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WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

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Re: WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  JGM on Wed Apr 18, 2012 5:03 pm

RJM

In the Law of Limitation Act CAP.89 the issue of commencement of period of limitation in relation to building contracts is explained in Sec 26. Effects of fraud or mistake.

26. Where in the case of any proceeding for which a period of limitation is prescribed-
(a) the proceeding is based on the fraud of the party against whom the proceeding is prosecuted or of his agent, or of any person through whom such party or agent claims;
(b) the right of action is concealed by the fraud of any such person as aforesaid; or
(c) the proceedings is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, or could, with reasonable diligence, have discovered it:

Therefore in building contracts, where we normally have what we call latent defects, the limitation shall only begin to run after the defect is detected.

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Re: WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  RJM on Sat Apr 14, 2012 7:23 pm

JGM,

Many thanks for live example.

From your submission it appears that there is no limitation of liability as far as rights and obligations are concerned - The lesson is that a contract may come to an end but some rights and obligations remain in force..On the same note, I have come across what is called the Limitation Act which limits actions that parties should not raise/bring stale claims arising from the contracts. Under the Limitation Act, it recognizes SIMPLE CONTRACTS - barred from actions after a period of 6 yrs and SPECIALTY CONTRACTS - 12 yrs from the time when contentious issue was discovered.

Going by the Arbitration case you have referred, how does the Limitation Act comes into play?


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WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  JGM on Sat Apr 14, 2012 5:53 pm

RJM

Thank you for the good question - Can parties to a Contract raise claims against each other after a contract has been discharged?

YES!

One good example is the Arbitration between the Revolutionary Government of Zanzibar and Cogefar Impresit in respect to defects in the Malindi Wharfs Zanzibar Port. In this case, the respondents argued that the claimant had accepted the works and had even released the Performance Security and therefore the respondent was exonerated from any liability (Infact the final acceptance of the works was certified on September 1991 but the arbitration proceedings started in 2004). Dispite this arguement, the Arbitral Tribunal decided in favour of the government of Zanzibar. The lesson is that a contract may come to an end but some rights and obligations remain in force.

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Re: WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  RJM on Tue Apr 10, 2012 11:32 pm

JGM,

Many thanks for emphasis and clarity.

You have mentioned that beyond the contract period, the applicable law takes over - this is interesting. In this case, can parties to the contract raise the claims against each on the contract which has been already concluded?

JGM, Grateful if you could explore more on this for the benefit of the forum members.

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WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  JGM on Tue Apr 10, 2012 1:46 pm

Usually a construction contract is considered discharged after issuing of the Performance Certificate. However, taking an example of the FIDIC Conditions of Contract for Construction 1999 clause 11.10 there is what is refered to as unfulfilled obligations "After the Performance Certificate has been issued,each Party shall remain liable for the fulfilment of any obligation which remains unperformed at that time. For the purpose of determining the nature and extent of unperformed obligations, the contract shall be deemed to remain in force".

The reason is that at the time when the Performance Certificate is issued the Employer may not have made all the payments due under the contract. There is also the issue of latent defects. The conditions of contract do not put a limitation to liability. This is normally prescribed in the applicable law. Therefore we may say that beyond the contract period, the applicable law takes over.

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Re: WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  RJM on Fri Jun 24, 2011 8:30 pm

Nicholas, I am not quite sure I understood your question – I will try to highlight what I have gathered so far in your submission and if there is something in particular you can come on board as motion progress.

When parties to the contract [Employer and Contractor] sign the contract principally they agree to perform their promises which contained in the contract which outlines terms and conditions. Simply one can say, contract stipulates rights and obligations of the parties to the contract.

In law of contract, performance means the doing of what is required by a contract. Discharge by performance takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed in the contract. Discharging the contract by performance then performance should be complete, precise and according to the terms of agreement.

n most of contract if not all in construction industry, clearly give the relationship between the “time for completion” and “Defect Liability Period [DLP] as far as the rights and obligations of the parties is concern. Let take example of FIDIC [Most recognized form of contract] which defines “time for completion” means the time for completing the works or a section (as the case may be) with any extension calculated from the commencement date. This implies that commencement date + time for completion [weeks/months/years] = completion date for works or section [it could be amended if at all there is extension of time granted by the Employer]. If works are substantially completed at the completion date – Employer will issue a Taking-Over Certificate [Practically Completion Certificate] and marks the commencement of DPL – for the contractor to complete any work which is outstanding and execute all work required to remedy defects or damage for expiration of DLP. Mind you the contract still in force! Remember - Retention Money, Final Inspection, Final Account and Final Certificate.

After DLP Engineer issue Performance Certificate [Final Completion Certificate] stating the date on which the contractor completed his obligations under the contract – 50% retention money released. Note that performance certificate deemed to constitute acceptance of the works but not concluding the contract. After the performance certificate liable for the fulfillment of any obligation which remains unperformed at that time. For the purpose of determining the nature and extent of unperformed obligations, the contract shall be deemed to remain in force i.e. final payment certificate based on the final account, unresolved disputes etc.



Lastly, contractor will make application for Final Payment Certificate which will be certified by the Engineer and Employer shall have obligation pay what amount finally due to the contractor. At this stage one can say that contract has been discharged by performance.



What is your take?

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Re: WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  nkinyanjui on Thu Jun 23, 2011 5:15 pm

The defect liability means that your contractor should be obliged/liable for rectifying defects in their work. The defect liability period is therefore to be considered only if it is a defect that the contractor was repairing. Is the delay incompleting the project caused due to the contractor repairing his defects? If the answer is no then i don’t see how the defect liability period could apply.
PROCUREMENT MENTALITY101 visit http://naomikinyanjui.wordpress.com/

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WHEN DO THE CONTRACT BE COMPLETELY DISCHARGED

Post  Nicholas FD on Tue Jun 21, 2011 11:45 pm

There are several way that a Contract can be Discharged, to mention only few include Discharge of Contract by Mutual Agreement, Discharge of Contract by Subsequent Impossibilily, the most common to me is Discharge of Contract by Performance where all parties of the contract has performed or fulfillment to satsfaction of the parties rights and obligations.
NOW the later discharge [perfomance] the contract should be within CONTRACT COMPLETION PERIOD, any thing beyond this period it is assumed that the contract is not valid, eg. if you want to effect payments. if that is the case question comes DOES THE DIFFECT LIABILITY PERIOD QUALIFY THE CONTRACT TO BE VALID, WHICH IS BEYOND CONTRACT COMPLETION PERIOD.

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