Archive for the ‘Contract Administration’ Category

Project finance: how to secure it

By Martin Preston
THE majority of the features of a project finance loan agreement are the same as a corporate loan agreement. However, because the basis on which the lenders are advancing the loan is the forecast revenues of the project, rather than the assets or creditworthiness of the sponsors, the risks taken by the lenders and, therefore, the controls that they require under the loan agreement, are greater than would be required under a corporate loan agreement. Inevitably, some of these additional controls impact on the construction contract.

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Front end advice

Despite the harsh lessons learnt over the latter part of 2009 and first quarter of 2010 it is still patently obvious that parties to contracts are falling into a number of age old pitfalls, many of whom are convinced that they have no other viable choice but to accept top-down back-to-back arrangements and in some cases a scramble of documents that barely resemble a contract at all.

There is still an overwhelming market tendency to order mobilisation and commence work on the back of a very brief Letter of Intent (LOI), particularly if the commissioned works are minor works or low value. This is a particularly high risk practice. (Read more..)

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Dispute boards: the missing link?

   Leonora Riesenburg.

After the Dispute Review Board (DRB) Foundation and Society of Construction Law (Gulf) met to discuss dispute boards and their function in the local market, many praised the ‘checks and balances’ proffered by the mechanism.

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Design-build contracts

By Dennis Brand

Perhaps the best way of describing ‘design-build’ is to describe what it is not.
The traditional ‘design-bid-build’ method of construction is a sequential process in which the owner or developer first contracts with a design professional to prepare a concept or basic design, then a detailed design for construction. This includes specifications to solicit competitive bids for construction, and finally the award of a construction contract to the lowest bidder. (Read more..)

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Delay claims

by Dr Jay Palmos
Last month, Deutsche Bank estimated that as many as 30 000 new units will enter the Dubai residential market this year, decreasing demand for new and existing units. A Union Bank of Switzerland study predicts rental prices could decline by as much as 30% during the course of financial year 2010 due to overcapacity in the sector. These reports paint a bleak picture for current developments. (Read more..)

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Tales of the Unexpected: Where Liability Lurks Unseen

by Melanie Grimmitt

Uncertainty in the Application of UAE Laws

The UAE legal system is a civil code system based on both Islamic and civil code principles. Any contract subject to UAE law must comply with the UAE Constitution, Federal and local Emirate laws, Islamic Shari’a and custom and practice.

There are challenges in deciding how the law of the UAE will be applied in any particular case. This is due to a number of factors. The UAE legal system is still very much in its infancy, the collision of French – via Egypt and other Middle Eastern countries – civil code principles and Islamic Shari’a principles, the lack of judicial precedent – previous decisions may be useful but do not create any binding or persuasive precedent to the court, and the difficulty of predicting which legal principles and/or custom and practice a judge will apply when reaching a decision. (Read more..)

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Tests on Completion under the FIDIC Yellow Book

by Sarah Thomas

I am a contractor working on a wastewater project in Eastern Europe, using the FIDIC Yellow Book –Design & Build. Vol.3 of our contract contains the following clause: (Read more..)

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Letters of Intent: Still Crazy After All These Years?

by Melanie Grimmitt

Reviewing the wealth of commentary on the use of letters of intent in construction contracts, one might speculate that at the time the pyramids were being built some well-intentioned Egyptian lawyer was earnestly hammering out hieroglyphics warning his contemporaries of the potentially dire consequences of commencing construction works without a concluded contract in place. Nevertheless, despite the plentiful guidance cautioning contractors against relying on letters of intent which has been produced by legal professionals in more modern times, a significant proportion of construction projects do, in fact, proceed on the basis of a letter of intent. This practice is particularly common within the UAE and the wider Gulf Region. (Read more..)

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Record what happened, when it happened – the importance of ‘contemporary records’

by Sachin Kerur

A large part of the administration of a construction contract comprises a contractor seeking genuine contractual entitlements for additional time and costs and the determination and award or rejection of those claimed entitlements by the engineer/employer. As a result, contractor’s claims for extensions of time and additional costs are also often the subject of arbitral proceedings and litigation. (Read more..)

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Liquidated Damages in PPP Transactions

by Melanie Grimmitt

One of the most interesting aspects of working in different jurisdictions is seeing how different regions approach the same issues in different ways – both legally and commercially. An example of this in the context of PPP transactions, is the differing approach taken in the UK and the Middle East in respect the inclusion of delay liquidated damages regimes in Project Agreements. (Read more..)

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