ENGINEERING & LAW 37 Demystifyin Direct Logs And Expense Claims By tr. Harbans Singh K.S.", contracts to be delayed for one reason a another This may be due to neutral events i.e. events beyond the contracting parties control ?o¢ due to some act of prevention ' caused by the employer or his authorized agent. More often than not, the contractors the culpable party oF one oF mote ofthe sub-contractors i the,cause ‘of the ensuing delay. For the former case, the employer is obliged under most contracts to graat the contractor ‘extension of time; thereby fixing a new or revised date fr the completion of the contract. The main aim of such a process isto prevent the contract time from becoming, at large and thereby to preserve the employers rights vis-t-vis Liquidated and Ascertained Damages, | {isa common occurrence for engineering/constction Whether the extension of times granted prospectively or retrospectively, the usual “knee-jerk” ceaction from most contractors is to consequently make a claim for direct loss andl expense ensuing from the said delay. Itisa commonly held belie! by most contractors” that the grant of any extension of time to their contract irespective of the cause automatically entitles them to extra costs fn the form of direct loss and expense claims. This isa myth which has been dismissed by many authorities; a Classic statement by Roger Knowles ° which echaes the commonly held position i the following words: “oc there is a common misconception in the construction industry that once an extension of time has been granted, there will be an automatic entitlement to the recovery of loss and expense, Under ost standard! forms of contract, the entitlements to extensions of time and payment of additional cast or loss and expense are quite separate...” The sbove preposition is supported by The Society of ‘Construction Laws Delay and Disruption Protocol 2002 which, in clayse 1.6.2 states “Entitlement to an EOT does not automatically lead to entitlement to compensation (and vice versa)" In view of the prevalence of such misconceptions inthe local construction industry, this article has been formulated to clear the situation particulary in the light of recent developments in other parts of the world so 35 10 keep the local practitioners aware ofthe true pesition and to dispel any myths or doubts currently permeating all facets ofthe practice: be these on part of the employers, contract administrators or the contactors. Beating in mind the remit ofthis article, it should nat be taken as an exhaustive treatise on the subject matter but a mere Introduction. Reference should be made to the relevant texts and authorities to augment and expand upon the skeletal outline given herebelow. fun toneor ews In the celebrated case of Minter ¥ Welsh HISO *, the English Court of Appeal accepted that “direct loss andlor expense” has the same meaning as common lav damages. A similar sentiment expressed in the Building Contract Dictionary * where at p 130 is stated: “After 4 good deal of contraversy, itis pow clearly settled law that this phrase or similar phrases such as ‘direct loss and/or damage’ ~ extends (0 those heals of claloss which would be recoverable at common fav as damages for breach of contract”. Inthe English case of Rees & Kirkby Ltd. v Swansea Gity Council *, tne Court hela, inter alia, that: {a} The meaning of the word ‘direct’ in the expression ‘direct loss and/or expense’ should permit recovery 1. Buecton HSH Consul Se Ione land, CLP Dips, 2. Ea Torce majeure, © BE, Mech) Spore, (U8 £6. tng element weather ee mie, ordering aoa 4 Ans Sub-coniactoes Supplies ako 150 Convactal Problems and Their Sout ps6. 980) 13 BLE 1B. Chappell, D, Morshall VP-Smia8 ENGINEERING & LAW ‘of damages flowing naturally in the usual course of things within the meaning of those words as used inthe first limi of the rule in Hadley v Baxendale"; and The distinction between ‘direct loss andior expense! and ‘indirect or consequential loss’ is the same distinction as that which has to be made whenever common law damages are being considered. The distinction between the terms “direct” and “indirect oF consequential” loss and/or expense was further revisited and restated by the English Court of Appeal in British Sugar Pl. v NEI Power Plant Projects td," tothe effect that": on te proper way to examine this question was by reference to Hadley v Baxendale (1854. in this case, the Court categorized damages under two headings commonly referred to as the first leg and second leg. The fist log deals with fosses arising naturally i.e, according to the usual course of things. By way ‘of contrast, the second leg covers the type of losses which both parties hac in mind when the