Overview
Quantification of claims related to delay
and disruption in Danish construction law
In case of delay or disruption in construction caused by the employer, various claims may arise which the contractor can advance against the employer. These claims are:
- Delay claims: If the works are delayed, the contractor may require any costs paid during the delay period covered by the employer through a delay claim.
- Acceleration claims: If the contractor has to work more for a period due to delay or disruption, e.g. by using more labour to catch up on the delay or to avoid threatening delay, the contractor may require those costs covered by the employer through an acceleration claim.
- Disruption claims: If the completion of the works becomes disrupted and thus delayed due to e.g. ambiguities in the project, lack of access to the works or unforeseen conditions not caused by the contractor’s circumstances, the contractor may require the additional costs covered through a disruption claim.
- Extension of time limits: If the construction period is extended due to delay or disruption, the contractor may require an extension of the time limit so that the employer cannot require a daily penalty for the period after the originally agreed handover.
2.1. The employer’s liability in case of delay, cf. ABT 93 § 27, subs.
-
”The contractor shall be entitled to compensation for losses suffered because of delays caused by
(1) circumstances relating to the employer, cf. § 24, subs. 1 (2), and where he is guilty of any errors or neglect, or (2) liability-entailing delays by other contractors, cf. § 25, subs. 1, or liability-entailing delays on the part of other contractual parties.”
- The compensation which the employer must pay due to delay claims according to § 27 subs. of ABT 93 must be calculated according to the general rules of Danish law and thus includes any financial loss caused by the delay.
- In principle, the contractor is entitled to compensation for his full loss, but the basis for the calculation, particularly of the contractor’s lost profits during the delay period and the requirements for proof of the loss, is not clear in arbitration practice.
Lost profits
- The compensation also includes loss profits which could have been earned by the contractor through the performance of other tasks.
- According to Erik Hørlyck, lost profits are calculated according to the following formula according to which the assessment is made considering the profits with which the contractor has calculated and the length of the delay:

- According to Torsten Iversen, certain accruals must be made when calculating the calculated contribution margin. Therefore, the crucial factor cannot be the contractor’s anticipated contribution margin for the specific contract but rather the contractor’s “average contribution margin”.
- An example is TBB 2014.773 where a claim for compensation for the employer’s actionable delay is determined “based on an estimate”, among other factors based on information about the contractor’s “average contribution margin” in “2005 and 2006”.
2.2 The employer’s liability in case of delay, cf. ABT 93 § 27, subs. 2
“The contractor shall be entitled to indemnity if the cause of the delay falls under:
(1) § 24, subs. 1, 1 (1), 1 (5) and 1 (6), or
(2) § 24, subs. 1 (2), however without falling under subs. 1, or subs. 3, of the present section.
The indemnity shall amount to the loss sustained by the contractor, however to the exclusion of any loss of profit sustained by him by not being able to perform other works for the duration of the delay or similar consequential losses.”
- The contractor’s claim for indemnity according to § 27 subs. 2 of ABT 93 concerns the direct site-related expenses and share of fixed costs.
- Site-related expenses
- The contractor may include the site-related expenses which he has paid during the period of delay. Wage costs may be indemnified, both own hourly-paid employees and rented working capacity.
- Share of fixed costs
- The extent to which the contractor’s fixed costs paid during the period of delay can be required paid as a share of the claim for indemnity is uncertain.
- Fixed costs concern costs for the head office and other typically associated costs, e.g. building insurance, IT systems, expenses for accounting assistance. The uncertainty arises because costs are normally paid as a precondition of the contractor’s other business activities as well. In principle, a share of these expenses will, however, be paid as the basis or a precondition of the contractor’s performance of the specific agreement. Depending on e.g. the size of the specific task compared to the contractor’s total capacity, the contractor’s corporate structure and the systems used for financial management, it will, however, be possible to identify the share of the head office expenses and relate it the specific task in the given circumstances. This will for example be the case when the contractor’s business is based on the performance of few contracts.
- In practice, indemnity is often not given for fixed costs – in those cases where the opposite is the case, only an indemnity based on an estimate (rather low) is given.
2.3 The contractor’s claim for payment of the acceleration costs
- ABT 93 contains no rules on acceleration. Acceleration claims are a result of arbitration practice but are codified in the new ABT 18.
- Acceleration requires an agreement. The contractor is under no obligation to accelerate if the employer is not willing to conclude an agreement.
- Acceleration agreements can be concluded in the same ways as other general agreements.
