FAQ's Principal Building Agreement

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Clause 36
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Question 1

The employer terminates the agreement in terms of 36.0. There is defective work that has to be attended to and the employer is suffering damages such as loss of rental due to late completion, interest etc. Is the employer entitled to claim damages as well as the penalty related to the termination or only the penalty?

Ref: P36.001

Answer

The basic contractual principle is that the employer can apply penalties and claim damages but not for the same event. Therefore:

1. Should the contractor be liable for penalties and subsequently achieves practical completion the application of penalties will cease. Should the contractor then fail to bring the works to final completion the employer can claim damages related to this later default. The employer will then have been entitled to both penalties and damages as they are separate defaults

2. Should the contractor be liable for penalties and the employer invokes his right to terminate the agreement due to the non-performance of the contractor to achieve practical completion the penalties will cease when the termination is put into effect and no damages can be claimed in relation to the termination or later events as the contract has ceased to exist