contact was entered into, but which were particular t0 the contract, sometimes refered toas special damages. tt was held that consequential damage is akin to special damage en” In the Malaysian context there is a paucity of authoritative pronouncements on the legal finitions of such phrases; hence resort has tobe made to the English case lave although those are of mere persuasive nature}. ‘A recent attempt has been made in the CIDB Standard Form of Contract For Building Works (2000 Edition) ‘where in Clause 1.1" the expression ‘Lossand Expense” thas been defined as: (a) the direct relevant costs of labour, Equipment, ‘materials, or goods actually incurred on the site jn so far they would not otherwise have been incucred and which were aot and should not have been provided for by the contractor; and Costs of an overhead nature actually and necessarily incurred on the Site but in either case only in so far they would not otherwise have been incurred and which were not and should not have been provided for by the Contractor: and the amount equivalent tothe percentage named In the Appendix of such cost referred to in (a) and (b) above, such amount shall be deemed to be inclusive of any profits, head office or cotlver administrative charges (including foreign naeNUR exchange losses) and any other costs, oss or ‘expense of whatsoever nature and howsoever arising. This percentage shall exclude interest payable pursuant to sub-clause 42.9(b)" “Though the label “direct” or “indirect/ consequential” is missing from the definition, prima facie, from the construction of the contents of the said definition, it purportedly encompasses both such losses and is, seemingly wide in its ambit mo Where a party to a contract breaches the contract, ‘damages represent the most common remedy claimed by the innocent pary for such breach. Unlike the equitable remedies of specific periormance and injunctions, damages are awarded to the innocent party as of right, subject only to exceptions such as mitigation and remoteness of damage "'. To determine how such damages may be awarded, at common law, two main principles of law are employed ‘The first ofthe said principles is that laid down in the ‘case of Robinson v Harmon '* which, per Parke B, 5 to the effect that ©..u the innocent partys entitled to be placed so far as money can do it, ia the same position as he would have been had the contract been performed..." This principle is lucidly explained by Chow Kok Fong "as follows: “The purpose of damages is therefore to restore to the plaintiff the value of his defeated contractual expectation, in efiect, the benefits or profits which would have earned, but for the breach, and compensating him for the expenses caused by the breach. Thus, there would be no premise for a claim, Hf the cause of the plaintiff's loss would have arisen independently of the breach by the defendant. Nor would there be any cause for a claim if a breach is technical in nature and did not resut in any loss or injury for the plaintiti” Hasal9 B34 ny8) a7 BLE 42 Koes, "750 Conractual Problems ard Thee Solutions? Ean a p 201 Enliled‘Detations See Chesin, Foal Fastans Law of Coast tp 616.637 4, 148) T Exch, 850 9 85. 5. eat and Practice of Construction Conracs” Eda) a o~tdnsco) Hence, although the starting point is the cule in Robinson v Harmon, this s subjectto the premise that the damages sought must not be remote; which brings the second principle ofthe rule in Hadley v Baxendale ° into play. This rule stipulates “When two parties have made a contract which ‘one of them has broken, the damages which the other party ought to receive in respect of such ‘breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e. according to the usual course of thing from such ‘breach of contract ise, or such as may reasonably ‘be supposed to have been in the contemplation of ‘both partes, at the time they made the contract, as the probable result of the breach of i”. in summary, the tule in Hadley v Baxendale comprises two main limbs "i. (a) The first limb: damages arising naturally i.e. according to the usual course of things from such breach of contract itself (also called “direct” damages’); and (b) The second limb: damages as may reasonably be supposed to have been ia the contemplation of both parties at the time they made the contract, as the probable result of the breach of it commonly reierred to as “indirect or consequential” losses! damages) The above rule has been codified in the Malaysian Contracts Act 1950 "in the form of Section 74 which reads! “C1) When a Contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the Contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, ar which the panies know, when they made the contract, to be hikely to result from the breach of it Such compensation 18 not (o be given for any remote and indirect loss or damages sustained by reason of the breach..." ‘his fact has been expressly acknowledged by the local courts in a string of cases, notable of which are Tham Cheow Toh v Associated Metal Smelters Ltd.