Administration Impairments Resulting from Imbalanced Contract Conditions: Owner Payment Default

Abstract

It is not uncommon that construction contract conditions are found to be drafted in such a way that protects the interest of project owners, and that contractors fail to detect—or succeed in favorably negotiating—such conditions before entering into these contracts. Such imbalanced contracts are likely to generate major difficulties for all participants involved in their administration during the course of construction. This paper presents a thorough analysis of a claim case dealing with the repercussions of an owner’s successive payment defaults under a contract—characterized by imbalanced contract conditions—for the construction of a 300-unit residential towers project. The adopted methodology involved (1) benchmarking the relevant contract terms governing the arisen dispute to those of an international standard form of conditions widely used in the project locality; (2) examining the full series of actions and correspondence by, or on behalf of, the parties to the contract along the dispute timeline that extends into the arbitration proceedings period; and (3) highlighting the steps that could have been taken by the contractor in order to better preserve their interests despite the prevailing biased contract conditions. The findings clearly reveal that timely yet tactical contract administration actions, which could have been used for dealing with the mandated unbalanced conditions, can help improve the standing of the contractor’s raised claim and its chances for a more successful resolution. The paper concludes with an analysis of proposed preventive strategies and windows of opportunities available to contractors for questioning and negotiating such detrimental conditions.