How do you Recover the Extra Cost of Loss and Expense?
Liability is your right to entitlement which is the first step. Quantum is the value of that entitlement.
Liability or Entitlement, in the case of delay and disruption, is likely to be in the form of a right to additional unforeseen expenses incurred as a result of an event occurring directly from an act or omission of the paying party that affects the regular progress of the works.
Standard Forms of Contract deal with Extensions of Time and Loss and Expense separately. Effectively the Standard Forms make provisions for what is at common law considered a Breach of Contract by the paying party.
A Claim at common law is a secondary right to the Contract provisions. Watch out for Contract amendments which require Notices as a condition precedent to entitlement under the Contract and Clauses that negate your common law rights. If you are making a Claim and are unsure, advice is on hand at Arbicon ADR Ltd.
It is a common misconception that obtaining an Extension of Time will trigger entitlement automatically to Loss and Expense. It is not uncommon for parties to argue hard on their entitlement to more time to find at the end of it they are not owed a penny.
How can this be?
First of all, time entitlements may become due to force majeure or adverse weather. Under JCT Contracts there is no facility to an entitlement to financial recovery for such events. Secondly, where an entitlement would become due, say where the paying party has failed to provide access to the work place, if there is no evidence of any losses or expenses linked directly to the offending event there will be no entitlement.
It is therefore essential that record keeping is first rate in respect of the events as they unfold. The personnel, plant and materials, preliminary items and head office involvement must all be recorded separately even better signed for by the paying party’s agent.
It is not unusual for such instances to be recorded on a daywork sheet, this is not a bad habit to get into but often the information recorded is inadequate and the preliminaries and head office items are missing.
If there are no records, there will be no evidence and thus no valid claim. If you are a Claimant your record keeper should also understand the principles of Hadley v Baxendale (1854) and those only actual costs will be allowed. Hadley v Baxendale (1854) is the principle case for a Contractor claiming damages and sets out the rules for recoverable damages, these are;
- Those arising naturally i.e. according to the usual course of things from such a breach
- Such as may reasonably be supposed to have been in contemplation of both parties at the time they made the Contract
To succeed in a Loss and Expense Claim there can be many hurdles. The rule is to obtain contemporaneous records of all resources expended demonstrating how these expenses are the result of the offending event.