Construction Contract Law by John Adriaanse

Author:John Adriaanse [Adriaanse, John]
Language: eng
Format: azw3
Publisher: Palgrave Macmillan
Published: 2016-08-19T04:00:00+00:00

Direct loss and/or expense

Clause 4.23 of JCT 11 allows the contractor to claim ‘loss and/or expense’ caused by matters materially affecting the regular progress of the works. Clause 4.23 requires the contractor to make written application to the architect/contract administrator stating that it has incurred or is likely to incur direct loss and/ or expense in the execution of the contract for which it would not be re-imbursed by payment under any other provision of this contract.

… and if, and as soon as the Architect/Contract Administrator is of the opinion that the direct loss and/or expense has been incurred … [by matters referred to in clause 4.23] … then the Architect/Contract Administrator shall ascertain or shall instruct the Quantity Surveyor to ascertain the amount of such loss and/or expense which is being or has been incurred.

Extension of time and money claims

Reimbursement of direct loss and/or expense and the grant of an extension of time are separate and distinct matters. The purposes of provisions for money claims and those for extension of time are quite different. The grant of an extension of time merely entitles the contractor to relief from paying LD from the date of completion stated in the contract. There is no automatic entitlement to compensation because the supervising officer or architect has determined an extension of time. Some events giving rise to an extension of time are neutral events and the responsibility of neither party. Some contracts (IFC 98, for example) emphasise the lack of connection between the two by widely separating the provisions. JCT 98 placed the two provisions sequentially, so creating the impression that they are connected. JCT 11 makes it clear that they are not, and the provisions are now in separate sections of the contract. The clause on adjustment to contractual date is in the section dealing with the carrying out of the works, while clauses covering additional payments are in the section dealing with payment. Note in the NEC3 they are treated as closely connected.

The meaning of direct loss and/or expense

The words ‘direct loss and/or expense’ were considered in Wraight Ltd v. PH &T (Holdings) Ltd (1968) 13 BLR 26. They were held to mean that the sums recoverable are equivalent to damages at common law: see Hadley v. Baxendale.

The Court of Appeal in FG Minter v. WHTSO (1980) 13 BLR 1 CA considered the words in relation to the JCT 1963 contract. It held that direct loss and/or expense is loss that arises naturally, and in the ordinary course of things, as stated in the first limb of Hadley v. Baxendale. It approved the definition of ‘direct damage’ in Saint Line Ltd v. Richardson [1940] KB 99 at 103: ‘That which flows naturally from the breach without any other intervening cause and independently of any special circumstances whereas indirect damage does not so flow.’ Any claim put by a contractor is subject to the question whether it falls within the first limb of Hadley v. Baxendale. Keating (7th edition, 2001) considers that the use of other formulae by contractors does not displace or detract from this principle.

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