SECTION VIII: SUSPENSION OF WORK AND TERMINATION OF CONTRACT

ARTICLE 26: CONTRACTOR'S RIGHT TO SUSPEND WORK OR TERMINATE CONTRACT

 

1. Can the Contractor suspend work or terminate the Contract?

 

Yes, the Contractor may suspend work or terminate the Contract upon fifteen (15) days' written notice to the Owner for any of the following reasons:

        If an order of any court or other public authority caused the work to be stopped or suspended for an aggregate period of ninety (90) days through no act or fault of the Contractor or his employees.

        If the Owner shall fail to pay the Contractor the approved Request for Payment as provided in Article 22.05.

        If the Owner shall fail to pay the Contractor any sum within  thirty (30) days after its award by arbitration.

        If the Owner suspends the work without just cause for more than the aggregate period of fifteen (15) days without the Contractor's consent.

        If the Owner fails to deliver at the construction site Owner-supplied materials or equipment, for the scope of work along the critical path, beyond fifteen (15) days after its scheduled delivery date as provided for in the Contract.

        If the Owner delays his or her approval of Variation Orders for additional works for more than fifteen days after submission.

The Contractor may request the Owner to suspend work if the suspension is necessary for the proper execution of the Work or by reason of weather or other conditions which affect the safety of the works and the laborers (26.01).

 

2. Will a suspension or termination of the Contract  affect the Completion Time or the Contract Price?

 

Yes, for suspension of work due to the circumstances described in Article 26, the Contractor shall be entitled to an equitable adjustment of Completion Time and/or Contract Price (26.01).

 

 

ARTICLE 27: OWNER'S RIGHT TO SUSPEND THE WORK

 

1. Can the Owner suspend the work without cause? If so, for how long?

   

Yes, the general rule is that the Owner may, at any time and without cause, suspend the work or any portion thereof for a period of not more than the aggregate period of fifteen (15) days by notice in writing to the Contractor and shall fix the date on which work shall be resumed.

 

The Contractor will be allowed an adjustment in the Contract Price to include demobilization and remobilization costs and/or stand-by time as applicable as well as adjustment of Completion Time which shall not be less than the period of suspension and shall include the delay due to remobilization of equipment and personnel (27.01).

 

2. Can the Owner suspend the work for more than 15 days?

 

Yes. While the general rule is that the Owner can only suspend the work for a period of not more than fifteen (15) days, there are two exceptions:

 a)    if there if there is a just cause or

 b)    if the Contractor consents to a longer suspension (27.01).

 

3. What are the just causes for suspension of work?

 

The Owner, by a written order, may direct the Contractor to stop the work or any portion thereof, in any of the following cases until the cause for such order has been eliminated:

 a)    Unsuitable weather or other conditions considered unfavorable for the prosecution of the work;

 b)    Failure of the Contractor to correct conditions which constitute a danger to his workers or the general public, or to correct defective work;

 c)    Failure of the Contractor to carry out valid orders issued by the Owner or to comply with any provision of the Contract, or his persistent failure to carry out the Works in accordance with the Contract;

 d)    The necessity for adjusting the Drawings to suit site conditions found during construction, or in case of a change in Drawings and Specifications;

 e)    Failure of the Contractor to supply sufficient skilled workmen or suitable materials or equipment;

 f)     Failure of the Owner to supply Owner-supplied/furnished materials on time, where such failure is due to causes beyond the reasonable control of the Owner;

 g)    Delay by the Owner in obtaining a right-of-way, where such obligation is assumed by the Owner under the Contract, and the delay is not due to the fault or negligence by the Owner;

 h)   Force majeure or fortuitous event;

 i)     Peace and order problems; or

 j)      Any condition similar to the above beyond the control of the Owner (27.02).

 

The Contractor shall immediately comply with such order to suspend the work or any part thereof for such period or periods and in such manner as the Owner may direct, and during such suspension shall properly protect and secure the Work.

 

The Contractor shall be entitled to an equitable adjustment of Completion Time and Contract Price for suspension of work due to Items [a], [d], [f], [g], [ h], [i] & [j]. However, for Item [a], no such adjustment shall be allowed if unsuitable weather conditions were taken into account in determining the Completion Time as provided for in the Bid Documents. If the actual number of days of unsuitable weather exceeds the period taken into account in the Bid Documents, the Contractor shall be entitled to an adjustment of Completion Time and Contract Price (27.02). 

 

ARTICLE 28: OWNER'S RIGHT TO TERMINATE CONTRACT

 

1. Can the Owner terminate the Contract without prior notice to the Contractor?

 

Yes, upon the occurrence of any of the following events:

        If Contractor is adjudged bankrupt or insolvent;

        If Contractor makes a general assignment of his assets for the benefit of his creditors;

        If a trustee or receiver is appointed for the Contractor or for any of the Contractor's property; or

        If the Contractor files a petition for suspension of payments, or to reorganize under the bankruptcy law (28.01).

 

2. Are there instances when the Owner is required to give prior notice before terminating the Contract?

 

Yes, the following grounds for termination with cause require 15 days' written notice::

 •       The Contractor repeatedly fails to supply, based on the construction schedule, the sufficient number of skilled workmen or suitable materials or equipment;

 •       The Contractor repeatedly fails to make without just cause prompt payments to subcontractors for labor, materials or equipment, and completion of the Work is being delayed;

 •       The Contractor disregards the Laws or orders of any public body having jurisdiction;

 •       The Contractor otherwise violates in any substantial way any provision of the Contract; or

 •       Slippage of the Contractor in excess of 25% in the prosecution of work per agreed construction schedule plus any time adjustment duly granted to the Contractor (28.02).