“ and Teoh Kee Keong v Tambun Mining Co. tid. © Hence, under Section 74 an aggrieved party isentitled {o the following damages of losses: a _~ ENGINEERING & LAW > {a) The so called “direct” damages i.e. damages arising naturally, that is, according to the usual ‘course of things arising fom the breach; and “indicect or Consequential” losses (or special damages for any loss sustained) only if it can show that these are such that the other party knew at the time of making the contract that the said losses or damages were likely to result from the bread ‘The loss recoverable is subject to the proviso that such ‘compensation s natto be given for any remote or indirect loss or damage sustained as a result of the breach The cules as to the recovery of damages by the innocent party are further subjected to an additional ‘qualification inthe sense that tis nox permitted to recover such damages which it could have taken reasonable steps to avoid or mitigate. This requirement is expressly stipulated ia the Explanation to Section 74 of the ‘Malaysian Contracts Act 1950 in the following form: “in estimating the loss or damage arising rom a breach ‘of contract the means which existed of remedying the inconvenience caused by the non performance of the contact must be taken into account”. ‘The rationale for the necessity of such mitigation is adequately exemplified in the following passage from ‘he locus classcus case of Kabatasan Timber Extraction ¥ Chong Fah Shing ° “It follows fiom the mule that damages are compensatory only that one who has sutfered foss fam a breach of contract must take any reasonable steps that are available to him to mitigate the extent af damage caused by the breach. He cannot claim to bbe compensated by the party in default for loss which is really due aot for the breach but to his own failure to behave reasonably after the breach”. causa) 98 30 Per Anderson, See ab “Engineering and Constction Comte onagement Laws ant Principles tp 208 ‘ees ‘Act 130 in particular vie Section Pit) 612, See isn Tham Chea Toh v Asocisted Metal Smelter ih 922) 1 MLE ti 194 4) Vitoria Laundy Windsor id, ¥ Nessman Indies Ld 1949) 2 KB 328, 1H Paesons (Livestock Ue « Litley Ingram & Co Lid (2978) 18 797 and Section 7312) Cemaets set 1950 1969) 2 ML & qucting Anson's Principles of English Law of\@ ENGINEERING & LAW Accordingly, the innocent pany is precluded from Claiming loss oF damage consequent to the defaulting partys breach of contract where il could have avoided the loss or damage by taking reasonable steps under the prevailing circumstances *. Ifthe innocent party jn fact manages to avoid or mitigate its loss or damage consequent tothe defaulting partys breach of contrac, the former cannot recover for such avoided or mitigated loss oF damage even though the steps it took were more than could be reasonably required of i". However, if such party by taking reasonable steps to avoid or mitigate the loss or damage consequent to the breach incurs further foss or expense, the innocent party can then recover such amount in full from the defauking party ®. Eien Nature of Claim A clair for direct loss and expense is usually made pursuant to and within the ambit of the contract itself this being thus labelled as a "Contractual Claim” *, For such a claim to be tenable in law, it should arise froma the contract itself and be made under a specific provision or terms of the contract In the event that there is no such provision or term in the contract oF should such a provision or term be found to be invalid in law, this not necessarily extinguishes the contractors right to pursue the right to recover loss or damage as a cause of action for breach of contract in the form of an “Extra-Conteactual” or “Common Law” Claim *. Even without an express retention of common law rights such a cause of action would not be lost. The only way such rights being ‘extinguished is through the inclusion of a very clearly worded and unambiguous clause in the contract to this effect " Hence, in the final analysis the “extra- contractual” claim can serve as an akernative to a ‘Coniractual” claim; a sentiment echoed by Vinelott Ln the English case of London Borough of Merton v Stanley Hugh Leach Ltd. ° in celation to Clause 24(1) 0f JCT 63 as follows: “But the Contactor & not found wo make ao application under Clause 24(1). He may prefer 10 ‘wait until