- In writing or orally
- Expressly or implicitly
- Through quasi disposition
- Due to inactivity (no complaint)
- No specific requirements as to form apply, but the existence of a written agreement makes a big difference.
- In the given circumstances, the contractor may also receive remuneration for acceleration with no agreement:
- If the employer caused an actionable delay
- If the employer refuses the contractor’s claim for extension of time without justification and the contractor accelerates to avoid fines due to the delay
2.4 The contractor’s right to extension of time limits, cf. ABT 93 § 24
”The contractor shall be entitled to extensions of time limits in case of delay of the work caused by
(1) alterations in the nature and extent of the work ordered by the employer, cf. 14,
(2) circumstances relating to the employer,
(3) circumstances for which the contractor cannot be blamed and which are outside his control, e.g. war, unusual natural events, fire, strikes, lock-out or vandalism,
(4) the occurrence of precipitation, low temperature, strong winds or other weather conditions which prevent or delay the work because they are essentially greater than what is usual for the season and region concerned, or
(5) public orders or bans which were not issued because of the contractor’s own situation, or
(6) the fact that the permits from public authorities required for the performance of the building work have not been obtained within 30 workdays of adequate project documentation having been filed with the public authorities, unless the parties have agreed on a different time limit, cf. § 2, subs. 3 and § 3, subs. 5.
Subs. 2. However, the contractor must endeavour to avoid or limit the extent of delays by means of such measures as can reasonably be required.
Subs. 3. Where the contractor feels entitled to an extension of a time limit, he must inform the employer thereof in writing without delay. The contractor must upon request substantiate that the delay was caused by the circumstances relied upon by him.”
- When accepting ABT 93, the contractor may require an extension of time in the cases mentioned above in § 24, subs. 1:
- In case of alterations in the nature and extent of the work
- In case of the employer’s circumstances or a different contractor’s delay
- In case of force majeure
- In case of weather hindrances
- In case of public orders or bans not caused by the contractor’s own circumstances
- The contractor may also require an extension of time due to circumstances that obstruct work or make work difficult, see the second sentence of § 15, subs. 3 of ABT 93.
- ABT 93 § 15, subs. 3: ”The contractor shall immediately inform the employer of the occurrence of any events which obstruct work or render work difficult or due to which the employer is likely to suffer inconvenience or loss, including cases in which the employer will incur liability towards third parties. If there is no time to receive instructions from the employer, the contractor must take the best possible measures for the purpose of avoiding losses being suffered by the employer in return of being granted the necessary extension of time limits and against payment.”
- The contractor will have to prove that he is entitled to an extension of the time limit.
- The following is relevant for the assessment of evidence:
- Whether the contractor made reservations (complained) in consequence of a circumstance allegedly resulting in an extension of the time limit
- When the complaint took place compared to how much time passes between the circumstances resulting in the extension of the time limit and the time at which the complaint against the employer is made
3. Complaint
- According to practice, there are strict requirements for the contractor’s complaint in case of compensation or indemnity due to delay.
- It is assumed that a complaint rule applies equivalent to section 27 of the Danish Sale of Goods Act (købeloven) according to which the creditor must file a “neutral complaint” without undue delay in order to preserve his or her right to rely on the delay at a later time.
- In TBB 2016.443, the contractor first made his disruption claim following the completion of work. At no time during the completion had the contractor notified the employer that expenses accrued which would be claimed covered. The employer therefore did not have to pay the contractor’s claims.
- However, if the contractor “knew or should have known” that a delay claim would be advanced later on, the delay claim will not be precluded due to the lack of a complaint.
- In TBB 2008.418, the arbitration tribunal took into account that based on the correspondence that took place regularly between the parties, the employer’s consultant could not have been in doubt in the period until the handover that the principal contractor wanted an extension of the time limit and financial compensation due to the project alterations. Thus, the arbitration tribunal seemed to support the principal contractor’s statement that the arbitration tribunal does not take into account any formalities regarding notification but that rather the facts of the case are considered.
4. Burden of proof
- Proving the expenses paid and included in the claim for damages is the contractor’s obligation.
- However, arbitration practice expresses some understanding that it may sometimes be difficult to meet the burden of proof for the causal connection between the delay and the specifically paid expense.
- Based on arbitration practice, it may be generally inferred that specified statements are required stating when and to which extent there has been an additional consumption of time.
To support the connection between the delay and the specifically paid expense, written material, including minutes from site meetings, correspondence, time schedules, variation orders and statements given during the case is given a probative value.
