Thursday, November 14, 2013

The execution of a construction contract must be seen as a fluid and dynamic process that alters as the scope of work changes, disruptions occur, programmes are revised and variations are stated. These changes can affect the time and cost associated with the performance of the works, as well as the manner in which the works are performed, says law firm Bowman Gilfillan director Shane Voigt.

It is, therefore, not surprising that a myriad of claims pertaining to time extensions – for disruption costs and defective workmanship or concerning noncompliance with performance warranties – arise in the construction industry. “Sometimes the evidence of the basis of such claims is clearly visible, known as patent defects, while others, even upon a reasonable inspection of the works, are not discernible. These are known as latent defects. Inherently, a construction project entails various components, which eventually form one functional unit,” explains Voigt. “After the amalgamation of the various components, a defect in one of the works may not be readily identifiable.

On large projects, the execution of the works may take several years and a defect may exist for a substantial period before being rectified.” It is against this background that parties to a contract find that their claim has become prescribed. Voigt explains that, in terms of South African law, if a claim is not the subject matter of legal proceedings instituted within a prescribed period, it is no longer enforceable because the party’s right to claim has expired. “Generally, the prescription period for a claim for damages in terms of a construction project is three years from the date that the claim arose,” he notes. The Prescription Act No 68 of 1969 sets out when the running of prescription of claims begins.

Voigt says that, from a practical perspective, it is not always a simple exercise to ascertain the start of the running of prescription, particularly with regard to the Act containing certain so-called ‘deeming’ provisions, such as Section 12 (3), which provides that a debt shall not be deemed due until the creditor has knowledge of the identity of the debtor (knows who the debtor is and why the debt exists) and of the facts from which the debt arises.

This, he explains, is on condition that a creditor will be deemed to have such knowledge if he or she could have acquired it by exercising reasonable care. “The Act provides that a debt (the damages constituting the claim) can be declared as due only if a creditor (the claimant) has the right to institute an action for its recovery, that is, when the creditor has a complete cause of action in respect of such claim,” states Voigt.

Moreover, he notes that the expression “cause of action” was held in the case of Evans v Shield Insurance Co Ltd 1980 2 SA 814 (A) 838 to mean the entire set of facts which give rise to an enforceable claim, and includes every fact which is material to be proved to entitle a plaintiff to succeed in his or her claim.

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