Specifications of contractual technicalities and its bearing on arbitral claims

An arbitration proceeding is initiated solely on basis of an arbitration agreement. To proceed, the claimant is required to file a statement of claim. The respondent is required to submit its statement of defence and simultaneously raise a counter claim, if any. To prepare a claim statement, the claimant is required to evaluate the disputes at hand and decide whether it falls within the terms of the arbitration clause. Regardless, once the pleadings are filed from both sides, the arbitral tribunal shall decide whether they fall within the scope of the arbitration agreement and has jurisdiction to adjudicate on those disputes and in case the outcome is in affirmative, the arbitral tribunal may proceed to adjudicate upon the same.

Evidently, nowadays most contracts contain an arbitration agreement. While preparing a statement of claim, a person is required to be thorough with the following:

• The material circumstances on which the claimant relies;
• The documents on which the claimant relies;
• The cause of action, the elements of such cause of action;
• The material terms of the contract supporting the dispute;
• The remedy intended to be sought;

Simultaneously, the statement of defence shall include the following:

• Any objection regarding the existence, validity or applicability of the arbitration agreement;
• A statement of admission and denial of the relief sought by the claimant;
• The material circumstances the respondent relies;
• The documents upon which the respondent relies;
• Any counter-claim or set-off and the grounds on which it is based.

The basic formation of contract starts with a party inviting tenders (i.e., an offer). The other party then obtains the tender documents and submits its tender (proposal). The tender is analyzed and then the tender is accepted (acceptance). Once accepted, an agreement is executed embodying all prices, terms and conditions, thus becoming a contract.

Now coming back to arbitral claim, in order to avoid any confusion while drafting a claim statement, there are some instances to be borne in mind as follows:

• Avoid preparing a faulty tender containing error and discrepancies or usage of words that would lead to more than one meaning. The Courts tend to adopt the interpretation most favorable;
• Incomplete or faulty bids results in issues remaining vague and unclear;
• Technical specification, payment terms, disregarding the long-term effects between an inferior and a superior brand should be explained in detail.
• Negotiations mostly are irrational usually ending only in cost negotiation and technical and commercial aspects are neglected;
• Always keep a linkage and continuity between technical, commercial, mobilization and pricing aspects before issuance of letter of acceptance.

In light of the aforesaid, it is essential to analyze a contract in order to determine the precise target to be achieved, arrangements required to attain so, checks and balances, contingency plan towards probable and sometimes not so probable situations. Moreover, every project varies in various aspects; hence a contract has to be suited best to adjust to its environment. For instance, description differs from BOQ than the scope envisaged in the technical specification. A closer examination on deciding the preference of documents would certainly result in arriving at a reasonable settlement and a fair compensation to the contractor.  

Post the award of the contract, work plan is one essential ingredient which requires to be comprehensive yet concise. It involves all internal external factors such as the data, terrain and environment.  The work plan becomes the basis for the mobilization and implementation of the contract.  From such records of the detailed work plan arises a claim out of two principal bases. 

1.Damages for breach of contract, which is further sub-divided into:

• Breaches affecting the performance of the contract, which nevertheless proceeds to completion;
• Breaches resulting in termination of the contract before completion;
• Breaches of payment obligation.

2.Additional payment due under one or the other contract provision which is further sub-divided into:

• Sums due to variations/deviations;
• Sums due to measurement in unit price contract;
• Sums due to miscellaneous clauses under changed circumstances and conditions.

As a result of breach, a party becomes entitled to claim losses or damages and “the claimant is to be placed as far as money can do it, in the same position, as he would have been had the contract been performed.” 

The relevant provisions of a claim for damages arises during the following:

• The other party must have broken the contract;
• The other party should have suffered a loss or damage;
• Losses and damages have occurred from usual course of events from such breach;
• Parties being aware, that such event may result in such breach, which would result in loss and damage payable to the other party;
• No loss or damage for remote or indirect consequence;
• Claimant ought to have taken steps to minimize the loss in given circumstances;
• Termination being unjustified.

Therefore, in order to conclude, it is suggested to examine for primary categories of losses, ascertain their applicability and coverage and then evaluate them. In the above context, a contractor often finds inevitable to end up in a deadlock with the other party and resort to arbitration. For that, it is best to take an approach of maintaining all records and data to ensure attainment of a favorable solution across the table against the other party. 
Anyone engaged in business of contracting, it is pertinent to understand few issues and their impact upon contractual engagements to avoid any confusion and harassment at stages of awakening of dispute between the contracting parties. For starter, I hope bearing the above in mind at initiation will not only diminish the agony while dealing with contractual / arbitral disputes but will also create a crystal transparent business dealing between the contracting parties.

References:

1. Chambers Twentieth Century Dictionary PP.-13.
2. Sujan MA – Law relating to Building Contracts.
3. Duncan Wallace LN Construction Contracts- Principles and policies in tort and contract. London Sweet and Maxwell 1986
4. Rajan GAN – Law of Engineering Contracts- Construction Disputes and Remedies – Arbitration Law Reporter – Delhi, Chapter 11.