier date the current date of work advancement will permit. It occurs when the contractor is
ordered, either directly or constructively, to speed up performance in some way. These types of claims may
occur in big projects but for residential houses, these are rare.

For example, assume that the contract scope required the contractor to install 5000 lineal feet of piping in
30 days. If the owner later required the contractor to install 5000 feet in 20 days or 8000 feet in 30 days,
the contractor was accelerated.

Payment Related claims

In the construction industry most of claims arise for the not payment or delayed payment of running bills,
final bills, unreasonably deduction of money from bills without any strong reason, delay in payment of
security deposit, maintenance deposit etc.

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Change claims

Almost every construction project encounters change. Whether it’s a change to the scope of work, a revision
to the specifications, or an impact to the means and methods of performing the work, changes can
significantly impact a project’s cost and schedule. Due to change in work scope, the claim may take place
between the contractor and client. Due to change in work scope or change in design the quantity of work
may increase or decrease and if it is the work from which contractor is going to get the maximum profit,
then he can claim for increased rates for performing the work or extra money for completing the work.

1.2 Major causes of claims

Delay in supply of drawings; drawings form an important part of the contract documents. Where drawings
are supposed to be issued in stages by the consultants, failure to do so on time can result into the contractor
claiming for the lost time.

Delay in handing over the site; contractors usually seek compensation for late handing over of the site from
the owner because they incur costs of mobilizing resources to complete the work on time.

Delay in supply of materials; usually, in cases where the delay in the supply of construction materials by
the owners affects the project schedule, the contractor can issue a claim.

Delay in Payments; the construction contract involves different types of payment like mobilization advance,
workers bonuses, etc. which when delayed can delay the project. Usually contractors plan their finances
considering the cash inflow of the part of the work completed. If they don’t get the payment, then the project
is hampered.

Delay in Starting work; this can be a claim of the consultant or owner against the contractor for his delay
in commencing the project yet all the resources have been availed to him.

Delay in completing the work; if the contractor fails to complete the project within the contracted period,
he may be liable to liquidated damages to the client based on a calculation of the actual loss that the client
incurs.

Loss due to extra overheads on account of extension of time limit; an extension of time results in the
contractor incurring extra overhead costs to run administration on site. This results in a claim.

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Loss due to idle machinery and idle labour; the fact that machinery is paid for every day it spends on site,
the contractor has to claim for the money lost incase machines are on site, but there is no work going on
because of the owners negligence.

Due to Design errors; design errors have a negative impact on project management, efficiency and
effectiveness. They are common contributors to reworks, cost over-runs, schedule delays and unsafe
working conditions which affect project performance.

Due to inadequate or incomplete specifications; these cause delays as the contractor waits on the consultant
to modify the documents. In that case, he has to claim for the money wasted in the process.

Due to Changes in plans and specifications during construction.

Due to Insufficient plans and specifications; this causes project stand-stills which have financial
implications for the contractors.

Due to Extra items and Variations; a variation is an alteration to the scope of works laid out in a construction
contract. Extra items and variations lead the contractor into asking for more money to ensure the changes
are attended to.

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References
Bhagyashree, A., & Sudhanshu, P. (2016, April-June). Review of Types and Causes of Construction
Claims. International Journal of Research in Civil Engineering, Architecture & Design, 4(2), 43-
44.

Mohsin, M. (2012). CLAIM ANALYSIS OF CONSTRUCTION PROJECTS IN OMAN.

Rajesh, S. (2019). Contruction claims. Retrieved October 28, 2019, from Slide Share:
slideshare.net/construction_claims

Zandelin, E. (2005). Construction claims in the United Arab Emirates, causes and frequency.