5. Examples of time requirements in Danish case law
5.1 TBB 2017.915: Claim for extended site operations (delay claims) – Approx. 18% of the claim sustained
The claim
- The turnkey contractor required payment from the employer for extended site operations of DKK 6,396,836.00.
- According to the bid schedule of 27 September 2011 which was an appendix to TE’s bid of that same day, the price for the site was a total of DKK 3,270,000 and the unit price for a month was DKK 500,000. The tender price for the site partly covered operations of the site, partly establishment and stripping, including further defined parts of fixed building site materials while the unit price only covered operations. According to the bid schedule, the unit price for a month was to cover “operations of the site in case of an extended construction period all inclusive”.
Statement of the claim and its proof
- The claim is calculated on the basis of a variation order based on the unit prices for the site and winter measures of DKK 500,000,00 and DKK 50.000,00 per month, respectively, plus a number of actual, further defined expenses for:
- In general: Tower crane, forklifts, iron plates, project manager and project director etc.
- Demolition and roofing: – – – additional expenditure, UE ApS additional expenditure, DB 12 %, foreman and construction manager etc.
- Concrete works: Crew, crew vehicles, rented concrete material, foreman and construction manager etc.
- All expenses mentioned are added up to DKK 1,801,819.00 per month or DKK 85,801 per day (21 days) calculated in relation to the period from 26 October 2012 to 14 February 2013, 74 days. DKK 47,569 has been added for personal gear during the winter period.
Reason and finding of the arbitration tribunal
- On the wording, the agreement on a unit price for extended site operations of DKK 500,000 per month all-inclusive must be understood to mean that no claims can be made for additional, extended site operations. The tender price for included site expenses in the contemplated construction period does not provide a basis for any other understanding because that tender price – as opposed to the unit price for an extended period – not only includes operations but also erection and stripping. The current monthly payments included therefore must be significantly lower than DKK 500,000. Based on the legitimate, extended construction period of 48 days, the arbitration tribunal then determines the additional payment for an extended construction period as follows:
Site operations:
Period |
Days |
Price |
In total |
October 2012 |
3/23 working days |
500,000 |
65,217 |
November 2012 |
Entire month |
500,000 |
500,000 |
December 2012 |
Entire month |
500,000 |
500,000 |
January 2013 |
3/23 working days |
500,000 |
65,217 |
In total |
|
|
1,130,434 |
Winter measures:
Period |
Days |
Price |
In total |
October 2012 |
Nothing |
50,000 |
0 |
November 2012 |
Entire month |
50,000 |
50,000 |
December 2012 |
Entire month |
50,000 |
50,000 |
January 2012 |
3/23 working days |
50,000 |
6,522 |
In total |
|
|
106,522 |
- Thus in total: DKK 1,130,434.00 + DKK 106,522.00 = DKK 1,236,956.00
5.2 TBB 2018.649: Delay claims – Approx. 38% of the claim sustained
The claim
- Due to the delay of the construction, the principal contractor advanced the following:
- Claim for the right to extend the time limit by 65 working days or 13 weeks
- Claim for payment of DKK 2,184,875.00 exclusive of VAT for a number of circumstances linked to the delay of the construction, including construction process management, welfare facilities and scaffolding rent
Calculation of claims and their proofs plus the reason and finding of the arbitration tribunal for each claim
- According to the principal contractor, 5 weeks out of the 13 weeks could be attributed to the parties’ dispute regarding the design of longitudinal steel beams which the employer’s consultants refused to design although according to the contract, that was the responsibility of the employer, thus the employer’s consultants.
- Proofs of the claim:
- Minutes from site meetings
- Mail containing the principal contractor’s emphasis of the importance of the design
- Mail containing the principal contractor’s notification of an extension of the time limit
- Mail from the consultants to the principal contractor stating that the consultants had started making calculations for the steel beams
- Mail correspondence that showed that the consultants did not agree with the principal contractor that they, not the principal contractor, were to manage the design of the steel beams
- Mail containing the consultants’ final forwarding of sketches with instructions showing the location of the beam anchoring
- Arbitration tribunal: The arbitration tribunal found that the employer’s consultant caused the delay of the first 5 weeks due to the lack of calculations for part of the design which made it work at a critical path. However, the arbitration tribunal found that 1 out of the 5 weeks also had delaying circumstances caused by the principal contractor’s circumstances but that this could not change the fact that according to § 24, subsection 1 of AB 92, the principal contractor is entitled to a 5-week extension of the time limit in relation to the start-up phase.
