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Steel Prices Escalation

5 replies [Last post]
Sat, 2009-06-06 15:21
Nariman Arslan
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Joined: 12 Dec 2006
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Dear all,

Could you please advise on how can the Contractor’s entitlement for increase in steel prices be established where no clause in the contract indicates the same???
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Replies

Mon, 2009-06-08 19:19
#1
Safak Vural
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Joined: 12 May 2008
Posts: 117
Groups: Petro-Chem / Oil & Gas
Majority of the times the argument will be beyond the laws if the CLIENTS are international (not by technically, only from the CONTRACTOR’s avoidance from disturbing CLIENT).

I think if you buy the steel and commence in the job the bargaining will be a nonesense. The CLIENT will give you nothing. BUT!!! If you did not complete the job, you can claim that you cannot complete the job due to economic conditions of the project. This will push them.

Other suggestion check the EURO-USD EURO-POUND currency and include if it is on your side (You are buying steel in EURO and being paid in USD in majority of the Middel East and FSU projects).

Regards,

Safak
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Sun, 2009-06-07 08:41
#2
Rafael Davila
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Joined: 1 Mar 2004
Posts: 5241
Groups: Spider Project Team
It does not necessarily have to be Civil Law but also can be what we call Common Law. I believe both are being accepted in jurisdictions whose law is based on the French Code as well those based on the English Code. In my jurisdiction we got both, from the French through the Spaniards, from the English through USA.

http://en.wikipedia.org/wiki/Civil_law_(legal_system)
http://en.wikipedia.org/wiki/Common_law

Either way in the absence of an escalation clause it seems to me up against the hill in pure legal terms.

Nariman, any agreement can be changed if both parties agree. The fact that the Contractor go to a Blak Market somehow worries me, can be just a cultural issue, you should know better. I hope others will appreciate your good faith and a reasonable settlement is reached for the good of all, of course if the Contractor can still deliver.

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Sun, 2009-06-07 07:49
#3
Mohamed AL Sherbiny
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Joined: 4 Feb 2009
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Dear Nariman,

Good luck in your arguement.

but do not forget that part of current bad results are pertainig to contractor default.

just put that in your consideration during discussions .

Good luck,

Mohamed
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Sun, 2009-06-07 07:07
#4
Nariman Arslan
User offline. Last seen 14 years 3 weeks ago. Offline
Joined: 12 Dec 2006
Posts: 6
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Dear Mohamed,

Thank you for the elaborated reply. I do appreciate it.

Our problem exists in having agreed with the Employer on a higher percentage of advance payment (i.e. 15% instead of 10%) to secure all required steel quantities as earlier as possible, since the prices were anticipated to increase.

Unfortunately, the Contractor could not purchase the quantities at the time due to the reluctance of steel suppliers/vendors to deliver based on the Contractor’s contract prices (monopolizing).

Therefore, to mitigate delays and to ensure a timely completion of the project, the Contractor purchased the quantities from the black market at much higher rates than allowed for in the contract. Now a big loss has incurred while the Employer insists on no compensation is legitimate since the price escalation clause is omitted from the contract.

We believe in the Contractor’s entitlement while the evidence is so difficult to achieve.

As for the relation between the Contractor and the Employer, it is a good one, but the Designer, who’s acting as a construction manager, stands in between to the Contractor’s detriment.

However, I’ll try to use the argument of the civil law’s article about profitability. Hope it will work!!!
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Sun, 2009-06-07 04:38
#5
Mohamed AL Sherbiny
User offline. Last seen 16 years 2 weeks ago. Offline
Joined: 4 Feb 2009
Posts: 11
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Dear Nariman,

I believe there is no way, unless:

* its mutually agreed between you and the employer

or
* price analysis of said item had been discussed and accepted earlier.

* if it is not discussed earlier, try to pose the problem the employer using the price analysis aspects for the item

* your request may be based uppon the civil law article that the main purpose to establish a contracting firm is profitability.

this article is working and active in most of tribunal cases

when its not profitable its better to close down

and requesting the employer to guide or help you to be a profitable firm, in order to expose better performance and progress.

in case there is no good relationship between the contractor and the employer,
FORGET ABOUT THAT.

then, stay dreaming.

I hope that helping

Mohamed

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