1. What qualifications or characteristics must the Contractor's workmen have?


The Contractor shall employ only competent and duly qualified professionals, technical personnel, foremen, mechanics and workers to supervise or execute the Work (19.01).


Upon written request of the Owner, the Contractor shall remove from the site an employee who is careless or incompetent or obstructs the progress of the work or acts contrary to instructions or conducts himself improperly (19.01). 




1. How must the Contractor conduct his or her work?


The Contractor shall use such methods and appliances for the performance of the Work as will ensure its timely  completion and of the required quality.


If, at any time before the commencement or during the progress of the Work, such methods or appliances appear to the Owner to be inefficient or inappropriate for producing the quality of work required, or insuring the required rate of progress, the Owner may order the Contractor to increase the rate of their efficiency, or to improve their system of operation. The Contractor must comply with such order. Failure, however, of the Owner to demand such increase of efficiency or improvement of the character or methods of work or of the appliances shall not relieve the Contractor from his obligation to turn out such quality of work and rate of progress as are called for  in the Contract (20.01).


All stakes and benchmarks placed by the Contractor in laying out the work and approved by the Owner shall be carefully guarded and preserved by the Contractor. Unless such stakes or marks are displaced or rendered useless through the carelessness or neglect of the Owner or of his agents or employees, they shall be replaced by the Contractor at his expense (20.02).


2. What is a defective work? What are the options available to the Owner in case of defective work?


Work that fails to comply with the Contract is defective.


Defective work shall be condemned by the Owner upon discovery, and when such work has been condemned it shall be immediately removed by the Contractor and replaced in accordance with the Drawings and Specifications (20.03).


The Owner, however, may accept defective or non-conforming work, in which case, the Owner shall issue to the Contractor a change order to reflect a reduction in the Contract Price where appropriate by an amount not exceeding the value of the unfinished work as determined in the Breakdown of Work and Corresponding Value. Such adjustment shall be effected whether or not final payment has been made (20.15).


3. Can the Owner inspect the premises during the progress of the Work?


Yes. The Owner may conduct inspections of the Work. 

        The Owner shall have access to the Work at all times. The Owner shall provide a sufficient number of inspectors while Work is in progress to ensure its timely inspection.

        The Contractor shall furnish without additional charge all reasonable labor and materials necessary for the convenient inspection that may be required by the inspectors.

        The Owner shall allow inspectors to witness the pouring of concrete and the absence of the Owner's inspectors at any time during the progress of the work shall be an implicit approval of the quality of the cement mix and the authority to pour it.

        If the Specifications, the Owner's instructions, the Laws, or any public authority requires any work to be specifically tested, the Contractor shall give timely notice to the Owner and other parties required to be present of the date and time of such inspection. Inspection by the Owner shall be made at the source of supply.

        If any work should be covered up without timely notice to the Owner, or before the Owner can make a timely inspection thereof, it must, if required by the Owner, be uncovered for examination at the Contractor's expense. If the Owner fails to make an examination, its re-examination may be ordered by the Owner at the Owner's expense but if such work be found not in accordance with the Contract, the Contractor shall shoulder the cost of uncovering and re-doing the work.

        If there are indications that the work done is not in accordance with the Drawings and Specifications, the  Owner may at any time before final acceptance of the Work make an examination of the portion already completed by removing or tearing out the same. If such work is found to be defective in any material respect due to fault of the Contractor, he or she shall defray all the costs of such examination and of satisfactory reconstruction. If, however, such work is found to meet the requirements of the Contract, the actual cost of labor and materials necessarily involved in the examination and replacement plus 15 percent (15%), shall be allowed the Contractor and he shall, in addition, if completion of the work has been delayed thereby, be granted a suitable extension of time on account of the additional work involved.

        All inspection and tests shall be performed as not to delay the work unnecessarily (20.04).


4. What is the scope of work that is required of the Contractor during an emergency?


The Contractor is required to perform any work and furnish and install all materials and equipment necessary during an emergency endangering life or property (20.05).


5. Can the Contractor make adjustments to the scope or quantities of work to be done?


Yes. Adjustments in working drawings to suit field conditions which cannot be foreseen at the time of calling for bids, may be necessary during construction. It is the essence of the Contract to recognize such changes in Drawings as normal. The resulting change in quantities or the increase in the scope of work of the Contractor shall be covered by a Change Order.