- According to the principal contractor, 3 weeks out of the 13 weeks could be attributed to a lack of clarification regarding the selection of materials for kitchens and floors.
- Proofs of the claim:
- Statement during the case from the sub-contractor regarding the original intention to complete kitchens and floors at the supplier in Latvia before the room modules were transported to Denmark
- Arbitration tribunal: Based on an estimate, the arbitration tribunal determined the delay caused by the late delivery and installation of room boxes and by the lack of clear instructions from the employer’s consultant to be 2 weeks. The delayed work was at a critical path. In respect of one of the two weeks and following an assessment based on an estimate, the arbitration tribunal found that the delay was also due to circumstances which could be attributed to the principal contractor’s planning and organisation of the work and for which the principal contractor was therefore responsible. However, the arbitration tribunal found that the delaying circumstances that could be attributed to the principal contractor do not change the fact that according to § 24 subs. 1 of AB 92, the principal contractor was entitled to a 2-week extension of time for the selection of materials for kitchens and floors.
- According to the principal contractor, 5 weeks out of the 13 weeks could be attributed to a number of conditions. According to the principal contractor, some of them overlapped in terms of time, but according to the principal contractor, they had caused a cumulative delay and a derived claim for a 5-week extension of time.
- Lack of electricity in the module boxes:
- Proofs of the claim:
- Construction project description about the principal contractor’s responsibility for construction electricity
- Minutes from two site meetings in which the principal contractor asks for clarification regarding the end user addresses so that electricity meters can be installed and electricity be routed to each module box (apartments)
- Minutes from a site meeting indicating that the municipality had stated the addresses and that the electricity supplier was able to initiate the necessary activities
- Minutes from a site meeting indicating that the electricity supplier would make new cable boxes as an urgent job and that the electricity contractor would initiate establishment of the service lines
- Arbitration tribunal: On that background, the arbitration tribunal found that at least part of the delay in the work connected with the lack of electricity in the module boxes installed was caused by the consultants’/employer’s circumstances. As the work was at a critical path, the delay entitled the principal contractor to an extension of the time limit.
- Steel project in connection with gable rafters
- Proofs of the claim:
- No evidence produced
- Arbitration tribunal: The principal contractor stated that the lack of clarification regarding the steel project in connection with gable rafters had led to a delay in the subsequent works and that the result would be an extension of the time limit. The arbitration tribunal did not find that an extension of the time limit was justified as it had not been established that it was a matter of delay in work at a critical path.
- Fire parapet substitution
- Proofs of the claim:
- Expert opinion
- Arbitration tribunal: In agreement with an expert opinion of 4 October 2016 (reply to question 1), the arbitration tribunal considered that a fire parapet substitution, staircase and windbreak had largely been constructed as designed and that only minor adjustments had been made. Whether there was a delay in connection with the design or not, the arbitration tribunal found that it had not been established that it was a matter of a delay in work at a critical path.
- Drain systems, residential ventilation – installations in crawl space and loft
- Proofs of the claim:
- Time schedules
- Minutes from a site meeting in which the principal contractor stated that a “collision” had been found between the smoke and heat ventilation and discharge pipes below the module boxes and that an assessment meeting had been arranged with a person from the sub-consultant.
- Minutes from three site meetings stating that the issues with finding room for discharge pipes crossing longitudinal steel beams had not been solved.
- Minutes from a site meeting stating that a solution to the problem had not been found and that a trial mounting was in progress.
- Arbitration tribunal: The late solution to the drain system issues which – in the arbitration tribunal’s opinion – was the employer’s/his consultants’ responsibility involved among other things that it was necessary to do the installations in the room between the original roof deck and the bottom of the new room boxes (“the crawl space”) which had caused a delay in the construction and had rendered the construction difficult. The work was at a critical path. In the arbitration tribunal’s opinion, the actual change of making the drain system a UV system, meaning a system with a closed flow, did not in itself cause a delay. With regards to the residential ventilation, the principal contractor’s work according to the time schedule of 18 June 2012 also had to be completed from week 37. As previously mentioned, delay had already occurred at that time due to the late design of the longitudinal steel beams. The parties’ disagreement regarding residential ventilation includes the responsibility and significance of any missing project clarification regarding ventilation at roof level (loft), including changes in the location of roof vents/ventilator cowls. Based on the considerations stated by the arbitration tribunal, designing residential ventilation is the employer’s/his consultants’ responsibility. The principal contractor did not receive the final plan regarding i.a. duct routing for residential ventilation until 3 May 2013. Although the arbitration tribunal finds that it is a matter of design delay for which the employer is responsible, it is not a matter of work at a critical path. Therefore, the principal contractor is not entitled to an extension of time in those regards. Regarding the delay caused by the fact that part of the ventilation work had to be completed in the crawl space, the arbitration tribunal refers to the above notes regarding the drain system work in the crawl space which also applies to this delay.
