CONTRACT SUSPENSION – INTRODUCTION
- Contract Suspensions is a frequent occurrence especially on long-term contracts and it must be handled judiciously and within the contractual provisions to avoid contractual disputes
- Contract Suspension(“Time Out or Respite") clauses are provided in contracts to allow a breathing space or time space for one or both parties to resolve issues in the contract.
CONTRACT SUSPENSION – CONTRACTUAL BASIS
- The contract suspension must have a contractual basis in terms of a claimable event clause in the contract agreement.
- The claimable events for contract suspension are typically specified in the clauses of the contract agreement.
- Common claimable events;
- Delays in payments or non-payments by the employer
- Delays in obtaining necessary work permits or approvals by the employer
- Delays in obtaining finance or secure the land by the employer
- Impossible or illegal to continue work eg Covid19 work restrictions, statutory holiday
- Works disrupted for an extensive period due to force majeure eg load shedding or extensive flooding, disease outbreak (covid 19),civil strife, work stoppages etc
- Unclaimable Cardinal or Drastic change in the original contract due to unforeseen conditions
CONTRACT SUSPENSION - PROCEDURE
- •The procedure for contract suspensions are typically specified in the clauses of the contract agreement.
- •Failure to follow the contract stipulated suspension procedures is deemed a wrongful suspension and constitutes a breach of contract and the offended party gains the right to terminate the contract and institute a legal suit against the other party for damages or losses due to wrongful suspension
STEP ONE – NOTICE OF SUSPENSION & NOTICE PERIOD
•The contract suspender must follow and exhaust all the contract suspension notification procedures in the contract agreement.
•The contract suspender must give sufficient written notice of intension to suspend to the other contractual party(s) as per the contractual provisions and must indicate the contractual basis or the reasons.
STEP TWO – AGREEMENT ON THE TERMS & CONDITIONS OF THE SUSPENSION
If the other contractual parties agrees to the suspension then both parties within the notice period must agree to the ff. terms & conditions of the suspension and record it in the minutes of the last contract meeting.
- Time limit for the suspension as specified in the contract agreement or a mutually agreed time limit.
- Suspension of the whole works or a portion must be clear.
- The rights and obligations of both parties during and after the suspension pertaining to the ff. amongst others;
- Regulatory Authorities Notifications eg. Dept. of Labour etc
- Social facilitation obligations before, during and after the suspension for the affected stakeholders or project beneficiaries
- Construction work security or protection
- health & safety ,
- Work inspections and quality tests before and after the suspension,
- Work Status before and after the suspensions ; Cost, time and progress etc
- Insurance Cover Extensions
- Work Permits & Licenses Extensions
- Any outstanding claims or unresolved disputes
- Construction site de-establishment & re-establishment
- Contractor Re-mobilization
- Sub-Contractors, Suppliers
- Applicable rates to the suspended work portions
- Consequences/Impact of the Suspension;
- Consequential Delay claims; EOT claims notices and claims obligations
- Additional Expense claims notices and claims eg. Health & safety obligations, Environmental Quality Obligations, site de-establishment & re-establishment, Re-mobilization expenses, Site utility usage and payments, salary for idle workers, additional security cost, loss of productivity or work disruption claims,, sub-contractor claims etc
- Impact on Stakeholders or Project beneficiaries and mitigative measures
- Risks & Mitigate measures to be taken
- Any Special Conditions
Failure to agree on the terms and conditions of the contract suspension will lead to contractual disputes.
STEP THREE- WORK SUSPENSION
If the reasons of the suspension stated are not resolved by the other contractual party or both parties within the notice period, the contract suspender may suspend execution of the works on expiry of the notice period until such reasons has been remedied without prejudice to any rights the contract suspender may have
Failure to reach an agreement on the terms and conditions of the suspension within the notice period the contract suspender may suspend execution of the works on expiry of the notice period until such reasons has been remedied without prejudice to any rights the contract suspender may have
CONTRACT SUSPENSION – MAXIMUM PERIOD OF SUSPENSION
If the reasons that triggered the suspension are not resolved by the other contractual party or both parties within the contract stipulated maximum time period of suspension the other party shall treat the suspension as a repudiation of the contract and shall terminate the contract.
STEP FOUR - NOTICE OF RESUMPTION OF WORK
Prior to the lifting of the suspension the contract suspender must issue sufficient written notice of work resumption as per the contractual provisions.
CASE- DISPUTE DUE TO WORK SUSPENSION
•Employer suspended a portion of work due to insufficient funds but the rest of the contract continued.
•There was no agreed upon contract suspension period or time limit set for the suspension
•There was no agreed upon rights and obligations for both parties during and after the suspension
•Work progressed on the other portions for 3 years with numerous delays until the suspension was lifted by the employer.
•At what rates is the contractor to undertake this portion of the works?
•Original or revised rates?
•Contractor challenges the terms of the suspension
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