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Termination by Convenience or Deletion of Works

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Termination by Convenience or Deletion of Works

Post by amoresmanuel on Mon Jul 30, 2012 1:58 pm

July 30, 2012

Query:

Does the Procuring Entity (PE) has the right to terminate (by convenience) a contract, if project funds is no longer available?

Does the PE also has he right to delete portion of works (especially the remaining portion of works) if project funds is no longer available?

Which is better to adopt among the above options, if project funds is no longer available?, to avoid any dispute between the PE & the contractor.


Anyone please.

Manny A.

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Re: Termination by Convenience or Deletion of Works

Post by regina avelino on Mon Jul 30, 2012 5:02 pm

A. Any one following event may be enough grounds for the procuring entity to terminate a contract for convenience:
1. If physical and economic conditions have significantly changed so as to render the project no longer economically, financially or technically feasible, as determined by the Head of the Procuring Entity;
2. The Head of the Procuring Entity has determined the existence of conditions that make project implementation impractical and/or unnecessary, such as, but not limited to, fortuitous event/s, changes in laws and government policies;
3. Funding for the project has been withheld or reduced by higher authorities through no fault of the Procuring Entity;
4. Failure of the Procuring Entity to acquire the necessary right-of-way; or

B. The Procuring Entity, by written notice sent to the contractor, may terminate the contract, in whole or in part, at any time for its convenience. The notice of termination shall specify that the termination is for the Procuring Entity’s convenience, the extent to which performance of the contractor under the contract is terminated, and the date upon which such termination becomes effective. This can be correlated in situations above which may lead to partial deletion of works.

C. There should be no option. What is really the main reason why the procuring entity will terminate the contract or to delete the portion of works? if these is establish, then you implement what is reasonable and application even if these would mean legal dispute with the contractor. for as long as you can defend it legally and your ground of termination/deletion is valid and has sufficient grounds to do it.

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Re: Termination by Convenience or Deletion of Works

Post by elib on Mon Jul 30, 2012 5:35 pm

manny,
if it is expressly stipulated in the contract, and you have agreed on it, IMO, the owner has the right to exercise it. the conditions of contract will generally define the qualifications that will demonstrate that the contract can be terminated for convinience or to delete portions thereof. If in any case, the cause for termination is not in accordance with the conditions of contract, then you may have a stand to contest such action.

regina,
Im a newbie in this forum, and also starting to learn more about RA 9184, maybe you could shed some light on this issue.. can a contractor claim his expected total loss profit if in case at the middle of the project implementation the project was terminated for owners convinience. Does RA9184 allow for such scenario.

Cheers.

elib
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Re: Termination by Convenience or Deletion of Works

Post by regina avelino on Tue Jul 31, 2012 11:04 am

In my opinion, the contractor can only recover loss on a quantum meruit basis. for example, if the contractor has already imported/purchased raw materials which is specifically customized for the project which the contractor cannot be sold in the market, then the contractor can demand payment for it and some analogous event such as this which the contractor can legally demand payment. LIkewise, the contractor can demand payment for the proportionate works completed prior to the notice of termination for convenience.


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