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Loss and Expense

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Project Breakdown Document

Construction Loss and Expense

Most standard forms of building contract contain loss and/or expense clauses, which provide a contractual equitable remedy for breaches of contract by the Employer, without giving such breaches that label. There is often a reluctance to pay such costs and the standard of proof is higher, as actual costs linked to the offending event must be proved. Where there is no such clause the claim can be made using common law as a remedy for damages for breach of contract.

Loss and expense claims are often associated with delays but can be for any event where the Contractor incurs loss due to the failure of the Employer. It is essential that if there are contract terms relating to loss and expense, especially amended terms, that these are understood fully. The claim can fail for example, due to defective notices and any stipulated condition precedent. Arbicon can advise on such matters.

Familiar causes, by example of loss and expense are delays, variations, suspension of work on site, prevention, default or act of the Employer and/or his consultants. Such causes can lead to the Contractor incurring acceleration costs, disruption costs, head office costs, loss of profit, finance charges and additional site labour, plant and overhead costs.

The burden of proof is on the Claimant, thus again it is essential that good records of actual costs are kept and their link to an offending event such as a delay. For example, recording labour and plant time and costs wasted, specifically identifying the offending event on a daywork type sheet and submitting the same to the Employer, is good evidence. If a submission made in the form of a daywork payment application is ignored by the Employer the evidential burden of proof shifts to the Employer, thus highlighting the importance of such contemporaneous evidence.

Arbicon can advise on:

  • Analysis and reporting on entitlement to loss and/or expense (establish the case merits and contractual or common law rights and remedies).
  • Loss recovery from delays, disruption and acceleration.
  • Service of valid claims notices (form, communication of and any condition precedent).
  • Compilation of contemporaneous evidence (record keeping, burden of proof).
  • Mitigation of loss and "Global" claims.
  • Linking cause and effect and calculation of Quantum.
  • Submitting or defending a claim to ADR proceedings, if required.

It is often difficult to prove the actual losses incurred and how they relate to the offending Employer or Contractor default. In adjudication the claim must be effectively and properly prepared, bare sums claimed will always be met with a big black pen. Again, do not leave this complex area to chance. Arbicon are experts at prosecuting and defending loss and expense claims in adjudication.