WHERE WORK IS OMITTED FROM THE CONTRACT CAN A CONTRACTOR CLAIM FOR LOSS OF PROFIT?
Contractors sometime argue that where work is omitted from the contract they lose an opportunity of earning the profit element which was built into the value of the work which was omitted. They then attempt to claim from the Employer the loss they allege they have suffered.
In the JBCC Series 2000 form of contract, Clause 32.2.4 addresses the valuation of work which is omitted:
"Items of work omitted shall be valued at the rates in the bills of quantities/lump sum document, but where the omission of such work varies the circumstances in which the remaining work is carried out, the value of the remaining work shall be determined by the method in terms of 32.2.2".
Clause 32.2.2 provides that:
"Items of additional work not of a similar character or not executed under similar conditions shall be priced, where applicable, at rates based on those in the bills of quantities/lump sum document and adjusted to suit the changed circumstances".
Similar provisions are to be found in most standard forms of building contract.
The intent is to provide for the circumstances where, for instance, in a contract for a three-storey concrete frame building with brickwork on all levels, the Principal Agent issues an instruction which omits all the brickwork on the ground floor level.
The brickwork left behind on the two upper levels is more expensive to execute and the price in the bill of quantities for the remaining brickwork will now have to be adjusted to suit the changed circumstances.
There is no provision however for the Contractor to recover the profit he would have made on the work omitted.
Conversely, if the brickwork on the top level was omitted, the owner could argue that the rates for the remaining brickwork should be reduced.
Standard forms of contract in general provide for the work to be varied, including omissions, and a genuine omission of work is not a breach of contract giving rise to the claiming of damages.
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