completion of the work and join the claim for damages for breach of obligation to. provide instructions, drawings and the lke in good time with other claims for breach of obligations under the contract. Alternatively, he can, a5 1 see it. make a claim under Clause 2401} in order to obtaio prompt seitbursement and later claim damages for breach of contract, taking the amount awarded under Clause 2401) inta account” einen Ina nutshell, therefore, the “extra-contractual” route ‘would constitute either a fallback position should a “contractual” claim be not tenable or it ean augment the amount that may be recovered pursuant to the “contractual” claim the uktimate decision being dictated by the particular circumstances of the case and the preference of the claimant, Common Contractual Provisions A study of the common standard Forms of Conditions of Contract being employed in this country reveals, the existence of a plethora of contractual terms or provisions governing the entitlements and procedural requirements governing the subjeet of direct loss and expense claims, Clause 44 of the JKR Form 2034 (rey, 10/83) stipulates: “iH the eegular progress of the Works or any part thereof thas been materially affected by reason as sated under louse 43 (c).{) or {) hervor fand no ater), anc he Contractor has incurtest direct loss and/or expense for which he would not be reimbursed by a payment ‘made under any other provision of this Contract, then the Contractor shall within one {1} month ofthe accurrence af such event of etcumstance give notice in writing to the S.O. of his intention to claim for such direct Joss or expense (ogether with an estimate of the amount of such loss andor expense, subject always (0 Clause 48 hereof.” Clause 24.0 * PAM 98 Form af Contract (With Quantities Edition) reads “28. Application to Ascertain Loss andior Expense Hand when the Contractor nouities the Architect in writing that the regular progress See thao Then Sul v Chan Chine Hee 2 ‘Gebruder Metal Mana GmbH & Co. KG» NBR (London) id (98s) Uoyes Rep 614 Wabon v United Counties 11920) 1 WLR 26 ‘or aterativaly as "B-Contactu” cai, fog Clause 44 JKR 2034 Rev, TOMER Form, Sco London Borough of Merten Stanley Hugh Resch th 17966" 32 BIR 31 Sc Strachan & Henshaw v Stein indus (UK) td. 9 98 17 BLR 5 ancl Armitage » Nurse (1997) 2 lh R705 1986) 32 BLR St Eratled “toss and tense Caused By Delays” Labeled “Loss and Expose Caused By Distursanen of Regelar Progess of the wicks 7) | M25Ine Gene ENGINEERING & LAW 4 Cf the Works or any part of i has been oF 8 neither uneeasonably distant trom likely to be materially affected and that he ‘nor unreasonably close to the date had incurred oF 1s fikely to incur direct foss fon which it was necessary for bien ancdifor expense for which he would not be to receive them, reimbursed by a paymeat under any other provision of this Convact thea the Architect 24.211) the opening up for inspection of fr the Quantity Surveyor as instructed by the any work covered up or testing Architect shall as and when necessary from ‘of any work, materials or goods time to time ascertain the amount of such oss in accordance with Clause and/or expense which had been incurred by 6.3, including making good in the Contractor, provided that consequence of such opening up or testing, unless te inspection ortest 24.14) the Contractors appicaion is made showed thar the work, materials or in writing as soon as it becomes or goods were notin accordance with should be easonably apparent to tis Contact. hi tha the regu progress ofthe Works or any part oft had been or 24.20) any discrepancy tn or divergence is fikely to be affected; and between the Contract Drawings andor the Contract Bills 24.14 the Contractor submits together with his application relevant Jofoamation substantiating his clan 24.20%) delay on the part of artists, 50.38 toenabie the Architect or the tradesmen, or others engaged by ‘Quantity Surveyor as instructed by the Employerin executing work not the Architect to form an opinion; forming part ofthis Contact. and 24.260) the Architects instructions sued 24.140) the Contactor ypon request submit in regard t0 the postponement of to the Architect or the Quantity any work to be executed under the Suneyor as instructed by the provisions ofthis Contact. Architect any other adelitional details of lass and/or expense 24.2(vi)_ delay or failure by the Employer as are reasonably necessary for ‘e supply or provide materials and ascertainment. goads which the Employer hac ‘agreed to provide or supply forthe Circumstances Material Affecting Progress Work. of the Works 24.2(vilhfallre of the Employer to give in The Contractor is not entitled to loss andor dae time entry to oF ext