However, work done by the Contractor without timely notice to the Owner that an adjustment is required of Contract Price and Completion Time shall be at his own risk and expense (20.06).


6. Can the Owner make changes to the work?


Yes. The Owner may at any time order extra work or make changes by altering, adding to or deducting from the Contractor’s scope of work and within the general scope thereof; provided however that the changes do not exceed twenty five percent (25%). Such changes shall be ordered by the Owner in writing.


The issuance by the Owner of the revised Drawings or Supplemental Specifications changing the nature or work to be performed or of the materials to be provided shall be treated as sufficient written instruction of the Owner to the Contractor to execute the change (20.07).


7. What happens if there are any deviations to the sub-surface conditions?


If, during the progress of the work, sub-surface conditions at the site materially different from those shown on the Drawings or indicated in the Specifications or in any Contract Document, are discovered, the attention of the Owner shall be called to such conditions before they are disturbed.


The Owner shall thereupon investigate the conditions, and if he finds that they differ from those shown on the Drawings or indicated in the Specifications or in the report of the Owner's geodetic survey and sub-surface exploration, he shall make such changes in the Drawings and Specifications as he may find necessary.

If as a result of sub-surface conditions, additional or a different type of work be required, although no change in the Drawings or Specifications is made, a Change Order shall be necessary and issued to the Contractor (20.07)


8. What happens to the Contract if adjustments are required?


If there are any changes which shall lead to an increase or decrease in the amount due under the Contract, or in the time required for or manner of its performance, an equitable adjustment shall be made and the Contract modified accordingly. In the event that the Work is increased by such changes, the Contractor shall furnish proportionate additional performance bond.


In case where, without fault of the Contractor the Owner initiates a deductive change order for the purpose of transferring certain work items or part of the scope of work to another party or for the owner to supply certain construction materials, then the Contractor shall be entitled to 15% of deductive change order to recover his overhead and profit (20.07).


9. How shall extra work be valued?


The value of any extra work or change shall be determined by the Owner in any one or more of the following ways:

        By a lump sum acceptable to the Contractor.

        By unit prices either stipulated in the Contract or subsequently agreed upon, provided the aggregate value of changes does not exceed 25% of the original Contract Price.

 o   Changes required by the Owner which in the aggregate exceed twenty five percent (25%) for overruns shall be covered by a supplemental contract. The Contractor shall not be obliged to execute such changes in accordance with the unit rate specified in his Bid, a supplementary contract being treated as one separate from and independent of the Contract.

o   Where the aggregate value of all changes per pay item exceed twenty five percent (25%) and the Contractor, without demanding the execution of a supplemental contract executes the additional work required without objection or protest, the value of the changes shall be determined in accordance with the second bullet point above.

        By actual direct cost plus value added tax, if any, plus fifteen percent (15%) for Contractor's profit and overhead.

o   Contractor shall keep and present a correct account of the direct cost together with vouchers and other supporting documents (20.07).


10. What if the Contractor and the Owner fail to agree as to the adjustment of the Contract Price and/or Completion Time?


In case any extra work shall be required in the proper performance of the Work, and the Contractor and the Owner shall fail to arrive at any agreement as to the adjustment of Contract Price and/or Completion Time, the Owner may award such extra work to another contractor (20.07)


11. Are there any instances where the Contractor can claim for extra costs?


Yes, the Contractor can is entitled to extra cost in the following instances. When instructions by the Owner or the Drawings or Specifications issued after submission of the Bid involve a change, he shall give the Owner written notice thereof within fifteen (15) days after the receipt of such instruction before proceeding to execute the work, except in emergency endangering life or property provided for in Article 18.01.


In addition to this, if the Contractor incurs a delay in the mobilization and/or in the progress of his work for reasons attributable to the Owner, such as but not limited to delay of delivery of Owner-supplied materials, movements or work executed by the Owner which interfere with the progress of the Contractor's work, delayed decisions by the Owner and other matters related thereto, he or she shall give the Owner written notice thereof within fifteen (15) days after recognition of such delay and request the issuance of a change order.