 

3. What happens if an Owner terminates the contract with cause?

 

Subject to Articles 29.02 and 29.03, last paragraph  below, the Owner may exclude the Contractor from the site and take possession of the Work and of all the Contractor's tools, appliances, construction equipment and machinery at the site and use the same and incorporate into the work all materials and equipment stored at the site including those stored elsewhere for which the Owner has paid the Contractor, and finish the work as Owner may deem expedient. In such case, the Contractor shall not be entitled to receive any further payment until the work is finished  (28.02).

 

[NOTE: It should be made clear that the Owner shall credit the Contractor for the value of all such tools, materials and equipment which are integrated into and form part of the Work, and for the rental value of the use of equipment.  The excess or unused materials, unused equipment as well as the heavy equipment shall be returned to the Contractor after use.

 

[This provision is intended to allow the Owner only to possess them in order to use them if it should be necessary to complete the Project, if possible,  on time and within budget.  It should not be interpreted to mean an  appropriation/ confiscation of such materials and equipment  as additional damages.]

 

4. Can the Owner terminate the contract without cause?

 

Yes, upon 15 days' written notice to the Contractor, the Owner may, without prejudice to any other right or remedy, elect to abandon the work ,or terminate the Contract for its convenience.. In such case, the Contractor shall be paid for all work executed and any expense sustained plus reasonable termination costs (28.03).

 

ARTICLE 29: OWNER'S RIGHT TO PROCEED WITH THE WORK AFTER REDUCTION IN CONTRACTOR'S SCOPE OF WORK; PARTIAL TAKEOVER FROM CONTRACTOR

 

1. When can an Owner elect to carry out the Work?

 

The Owner may, after seven (7) days following receipt by the Contractor of written notice and without prejudice to any other remedy the Owner may have and without terminating the Contract, elect to carry out the work if the Contractor:

        Repeatedly fails to supply sufficient skilled workmen or suitable materials or equipment;

        Repeatedly fails to make prompt payments to subcontractors for labor, materials or equipment;

        Fails within a mutually agreed time after written notice of the Owner to carry out remedial or repair work;

        Fails despite repeated remedial work to rectify the defects or the result of remedial work does not conform to the specifications;

        Fails to perform the Work in accordance with the Contract (29.01).

 

In such cases, an appropriate change order shall be issued deducting from the payments due the Contractor the cost of carrying out the specific work. This can also include the compensation of additional services made necessary by such default. If the payments are worth more than what was owed to the Contractor, he or she shall pay the difference. (29.01).

 

2. What happens to the materials and equipment at the site?

 

The Contractor, upon receiving notice of termination of the Contract, shall vacate the site and deliver possession of the Work, or the parts thereof specified in the notice, to the Owner and promptly remove all his materials, plant, appliances and other essential equipment from the site, except those which the Owner may need for the construction of the project. At the option of the Owner, they shall remain on the site until the Work is completed. The Owner shall credit the Contractor with a reasonable rental for the use the same.

 

In case such materials and/or equipment do not belong to the Contractor, then the Owner, provided it does not violate the lease contract of the Contractor, shall have the option to retain them for use in the project and pay reasonable rent directly to the lessor for their use, chargeable against the Contractor (29.02).

 

The Owner shall then take over the work, and use such tools, appliances and materials of every description as may be found at the site for the purpose of completing the Work (29.03).

 

3. How much does the Owner pay the Contractor if the former takes over the work?

 

Upon such termination of this Contract, the Owner will ascertain and fix the value of the work completed by the Contractor and not paid for by the Owner and of all usable materials of the Contractor taken over by the Owner at the time of said termination.

 

If the cost to the Owner of completing the work is not in excess of the Contract Price, then the difference between them may be applied to settle claims filed against the Contractor, and the balance may be paid to the Contractor. No amount in excess of the combined value of the unpaid completed work, retained percentage and usable materials taken over by the Owner at the time of the termination of the Contract shall be paid to the Contractor until the completion of the work (29.04).

 

In case of suspension of work, all unpaid work executed including costs incurred during suspension shall be charged to the Owner (29.04).

 

4. Can the Owner recover damages from the Contractor?

 

Yes. neither the taking over by the Owner of the work for completion by administration nor the re-letting of the same to another Contractor shall be construed as a waiver of the Owner's rights to recover damages against the original Contractor and/or his sureties for the failure to complete the work as stipulated.

 

In such case, the Owner may be able to recover:

        Liquidated damages which may have accrued up to the day before the Owner effectively takes over the work or the date of substantial completion whichever occurs earlier;

        The excess cost incurred by the Owner in the completion of the project over the Contract Price inclusive of re-letting the same. If the Owner completes the work by administration, the direct cost of completing the work shall include the reasonable cost of managerial and administrative services incurred from the time the Owner effectively took over the work by administration  (29.05).

 

5. What are liquidated damages?

 

According to Article 2226, liquidated damages are those agreed upon by the parties to a contract, to be paid in case of delay in the completion of the Work. Where the Contractor refuses or fails to satisfactorily complete the Work within the specified Contract time, the Contractor shall be liable to pay the Owner liquidated damages in the amount stipulated in the Contract. Liquidated damages shall accrue from the first day of delay in completing the Work until the date of substantial completion as determined under Article 20.11.

 

The Owner shall claim but does not have to prove that it has incurred actual damages. Such amount shall be deducted from any money due or which may become due. The Owner may collect such liquidated damages from the retention money or other securities posted by the Contractor, whichever is convenient to the Owner.  In no case, however, shall such liquidated damages exceed 1/10 of 1% for every day of delay nor shall  the total sum of liquidated damages exceed ten percent (10%) of the total contract price.

 

If before the completion of the Work, parts or sections have already been certified as completed by the Owner's Engineer or was used by the Owner, the liquidated damages for delay shall be reduced in proportion to the value of the completed portion (29.06).