from the expense except in accordance with the express site ofthe Works or any pact thereof provision ofthe Contract. the following ave through or aver any fand by way Gireumstances materially afecting the regular of passage adjoining oF connected progress of the Works referred to in Clause to the site and in the possession 24d and control of the Employer in accordance with the Contact 24.210) the Comiactor not having eceivedin Drawings and/or the Contract due ie the necessary inscuctions, Bil cirawings, details or levels from the Architect for which he hac 24.2(vib) any act of prevention or breach of specifically applied in writing ‘contract by the Employer. provided that such application was made on a date which having Ascertainment of Loss andor Expense regaed tothe Date for Completion stated in the Appendix or any IF and when the Contractor makes writen extension of time under Clause application within a reasonable time of it 23.0 or sub-clause 32.1 (it) was becoming appareot that the progress of the1 ENGINEERING & LAW Work or any part of it has been affected as aforesaid, thea the Architect or the Quantity, Surveyor as instuucted fy the Architect shall ascertain the amount of such foxs and/or expense. The failure by the Contractor (0 comply with the requirements of Clause 24.0 shall entitle the Architect or the Quantity Surveyor as instructed by the Architect 10 ascertain the quantum of such loss and/or ‘expense on the basis of information available 10 them, Amount Ascertained Added to Contract Sum Any amount so ascertained from time to time shall be added to the Contract Suen, and if an Intevin Certificate is issued after the date of ascertainment any such amount shall be added to the amount which would otherwise be stated as due in such conditions.” Similar provisions are contained inthe other Standard Forms e.g. C1DB Form 2000 Edn. (Clause 31 & 22), CIDB, NSC Form (Clause 26), IEM Form CE1/89 (Clause 44, etc. though there is quite a variance in ferms of content and detail A thorough study ofall the said provisions witl reveal the following principal facets of the entitlements under this head of the claim: {a} The extent of the entitlements Save for the CID8 Form 2000 Edition, the rest of the standard form provisions entitle the contractor to mere “direct loss andor expense ive. the first limb ® or leg of the cule in Hadley v Baxendale and Section 74(1) of the Malaysian Contracts Act 1950. Hence the amount of redress is cutailed and ‘excludes the so-called “Indirect” or “Consequential” Fosses. To this effect, such losses are confined to the ‘consequences of delay and disruptions pursuant {o acts of prevention and not neutral events. Even 50, Its not a blanket right consequent to all acts ‘of prevention but only to certain stipulated acts as circumscribed within the ambit of the particular provision”. ‘The procedure for application’ substantiation ‘Contrary ta popular belie among contractors, there is no automatic dispensation of loss andor expense upon the occurrence of the stipulated delaying or lisuption events, On the other hand, there is an ‘express requirement in each and every provision in the said standard forms for the contractor to apply in writing” 10 trigger the commencement of the claim process ‘The Standard Foxm provisions, though sharing a host cof common features, do dlfer in their procedural approaches. Some take the so-called “two-stage” " view of the matter, whereby the contractor is frst requited to notify the Contract Administrator of his intention to make a claim for direct loss andor expense followed by the subsequent justification Or substantiation of the claim **. Others adopt the “Unitary or Single Stage” approach whereby the notification must be supported with enough information or details to justify the claim *. Whichever approach is stipulated, one must be mindful whether it is of mandatory or directory nature, for should it be breached, the contractual consequences may be fatal to the claim, This is aptly summed-up by Roger Knowles inthe following, sons “Whether the lack of a proper claims notice and ‘back-up details will result in a Contractor or Sub contractor losing an entitlement to addltional payment will depend on the wording of the contract. Where the contract states that a notice isa condition precedent then a lack of notice will be fatal. The same would apply #the contract is silent o9 the matter." Inthe final analysis, the contractor should always er on the side of caution even if the requirement, prima facie, is of the directory nature, lest their Contractual claim s rendered invalid for procedural non-compliance, ‘Afurther eequirement stipulated in most contemporary Forms of Conditions of