SECTION IX: RESPONSIBILITIES AND LIABILITIES OF CONTRACTOR AND OF OWNER

ARTICLE 30: CONTRACTOR’S RESPONSIBILITY FOR ACCIDENTS AND DAMAGES

 

1. What are the safeguards that should be undertaken by the Contractor?

 Ÿ       The Contractor shall take all necessary precautions for the safety of employees and workmen on the Work, and comply with all Laws to prevent injury to persons on, about, or adjacent to the premises where the Work is being performed.

 Ÿ       The Contractor shall erect and properly maintain at all times, as required by the conditions and progress of the work, such as barriers, shoring, supports, braces, lights, danger signs and necessary safeguards, as will protect workmen and the public and as will effectively prevent any injury to persons and damage to property in consequence of his work.

 Ÿ       The Contractor shall designate a responsible member of his organization at the site, whose duty shall be the prevention of accidents and damage to the Work, the Owner's property, and adjoining property. The name and position.

 Ÿ       The Contractor shall be primarily responsible for all safety measures in prosecuting the Work in accordance with the safety manual approved by the Construction Industry Authority of the Philippines (CIAP) (30.01).

  

2. Will the owner be responsible for the death or injury of the Contractor or his employees from any source or cause by or to the Contractor's plant or materials? What about damages caused by the Contractor or his employees to any property of the Owner and adjoining property?

 

No. Article 30.02(a)states that the Contractor shall indemnify and save harmless the Owner from and against all losses and all claims, demands, payments, suits, actions, recoveries, and judgment of every nature and description brought or recovered against him, for any act or omission of said Contractor, or of his agents or employees, in the execution of the Work or the guarding of it.

  

3. Who will pay for the repair and damages of the Contractor?

 

Claims for payment and repairs for damages for which the Contractor is liable shall be settled by the Contractor at his own expense. (30.02[b])

  

4. What if the Contractor fails to repair and pay claims?

  

The Owner may repair the same and pay the claims, and deduct the entire cost of such repairs and claims from the payments due the Contractor.

 

5. What if the Contractor defaults?

 

The Owner shall have the right to undertake reasonable safety and protection measures, and charge the cost of such measures to the Contractor. (30.03)

 

ARTICLE 31: CONTRACTOR’S INSURANCE AND BONDS

 

1.   What are the kinds of insurance required of the Contractor?

 A.   Liability Insurance

 1.   What is the purpose for securing an insurance?

 

To protect himself, his sub-contractors, and the Owner from claims for bodily injury, death or property damage.

 2.   Can the Contractor commence work without insurance and subsequently acquire one?

 

No, the Contractor shall not commence work under the Contract until he has obtained the insurance coverage required and shall have filed the insurance.

 3.   Is there any special clause that should be provided for in the Insurance policy?

 

Yes, the insurance policy shall contain a clause providing that it shall not be cancelled by the insurance company without written notice to and approval of the Owner. The nature, extent and amount of such insurance coverage shall be as agreed upon between the Owner and the Contractor. The Contractor shall ensure that such insurance policy is effective during the execution of the Work.

B.  Accident Insurance for workers

 

In addition to compulsory coverage of workers under the workmen's compensation law, the Contractor must obtain insurance coverage for accidental death or injury of his officers, employees and laborers without regard to their tenure of employment as permanent or regular workers.  The amount of the coverage shall be at least P100,000 per worker.  The Contractor shall pay the appropriate premiums without any cost to those covered by the policy.

C.  Fire Insurance

 

In addition to such Fire Insurance as the Contractor elects, he must secure and maintain the policies upon such structures and materials and in such amounts as shall be designated in the joint names of the Contractor and the Owner as their respective interest may appear.

 

2. What are the bonds required of the Contractor?

A.   Performance and Payment Bond

 1.   How much is the performance bond?

        15% of the Contract amount for the faithful performance of his work; and

        15% bond covering Contractor's obligations arising from the Contract to its workers, subcontractors and suppliers.

2.   How long will the bond remain in effect?

 

It shall remain in effect until replaced by the Contractor's guarantee bond.

B.  Guarantee Bond

1.   When will the performance and payment bond be released?

 

Upon posting by the Contractor of a Guarantee Bond equivalent to the amount of the retention released to the Contractor.

2.   For how long should the Guarantee Bond be held by the Owner?

 

For a period of one (1) year commencing from the date of posting as a guarantee that all materials and workmanship installed under the Contract are of acceptable quality.

C.  Guarantee-Warranty

1.   What if the Contractor gets a sub-contractor to do its work, who shall guarantee for the sub-contractor?

 

The Contractor shall secure guarantees from said sub-contractors and deliver copies of the same to the Owner upon completion of work. The term "guarantee" shall include "warranty".

 2.   What are the other guarantees by the Contractor?

       All work performed by him directly and for which guarantees are required.

