February 19, 2024

Problematic Construction Contract Clauses: Suspension of Work

This is the third blog post in a series that discusses clauses in construction contracts with the goal of providing awareness of contract terms that often cause difficulties and give rise to claims.

Previous blog posts have addressed problematic contract clauses involving differing site conditions, no damages for delay, changes, and coordination. This post discusses suspension of work clauses, and other posts will discuss the following clauses in construction:

Warranty and defects liability
Variation in quantity
Inspection
Force majeure
Flow down
Compensation and payment
Weather
Escalation
Oral modifications

Suspension of Work
Suspension of work clauses state that the owner has the right to suspend or delay the work. Suspension clauses that deny the contractor’s right to recover costs for the delay improperly allocate risks to the contractor. The suspension clause should, instead, spell out allowable costs recoverable for such delays.

An example of a private contract contains the following suspension provisions:

15.1 Owner may suspend Contractor’s performance of the Work hereunder, in whole or in part, at any time and from time to time for any reason, including for Owner’s own convenience. Any such suspension shall be effective by delivery to Contractor of a Notice (“Notice of Suspension”) specifying the extent to which performance of the Work is suspended and the date upon which such suspension becomes effective (“Suspension Date”).

15.2 After receiving a Notice of Suspension and except as otherwise directed by Owner, Contractor shall:

(a) Immediately stop the Work on the Suspension Date to the extent specified therein;

(b) Place no further purchase orders or subcontracts except as may be necessary for completion of such portions of the Work as may not be suspended;

(c) Suspend all orders and subcontracts to the extent that they relate to the performance of the portions of the Work suspended; and

(d) Take such action as may be necessary or as Owner may direct for protection of personnel, protection and preservation of the Work and other property related to this Agreement which is in the possession of Contractor and in which Owner has or may acquire an interest.

(e) Act in the best interests of the Owner to protect all Work and to take all appropriate actions to ensure that continuation of the Work after the Suspension is ended remains feasible.

15.3 After receiving a Notice of Suspension, Contractor shall submit to Owner, within ten (10) business days after receiving such notice, an itemized list of all action taken or intended to be taken as a result of such suspension.

15.4 In the case of any suspension hereunder, the Scheduled Mechanical Completion Date and Final Acceptance shall be extended by a period reasonably necessary to make up for the period of suspension and the schedule shall be adjusted accordingly. Should the Work be suspended, Owner shall compensate Contractor for those costs attributable to the suspension and incurred during the suspension period that are documented by the Contractor to the reasonable satisfaction of Owner. All claims by Contractor for compensation under this Article must be made within forty-five (45) days after the suspension period has ended or the Work has been terminated. Payments by Owner under this Article shall be made pursuant to Article 5. Contractor shall not, in any event, receive, or be entitled to any incidental, consequential, or special damages or loss of anticipated profit.

15.5 The Contractor agrees to promptly resume the Work upon notice from Owner that the Suspension has ended.

FIDIC contracts also include suspension provisions.¹ The engineer may at any time instruct the contractor to suspend progress of part or all of the works. During such suspensions, the contractor is entitled to (a) an extension of time for any such delay, if completion is or will be delayed, and (b) payment of suspension costs. However, the contractor shall not be entitled to an extension of time for, or to payment of the cost incurred in, correcting the contractor’s faulty design, workmanship, or materials, or the contractor’s failure to protect, store, or secure its work. If the suspension continues for more than 84 days, the contractor may request permission to proceed, and if no permission is provided within 28 days, the contractor may, by giving notice, either treat the suspension as a variation or give notice of termination.

If the engineer fails to certify the contractor’s work or the employer fails to pay the contractor, the contractor may, after giving not less than 21 days’ notice to the employer, suspend work (or reduce the rate of work) unless and until the contractor has received the payment certificate, reasonable evidence, or payment.

¹ See FIDIC Conditions of Contract for Construction MDB Harmonised Edition for Building and Engineering Works Designed by the Employer, Clauses 8.8, 8.9, 8.11, and 16.1, May 2005.

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