- Lift
- Proofs of the claim:
- No evidence produced
- Arbitration tribunal: The principal contractor stated that the lack of project clarification regarding the lift caused a delay in the subsequent works and that this led to an extension of time. The arbitration tribunal did not find that an extension of the time limit was justified as it had not been established that it was a matter of delay in work at a critical path.
- The arbitration tribunal’s overall reason and finding as regards the principal contractor’s extension of time claim for “other circumstances”:
- The arbitration tribunal found that the principal contractor was entitled to an extension of time for delays in connection with the lack of electricity and regarding drain systems and residential ventilation (crawl space and loft). As the delay in connection with the relevant works overlapped to a certain extent and as there also was some degree of uncertainty related to the exact duration of the delay, the arbitration tribunal determined the principal contractor’s claim for an extension of time to be 4 weeks based on an estimate.
- Thus, the arbitration tribunal determined the principal contractor’s total claim for an extension of time to be 11 weeks.
- The principal contractor’s financial claim due to the 11-week extension of time
- The principal contractor claimed DKK 2,184,875.00 exclusive of VAT for extended construction time.
- Proofs of the claim:
- No further documentation was presented for all of the expenses at issue.
- Arbitration tribunal: The arbitration tribunal found that the delay was caused by the employer’s circumstances considering the 11 weeks, and the principal contractor therefore was entitled to compensation, cf. § 27 subs. 1 paragraph 1 of AB 92, cf. § 24 subs. 1 paragraph 2. Two weeks of the total extension of time also involved delaying conditions caused by the principal contractor’s circumstances. The arbitration tribunal found that the principal contractor was only entitled to compensation regarding delay which was not (also) caused by the principal contractor’s own circumstances. Thus, the principal contractor was only entitled to payment due to a 9-week extension of time. As no further documentation was presented for all of the expenses at issue in the principal contractor’s claim of DKK 2,184,875.00 exclusive of VAT, the arbitration tribunal determined the principal contractor’s claim regarding an extended construction time to be a total of DKK 900,000.00 exclusive of VAT based on an estimate.
5. 3 TBB 2009.379: Claim for cover of additional costs in case of delay and disruption – Approx. 88% of the claim sustained
The claim
- The sub-contractor claimed that the principal contractor be ordered to pay DKK 1,227,515.00 exclusive of VAT due to start-up problems/dead time, disturbances, extra work and the rebuilding of the scaffolding due to delay and disruption.
Calculation of claims and their proofs plus the reason and finding of the arbitration tribunal for each claim
- Start-up problems/dead time – DKK 26,070.00
- Proofs of the claim:
- Complaint by mail regarding start-up problems/dead time comprising of:
- Claim for a 20-day extension of time
- Claim for remuneration for a waiting period for 3 men of 22 hours of DKK 295.00 or DKK 26,070.00
- Statements during the case
- Arbitration tribunal: The principal contractor was responsible for the delay. The arbitration tribunal allowed the sub-contractor’s calculated claim.
- Disturbances – DKK 61,225.00
- The calculation of the claim was calculated in the final settlement:
- 10 men who had to move 6 times = 120 lost hours of DKK 395.00 = DKK 47,400.00
- 1 day of idleness for ½ crew, a total of 35 hours of DKK 395.00 = DKK 13,825.00
- In total: DKK 61,225.00
- Proofs of the claim:
- Complaint by mail regarding limited options to perform work with the presentation of an email receipt for the submission of the email. The mail contained a description of the fact that a crane had been in the way, excavation had been prevented and brickwork had been stopped 3 times due to installation of elements. The sub-contractor believes that he only had access to do approx. 5 % of brickwork due to these circumstances.
- Claim for extension of time
- Claim for payment of costs in consequence – calculation would be submitted later.
- Statements during the case
- Arbitration tribunal: Considered that dead time had occurred for the sub-contractor’s crew. The sub-contractor’s calculation was accepted and it was found to be of no importance that the sub-contractor had not calculated his claim until the submission of the final settlement.
- Extra work regarding drilling in wall ties – DKK 61,471.00
- Proofs of the claim:
- The contract sum included the work of drilling in the first 1,000 wall ties.