       For a period of one year, or for a longer period where so provided in the Specifications, all materials and workmanship installed under the Contract are to be of acceptable quality in every respect and to remain so during the guarantee period.

       Repairs and necessary work to correct defective work to the Owner's satisfaction. This shall be done at Contractor's exclusive expense and shall be commenced within five (5) days after receipt of written notice by the Owner.

 3.   What if the contractor fails to commence or do the work so ordered?

 

The Owner may have the work done by another contractor and charge the cost against monies retained as provided for in the Contract and/or against his sureties.

 4.   What is the effect of the surety or bondsman issuing any bond called for in the Contract?

 

He is deemed conclusively to have accepted the mandatory conditions, and any provision thereby issued or in any document made prior to, concurrent with, or after the issuance of the bond which tends to nullify, modify, or limit by time or otherwise, any right of the Owner shall be void and shall not prevail over the mandatory conditions.

 5.   What are the mandatory conditions of these bonds?

       The surety or bondsman agrees in advance to future novation/s of the bond either by adjusting the scope of the Contractor's work caused by directed or constructive changes, the Completion Time or the Contract Price. Where the Contract provides that the Contractor shall obtain the approval of the surety or bondsman to any such adjustment, the required approval shall be deemed to be a mere formality, the absence of which shall not affect the obligation and liability of the surety or bondsman under the bond.

       The bond issued shall continue to have force and effect beyond the effectivity period stated in the bond if the work or the obligation for which it was issued has not been completely performed. This is without prejudice to the right of the surety or bondsman to demand from the Contractor the payment of the premium on the bond or to the right of the Owner to pay such unpaid premium for the Contractor. The additional premium on the bond for an extension of the Contract time due to reasons other than the fault or negligence of the Contractor shall be billed at cost to the Owner. The bond may not be cancelled or otherwise terminated by the bondsman or surety without the express written consent of both the Owner and the Contractor. the right of the surety shall be limited to demand the payment of unpaid premium.

       The Owner shall have a right of recourse against the surety on the bond until (a) it is cancelled by the Owner and returned to the Contractor, (b) it is replaced by another bond unless the Owner reserves the right to recover against the former bond due to default of the Contractor, (c) the Owner issues to the Contractor an unconditional Certificate of Acceptance of the Work.

       Until the Owner takes over the work or terminates the Contract, the Contractor shall not be deemed in default notwithstanding the reduction of the Contractor's scope of work and any assistance provided by the Owner to enable the Contractor to catch up and complete the remaining work. The Owner's assistance to the Contractor shall not prejudice nor limit the right of the Owner to have a later recourse against the bond.

D.        Other remedies

 

 

The Owner's remedies are without prejudice to its rights under the Civil Code and other applicable laws.

 

ARTICLE 32: Owner's Responsibilities and Liabilities

 

1. What are the responsibilities and liabilities of the Owner?

 A.  Advance Payment

 i.   How much should the advance payment to the Contractor be?

 

The advance payment should be in an amount to be mutually agreed upon by the Owner and the Contractor.

ii.  What is the purpose of the advance payment?

 

The Contractor shall use the advance payment for mobilization, purchase of materials, and the like for the project. This shall be recouped pro rata in the progress billings.

iii.   Are there any conditions before any advance payment is made?

 

The Contractor shall post a surety bond of equivalent amount callable on demand and acceptable to the Owner to guarantee its repayment.

iv.  When is a bond callable on demand?

 

A bond is callable on demand when the surety is obliged to pay the Owner upon its call. It means payable on demand.

B.  Protection of employees and professionals performing services for the Owner

 

The Owner shall be responsible for and shall maintain such insurance as will protect him from liability for personal injury including disease and death of persons under his employ or service whether as temporary or permanent in status that are assigned to the project.

C.  Owner's optional Insurance

i.  What is the purpose of this?

 

To protect him from his contingent liability for damages, for personal injury, including death, which may arise from the work under the Contract.

D.  Additional information and services required of the Owner

 

The Owner shall, at the request of the Contractor, at the time of the execution of the Contract, furnish to the Contractor reasonable evidence that the Owner can fulfill its obligations under the Contract. Unless such reasonable evidence is furnished, the Contractor may not be required to execute the Contract or to commence or continue the Work.

 

 

 

ARTICLE 33: Liens, Disputes, and Arbitration

 

I. LIENS

A.   Can the Contractor release the Work even though there are legal liens attached to it?

 

No. The Contractor shall release the Work from any legal liens attaching therewith as a result of unpaid claims of subcontractors and/or suppliers for the supply of materials and/or equipment to the Contractor for the project.

B.  What documents should be executed by the Contractor in respect of any such legal liens?

 

A sworn statement by the Contractor or a duly authorized officer of the Contractor stating that all such claims have been fully paid; and furnishing the Owner, when required, with receipts or acknowledgements of payment issued by the subcontractors and/or suppliers.

