Loss and Expense
Introduction
Readers will be familiar with the phrase "loss and expense". However, I suspect it means different things to different people. Most legal text books do not contain a succinct definition of loss and expense. The phrase direct loss and/or expense is found in the JCT Contracts to describe the reimbursement to which the Contractor is entitled under the provisions of the Contract in respect of disruption and prolongation. Loss and expense normally arises by virtue of a specific clause in a building contract or as a result of a breach of contract by the Client.
Under the JCT Contracts loss and/or expense can be claimed because of the deferment of giving possession of the site by the Client or because the regular progress of the works has been or is likely to be materially affected by one of the listed Relevant Matters. A classic Relevant Matter would be a late instruction or late provision of information by a Contract Administrator.
You will not find mention of loss and expense in the NEC3 Contract but instead there are a list of compensation events which entitle the contractor to more time and money if he has suffered delay or extra cost as a result of the compensation event.
Interestingly, there is no right for a contractor to claim a lost contribution to head office overheads under the NEC3 or PPC2000 Contracts, whereas such a claim is possible under JCT 2005 and the new JCT Constructing Excellence Contract.
The categories of loss and expenses which may be claimed by a contractor are broadly as follows :-
- Prolongation costs
- Disruption costs
- Finance charges
- Cost of additional management time
- Damages or costs payable to third parties.
Note that there is an overlap between a claim for variations and loss and expense.
Prolongation costs consist of the costs of on-site overheads and (in JCT Contracts or at common law) off-site overheads. Disruption consists of the costs of inefficient working and the increased cost to the Contractor of executing work at a different time or in a different sequence to that anticipated eg unforeseen winter working.
Loss and expense claims are likely to remain a feature of construction projects for the foreseeable future. Claims made bear close analysis as they often include irrecoverable sums and/or duplication.
Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.
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