- In the final settlement of 27 December 2005, the sub-contractor calculated the total number of wall ties to be 3,627 units and invoiced 2,627 units of DKK 23.40 or a total of DKK 61,471.
- Statements during the case
- Arbitration tribunal: According to the information about the scope of the contract and the nature of the concrete elements compared to the statements given, the arbitration tribunal found that it had been established that a number of extra wall ties had been drilled in than invoiced by the sub-contractor. Thus, the arbitration tribunal allowed the sub-contractor’s claim.
- Extra work regarding rebuilding of the scaffolding – DKK 30,810.00
- The sub-contractor calculated the claim to be 72 hours of DKK 395.00 or DKK 30,810.00. The claim concerns building and subsequently removing scaffolding with lattice decks for the window installer which was late.
- Proofs of the claim:
- Interpretation of contract
- Statements during the case
- Arbitration tribunal: According to the statement given by A and other statements in the case, the arbitration tribunal found that it had been established that the window installation was late and that the scaffolding therefore had to be rebuilt. According to the provisions of the contraction contract, the sub-contractor was not obliged to rebuild the scaffolding free of charge for the late window installation. Accordingly, the arbitration tribunal allowed the sub-contractor’s claim.
- Extra work regarding walling up holes from the platform DKK 6,320.00
- The sub-contractor calculated his claim to be 16 hours of DKK 395.00, in total DKK 6,320.00 to wall up 16 putlog holes in the west façade from the carpenter’s working platform.
- Proofs of the claim:
- Interpretation of contract
- Statements during the case
- Photos
- Arbitration tribunal: Based on the photos presented and the statement given by A, the arbitration tribunal considered that the work invoiced concerned the walling up of putlog holes. The holes had been made in the face wall for a different contractor’s working platforms. That word was not included in the provision of the contract documents regarding follow-up repairs, and the arbitration tribunal therefore allowed the sub-contractor’s claim.
- Extra works concerning the straightening of pre-shaped wall ties – DKK 528,000.00
- Proofs of the claim:
- Interpretation of contract
- Minutes from a project review meeting regarding brick facing
- Amendment sheet to the tender documents
- Minutes from a sub-contractor site meeting
- Statements during the case
- Arbitration tribunal: At the project review meeting on 28 February 2005, it was mentioned that there were specific requirements for the straightening of the embedded wall ties, but the minutes or any other written material do not state that the requirements were specified at the meeting. The statements given in those regards are conflicting, and for practical purposes of proof, it can only be considered that the requirements were specified in the amendment sheet of 23 May 2005. Consequently, the special requirements for the straightening using special special-purpose tools involved a project change which required extra work performance and for which the sub-contractor could therefore require additional payment. The sub-contractor’s calculation of the time-consuming extent of the work, thus the costs of straightening each binder, can be substantially accepted, however, the decision is based on an estimate. For the estimate, the arbitration tribunal considered that according to the statements given, it could be considered that the straightening work using special-purpose tools was not completed until the face wall work had been in progress for some time. Accordingly, the arbitration tribunal allowed the sub-contractor’s claim with respect to DKK 400,000.
- Extra works regarding increased amount of brickwork – DKK 18,670.00
- The parties settled the claim in oral negotiations so that the principal contractor pays DKK 7,000.00 plus VAT.
The entire findings of the arbitration tribunal
- Thus, the arbitration tribunal allowed the sub-contractor’s claim of DKK 1,087,845.00 exclusive of VAT and including interest as claimed out of the DKK 1,227,515.00 exclusive of VAT due to start-up problems/dead time, disturbances, extra works and rebuilding of scaffolding due to delay and disruption.
Methodology regarding the best way to structure a claim
6. Overview of a well-structured claim
This methodology is based on case law:
- Short introduction of the claim (max. 5 lines)
- What burden of proof needs to be met to get the claim awarded?
- Facts and description of the claim including timeline
- Qualification and legal arguments
- Capped or not capped
- Claim amount
- Documentation
- Assessment/estimation
- Conclusion
6.1 Short introduction of the claim
A very short introduction of the claim is important so the judges have an idea of what kind of claim it is. This has to be very simple so that the judges knows the overall “picture” though this headliner. The claim amount should be mentioned here too.
6.2 What burden of proof needs to be met to get the claim awarded?
This is the “what”-section of the description of the claim. A short list of the criteria which has to be proven to be successful and who has the burden of proof.
For variation orders the burden of proof is on the contractor.