C.  What will happen if any of such claims remain unpaid as of the time of executing the sworn statement?

 

The Contractor shall furnish the Owner with an indemnity bond equal to the amount of the claims still unpaid. The indemnity bond may be issued by the surety which previously issued the Contractor's performance bond or any other bond required under the Contract or by any other surety acceptable to the Owner. The Owner may recover against the Contractor and/or surety, on the latter's indemnity bond, any amount paid by the Owner to discharge such liens, including costs incurred incident thereto and a reasonable amount of attorney's fees.

 

II. ASSIGNMENT

A.   Can the Contract be assigned?

 

No, the Contract may not be assigned in whole or in part. Any purported assignment made of the Contract or any part thereof without the consent of either party shall be void and ineffective. (33.02[A])

B.  May the Owner exact full compliance from both the Contractor and assignee?

 

Yes, he may do so even without waiving his right at any time thereafter to reduce the Contractor's scope of work by removing from the Contractor the part of the work which was assigned and giving it to any other contractor and/or terminating the Contract in either case, without any further cause than the assignment. [33.02(B)]

C.  May the Owner request for contracts entered into by the Contractor with any other person?

 

Yes, the Owner may request any contract, agreement or binding written commitment entered into by the Contractor either before or after the execution of the Contract, with any other person as cooperator, consortium member, joint venture member, or supplier of equipment, technology, materials or services for the joint execution of the Work. (33.02[C])

D.  What if the Owner finds that such contract entered into by the is a disguised assignment of the Contract?

 

The Owner shall notify the Contractor and shall have the rights under Article 33.02(B).

 

III. SUBCONTRACTING

A.   May the Contractor subcontract the Contract?

 

Yes. The Contractor may subcontract any part of the Contract with the approval of the Owner (33.03).

B.  What are the conditions the Owner may impose for the approval of the subcontract?

       That the subcontract shall be submitted to the Owner and the subcontract must require the subcontractor to obtain the same bonds and insurance coverage as are required of the Contractor under the Contract,

       That the Contractor furnish the Owner copies of these insurance policies and bonds (33.03).

C.  What is  nominated subcontractor?

 

A nominated subcontractor  is one selected by the Owner to carry out an element of the work requiring specialized skills and experience, whose scope of work, terms and prices are pre-negotiated with the owner and, as such, are imposed on the Contractor.

 

D.  What is the Contractor’s liability to the Owner for the fault or negligence of the nominated subcontractor?

                                                                  

[For discussion!]

 

IV. DISPUTES

A.   May the Owner entrust to his authorized representative the determination of matters which under the Contract require his acceptance, approval, or decision?

 

Yes, the Owner may, within a period of 15 days, entrust these to his authorized representative who shall act as his agent and whose determination binds the Owner.

B.  What if the Contractor disagrees with the determination by the Owner or his representative?

 

Such disagreement shall be brought before an adjudicator, who shall be jointly engaged by the Owner and the Contractor, not later than fifteen (15) days before the commencement of the Work to resolve conflicts arising from the foregoing determination by the Owner or by his representative.

C.  What if either party disagrees with the resolution of the adjudicator?

 

Such shall be deemed as a dispute which may be submitted to arbitration.

 

V.   SETTLEMENT OF DISPUTES

A.   Dispute or agreement submitted to Arbitration

1.   What law governs disputes?

 

Disputes shall be referred to and finally be resolved by arbitration under the Rules of Procedure Governing Construction Arbitration promulgated pursuant to Executive Order No. 1008 (Construction Arbitration Law) by one or panel of three (3) arbitrators appointed in accordance with such Rules.

2.   Where should arbitration take place?

 

The place of arbitration shall be in Metro Manila, Philippines.

3.   How should the claim be done?

 

By filing a claim with the Construction Industry Arbitration Commission.

B.  Substituted Service

1.   What is the effect of entering into a Construction Contract?

 

A party to a Construction Contract for a project in the Philippines shall, by entering into the same, be deemed to be submitting himself to the jurisdiction of the Construction Industry Arbitration Commission with regard to any dispute arising out or in connection with the Contract.

2.   To whom should a claim be served?

 

His co-venturer, partner or authorized representative, notwithstanding any statement to the contrary in the Agreement, Contract Documents, or any other communication to the other party or after entering into the Contract, unless he has filed with the Construction Industry Arbitration Commission an irrevocable special power of attorney authorizing another person or entity to receive by personal service at a definite address in Metro Manila, Philippines such claim, notices, and processes.

3.   What if a party, his co-venturer, or authorized representative declines service of such claim or notice? What if they cannot be found at his given address?

 

 

Such service shall be made upon the said party by filing the same with the Construction Industry Authority of the Philippines (CIAP) at its office address, and filing the claim, notice, or process shall complete the service upon the party concerned.