The amount due to the Contractor under this article shall be paid by the Owner in the same manner as any other sum to which the Contractor may be entitled under the Contract, particularly under Articles 20.06, 20.07, 22.05 and 22.10. Any delays in said payment shall entitle the Contractor to an extension of time and to payment of interest in accordance with Article 22.05. Refusal or unreasonable delay by the Owner to pay the amount due shall entitle the Contractor to suspend or terminate the Contract whenever permitted under Article 26 (20.08).


12. Does the Owner have any responsibility with regard to the cleanliness of the premises?


The Contractor shall at all times keep the premises free from accumulations of waste materials or rubbish caused by his employees. Rubbish shall not be thrown from windows or other parts of the structure without the use of rubbish chutes. At the completion of the Work, the Contractor shall remove all temporary work, its rubbish therefrom and all his tools, scaffolding and surplus materials and turn over the work for occupancy.


All dirt, stains, and the like on all finishing of floors, walls and ceiling, decorative work, finishing hardware and fixtures shall be removed.


All woodwork, finishing hardware and all metal works shall be cleaned and polished. All glazing, marble and tile work shall be washed and cleaned. The Contractor shall also clean the site as shown in the Drawings and all areas which the Contractor used in the execution of the project.


If the Contractor fails to clean up after due notice at the completion of the Work, the Owner may do so and the cost thereof charged to the Contractor.


If a dispute arises between the Contractor and separate contractors as to their responsibility for cleaning up, the Owner may clean up the site and charge the cost thereof to the contractors responsible therefor as the Owner shall determine to be just (20.09).


13. Can the Owner make use of completed portions of the Work?


Yes, the Owner may take possession of and use any completed or partially completed portion of the Work, although the time for completing it or portions thereof may not have expired; but such taking of possession and use shall not be deemed an acceptance of any work not completed in accordance with the Contract. Neither shall it be deemed a waiver by the Owner of the right to claim damages due to delay in the completion of the Work. If such prior use increases the Contractor’s cost or delays the completion of uncompleted work or causes refinishing of completed work, the Contractor shall be entitled to extra compensation or extension of time or both.


However, if the Owner does take over any portion prior to overall completion, he or she shall issue a Certificate of Completion for such portion taken over and release retention as required by the Contract (20.10).


14. What constitutes substantial completion of the Work?


There is substantial completion when the Contractor completes ninety five percent (95%) of the Work, provided that the remaining work and the performance of the work necessary to complete the Work shall not prevent the normal use of the completed portion (20.11).


The Owner shall be deemed to have recognized the substantial completion of the Work through:

       The approval of the Contractor's billing for completing at least 95% of the Work; or

       The issuance of a Certificate of Substantial Completion or equivalent document.  However, the date of this document shall not be controlling if substantial completion is shown to have been made at an earlier date, unless the Contractor accepts the certificate without taking exceptions thereto in writing within fifteen (15) days from receipt (20.11).


Notwithstanding this, the equipment, fixtures and utilities furnished and/or installed by the Contractor which the Contract requires to be test-run prior to acceptance shall be test-run successfully before the Work can be accepted as substantially completed. The Owner shall, without delay, cause the test-run of the Facility. Should the Contractor be unable to completely install or furnish and test-run the Facility through no fault of his, the Contractor shall automatically be entitled to an extension of Completion Time equal to the period of delay (20.11).


The Supreme Court has applied the 95% threshold to determine what constitutes substantial the absence of agreement to the contrary.



15. What happens if the Contractor cannot complete the Work due to the actions of the Owner?


If the targeted date of completion has arrived and the Contractor cannot achieve substantial compliance due to the uncompleted Facility caused by the Owner's fault, negligence or delay, the Contractor shall be deemed to have achieved substantial completion provided (i) the contractor has completed at least ninety five percent (95%) of the work minus the uncompleted Facility, and (ii) the Contractor has completed the work required on the Facility but for that which is directly affected by the Owner's fault, negligence or delay. The Owner shall release to the Contractor the Contract Price less the cost of the uncompleted portion of the work and the amounts mentioned in Article 22.03. (20.11).


16. What happens if the Owner discovers any defects?


If there are any defects, the Owner shall issue a punch list, which the Contractor must receive not later than thirty (30) days from the date of substantial completion. The Owner may add to the punch list items, not later than sixty (60) days from date of substantial completion corrective work on the items in the original punch list or lists (20.11). The period of thirty days, calculated from the date of receipt by the Contractor of the last item in the punch list submitted, is known as the "Period of Making Good of Known Defects or Faults" (20.12).