6.3 Facts and description of the claim including timeline
Here it is very important to keep it clear and simple.
In this section you describe the documentation which will support the claim. The more factual documentation which can be submitted to the Arbitration Board, the better.
Facts have to be drawn from existing documents like time line/baseline in the original contract, changes in the contract during execution of the project, minutes of meeting from various meetings with the Employer, e-mails and witness statements etc..
If a claim concerns a variation order documentation of the facts could for instance be as follows:
- Description in the signed contract (most likely the appendices to the contract)
- Description of the in-fact delivered – could be drawn from:
- E-mails
- MOM from meetings
- Photos
- Witness statements
- Drawings (as built documentation)
- Hand over report
6.4 Claim amount
In case law the amount claimed by the contractor is often reduced by the Arbitration Court based on their own estimation, which is always in favor of the Employer (due to the fact that the burden of proof is on the contractor). Often, they are reduced by 1/3 or 2/3.
Sometimes it will make sense to state your full claim, but in recognition of that fact that case law often base it on an estimation, you reduce your own claim with your own credible estimation. This will heighten the credibility of the claim.
References to case law can be relevant here too.
6.5 Conclusion
In the conclusion you wrap everything together and state the exact claim and your claim of interests.
Methodology regarding extension of time and additional delay costs
7. Overall priciples
Some principles have to be kept in mind when claims shall be described and submitted to the Danish Arbitration Board, including a claim to EoT entitlement. Besides the overall strategy all claims must be documented and described with clarity and simplicity. As contractors we must in a clear and simple way explain to the judges that we are entitled to extension of time and payment for costs related to delays. Furthermore, we have to be fair in pricing and estimation of the claims so we appear credible and not greedy.
In order to increase the credibility of the clients claims, when submitting a claim to the Arbitration Board, the claim should be presented in chronological order from the origin point of the claim i.e., what was the baseline/original agreement/plan and how was it impacted/changed/delayed, ending with the incurred cost.
As an example, an acceleration claim should be presented as:
John was hired to complete the task on the 25th of October, beginning the work on the 15th of October.
John did not gain access to the building before the 21st of October, due to a delay caused by another contractor, for whom the Employer was responsible for.
In order to avoid delays, John hired Jane to assist him with performing the task.
With the assistance of Jane, the task was completed on time.
Due to hiring Jane, John incurred an additional cost of EUR 1.000.
Conversely, claims are often presented backwards, starting with the extra cost incurred, which in practice significantly damages the credibility of the claim. Using the previous example, the claim presented backwards would be:
John has incurred an additional cost of EUR 1.000 after completing the task.
The additional cost was due to hiring Jane.
John had to hire Jane to complete the task on time
John was supposed to begin the work on the 15th of October.
John did not gain access to the building before the 21st of October, due to a delay caused by another contractor.
When presented backwards, the claim is less coherent and is often (wrongfully) construed as a post-rationalization of the claim by the Arbitration Board.
8. The Arbitration Boards method of awarding a claim
When the Arbitration Board awards a party a compensation, including time related claims, the Arbitration Board is infamous for awarding the claim discretionary, awarding either one third, one half or two thirds of the claim, depending on the credibility and quality of documentation of the claim. This method is clearly seen in our “review of acceleration costs in Danish Arbitration practice”
This both means that it is hard and unlikely to get awarded a claim in full, but conversely it is also easier to have a claim partially awarded.
It is important that this is kept in mind when going forward, as even just convincing the Arbitration Board of the probability of a claim is likely to get awarded a part of the claim.
9. Methodology for EoT claims
There is no specific described methodology for EoT claims, but the following methodology is what we suggest based on case law:
- Short introduction of the claim (max. 5 lines)
- What burden of proof needs to be met to get the claim awarded?
- Facts and documentation of the delay
- Qualification and legal arguments
- Proving an EoT eligible event
- Proving causation
- Claim amount
- Conclusion
9.1 Short introduction to the claim
It is initially necessary to present a short introduction to the claim for EoT, so that it is clear to the judges, which type of claim is being presented. This has to be very simple so that the judges know the overall “picture” though this headliner. The amount of days extension claimed should be mentioned here too.
9.2 Explanation of the requirements to get the claim awarded
This is the “what”-section of the description of the claim. A short list of the criteria which has to be proven to be successful and who has the burden of proof.
For EoT claims the burden of proof is on the contractor.
