Driver Trett Digest Issue 25 - Flipbook - Page 8
CONTRA CHARGES
AN EMPLOYER’S SWORD?
Mark Blackmore
Associate Director
Coventry, Driver Trett UK
This article is written based on the construction industry of
the United Kingdom.
The use of contra charges, or counterclaims, will generally
provoke a reaction from all parties involved, often negative.
A contra charge, or counterclaim, is usually raised by the
party paying for the works (the Payer) because of an error,
omission, or breach of contract by the party carrying out
the works (the Payee). A simple example could be that a
contractor has failed to keep the site clean and tidy, or a defect
has been identified that has not been rectified. If that failure
continues, even after notice by the employer, the employer
may undertake these works themselves, or instruct a third
party to do so, contra charging the cost to the contractor.
SET-OFF, COUNTERCLAIMS AND ABATEMENT
There are several different types of contra charge commonly
used in the construction industry: set-off, counterclaims and
abatement.
A comparison is sometimes formed between set-off and
counterclaims, although the two are different concepts.
Set-off is only used defensively, reducing, or completely
removing a claim. It provides protection, in essence acting like
a shield. A counterclaim is an offensive action, comparable to
a sword and can be a claim that exists independently.
However, there may not always be a direct contractual link
between the parties involved where contra charges are
advanced. For example, a sub-contractor may have caused
damage, based on which the employer withholds money
against the contractor. There is generally no contractual
link between the employer and the sub-contractor, and
by the time the sub-contractor receives the contra charge
against them, it is likely that there will be the addition of the
Contractor’s costs on top of the employer’s deductions.
Likewise, there is often confusion between abatement and
set-off. Abatement is generally used to reduce the contract
price in instances where full payment may not be appropriate,
such as when a contractor does not meet a performance
specification, but where the employer is content to take
possession of the building; the employer is accepting a
reduced specification product and does not pay the full value.
An abatement only applies where there is a reduction in the
work carried out and does not apply as a counterclaim for a
delay in executing the works; this would be a set-off.
Due to the close-knit nature of construction, the issue
of contra charges generally causes friction between the
parties, resulting in what some may consider trivial issues, to
become personal. No one likes to have well-earned money
withheld from them.
Potentially, set-off has wider application than abatement
and can (subject to the contractual provisions in question) be
used to reduce any debts owed, or even nullify them. It is not
used where the value claimed by the Payer is greater than
that claimed by the Payee.
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