The Contractor shall execute at his own expense all works necessary for making good of known defects, imperfections or faults (20.13).


If, in the opinion of the Owner, the defect or fault in the punch list is due to a cause attributable to it, the value of such work shall be ascertained and paid for as if it were additional work (20.13).


If the Contractor shall fail to do any such corrective work, the Owner shall, upon written notice to the Contractor, be entitled to carry out such work by his own workmen or by other contractors, and charge the cost thereof to the Contractor. The Owner may withhold an amount not exceeding the Contract cost of executing such work from the payment to the Contractor (20.13).


17. What happens if the Owner instructs the Contractor to conduct a special test?


Special test, inspection or approval, not otherwise required in the Contract which the Owner instructs the Contractor to perform after the date of substantial completion, shall be treated as a separate work which the Owner may cover by a supplemental agreement (20.14).


18. What can lead to an adjustment in prices?


There shall be added to or deducted from the Contract Price such sums affecting the execution of the Work caused by any of the following: an event of force majeure including abnormal changes in costs of materials, increases in labor costs mandated by law or wage order, increase in the cost of oil, and the deterioration of peace and order.


Adjustment of prices due to escalation or reduction of costs of executing the work shall be made using a parametric formula to be agreed upon by the parties. In default of such agreement, the parametric formula of the Department of Public Works & Highways [DPSWH] shall be applied.


The adjustment of prices shall be determined on the basis of the original Contract unit prices of labor and materials and such unit prices in effect during the relevant period of work accomplishment.


The Contract Price shall be adjusted, not oftener than once a month, due to increase or decrease of the direct cost of labor and materials of more than five percent (5%) of the original Contract unit prices of the relevant items of work. The adjustment shall include the first five percent (5%).


In case the project is behind schedule by more than fifteen percent (15%) from the approved construction schedule, not due to excusable delays, the payment for work accomplished shall be made on the basis of the Contract Price as adjusted in accordance with the escalation rate applicable during the period in which it should have been accomplished


These adjustments shall not apply to an increase or decrease in the cost of materials and services provided or supplied by the Owner (20.16).


19. What is the manner of payment?


Payments in money under the Contract shall be made in the currency stipulated; and if it is not legally possible to deliver such currency, then in Philippine pesos  (20.17).

1. When does Work commence and what is the period for its completion? 


Unless a later date is provided, it generally commences within seven days from receipt of the Notice to Proceed, which notice shall be issued by the Owner to the Contractor only when the Contract so provides. Premature commencement of construction shall be at the Contractor's risk unless it is due to their mutual desire to have the Contractor commence the work early, and the Owner gives the Contractor express or implied authority to do so (21.01).


The Contractor shall complete the Work in accordance with the Contract within the period fixed therein and as adjusted due to changes both directed and constructive.


For projects involving several phases of work with milestones, commencement date shall be reckoned from the time the Contractor receives the Notice to Proceed and/or Possession of Site for each milestone as shall be necessary to enable the Contractor to execute the contract works in accordance with the schedule stipulated in the Contract (21.02).


2. What is a construction schedule and what are its contents?


Immediately after the Contract has taken effect, the Contractor shall submit for approval a construction schedule in a form acceptable to the Owner. This schedule indicates the approximate date each pay item will be started and completed, the equipment to be used and number of men to be employed to complete the Work in accordance with the schedule. The progress of the work shall be at a rate sufficient to complete the Work in an acceptable manner within the Completion Time (21.03).


3. What happens when there is slippage?


Delays by the Contractor in the implementation of the contract are referred to as "slippage".


In case of slippage, the Owner may call for meetings with the Contractor and other contractors involved to determine the possible causes contributing to the slow progress of the construction work.


If such slippage is due to the fault or negligence of the Contractor, the Owner may require the Contractor to submit a catch-up schedule which shall be subject to approval by the Owner (21.03)


4. Can the Owner accelerate the schedule?


Yes, the Owner may order the acceleration of work to meet a desired completion date. Acceleration of work for the benefit or convenience of the Owner or caused by the fault of or delay by the Owner, shall be treated as extra work for which a Change Order shall be issued and the Contractor shall be paid for the cost of such acceleration. However, where the reason for acceleration is due to the fault of the Contractor, and for the purpose of catching up with the original schedule,  such additional cost for acceleration shall be borne by the Contractor alone (21.03).  


