Q4) Handle contractual claims

Explain types of contractual claim.

1. Loss and damages claim
2. Extra- Contractual claim
3. Ex-Gratia claim
4. Extension of Time claim
1. Loss and Damages Claim:
- This claim seeks compensation for financial losses or damages incurred as a result of the other party's
breach of contract.
- The claimant must demonstrate the losses were a direct and foreseeable consequence of the breach.
- The purpose is to put the claimant in the position they would have been in had the contract been
properly performed.
- Loss and damage claims involve the contractor seeking compensation for losses or damages
incurred during the construction project, which are not directly covered by the original contract.
- These claims can arise due to a variety of reasons, such as damage to the contractor's equipment or
materials, theft, or third-party property damage caused by the construction activities.
Example:
- A contractor is performing excavation work for the construction of a new commercial building.
During the excavation process, the contractor's backhoe accidentally hits and damages an underground
utility line belonging to the local municipal
- The damage to the utility line results in a temporary shutdown of the construction site, as the
contractor must wait for the utility company to repair the line before they can continue with the
excavation work.
- The contractor submits a loss and damage claim to the client, seeking compensation for the cost of
repairing the utility line, the labor and equipment costs associated with the downtime, and any other
related expenses incurred due to the incident.
- The client reviews the claim and, if deemed valid, agrees to provide the requested compensation to
the contractor, allowing the project to continue without further delays or financial burden on the
contractor.
By understanding the concept of loss and damage claims and their potential application in construction
projects, both contractors and clients can better anticipate and address such issues, ensuring the
smooth progression of the project and the fair allocation of risks and responsibilities.
2. Extra-Contractual Claim:
- This refers to claims made outside the terms of the original contract.
- It may involve work or services provided that were not specified in the contract.
- The claimant argues the extra work was necessary or beneficial and should be compensated.
- This can arise due to changed circumstances, unforeseen events, or the client requesting additional
work.
 - The claimant must show the extra work was reasonable and not covered by the original contract
terms. two examples of extra-contractual claims with applications:
* Force Majeure Claims:
- Explanation: Force majeure claims involve events beyond the control of either party, such as natural
disasters, war, or pandemics, that prevent the project from being completed as planned.
Example:
During the construction of a residential high-rise, a major hurricane strikes the area, causing significant
damage to the partially completed building. The contractor submits a force majeure claim to the client,
requesting an extension of the project timeline and additional compensation to cover the costs of
repairing the damage caused by the hurricane.
*Loss and Expense Claims:
- Explanation: These claims involve additional costs incurred by the contractor due to the client's actions
or omissions, such as changes to the design or delays in approvals.
Example:
A contractor is constructing a new office building, and the client repeatedly delays approving the design
changes submitted by the contractor. This leads to prolonged idle time for the contractor's workforce
and increased overhead costs. The contractor submits a loss and expense claim to the client, seeking
compensation for the additional costs incurred due to the client's delays.
These extra-contractual claims are important to consider in construction projects, as they can
significantly impact the project's timeline, budget, and overall success. By being aware of these types of
claims and their potential applications, contractors and clients can better anticipate and address any
issues that may arise during the construction process, ultimately leading to a more successful project
outcome.

3. Ex-Gratia Claim:
- An ex-gratia claim is a voluntary payment made by one party to the other, without legal obligation.
- It is made as a gesture of goodwill, typically to maintain a positive business relationship.
- Ex-gratia payments are made outside the terms of the contract and do not set a legal precedent.
- They are often used to resolve minor disputes or provide some compensation when the contract
terms do not clearly allocate liability.
- These claims arise when the contractor has experienced significant hardship or unforeseen
circumstances that were not adequately addressed in the original contract.
Example:
- A contractor is engaged in the construction of a large-scale infrastructure project, such as a highway
or a bridge. During the project, the contractor encounters a series of unexpected challenges, including
weather delays, supply chain disruptions, and labor shortages.
- These unforeseen circumstances lead to significant cost overruns and delays, which are not fully
covered by the terms of the original contract. The contractor's financial position is severely strained, and
they are at risk of incurring substantial losses.
 - In this scenario, the contractor may decide to submit ex-gratia claim to the client, requesting a
goodwill payment or concession to help alleviate the financial burden and maintain the viability of the
project.
- The client, recognizing the contractor's hardship and the potential impact on the successful
completion of the project, may choose to consider the ex-gratia claim and provide the requested relief,
even though they are not legally obligated to do so.

