Last edited 08 Oct 2020

Loss and expense

Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as:

Claims may comprise costs resulting from disruption to the works or from delays to the works (prolongation).

The contractor must give written notice of a claim as soon as it becomes reasonably apparent that the regular progress of the works is being materially affected. This need not necessarily result in a delay to the completion date, and so claims for loss and expense and claims for extensions of time do not necessarily always run together.

Claims are restricted to 'direct' loss and expense and so 'consequential losses' (such as lost production) are generally excluded. Direct losses are those that 'flow naturally' from the breach of contract.

There is disparity between contract types about whether items such as head office overheads can be included in claims for loss and expense, and some court rulings have allowed such claims. If there are specific consequential losses which the parties to the contract wish to exclude, it may be prudent therefore to state these explicitly within the contract.

NB: The New Engineering Contract (NEC3) contains provision for the contractor to claim payment for 'compensation events' rather than loss and expense.

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According to JCT - Standard Building Contract , in Article 4.23 ...if Contractor incurs or likely to incur loss and expense for which he would not be reimbursed under any provision in these Conditions due to regular progress of Works or any part of them has been or is likely to be materially affected by any of the Relevant matters the Contractor may make an application to the Architect/Contract Administrator. If Architect is of the opinion that regular progress has been or likely to be materially affected ... issues a variation instruction.

in 4.24, a Relevant Matter is described to include the matter described above which is not initiated by Architect directly.

In 5.2, it is mentioned in text, Variations required by direct Architect's instructions as identical to ones (first encountered by Contractor as "differing site conditions" and brought to Architects attention) subsequently sanctioned by Architect in writing ( as a valid variation).

Thus, as opposed to many articles about JCT's being mute about "unforeseeable ground conditions") JCT includes "unforeseeable or differing site conditions clause " as a loss and expense item. Variation is normally considered as a modification of design, quality or quantity of Works instructed by Architect. For unforeseeable ground conditions, It is requested by Contractor first and then, ascertained and instructed by Architect as variation. If it is not instructed, it is a claim.

Therefore, please include "differing site conditions" as a loss and expense item in your list. It is like this in all English and American standard contracts except fidic silver book. This will make your list meaningful and complete.

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