5. Can the Contractor ask for an extension of time?


Yes, there are certain instances when the Contractor shall be entitled to an equitable adjustment of Completion Time. For example, the Contractor shall be entitled to an extension of time when the Contractor is obstructed or delayed in the completion of the Work by:

 a)    the act, neglect, delay or fault of the Owner, or any other contractor employed by the Owner on the Work;

 b)    third-party strikes or lockouts or strikes by employees other than the Contractor's employees or a lockout by an employer other than the Contractor;

 c)    an act of God or force majeure;

 d)    unsuitable weather conditions which render the work impracticable or impossible or which slow down the prosecution of the Work;

 e)    peace and order conditions;

 f)     changes ordered or authorized by the Owner or authorized under the Contract; and

 g)    delay authorized by the Owner pending arbitration of an unresolved dispute between the Owner and the Contractor.


For delay caused by b), c), d), e) and f), the Contractor shall, within fifteen (15) days from the occurrence of the event which caused the delay, notify the Owner and the Owner shall, not later than fifteen (15) days from receipt of such notice, give the Contractor an equitable adjustment of the Completion Time. The failure of the Owner to reply to the Contractor or to give an equitable adjustment of the Completion Time shall be deemed an approval by the Owner of the adjustment requested by the Contractor.


For delay caused by a) and g), and in default of an agreement between the Owner and the Contractor, the Contractor shall be entitled to an adjustment of Completion Time equal to the delay caused by such factors. However, the Contractor shall not be entitled to extension of Completion Time due to the alleged failure of the Owner to furnish materials or information or provide drawings, unless in the construction schedule approved by the Owner, they are necessary to prosecute the Work in the order required, and the failure of the Owner to provide them caused a delay in the work of the Contractor.


The Owner, taking into account the construction schedule approved by him and the progress of the work of the Contractor, is conclusively presumed to know when materials, equipment or supplies or drawings to be provided by the Owner shall be required by the Contractor, and the failure of the Contractor to give prior or timely notice to the Owner of the date when such material, equipment or supplies or drawings shall be required shall not be a ground for denying the Contractor an adjustment of Completion Time.

The failure of the Owner to reply to the Contractor's request for adjustment of Completion Time within fifteen (15) days from the date of receipt of the request shall be deemed an approval by the Owner of the adjustment requested by the Contractor. Such request shall be deemed a formality which does not affect the right of the Contractor to an equitable adjustment of Completion Time as provided.

Delay in the payment of any progress billing as required in Article 22.05 shall automatically extend the Completion Time by a period equal to the delay. The Contractor shall not be required to give notice to the Owner nor be required to establish that such delay actually delayed the prosecution of the Work or delayed the Contractor to a period equal to the delay in the payment of the billing (21.04).


6. What happens when there is delay in the completion of the Work?


Time is an essential feature of the Contract.


Upon failure of the Contractor to complete the Work within the Completion Time, the Contractor shall be liable to pay the Owner liquidated damages in the amount stipulated in the Contract as indemnity. The Owner may deduct from any sum due the Contractor the amount which has accrued as liquidated damages. Liquidated damages shall accrue from the first day of delay in completing the work within the Completion Time until the date of substantial completion as determined under Article 20.11.


The amount of damages for corrective works uncompleted within the Period of Making Good of Known Defects shall be based on the value of such uncompleted corrective work in the Breakdown of Work and Corresponding Value for approved billings.


However, there are also certain instances when the Contractor shall have the right to suspend performance of the Work. For example, he or she may suspend the performance of the Work upon failure of the Owner to pay approved billings under the conditions provided in Article 27. The Contractor will also be entitled to the payment of interest under Article 22.05 (21.05).  




1. How are payments determined and paid?


Except in cases where unit prices form the basis for payment under the Contract, the Contractor shall, within fifteen days from the receipt of Notice to Proceed or from commencement of the Work, submit a Breakdown of Work and Corresponding Value of the Contract Amount. This Breakdown shows the value assigned to each part of the work and thus is used as the basis for all Requests for Payment. It may also be used for determining the value of uncompleted work (22.01).


