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Extension of Time under the Construction Contracts

Preparation of the EOT plays a vital role when the Works are not completed within the stipulated Time for Completion of the Works outlined in the Contract - regardless of the reason.
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  63B Calmette Street, Nguyen Thai Binh Ward, Dist. 1., Ho Chi Minh, Vietnam t : +84 28 6276 9900 | f  : +84 28 220 0913 w : | c :  CNC ©  A boutique property law firm © CNC | 2019 All rights reserved    Page | 1 Extension of Time EOT) under Construction Contracts   Time is of the Essence Construction contracts typically include a Time for Completion of Works 1 , and the preparation of the Extension of Time (EOT) which plays a vital role when the Works are not completed within the stipulated Time for Completion of Works outlined in the contract - regardless of the reason. Resulting damages and losses  –  including loss of profits  – affect both parties of the contract, and will likely be incurred by either party of the project ’ s cycle of development, and include various costs, such as:  AssociatedCostsduetoExtensionofTime  Mitigation of these damages is crucial and must be dealt with efficiently and effectively. Challenges abound for members of management, including those responsible for the implementation of Works and/or practitioners (experienced lawyers and engineers) to prepare and submit the EOT Claim in a timely manner and pursuant to contract requirements. Most important is the justification between and of the events leading to the claim and its effects upon the completion of Works. Similarly, the lack of background knowledge and experience regarding the legal basis for an EOT, along with the norms to review, assess, and clarify to file EOT Claims is cumbersome for those who involved in the determination of EOT Claims. Disputes and/or disagreements during performance of 1  Works means “ Section ”, “ Package ”, “ the Works ” or “ Project ”, depending on situation to situation. Customers claimsOther contractors' claimsLenders' andd sponsors' claimsOverhead and operation costLegal fees    Page | 2 the construction contract become complicated due to this lack of background knowledge and experience and threatens the long-lasting relationship between the parties. Collectively considering and implementing relevant guidelines and references of reputable global firms such as the Society of Construction Law 2 , The International Federation of Consulting Engineers (FIDIC) 3 , and CNC’s weal th of experience, CNC is unhesitatingly available to introduce a plethora of leading edge Vietnamese practitioners (including engineers, QS  –  Contract managers, lawyers, arbitrators, mediators, etc.) involved in managing, monitoring, and settling extension of time claims under construction contracts. Determination to the Time for Completion The justification(s) for the determination of each EOT Claim requires commencement (beginning) and completion (ending) dates - the relevant period of Time for Completion of the Works or Section ( “Time for Completion” 4 ) and the extension of time previously granted to the Contractor. Determination of the Commencement Date Initially, the determination of the Commencement and Completion dates appears easy - it may have been stipulated or defined under relevant contract documents. However, it is worth noting that the determination of the Commencement and Completion dates, becomes particularly cumbersome and/or unclear due to variances of such dates with respect to the reality of contract performance. The variances of these dates is easily identified and may be provided in conspicuous or obscured language such as, “ CommencementDateisthedateonwhichtheContractorreceivestheLetterof Acceptance 5 ” and therefore, it is set that the “ CompletionDateis[x]daysfromtheCommencementDate ”, or in another situation, it is set out that the “ CompletionDateisonx/y/z. ”  With respect to the aforementioned examples, it was thought that the Commencement Date, the Completion Date, and obviously the Time for Completion had been clearly defined, but it was not as such provisions lead to potential disputes between the parties at later stages. Considering the Commencement Date, it is highly recommended and encouraged that diligent and dynamic consideration be given to what is possible, feasible, and/or likely-to happen in nature of a Commencement Date. Once the contractor has neglected the deployment of the Commencement Date, then a wrongful determination of the Commencement Date in the Letter of 2  See more at,,  3  See more at,  4  Or time for completion of the “Works”, “ Section ”, “ Package ”,  or “ Project ”, as the case may be. 5  For the confidentiality matter, the name and the particular information of the Letter of Acceptance or the Parties is not disclosed.    