About Delayed Payment / Financing Charges.

[Bow]

We recently received the Engineer's Determination on our claim for financing charges under 14.8 [Delayed Payment] on

the delayed payment of the prolongation costs. The Engineer said as a condition precedent for our entitlement

for such financing charge, we need to prove that it is actually

suffered as a loss. As we consider the Delay Damage for the delayed completion of the Works, the Employer enjoys the benefit of setting certain percentage as a liquidated damages by putting the Contractor to

prove the sum specified is a penalty and not a genuine pre-estimate of loss.While the liquidated damages under the sub-clause

8.3 is deemed as equivalent to financing charges for the Contract Price per day and the daily cost of the Employer's Personnel involved to supervise the execution of Works, I cannot understand why they get different treatment? Why the Employer does not have burden of proof that it really sustained such loss especially that it really spent such financing charges? If we draft the delayed payment damage in a similar way as the delayed damage for the late completion such as by labelling the clause as "liquidated damages", then would this problem can be solved?

[Cord]

Dear K,

Normally, the Contractor has to justify claims for extra costs, but payment of financing charges under clause 14.8 is an absolute right without the need to claim.  The rate of interest is stated without any need to prove that it has actually been spent.  I suggest that your Engineer reads a copy of the FIDIC guide.  If you are claiming a higher rate than that given in clause 14.8, then you would have to prove the actual expenses.   

Incidentally, the size of delay damages has been questioned in several court cases and has been reduced where the judge thought that they were too high.  They are intended to cover not only financing charge or supervision costs but also the lost revenue or extra rental due to late completion.