Model Examination On: Construction Law & Contract Course

Addis Ababa University

Addis Ababa Institute of Technology

Department of Civil Engineering

Postgraduate Program in

Construction Technology & Management

CEng 6107 Contracts and Business Law

(“Construction Law & Contract”) Date: Thursday, February 16, 2012
I Semester 2011/2012 (2004 E.C.)

Instructor: Zewdu Tefera Worke

Model Examination (“60%”)

Information & Instruction

1. This Model Examination has three major parts.

I. General Course Knowledge Exam. Questions;

II. Comparative Analysis Questions; and
III. Case Study Exam. Questions;

2. Please, attempt questions as provided in each part of the examination.

3. You are allowed to consult your relevant course material, the relevant
standard conditions of contract, the Civil Code & other directly relevant
reference materials. The Exam. is Open Book!
4. Please, also consider & comply other instructions under each part of the
examination.
5. Do not repeat the question given in the Answer Sheet except the letter or
number of the Question to refer it.
6. Please, write your answers clearly & legibly.
7. The time allowed is 3 hours.

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 1

 Model Examination On: Construction Law & Contract Course

I. General Course Knowledge Exam. Questions (20%)

The objective of this part of the examination is to check your knowledge about the
general concepts that have been discussed or covered during the semester.

Instructions

a) Please, attempt questions no. 1 & 2 compulsorily.

b) Please, choose & attempt only two questions from the rest of the three
questions i.e. question no. 3, 4 & 5 questions.
c) Each of your answer for each exam. question must not exceed two pages;

1) Construction Claims (5%)

a) Please, define the concept of claims in construction & discuss, at least,

five major causes for construction claims; (2.5%)
b) Please, discuss, in terms of similarities & differences, the procedures
for the Contractor’s claims & the Employer’s claims under the MDB
FIDIC (2006) Conditions of contract, if any; Please, read Clause 20.1
& Clause 2.5 respectively, of the said Conditions of Contract; (2.5%)

2) Construction Disputes (5%)

a) Please, define construction dispute, discuss the causes for &

mechanisms/methods for the resolution of construction disputes;
(2.5%)
b) What are the fundamental similarities & differences, if any, between
adjudication & arbitration? Please, read the relevant clauses of PPA
& MDB FIDIC Conditions of Contract; (2.5%)

3) Payment (5%)

a) Please, discuss the importance of payment provisions in the

construction contract from the perspective of the Contractor; (1.50%)
b) Please, identify & discuss, at least, two major differences between
interim/progress payment & final payment; (1.75%)
c) Please, discuss four major legal & contractual effects of the final
payment; (1.75%)

4) Sub-contracting (5%)

a) The Sub-contractor which has been selected & appointed by the

Contractor, indeed with the approval of the Employer, has gone
bankrupt. The Main Contractor has been delayed in the completion of
the project. The Employer has deducted liquidated damages from the

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 2

 Model Examination On: Construction Law & Contract Course

payment due to the Contractor. The Contractor has argued that for
the bankruptcy of the Sub-contractor the Main Contractor is not
responsible. Why the Contractor is or is not responsible for the delay
caused by the selected Sub-contractor? (2.5%)
b) Would your opinion be different if the Sub-contractor were a
nominated one? If yes, why & if not, why not? (2.5%)

5) Project Delivery Systems (5%)

a) Please, discuss the concept of project delivery system by providing

illustration to that effect; (2.5%)
b) Please, thoroughly discuss the advantages & disadvantages of force
account project delivery system vis-à-vis the contract method project
delivery system? (2.5%)

II. Comparative Analysis Exam. Questions(20%

The objective of this part of the examination is to compare & contrast the substance
of the relevant clauses of the following conditions of contract.

Instructions

a) Please, compare & contrast the substantive similarities & differences of the
two clauses of the named conditions of contract;
b) You may present the comparison in table;
c) You have to be exhaustive in identifying the substantive points;

PPA (ICB) 2006 Conditions of Contract

Clause 60. Payment up on Termination

60.1 If the Contract is terminated because of a fundamental breach of Contract by

the Contractor, the Engineer shall issue a certificate for the value of the work done
& Materials ordered less advance payments received up to the date of the issue of
the certificate & less percentage to apply to the value of the work not completed, as
indicated in the Special Conditions of Contract. Additional Liquidated Damages
shall not apply. If the total amount due to the Employer exceeds any payment due to
the Contractor, the difference shall be a debt payable to the Employer.
60.2 …

MDB FIDIC (2006) Conditions of Contract

Sub-Clause 15.4 Payment after Termination

After a notice of termination under Sub-clause 15.2 (Termination by the Employer)

has taken effect, the Employer may:

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 3

 Model Examination On: Construction Law & Contract Course

a) proceed in accordance with Sub-Clause 2.5 (Employer’s Claims);

b) withhold further payments to the Contractor until the costs of execution,
completion and remedying of any defects , damages for delay in completion
(if any), and all other costs incurred by the Employer, have been established;
and/or
c) recover from the Contractor any losses and damages incurred by the
Employer and any extra costs of completing the Works, after allowing for
any sum due to the Contractor under Sub-Clause 15.3 (Valuation at Date of
Completion). After recovering any such losses, damages and extra costs, the
Employer shall pay any balance to the Contractor.

III. Case Study Exam. Questions (20%)

Please, carefully read the following facts of the Project Case, before you proceed to
attempt the examination question under this part.

Objective

The objective of this part of the examination being to check your understanding
whether or not you are be able to apply the theoretical knowledge acquired from
the course in terms of the applicable conditions of contract & the applicable law, if
any, to the actual construction case.

