Omission and Loss of Profit

Q: Where work is omitted and given to another contractor, is the employer liable to pay loss of profit?

A: Entitlement for loss of profit may depend on the wordings of the contract form. PAM98 cl 11.6 allow for valuation of direct loss and/or expense due to variation, however the word ‘loss’ is absent in PAM06 cl11.7.

However, cl 11.6(b) PAM06 provides that fair adjustment of rates to take into account when there is a significant change in quantity. It may be argued that fair valuation should include loss of profit in respect of work omitted.

From my observation, there is no clause in the standard form that prohibits the employer from omitting works to be carried out by others, although several case laws suggest that the employer may not omit work prescribed under Provisional Sum to be executed by 3rd party see Amec Building V Cadmus (1997). In Australian case Carr v JA Berriman (1995) it was held that works omitted would entitle the contractor to claim loss and expense