Page | 3 Acceptance/contract means the parties to the contract are now agreeing to uncertain factors for the start of the Works, such as potential access to the Site, availability of the contractor’s materials and equipment, establishment of temporary utilities - including water and electricity for the works, temporary transportation within the Site, e.g. hoists, tower cranes, forklifts, etc. and/or construction documentation - drawings, procedures and protocols, lines of communication, payment procedures etc., have all NOT been established. Whenever defining the Commencement Date, attention should be drawn to the matter in which FIDIC anticipates the duration for all parties (contractors, employers, and engineers) involved to set the Commencement Date whereby it provides that “ TheEngineershallgivetheContractornotlessthan 7days’noticeoftheCommencementDate.Unless otherwisestatedintheParticularConditions,theCommencementDateshallbewithin42daysaftertheContractorreceivestheLetterofAcceptance ” 6 . The expectation to have 42 days after the Contractor receives the Letter of Acceptance provides each party a reasonable period of time for preparation prior to commencing work, as well as necessary prior notice given by the Engineer. Nevertheless, the actual meaning of an anticipated period of time (e.g. 42 days) is that it allows the Contractor to submit important documents (under normal circumstance, 28 days after the Contractor receives the Letter of Acceptance) to ensure that the Commencement of the Works is properly implemented/started, in particular: (i)   Submission of the Performance Security 7  (ii)   Submission of the detailed program 8  Furthermore, a provision requiring the Contractor to submit confirmation of insurance arrangements (and perhaps evidence for payment of the premium), is something employers and Engineers generally do to ensure risks during construction are mitigated at the time the work is started. Succinctly, to determine a proper Commencement Date for any Works the consideration given to each specific situation becomes vital and must ensure that the Parties to the contract become aware of the required tasks and activities to be performed so that the meaning of the Commencement Date  –  the start of the Works - can be considered the “ countdown ”  toward the Time for Completion, and the Contractor is liable to the Employer for the timely completion of the Works within the contractually specified Time for Completion, and no further. 6  See more at Sub-Clause 8.1, FIDIC Red Book, First Edition 1999; 7  See more at Sub-Clause 4.2 [ PerformanceSecurity ], FIDIC Red Book, First Edition 1999; FIDIC Yellow Book, First Edition 1999; and FIDIC Silver Book, First Edition 1999. 8  See more at Sub-Clause 8.3 [ Program ], FIDIC Red Book, First Edition 1999; FIDIC Yellow Book, First Edition 1999; and FIDIC Silver Book, First Edition 1999.    Page | 4 Determination of the Completion Date Likewise, to determine the Completion Date necessitates the question “ whatdoesthecompletionmean ”. Completion can be construed in different ways, depending on each situation, from time to time, and applicable laws under the contracts. Therefore, the completion could mean: VariousPracticalCompletionStatus  In reference to the FIDIC contract, “ completion ” means the point at which the Contractor has completed the Works and each Section (if applicable) in its entirety within the contractually specified Time for Completion, including 10  (i)   Passing of Tests on Completion, and (ii)   Completion of all work outlined in the Contract as being required for the Works or Sections to be considered completed for the purpose of assuming control under Sub-Clause 10.1 [ Taking-OveroftheWorksandSections ]. Of course, prior to performing any Tests of Completion, the Contractor is required to provide (submitted) necessary paperwork, such as submission of as-built documents, and detailed operation & maintenance manuals sufficient for the Employer to operate, maintain, dismantle, reassemble, adjust, and repair any part of the Works. Simply put, the Works are only considered as completed when the Contractor has established three critical elements, including: 10  See more at 8.2 [ TimeforCompletion ], FIDIC Red Book, First Edition 1999; FIDIC Yellow Book, First Edition 1999; and FIDIC Silver Book, First Edition 1999.    P   r   a   c   t   i   c   a    l   C   o   m   p    l   e   t   i   o   n The Contractor in fact has completed the Works, however paperwork (such as as-drawings, approvals, test results, certificate of quality, etc.) is yet to be completed.    c   o   n   t   r   a   c   t   u   a    l   C   o   m   p    l   e   t   i   o   n The Contractor has successfully completed the Works pursuant to the Contract, including the completion of paperwork for the intended purpose(s).    L   e   g   a    l   C   o   m   p    l   e   t   i   o   n The Employer has obtained all approvals, certificates, licenses, permission from competent authorities for the safe operation, and management of the Works, such as fire- fighting certification, earthquake resistance, and the permit for public utility connections.
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