Contract * is tor the contractor to keep and submit adequate records vis-i-vis the entitlement itis seeking. The effect of such a requirement has been judicially examined fn depth and lucidly summarized in the case of Attorney General for the Falklands y Gordon Forbes Construction (Falklands) Ltd, (No. 2)°* wheve it was held that Sec id, Legal Basis See in particular Clause 44 of JKR 2034 Form where i it comin! serestiplanes under Claane er ver hon cr Tse See ior example Clause 12 (20% Form 2000 tem ee See tor example, Clause 44 JKR 204 Frm, Clause 24 PAM 5 Fou “158 Contact Paems and he Solutions” End at pies Soe 12 CIDR Foren 2000 Eds, ee 22003514 BUSS 8 2GDB/ BL 28Penton 5 _wcnceneur (i) Where the requirements of @ contract set out 2 clear and ordered way of dealing with any Claim for adaitional payments, claims have to beatified atthe time they aise, contemporary records have to be kept and regular accounts rendered The whole contractual system is aimed at the carly resolution of any queries at the time the claim arises; There is little difference between the words “contemporary” and “contemporaneous” ie ‘occurring at the same time. To constitute contemporary records, these must be prepared at or about the time ofthe events which give rise to the claim; Where there is no contemporary records, the claim will fait; and Where there are contemporary records to support part of the claim, it may succeed on that part ofthe claim which is supported by the contemporaneous records but not otherwise. IF however, the contemporary records are unclear as to their meaning, verbal evidence will be accepted to provide clarification It suifices to say that contemporaneous records are a pre-requisite forthe proper evaluation or assessment ofthe contractors application. Hence its incumbent for the contractor to keep adequate records which are timeously made, adequate for the purposes of substantiating the claim and in addition meeting the requirements as to accuracy and relevancy. a this respect, there should be no compromise as the very substratum of the contractors claim rests ‘on his records made in furtherance to his cause of action whether premised in contract or under the common lav Assessment and Award Requirements Provided that the contractor complies with the requirements pertaining to the notification and substantiation ofthe claim provisions, upon receipt (f the said claim it is imperative for the Contract Administrator to forthwith carry out its obligations diligently and promptly. Where a particular time frame is stipuiated in the contract for the due resolution of the same, then it is mandatory for this to be effected. Otherwise it can be deemed in law that there is no objection tothe claim and it be given due effect to. tn situations where no such period is expressly stipulated in the contract (as is _~ ENGINEERING & LAW © the case in most of the local Standard Forms), then the Contract Administrator has a reasonable time to respond; what is reasonable being decided by the Courts based on the particular circumstances of the case *, The Contract Administrator has to exercise ‘one of the three options available to him Le. he can either accept or approve the claim ar reject Jt (with reasons} or request for more information He just cannot elect to keep quiet or indulge in “feet-dragging” on merely spurious grounds *. The Contract Administrator, being no stranger to the contract cannot plead ignorance of the facts! information nor lack of authority. He has a right to access ll books, documents, papers or records in the possession, custody or control of the contractor *in So far as these relate to the claim and may instruct the contractor to furnish him with such further infomation, records or details which he consiiers are material to his decision making process In nutshell, he must not be an innocent by-stander bbut take on a proactive role. IF the contractor fails to comply to the Contract Administrators requests (of instructions, it is incumbent for the latter to nevertheless proceed with his assessment, valuation Cr opinion as he considers fair and reasonable under the ciecumstances on the basis of the information available to him". Failure on his part to do so may ‘open the employer to claims of breach of contract from the contractor and expose himself to possible ‘causes of action in breach of contract andor the tor. ‘of negligence from the emplayer Payment of the Certified! Amount Having established the contractor's entitlements and their quantum, its pertinent for these to be remitted 1 the contractor expeditiously; a fact conveniently ‘overlooked by many local employers. The bulk of the local Standard Forms of Conditions of Contract oblige the