When the Client refuse to pay for an approved VO..

Q: If the client refuse to pay for the V.Os, is it breach of contract by the client? Would it lead to determination or just suspension of work by contractor?

A: As I mentioned in previous posting, variation is the most important clause in the contract. It enables changes to be made to the scope of work, etc without vitiating the contract. As long as the VO was made within the contractual provision, the new scope is deemed to be part of the contract scope. Any cost and time implication (subject to EOT provisions) would alter the contract sum and completion date respectively.

Clause 24.4 (PAM06) provides that the loss/expense due to the VO shall be added to the Contract Sum and shall appear in the next Interim Certificate after the date of ascertainment. If the employer fails to honour the interim certificate within the Period of Honouring Certificate, the contractor may suspend the execution of work until such time payment is made, subject to the procedures stipulated in clause 30.7

Please note the right for suspension by contractor is a NEW provision under PAM06. In the absence of such provision, there are no general rights for contractor to suspend the execution of works. If you are administering a contract using PAM98 or JKR83, such suspension or even slowing down the execution of works by the contractor could amount to a repudiatory breach by the contractor, see PAM98 clause 25.1 (i). On the other hand, the contractor should resort to determine the contract (not to suspend work) as provided by PAM98 clause 26.1 (i).

JKR83 form has got another set-back; there is no provision for determination by the contractor within the contract! However, the unpaid contractor may commence an action against the Government for recovery of payment with interest; see s74 illustration (n), Contract Act 1950.