31 January 2012 Written by  Wondwossen Wakene

Non-performance of Contracts of Public Works

Effects of Non-Performance

The general effects of non-performance are dealt with when we discussed generally “non performance of administrative contracts”. Non-performance of contract of public works occurs when parties default in different ways. The section dealing with non-performance in our civil code magnifies the contractor as the only defaulting party. But because of the nature of the obligation that the contractor assumes, a special section for non-performance is important. Because the special section dealing with administrative contracts does not regulate the default on the part of authorities, it does not mean that the law does not regulate them generally. The presumption is the obligations assumed on their part is not that special which will not require special regulation other than the one we have under the general part. So it is reasonable to avoid any confusion that the code invites you in. Non-performance ensues when the contractor fails to undertake the obligations that he assumed under the contract. Basically, the obligation of the contractor is to construct, maintain or repair a public work. If he/she fails to do one of the things he undertook to do under the contract, we say there is non-performance. Non-performance has two special consequences. In the first place it results in the state control of the project. On the other hand, it may result in re-allocation of the work to another contractor. Let us briefly see these two effects.

  1. State Control-This is a process where works began by a contractor are placed under the domain of the state. It is possible to infer this from Art 3288 (1) which says partly “… declaration of state control may be made where the contractor fails to perform his obligation.”

A state control is on the other hand a decision, next to being a process. So it is a declaration to the effect that contract of public works shall become under state control. Mostly order of state control presupposes failure to carry out obligations as a result of lack of resource. Inadequate resource to carry out the works within a given time is a ground for authorities to assume the full responsibility of carrying out the work.

What comes under state control is the project. The ground of making the declaration on the other hand is the non-performance evidenced by the contractor.

Declaration of state control must be made after putting the contractor in default. After ten day’s of summoning the contractor to perform his obligations, administrative authorities may make the declaration.

The effects of state control are two fold. From the start, the declaration will temporarily deprive the contractor of contract. What does this mean? The effect of depriving one’s contract may even be prohibition of exercising one’s rights in a contract. Is this fair?

On the other hand, the declaration will force the contractor to bear the expenses of control. What possible expenses can you guess? Such expenses may include costs of administering the remaining work, cost of preservation or any other related cost.

State control is not permanent. Especially Art.3289 (1) which explains on the effects of state control tries to tell us that the declaration is temporary. This nature however is conditional on one thing:

“[Showing] that he has the necessary means to resume the works and    to carry them out to completion.” (Art 3290).

Under such a condition, the contractor may be allowed to resume the work. Such a decision by the administrative authority is called an order of cessation.

  1. The Allocation -The other effect of non-performance is re-allocation. As the name itself implies, reallocation is giving the work away to other person than the contractor. As to Art 3291, reallocation presupposes different conditions. One such prerequisite is the foreseeability of the matter. This is to mean that the contract should expressly foresee the possibility of reallocating the contract .Foreseeability may involve the situation in which the authorities are in. For example, the conditions may convince the authorities that they should not put the contract under state control. This again may be based on a cost-benefit analysis that a rational authority will make.  Secondly, reallocation presupposes cancellation. It is only contract that is cancelled that can be reallocated (Art. 3291 (1)).

Another condition which is worth considering is the “new contractor” requirement. The purpose of reallocation is to allow new contractors to take the work and act accordingly. Reallocation should not be in favor of the old contractor. The possibility of participation in the reallocation is barred by Art 3291 (1).

Reallocation may be made in two ways. Auction may be one option. Agreement on the other hand is also possible to effect reallocation.  Such a procedure has a different consequence than that of state control. Reallocation affects the arrangement in a permanent way, while state control has a temporary effect. In terms of effect, reallocation imposes a burden of bearing consequences, while state control involves costs and risks (Art 3291(2). We have two consequences (burdens. One is the burden of bearing the consequences of the transaction. But which transaction is the provision referring to? As you might observe from Art. 3291 (1), administrative authorities will enter into a transaction when they decide to reallocate the contract. They are forced to reallocate either by auction or private arrangement. Such transactions have consequences as well as costs. The code prefers consequences rather than costs here. Do not forget that consequences are wider than costs Can you show this? Among others, consequences may mean those side effects that the new contract will bring about.

Delay of Construction and Its Effect

Construction contracts stand on three pillars namely quality, price and time. Unless the contract proceeds compromising the disparities among these pillars, it will be terminated somewhere in point of time.  FIDIC contract has devised its own way to compromise the possible disparities. As such a mechanism of evaluating the problems that may ensue and proposing a plan that enables increase or decrease in time and price are some of the solutions that FIDIC has come up with. Concerning time, if the time fixed to conclude the project lapses, the contractor shall pay a liquated damage to the owner of the work.

Last modified on Wednesday, 02 May 2012 13:05