9.3 Facts and documentation of the delay
In this section it is very important to keep it clear and simple
9.3.1 Timeline
When dealing with a claim for EoT, it is essential to provide timelines of the event – both timelines for the project as it was originally planned – but also revised timelines for the project as it turned out with the delay(s)
The timelines have to be presented in such a way that it is as obvious as possible, how the different tasks are dependent of the completion of other tasks, as to prove that a delay of these tasks influenced the critical path
9.3.2 Facts and description of the claim
Here is to describe the documentation which will support the claim. The more factual documentation which can be submitted to the Arbitration Board, the better.
Facts have to be drawn from existing documents like timeline/baseline in the original contract, changes in the contract during execution of the project, minutes of meeting from various meetings with the Employer, e-mails and witness statements etc..
If a claim concerns extension of time due to a delay, documentation of the facts could for instance be as follows:
- Original timelines planned for the project
- Revised timelines due to the delays
- Descriptions of the cause of the delay – could be drawn from:
- E-mails
- MOM from meetings
- Photos of the delaying factor (e.g. dated pictures of a critical task being incomplete)
- Witness statements
- Hand over report
- Proof of the actual delay – could be drawn from:
- E-mails
- MOM from meetings
- Dated photos proving the (delayed) progress of a task
- Witness statements
- Hand over report
9.4 Qualification and legal arguments when proving the causation between the event and the delay
Proving causation is to prove that the delay has influenced the critical path of the building schedule. The term critical path is not widely elaborated on in either case law or in danish legal literature.
Critical path can be seen as the point in a project schedule, for which the timely completion is necessary as not to be delayed. An influence on the critical path could be due to the delay of a critical activity, for which upcoming work is dependent on the completion of. An influence on the critical path could also be due to delay of an activity, which in itself is critical for the timely completion of the work, without upcoming work being dependent on the completion.
As an example, the bricklayer whose job is to lay a brick wall on a concrete foundation, is dependent on the concrete foundation being done, before he can begin his work. If the concrete foundation is delayed, the bricklayers work is delayed, which in turn is expected to delay upcoming work e.g. isolation of the walls, mounting of the roof etc. In this example, delay of the concrete foundation would influence the critical path of the building schedule.
As a counterexample, the bricklayer who has to lay ten identical brick walls on ten concrete foundations, is not necessarily dependent on the timely completion of all ten concrete foundations. If one of the foundations were delayed by 5 days, but the bricklayer could spend those five days laying the brick walls on the other foundations, the 5-day delay has not had an actual impact on the critical path or the contractors ability to finish within the deadline. In this example, the contractor would not be entitled to EoT.
A contractor cannot claim EoT if a delay could have been averted through regular replanning of the schedule. As an example, from caselaw, the Arbitration Board came to the following conclusion regarding a claim for EoT:
The main project from 1 December 2004 had a number of defects as mentioned in the experts’ response to these questions.
This specifically applies to the electricity project, but as stated by the experts, there were no defects or uncertainties which could not have been clarified with the supervision during normal preparation and arrangement of the carrying out to such an extent that there would be no delay in connection with the actual carrying out.
Thus, in the opinion of the arbitration tribunal, the defects claimed regarding the main project cannot per se lead to an extension of time.
An example of a delay which influenced the critical path, but which does not influence a critical activity, would be if the final work before completion, e.g., cleaning, is delayed. In this case, a critical activity has not been influenced, given how there are no upcoming works dependent on the cleaning, but it is very apparent that the ability to finish the project on time has been delayed, and as such the critical path has been influenced.
9.5 Amount of days extension claimed
The amount of time that the contractor may be entitled to shall be calculated in whole days.
9.6 Conclusion
In the conclusion you wrap everything together and state the exact amount of days claimed for EoT and shortly the reasons for it.
10. Burden of proof
When the Arbitration Board awards a party a compensation, including time related claims, the Arbitration Board is infamous for awarding the claim discretionary, awarding either one third, one half or two thirds of the claim, depending on the credibility and quality of documentation of the claim. This method is clearly seen in our “review of acceleration costs in Danish Arbitration practice”
This both means that it is hard and unlikely to get awarded a claim in full, but conversely it is also easier to have a claim partially awarded.
It is important that this is kept in mind when going forward, as even just convincing the Arbitration Board of the probability of a claim is likely to get awarded a part of the claim.
12. Concurrent delays vs reflective delays
As an introduction to the subject it can be noted, that according to Hørlyck, the current understanding is that a concurrent delay entitles both the Employer and the Contractor to EoT, as both parties are culpable for a delay. However due to the delay being concurrent, it negates both the Employers and the Contractors potential claim related to delay costs.