As my introductory post on IChemE sets out, there are some significant limits under the Red Book on the rights of the purchaser to recover losses. What can you do about it? This post considers the purchaser’s remedies.
As the purchaser – either yourself or through the project manager – you have these remedies:
- Time: You can ask the contractor to accelerate works (remedy any potential delay) where the rate of progress could prejudice meeting the programme (13.5); and deduct agreed damages for delays to completion (15.1) or terminate the contract for failing to proceed regularly and diligently (44.2).
- Quality/Defects: If the works do not meet the contract, you can ask the contractor to rectify defects before acceptance (22.6) and for 12 months afterwards (37.3); the defect period starts afresh for any repairs or replacements (37.5) or is suspended if the plant cannot be used due to a defect (37.9). If the contractor does not rectify defects within a reasonable time, you can do so and recover the cost from the contractor (37.6).
- Quality/Testing: You can inspect and tests works before installation (22.1), as part of completion (32.3) and during taking-over (33.3), and the carry out the performance tests (35.2). If the works do not meet the tests in the contract, you can ask for tests to be repeated (22.6, 32.7, 33.6 and 35.11); you can deduct agreed damages for poor performance (35.12), extend the performance test period (35.13), or deduct compensation (35.14).
- Cost: You must issue certificates of payment to state the amount due and any deductions (41.4).
- Termination: You can end the contractor’s future obligations under the contract for convenience (43.1), insolvency (44.1), abandonment or unwarranted suspension, failure to proceed with due diligence or any material breach of contract (44.2).
Constraints on Remedies
As with all contracts, any remedy is subject to following the specific contract procedure. There are two key constraints under the IChemE Red Book which deserve specific mention:
- The exclusive remedies clause (45.2) which means that you can only rely on the remedies set out in the Red Book. You cannot bring any other claims for negligence, breach of statutory duties and even for breach of contract.
- Conclusivity (38.3) – the final certificate is conclusive that the contractor has completed the plant and made good all defects as required by the contract.
What Should You Do?
If you are a purchaser under IChemE Red Book, familiarise yourself with the remedies under the contract. Remedies are part of your overall risk management regime. It is essential that you understand what you can and cannot do if the project does not run according to your plan.