Re: commecement contract.

**RJM** Mon Sep 13, 2010 7:04 pm

Ramadhan, generally the Contract Commencement Date sometimes referred as Contract Effective Date depends very much on the Form of Contract you are using and the wording of the terms and conditions governing the contract.

Normally the contract should have a date stated as the Contract Date/Contract Effective Date or Contract Commencement Date. This date is not necessarily the date when the contract was signed or letter of acceptance was issued but rather the date from which all the contractual rights and obligations begin and from which point any term of time, usually commences. In other words, date when the parties to the contract starting to perform their obligations in the contract.

I will try to breakdown your concerns based on the PPA 2004 and its Regulations and Form of Contract issued by PPRA as well as practice in other Form of Contracts.

According to S55(7)/PPA2005 “the procurement contract shall enter into force when a written acceptance of a tender has been communicated to the successful supplier, contractor or consultant”. To me this doesn’t mark the Contract Commencement Date but rather establishing the contract between the parties [offer + acceptance = contract]. For the parties to the contract to start performing their obligations there are conditions precedent must be meet in order to fix the Contract Commencement Date. One of these conditions is the submission of the Performance Security and signing of the contract within 30 days after receipt of the Letter of Acceptance.

Site Possession Date is the date when the contractor is given full access to the site by the client for temporary and permanent works. Logically, this cannot happen before the conditions precedent mentioned above are fulfilled by the contractor as ITB Clause [Performance Security] warrant the client to cancel the award and take any remedy under contract and resort to awarding the contract to the next ranked tenderer in case successful tenderer failure to comply with conditions precedent.

According to Clause 18 [Commencement and Completion] of the Form of Contract [Smaller Works Contracts] issued by PPRA, “The contractor may commence execution of the on the Start Date [stated in SCC] and shall carry out the works in accordance with programme submitted by the contractor, as updated with the approval of the Project Manager, and complete them by the Intended Completion Date [stated in SCC]”. The same Form of Contract Clause 24 [Possession of the Site] states that “The employer shall give possession of the site to the contract. If the possession of a part is not given by the date stated in the SCC, the employer will be deemed to have delayed the start of relevant activities, and this will be a Compensation Event”.

FIDIC – Form of Contract

In the 1999 FIDIC Conditions of Contract, Sub-Clause 8.1 [Commencement Date] states that "The Engineer shall give the contractor not less than 7 days’ notice of the Commencement Date. Unless otherwise stated in the Particular Conditions, the Commencement Date shall be within 42 days after the Contractor receives the LoA [Letter of Acceptance]...” The FIDIC Guide defines the “Commencement Date” is the date on which the Time for Completion [Contract Duration] commences.

Ramadhan, in view of the above it’s imperative the contract to be crystal clear on the commencement date/contract effective date in order to avoid ambiguities in the contract interpretation especially in case of delays. My experience is that contract commencement date is one of the contentious issues in delays claims particularly when terms are not clear on the commencement date.

In delays analysis [valuation of claims relating to delays] particularly on Contract Commencement Date, one will be interested to identify whether the delay is compensable - excusable delays [responsibility borne by the client – caused by the client ], non-compensable –excusable delays [is acts of God or a third party- caused by factors beyond both parities] and or non-excusable delay [responsibility borne by the contractor – caused by the contractors] in order to establish the guilty party.

ramadhan Fri Sep 03, 2010 4:31 pm

Hellow! Forumnist

My question today is when the contract commerncing, is normally commence after awarding and acceptance, or normally commernce after signing two parties, because it noramlly contractor may posses site, but when executing the work later come to claim that commercement of the work have to be counted from the date when legal contract have been signed.

I submit.

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