The Breakdown of Work and Corresponding Value is what the Owner will use to estimate the value of work accomplished by the Contractor, serving as a basis for compensation (22.05).


The Owner shall estimate the value of work accomplished by the Contractor using as basis the schedule stipulated in the Breakdown of Work and Corresponding Value. Such estimate of the Owner of the amount of work performed shall be taken as the basis for the compensation to be received by the Contractor. While such preliminary estimates of amount and quantity shall not be required to be made by strict measurement or with exactness, they must be made as close as possible to the actual percentage of work accomplishment (22.04).


The Contractor may submit not more than once each month a Request for Payment. Each request shall be computed from the work completed on all items listed in the Breakdown of Work and Corresponding Value, less a retention of 10% of the progress payment to the Contractor. When 50% of the Contract has been accomplished, no further retention shall be made on progress billings for the balance of the Work (22.02).


In general, and unless the Contract provides otherwise, no payment shall be made for materials or items not incorporated in the work, except where such acquisition is made necessary due to shortages or to transportation difficulties or other similar causes in which case, payment shall be made conditioned upon the submission by the Contractor of bills of sale or upon compliance with such other procedures as will establish the Owner's title to such material or item or otherwise adequately protect the Owner's interest (22.02).


When a Request for Payment is submitted, the Owner shall, within 30 days from receipt thereof: (i) evaluate and certify the Contractor's accomplishment; and (ii) pay the amount as certified. If the Owner fails to pay on time, the Owner shall also pay interest thereon, computed from the due date in accordance with the 30-day regular loan rate of the Lank Bank of the Philippines prevailing on the due date. (22.05).


For  payments made in excess of ninety percent (90%) of the Contract Price, the Owner shall require the Contractor to submit a sworn  statement to the effect that all bills for labor, other than current wages, and all bills for materials have been duly paid by the Contractor and his Sub-contractor, if any, excepting only such bills as may be enumerated in such sworn statement. The Contractor shall render the Owner free and harmless from any claims and payment of such bills, and shall indemnify the Owner the cost of defending himself against such claims (22.07).


2. Is the approval of the Owner of a progress billing merely provisional or is it considered final?


The approval is merely provisional. The owner has the right to verify the contractor's actual work accomplishment prior to payment.


Therefore, the owner, for any just cause may question a prior evaluation of the percentage of accomplishment of the contractor and to downgrade such accomplishment after re-evaluation. It is the right of every owner to re-evaluate or re-measure in good faith the work of its contractor during the progress of the work.



3. Can the Owner deduct anything from the payment due the Contractor?


Yes, the Owner may deduct from any payment due the contractor for:

 •       The estimated cost of defective work not remedied; (Note: Unqualified power should not be allowed)

        The amount of substantiated and unpaid claims by subcontractors and suppliers unjustifiably withheld by the Contractor; and

        The amount which has accrued as liquidated damages (22.03).


4. Who has duty to pay the laborers, sub-contractors and suppliers?


The Contractor shall pay punctually all workmen employed by him on the project. He shall also pay promptly all materials purchased by him, rentals for equipment used by him on the project and all taxes due from him. He shall remit as required by law all amounts legally required to be withheld from the salaries or wages of his employees or workmen (22.06).


In case the Owner has reasonable grounds of belief that the Contractor has not remitted to the appropriate government agency the employer's and employee's contributions to the Social Security System or to Medicare, or the withholding tax on the employees' wages, the Owner may require evidence of remittance of such contributions or withholding tax in addition to the sworn statement mentioned above, and withholding release of the amount sufficient to cover such unremitted payments until the evidence required by the Owner is provided by the Contractor (22.09).


5. Other than the submission of a request for payment, are there any other documents or requirements that the Contractor must complete?


Yes, for the construction of buildings, the Contractor shall submit, before final payment, several documents including:

        Certificate of Final Building Occupancy, unless such certificate cannot be obtained.

        Certificate of Final Inspection of utilities, unless such certificate cannot be obtained.

        Original and three (3) sets of prints of "As-Built Drawings" of Electrical, Sanitary, Gas, Telephone and Mechanical works, if such works are within the scope of the Contract. "As-Built Drawings" are the working drawings showing the system and actual locations of outlets, fixtures, services and equipment that were installed.

        Three (3) copies of Directory of Panel Boards and list of circuits.