Contract Administrator to certify the amount due to the contractor following the assessment and See R. Knowles, "150 Contractual Problems and Thele Solutions” 2° En ap 160 To whom the duty of assessment and recommendation i normaly delegated See lion Fnginecring Sdn. Bhd. V Paucluan Development Si. Bhd. (1999) 4. A44R 9515, Which appearsta be the most common practice on the Jaca See Sub-lause 32.41 CIDR Form 2600 Ed, ‘See Sulbcausn 12.2 CID Form 2008 Gd See Clause 32.6 €1D8 Form (2000 Fen» As “MalAdeninistraion’ of the contract. See als ty Havbans Singh KS, "Engineering and Consruction Contacts Management Commencement and Administration al ro 180,valuation exercise and include it in the subsequent Interim Payment Certificate This ensures that the contractor is paid in a timely fashion. Should the ascertainment of the rightful amount due be delayed for any reason beyond the reasonable control of the Contract Administrator, then such entitlements be ultimately established in the Final ‘Account; the Contract Sum be adjusted accordingly and the amount included in the Final Cerificate Though such practice is not encouraged as i is an aberration of professionalism, nevertheless; it acts as a last resort measure to compensate the contractor before the contract is finally closed-of Whether the contractor is entitled thereby 10 any Interest accrued on the outstanding amount is a moot point Consequences of Default Where the contractor’ default renders the contractual claim invalid, ithas been established in the previous discussion * that it may merely extinguish the loss of right under the contract only. may not affect his right to recover such loss as damages for breach ‘of contract premised on the basis of an “extra contractual" claim unless the contract expressly excludes such rights in clear and unambiguous terms, Hence, much depends on the paciicular wording of the relevant provisions of the parties contract. Nevertheless, even ifsuch provisions deny the contractor of his “extra-contractual” rights, his final resort would be 10 pursue his entitlement on an “ex-gratia” basis; a course of action well beyond the armbit ofthis paper. CONCLUSION The invocation of diectloss andor expense claims is 2 mantra frequently on the lips of many a contractor ot sub-contractor attempting to tur a loss making contract into a nancial coup de grace. Move often than not it is a result of an afterthought or the ironing out of the Contractual kins into a financial bottom-line inked in 2 hue of blue rather than the reality of red. it profiers Contractors with visions of financial gain but on the contrary fills employers and Contract Administators alike with trepidation and fear. Much can be said of the sai species of claims, which has, and continues to ‘permeate ail levels of the industry and has subsumed its various facets with awe and fear. Despite the shroud ff mystery encasing such claims, upon an objective analysis, which tis short paper has attempted to do, its various myths and misconceptions can be progressively unravelled to reveal a basic core that difers no more than the otter heads of claim entitlements that plague the engineering and construction industry. tn the final analysis, when the mist is cleared, itis apparent that the right approach to such claims is one premised on the essential ingredients of common sense and good professional practice. Be that as it may, direct loss and/or expense claims should not be daunting to a professional practitioner but should be part and parcel ‘af realities facing the industry. ated + Andrew B.L. Phang, Chesire, Fifoot and Fuemston's Law of Contract 2” Edn), Butterworths. ‘Gammell, NJ, Causation and Delay’ mn Consiructon Disputes (2 Edn), Blackwell Publishing. ‘Chappel Buin Coronet Detorary E., Blackwell Publishing. . Chappell, D.. Marshall, D., V ®-Smith and S. avenderBuleng Contact Bicionary (3 Ed, © blac Pushing, ‘Chow Yok Fong law and Pacice of Consrucion Contracts, 6 Edn, Thomson/Sweet & Maxwell Agi DnB Baan Conwatt Ces, Bec Publishing: “te Harbans Singh KS. Engineering and Consruction Comacts Management, LexisNexis. Knowles, R., 150 Contractual Problems and Their ‘Solutions (2% End.) Blackwell Pablishing. + Pickavance, K (1997), “Delay and Disruption Jn Construction Contracts” Informa Publishing roup. é Ss Sunda Rajoo, The: Maiaysian Standard Form of ‘Builing Contract 2 Edn), Malayan Law journal: The Society of Construction Law Delay and Disruption Protocol 2002, SCL Sexe Clause 32 "98 Fo Fer example dve tothe comactors fale to substantiate, Although, in Be absence of an express comtaet prison to Tike ec. is mos ikl to be ata o a eontdctual claim See discussion under “Legal Basi CIDE Fem BoD Edn, Classe 24.4 FAM