FAQ's Principal Building Agreement

Clause 9

Indemnities (Ref 09.001 / 09.003 / 07.007 / 09.009 / 09.011 / 09.0 / 09.00 / 09.00 / )

Question 1 What about ‘Design’ of the works where the contractor is not responsible? Ref: P09.001

Answer ‘Design’ in this context would include a product specified by name, or work executed by a nominated subcontractor.

Question 2 When the works or any part thereof is occupied by the employer or his tenants before practical completion? Ref: P09.002

Answer The employer, as owner of the land or site, gives possession of the site to the contractor, but not ownership; The contractor is generally responsible for new works – but Clause 9.2.7 specifically states that the employer is responsible for the existing and alterations and additions, (also Clause 10.2) …to ensure seamless transition of insurance responsibility.

Question 3 Where loss or damage to the contents of the works occurs after practical completion has been achieved? Ref: P09.003

Answer The onus is on the employer to inform the insurer via a broker - in writing - that an existing building will undergo alterations and additions, the extent and duration of the project – and other information – partially occupied, installation of equipment after completion, etc Note: the ‘deductible’ amount must be quantified. The contractor’s liability is for the works (until the end of the defects liability period, excluding wear and tear!), the employer’s liability is for the building and its contents (also Clauses 8.1,8.2.1, 8.5.6 and 9.2.4) – after practical completion has been achieved if new work – or the whole project if alterations and additions; The ‘works’ becomes the ‘building’ once practical completion has been achieved.

Question 4 What is the extent of the site occupied by the works? Ref: P09.004

Answer The site may include (hidden) natural features including underground streams, poor or collapsing soil, etc – SANS 10400 now require the appointment of a geotechnical engineer to asses and make appropriate recommendations – that may require special insurance cover.

Question 5 Where defects in materials or goods supplied for incorporation in the works by the employer, and consequential damage is caused by such defects? Ref: P09.005

Answer Rectification of a latent defect by the contractor does not include repairs beyond the immediate area, not is the contractor responsible for any consequential losses = employer.

Question 6 How do the provisions for indemnity apply where the employer is the State? Ref: P09.006

Answer The contractor’s risk is for the whole works – the extent should be specified in the contract data. There is no guidance for the quantum of insurance as the State would not like to be responsible if the insured value is inadequate. State conditions may be perceived to be ‘unfair’ on the contractor if the project is a small alteration and addition to and existing large building.

Question 7 Can the employer “self insure” ? Ref: P09.007

Answer The employer may ‘self insure’ … but must be aware of the risk incurred and potential consequences?