        Three (3) copies of Instructions and Manual for operating and maintaining of fixtures and equipment.

        Three (3) copies of Keying Schedule.

        A release of liens arising under the Contract as provided in Article 34.01, and the sworn statements required in Article 22.09 (A) and Article 22.07 (22.08).


6. What happens during the final payment?


Whenever the Contractor notifies the Owner that the Work under the Contract has been completely performed by the Contractor, the Owner shall, within 10 days from receipt of such notice, proceed to verify the work, make the final estimates, certify to the completion of the work, and accept the same.


Except for causes herein specified, the Owner shall pay to the Contractor within the period stated in Article 22.05 the amount which shall be found due, less such sums as may be lawfully retained under any of the provisions of the Contract; provided that final payment on the Contract shall not be made until the Contractor has submitted a statement under oath showing that all taxes due from him in connection with this Contract have been duly paid.


The acceptance by the Contractor of final payment shall constitute a waiver of all his claims against the Owner, except the following:

 a)    a claim covered by a prior notice to the Owner reserved by the Contractor to be filed in accordance with the Contract;

 b)    a claim pending before and unresolved by the Owner at the time the request for final payment is made;

 c)    a dispute referred to arbitration in accordance with Article 34.05; and

 d)    a claim which the Owner acknowledges with the payment not to be covered by it (22.09).

 NOTE: include provision where contract is terminated before completion of the Work.


7. Can the Contractor be held liable for defects or inferior work after final payment?


Yes. While generally acceptance by the Owner of the Work shall relieve the Contractor of liability for defects, there are a few exceptions such as when:

        The defect is hidden and the Owner could not have discovered the defect even with the exercise of reasonable diligence.

        The Owner accepted the Work with express reservations seasonably made as to the specific portion of the Work which was found to be defective and which requires replacement or correction.  If the reservation fails to specify the portion which is alleged to be defective, the Owner shall state in as much detail as possible the nature and extent of the defect; otherwise the reservation shall be considered a general reservation and shall be ineffective.


Furthermore, if the Owner finds the Work poor or inferior or does not comply with the Drawings and Specifications, it shall forthwith be condemned and the Contractor notified thereof to give the Contractor an opportunity without loss of time and without incurring unnecessary cost, to correct the defective work. Work not so condemned within one year from notice from the Contractor that corrective works have been completed cannot later be rejected by the Owner. If the Owner, after the lapse of this one-year period, instructs the Contractor to remove or replace it thereafter, the instruction shall be treated as an additional work for which the Contractor shall be compensated.


The Contractor shall be liable to the Owner for any hidden defect discovered and notified to the Contractor which the Contractor receives from the Owner within the warranty period as provided in the Contract, or in default of any provision fixing the warranty period, within one year from the completion and acceptance of the Work, or from the date stated in the Certificate of Acceptance, or in default thereof, from the  posting of the Guarantee Bond (22.10).


The one-year defects liability period in CIAP Document No. 102 is considered as "established usage in the Philippines for private and government construction contracts".



8. Can the Contractor be held liable for any loss or damage suffered by third persons from any defects of the Work?


Yes, there is nothing that limits the liability of the Contractor to third persons who may have suffered losses resulting from the collapse of the Work due to defects in the construction or caused by or resulting from the use of inferior materials or to any violation of the terms of the Contract in accordance with Article 1723 of the Civil Code of the Philippine (22.10).


Article 1723 of the Civil Code states that "The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure, the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damages if the edifice falls, within the same period, on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor…"


9.  When can the funds retained by the Owner in accordance with the Contract be released?


The amount retained by the Owner under the provisions of the Contract shall be released  in accordance with its provisions; in default thereof, not later than the expiration of the period during which the Contractor shall complete corrective works on punch list items, upon the posting of the Contractor's Guarantee Bond (22.11).  (This provision is ambiguous; it may unduly extend the Contractor’s obligation to do corrective works.)


R.V. Santos Co., Inc. v. Belle Corp., G.R. Nos. 159561-62, 3 October  2012.


William Golangco Construction Corp. v. Philippine Commercial and International Bank, G.R. No. 142830, 24 March 2006. 



Transcept Construction and Management Professionals, Inc. v. Aguilar, G.R. No. 177556, 8 December 2010.