For damage in the form of delayed completion which is not attributable to the project owner and contractor, the interest of both parties and the amount of such damage, which are related to factors a court should consider with respect to the principle of changed circumstances, should be communicated to the parties for full-scale debates before a ruling or decision is rendered (Taiwan)

2016.07.13
Angela Wu

The Supreme Court rendered the 105-Tai-Shang-1173 Civil Decision of July 13, 2016 (hereinafter, the “Decision”), holding that for damage in the form of delayed completion which is not attributable to the project owner and contractor, the interest of both parties and the amount of such damage, which are related to factors a court should consider with respect to the principle of changed circumstances, should be communicated to the parties for full-scale debates before a ruling or decision is rendered.

According to the facts underlying this Decision, Company A was awarded a contract for the project at issue by the Railway Reconstruction Bureau. However, since the completion of the project was delayed for certain reasons, Company A requested additional payment under the principle of changed circumstances in accordance with Article 227-2 of the Civil Code.

It was first pointed out in the Decision that a court’s decision that increases payment due to changed circumstances should take into account the losses incurred by one party due to such changed circumstances, the unexpected benefits received by the other party due to such changed circumstances, the relations between the losses and benefits and other actual circumstances. To arrive at a fair ruling, an appropriate increased amount should be set not entirely based on the losses incurred by one party.

It was further pointed out in the Decision that since the completion of the project at issue was delayed by 221 days, which is almost half of the original construction period, for failure to hand over the construction land as scheduled and resulted in Company A’s damage due to increased expenditures, the damage was attributable to neither party. Circumstances such as whether Company A also received benefits from not assuming delay responsibilities due to construction delay in spite of its losses from additional expenditures, and whether the Railway Reconstruction Bureau sustained losses from delayed construction completion involve the amounts of benefits and damage of both parties are factors that the court should consider in light of the principle of changed circumstances. The court should instruct the parties to submit necessary statements and provide appropriate full-scale arguments concerning their legal perspectives. Deviating from such course of action, the original trial court jumped to the rash conclusion in its decision that all increased costs should be assumed by the Railway Reconstruction Bureau. In addition, the original trial court calculated the management cost associated with the construction delay by electing to remove items not related to time. However, according to the opinion of the Technical Assessment Committee of the Public Construction Commission, the construction contract at issue, which directly calculates the “profits, insurance premiums and management cost” by 10% of the direct construction fee, should first deduct the insurance premiums evidenced by actual receipts and the profits before treating the rest as the management cost. It seemed that the committee did not believe the costs not related to time should be deducted. Since the opinion of the original trial court was not consistent with construction practices, the original decision was reversed and remanded.