By understanding the concept of ex-gratia claims and their potential application in construction projects,
both contractors and clients can explore alternative dispute resolution methods and maintain a
constructive working relationship, even in the face of unforeseen challenges.
4. Extension of Time Claim:
- This claim seeks an extension to the original contract completion date.
- It is made when delays occur that are outside the control of the party requesting the extension.
- Common reasons include changes ordered by the client, unforeseen site conditions, or supply chain
issues.
- The claimant must demonstrate the delay was not their fault and that the additional time requested
is reasonable.
- These claims are made when the contractor is unable to complete the work within the originally
agreed-upon timeline, typically due to factors such as:
 Delays caused by the client or other third parties
 Unforeseen site conditions
 Unexpected weather events
 Changes in the scope of work
- If the contractor can demonstrate that the delay was not their fault and that they have taken
reasonable steps to mitigate the impact, they may be entitled to an extension of the project's
completion date without incurring any penalties.

Example:
- A contractor is engaged in the construction of a new office building, with a contractual completion
date of December 31st. During the project, the contractor encounters several delays that are outside of
their control:
- The client requests a significant design change midway through the project, requiring the
contractor to revise the construction plans and obtain new approvals.
- Unusually heavy rainfall during the winter months causes the contractor to pause certain outdoor
activities, such as roofing and paving, for an extended period.
- A shortage of a critical construction material in the local market leads to a delay in the delivery of
materials to the site.
- Due to these unforeseen events, the contractor is unable to complete the project by the original
deadline of December 31st. The contractor submits an extension of time claim to the client, requesting
an additional two-month extension to the completion date.
 - The client reviews the contractor's claim, along with the supporting documentation, and agrees to
the requested extension, recognizing that the delays were not the fault of the contractor. This allows the
project to be completed without the imposition of any contractual penalties.
By understanding extension of time claims and their application in construction projects, both
contractors and clients can better manage unexpected delays, ensuring the successful completion of the
project and the fair allocation of risks and responsibilities.
Explain effect of contractual claim.
1. Cost overrun
2. Time overrun
1. Cost Overrun:
- A cost overrun claim arises when the actual costs incurred by a party exceed the original budgeted or
contracted amounts.
- The effects of a successful cost overrun claim can include:
- The party making the claim receives additional compensation to cover the excess costs.
- It can lead to a renegotiation of the contract price or payment terms.
- It may trigger a review of the original cost estimates and budgeting processes.
- Repeated cost overruns can damage the commercial relationship between the parties.
- Common causes of cost overruns include:
- Inaccurate initial cost estimates
- Scope changes or additions to the original contract
- Unforeseen site conditions or external factors
- Inefficient project management or procurement processes
2. Time Overrun:
- A time overrun claim is made when a party fails to complete the contracted work within the original
schedule or completion date.
- The effects of a successful time overrun claim can include:
- The party making the claim receives an extension to the completion date.
- It can lead to the waiver of late completion penalties or damages.
- It may trigger a review of the project schedule and planning assumptions.
- Repeated time overruns can negatively impact the project's overall success and the parties'
relationship.
- Common causes of time overruns include:
- Inaccurate initial scheduling or planning
- Changes to the scope of work
- Delays in materials, equipment, or labor supply
- Adverse weather conditions or other external factors
- Poor coordination or communication between project stakeholders