Instruction

a) Please, choose & attempt only one case study i.e. either the road or the water
project; ;
b) Each of your answer must not exceed a full page;
c) You may apply either the PPA or the MDB Conditions of Contract, as
instructed;

1) The Road Project

A construction contract for the construction of 400 km road & 8 bridges has been
signed between a certain contractor & employer. The contract price being ETB 2.5
Billion. The completion time was 2000 days. However, the project has been
completed 250 days after the original completion date. The following disputes have
been occurred i.e. the one in relation to the bridges & the other in relation to
contract time. There are at least 13 legally recognized holidays in Ethiopia.

The Bridges

 two of the bridges collapsed due to yet unknown reasons;

 the bridges have to be reconstructed;

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 4

 Model Examination On: Construction Law & Contract Course

 a dispute has arisen between the contractor & the employer as to taking
responsibility for the cost of reconstruction of the bridges including the
required additional time;
 the employer has argued that the collapse of the bridges being due to poor
workmanship/material;
 the employer thus requested the reconstruction of the two collapsed bridges
at full cost of the contractor(i.e. ETB 50 Million);
 the employer has also requested the payment of liquidated damages up to
10% of the contract price;
 the contractor has also argued that the collapse of the two bridges is not
neither due to poor workmanship nor material but due to poor design;
 the contractor thus rejected the claims of the employer i.e. both covering the
full cost of reconstruction & the liability for the payment of the liquidated
damages;

Contract Time

 the contractor further argued that if the construction company were to be

liable for liquidated damages, the contractor’s liability for payment of
liquidated damages shall then be assessed or calculated based on working
days but not calendar days;
 assume that the construction contract signed stipulates no guidance as to
whether the contract time being calendar or working days;

You are a well known Construction Management Specialist. Both the employer &
the contractor pay a visit to your office to solicit your professional advice to resolve
their disputes.

Examination Question

a) What are the disputes, if any, between the employer & the
contractor? Explain. (5%)
b) What type of evidence you need to establish whether or not the
collapse of the two bridges were caused either by design or otherwise?
Why? Discuss. (5%)
c) What would be your professional opinion whether or not the contract
time being calendar days or working days? Does it have any legal or
contractual effect if the contract time were either calendar days or
working days? Why? Discuss & support your position by doing some
calculations. (5%)
d) Assuming that the collapse of the two bridges were caused due to poor
design, is there any liability of the engineer towards the employer(i.e.
the Client) under their agreement? If yes, why? If not, why not?
Assume that their agreement was based on the PPA Consultancy
Services Agreement ICB 2006. (2.5%)

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 5

 Model Examination On: Construction Law & Contract Course

e) Assuming that the collapse of the two bridges were caused due to poor
workmanship, is there any liability of the engineer towards the
employer (i.e. the Client) under their agreement due to lack of
supervision? If yes, why? If not, why not? Assume that their
agreement was based on the PPA Consultancy Services Agreement
ICB 2006. (2.5%)

2) The Water Supply Project

A construction contract has been signed between a certain employer & contractor
for the construction of dam & water treatment plant. The contract price being ETB
1 Billion out of which ETB 600 Million for the construction of the dam & ETB 400
Million for the construction of the said treatment plant. The plant is expected to
treat 300, 000cm water per day. The completion time shall be 400 days. If delay
occurs, the parties have agreed to calculate liquidated damages of ETB 200, 000.
00/d. The maximum amount of liquidated damages shall be 10% of the contract
price. The dam & the plant have their own sectional completion dates. The dam has
been completed in due time.

The Plant

 the plant has been completed 300 days after the agreed sectional completion
date for causes attributable to the contractor;
 the plant capacity has, up on completion, been reduced to 200,000 cm/d;
 the employer requested the payment of liquidated damages up to 10% of the
contract price;
 the employer has also requested the reduction of the contract price due to
reduction of the treatment capacity of the plant;
 the employer has also further requested some amount of money i.e. ETB 500
Million for the net loss of water sales (i.e. up to the design life of the dam &
the plant i.e. 50 years) due to reduction of the treatment capacity of the plant
based on the applicable law;
 the contractor has argued that the assessment of the liquidated damages shall
confine to the contract price of the sectional work i.e. the plant but not to the
whole contract price, which includes the contract price of the dam as well;
 the contractor has also argued that the method for the calculation of the
reduction of the contract price in case of reduction of the treatment capacity
of the plant has never been agreed;
 the contractor has also further argued that loss of water sales has never been
agreed between the contractor & the employer; therefore the construction
company shall not be held liable for the situations not provided in the
contract;
You are a well-known Construction Management & Claims Specialist in the
country. Both the employer & the contractor came to your office to solicit

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 6

 Model Examination On: Construction Law & Contract Course

professional advice to resolve their disputes. You may apply the MDB Conditions of
Contract under the circumstances.

Examination Questions

a) What are the disputes, if any, between the employer & the contractor?
Explain. (5%)
b) What are the essential points that you should consider regarding the claims
of the employer pertaining to liquidated damages? (2.5%)
c) What is your professional opinion on & justifications for the validity of the
contractor’s argument in relation to the maximum extent of the liquidated
damages? (2.5%)
d) What are the essential points that you should consider regarding the claims
pertaining to reduction of the contract price? Please, refer to Clause 9.4
(Failure to Pass Tests on Completion) of the MDB Conditions of Contract.
(2.5%)
e) What would be the extent of the reduction of the contract price in your
professional approach & method? Why? Please, refer to Clause 9.4 (Failure
to Pass Tests on Completion) of the MDB Conditions of Contract.
f) Is the contractor correct in denying any liability pertaining to loss of water
sales? If yes, why? If not, why not? (5%)

Developed by: Zewdu Tefera Worke, Engineering Contracts Lawyer Page 7