4a

Yes, although the cutting of budget of the Client is not a reason to terminate the
Contractor's obligation to Provide the Works under clause 91, as Option X11 is
incorporated in the contract, under this clause, the Client may terminate the
Contractor's obligation to Provide the Work for other reasons not identified in
the Termination Table.

Under clause 90.1, the Client shall notify the Project Manager and the Contractor
for the reason of the termination.
4b

Under clause X11.1, if the Client wishes to terminate the Contractor's obligation
to Provide the Works, the Client shall notify the Project Manager and the
Contractor giving the reason for the termination.

In this case, accordingly the reason of termination complies with the contract.
Under clause 90.1, as soon as receiving the notification from the Client, the
Project Man ager shall promptly issue a termination ce1iificate to the Contract01’
and the Client. Under clause 90.4, when the termination ce1iificate is issued, the
Contractor shall cease to Provide the Works.

To be effective, under clause 13.1, the notification and the ce1iificate shall be in
writing and in the language of the contract. Under clause 13.7 they shall be in a
form separate from other communications.

It is suggested that at the start-up meeting, the Project Manager and the
Contractor agreed the form to be used for issuing notification and ce1iificate.
This avoids miscommunication and potential dispute on when a valid terminate
ce1iificate is effectively issued.

As in this case, since the Contractor has started works and has arranged some
subcontracts some 3 weeks ago, the timely issuing of the termination ce1iificate
is important to minimize the Defined Cost of the Contractor so that it may
immediately notify the same to the subcontractors.
4c

Under clause X11.2, if the Client terminates the contract for a reason not
identified in the Termination Table, the procedure Pl under clause 92.1 and the
procedure P2 under clause 92.2 shall be followed.

The procedure Pl under clause 92.1 allows the Client to complete the works and
to use any Plant and Materials to which it has title.

Under clause 70.1, the Client has title on any Plant and Materials outside the
Working Area if the Supervisor has marked on them.

In addition, as the Contractor has already set up the Site facilities, commenced
Site clearance, started erecting temporary fencing, the Client also has title on
these Materials as well as any Plant already on Site if the Contractor has title on
them according to clause 70.2. The Client is therefore allowed to keep these
Plant and Materials on Site.

As the reason to terminate the contract is for budget cutting, the Client shall
review if it has sufficient budget to complete the works using the Plant and
Materials to which it has title under clauses 70.1 and 70.2. The Client may use its
own manpower resources together with the Plant and Materials as
aforementioned to complete the works.

If the Client wishes to complete the works with another Contractor, under clause
92.2, the Client may also instruct the Contractor to leave the Site and remove any
Plant and Materials from the Site, and to assign the benefit of its subcontractor
related to the contract to the Client. Prior to this arrangement, the Contractor
shall ensure that the subcontract conditions have incorporated the assignment
clauses. Again, the Client shall review if it has sufficient budget to complete the
works under this arrangement.

While the above describe the roles of the Client and the Contractor, the role of
the Project Manager is to ensure the termination comply with the procedures of
the contract. For example, the roles of the Project Manger include:
i) To ensure that all notifications and certificates are issued in
accordance with clause 13.7.
ii) After receiving instruction from the Client, if the Client's reason of
termination complies with the contract, to issue the termination
ce1iificate promptly according to clause 90.1.
iii) To implement the procedures for termination immediately after
issuing the termination ce1iificate as required in clause 90.3.
iv) To ensure that the Contractor does no further Works under clause
90.4 after issuing the termination certificate .
v) To arrange with the Supervisor to verify what Plant and Materials to
which the
Client has title according to clauses 70.1 and 70.2.
vi) To ensure that the Contractor obeys the instructions according to
clause 27.3.
vii) To assess the payment amount due under clauses 93.1 and 93.2. It
assesses and makes the final payment to the Contractor within the
time frame as required in clause 53.1.
4d

According to clause 53.1, it is the Project Manager's responsibility to assess and

ce1iify the final amount due within the specified time frame.

Under clause X11.2, upon the Client's terminates the contract for a reason not
identified in the Termination Table, the assessment of amounts due to the
Contractor shall follow the procedures Al under clause 93.1, A2 and A4 under
clause 93.2.

Under clause 93.1 the Project Manager shall include following items in assessing the
amount due at termination:
i) The amount due which is assessed as in the normal payment. This
includes the Price for Work Done to Date according to clause 11.2
(29). Therefore as the Contractor has completed the Site facilities
and if it is an activity in the activity schedule, it shall be included. Also
under clause 93.3, the Project Manager shall assess individual
activities which are completed although they are grouped in the
activity schedule.
ii) The Defined Cost for Plant and Materials which are within the
Working Areas. If they are outside the Working Areas, they shall also
be included if the Client has title on them. However, for example, if
the Plant and Materials for the Site facilities have already been
assessed as in the normal payment in above item i), they shall not be
included again.
iii) Other Defined Cost which the Contractor has reasonably incurred in
expectation of completing the whole of the works. As the Contractor
has commended the Site clearance and sta1ied erecting temporary
fencing but they are not yet completed, their amounts due shall not
be assessed in the normal payment, but their Defined Cost shall be
included under this item.
iv) Any amounts which are retained by the Client. This shall include
retention if Option X16 is also selected. Under clause 50.5, it shall
also include one qua1ier of the Price of Work Done to Date if the
Contractor did not submit the first programme. However, as the
Contractor has just sta1ied works on Site some 3 weeks ago, it is
likely that the termination occurs· before the first assessment
date, and no amount was therefore retained by the Client.
v) If advanced payment was made to the Contractor, any un-repaid
balance shall be deducted.
 Other items which the Project Manager shall include in assessing the amount
due at termination under clause 93.2 are:

i) As the reason of terminating the contract is for budget cutting on

the Client's side which is not the Contractor's fault, the
Contractor is allowed to recover the forecast Defined Cost of
removing the Equipment.
ii) Similarly, the Contractor is allowed to receive a certain amount
of the fee. This is calculated by deducting the Price for Work
Done to Date from the total of the Prices at the Contract Date,
and multiplying the fee percentage.

Under clause 53.1, the Project Manager shall assess the above items in the
final amount due and certify the final payment within thi1ieen weeks after
issuing the termination certificate. Under the same clause, the final payment
is made within three weeks of the assessment.

The Project Manager shall note that if the Client has any agreement with the
Contractor in connection with the amount due, the final assessment is
changed under clause 53.4.