1. Introduction
In any construction contract, the closing time limit is covered by day mulch unless otherwise specifically agreed. Daytime mulch responsibilities are normally considered to be particularly burdensome for a contractor, and for good reason. Since the day mulch normally amounts to 1 ! 0/00 Of the contract amount, there are significant amounts, and these are costs that go right on the bottom line. Taking into account that the daily allowance is a conventional fine that is incurred completely regardless of whether the builder has suffered a financial loss or not, it can often be perceived as unreasonable to have to pay daycare.
A contractor who is late will also incur additional costs in the form of rigging during the extended construction period, often the contractor will have taken corrective action at his own expense in the hope of working into the delay and the builder may have initiated a backlog of account payments because the payment schedule no longer harmonizes with actual progress and/ or because the builder withholds to have security for the rightful settlement of day mulch requirements.
This to name a few.
This exemplification of a stressed and difficult final stage for entrepreneur is not hypothetical. Often this is the situation when a contractor is delayed in relation to the agreed deadline.
At the same time, it is often not as easy for any of the parties to take a position on the causal circumstances of why the contractor is delayed. As we have dealt with in several other articles, there are many conditions the builder has the risk of and that can cause delay. Consequently, a situation in which the contractor is late will also include notifications and requests for deadline extension from the contractor, the builder we have often opposed these requirements, it is conceivable that the contractor has notified and then initiated enforcement, etc.
For these reasons, we are going to spend some time reviewing the rules on delay and daycare.
2. Overview of the rules
Below we have adopted the rules in a matrix and, as always, we take as a basis NS 8407 where the provisions are found in paragraph 40 “Delay”. In NS 8405 and NS 8406, the provisions of paragraph 34 and paragraph 26, respectively, are found under the same heading.
3. Daytime off in case of violation of the agreed deadline
The starting point in all standard contracts is that the daybreak runs unless the works have been taken over by the builder by the agreed deadline. The agreed deadline will normally be the final deadline and it is covered by day mulch unless otherwise specifically agreed, cf NS 8407 paragraph 40.2.
As pointed out in the introduction, often the contractor has demanded an extension of the deadline and justified claims must entail an offset of the closing deadline. It is the new deadline which, in this case, will be covered by day mulch, cf. NS 8407 paragraph 40.1, first paragraph.
We remind you in this context that an offset of the end date in the progress plan is, in isolation, not sufficient to offset the day-covered deadline. A displacement of the deadline which is no more than a consequence of the revision of the progress plan in accordance with, for example, the third paragraph of NS 8407 paragraph 21.3, does not result in the termination of the day cover when the originally agreed deadline is exceeded.
It is the rules on deadline extension, cf our article on this, that govern whether or not a daymulched deadline is shifted.
The cut-off time, by the way, is the takeover. We refer in this regard to the provision on the effects of the takeover in, for example, NS 8407 paragraph 37.4, where it is stated in paragraph c that any daylight mulch ceases to run when the building is taken over.
A builder cannot refuse to take over without having a factual reason. The subject of assessment is stated in NS 8407 paragraph 37.3, second paragraph in which the question is whether the deficiencies or their remediation have “of little practical importance” for the builder's presupposed use of the contract object, or not.
If the builder's refusal to take over is unlawful, it follows from NS 8407 paragraph 37.3, last paragraph, that the takeover shall nevertheless be deemed to have taken place.
The same also follows from NS 8407 paragraph 40.1, second paragraph, where it is stated that the works “deemed completed at the time the builder after 37.3 could not refuse takeover.”
In some situations, the takeover business takes place over several days. If the developer does not have a legitimate reason to refuse the takeover, the day mulch shall cease to run on the first day of the takeover transaction, cf. NS 8407 paragraph 37.4, last paragraph.
What is written here also applies in contracts governed by NS 8405 paragraphs 34.1 and 2, as well as NS 8406 paragraphs 26.1 and 2, as well as those provisions dealing with (and limiting) the builder's right to refuse takeover, cf NS 8405 paragraph 32.5 and NS 8406 paragraph 24.3.
4. Daytime off in case of violation of partial deadlines
It is not uncommon for the parties to agree daylong deadlines. This may be the case, for example, if the developer has a particularly strong need to have control at various stages of construction due to order requirements in the zoning plan. It may be that the builder wants to ensure good progress initially and requires daymulch when completing concrete works and raw buildings, or it may be other forms of daymulched deadlines where other types of logistics are the explanation.
In and of itself, there is nothing preventing the parties from agreeing on daytime-limited deadlines, but if it were to be done, we believe it should have a purpose. Day-mulched deadlines will necessarily have a guiding effect on the contractor's work, and perhaps have an unintended negative effect.
Our call is for the parties to make conscious, rational and sensible choices almost regardless of what they decide. However, if you want to agree on partial deadlines covered by day mulch, this must be done at the conclusion of the agreement. From experience, it is not possible to negotiate a daylong partial deadline after the conclusion of a contract, and this must be understood.
5. The size of the daymulch
It follows from NS 8407 paragraph 40.3 that the parties can conclude their own agreements on the size of the day mulch, and this happens very often.
If this is not specifically agreed, it follows from the provision that the daily allowance is 1 ! 0/00 of the contract amount, but not less than NOK 3000, -, cf. NS 8407 item 40.3, first paragraph letter a.
It follows from the third paragraph of the provision that the dayleave is limited to 10% of the contract amount, which means that the maximum dayleave period is 100 days if only the final deadline has been missed and the parties have not agreed on special contractual provisions.
From NS 8407, paragraph 40.3, first paragraph, letter b, it is stated that the daily allowance is 1 ! 0/00 also when overstaying a day-covered partial deadline, but here it is important to be careful. In such cases, the daily allowance shall not be calculated on the basis of the contract sum, but on the basis of what should have been produced up to the relevant partial deadline. The wording of the provision is”! 1 ! 0/00 of the contract sum for the part of the contract subject4n to be finalized'.
If one imagines a project consisting of an underground parking basement with five separate combination buildings on top, one can imagine, for example, that a daymulched partial deadline is agreed for each of the raw building parking basements and then for each of the five raw buildings. Then the day mulch will amount to 1 ! 0/00 of the cost share for the raw building parking basement, respectively, and the cost share for the raw building of each of the five above-ground buildings. In a turnkey contract, it can be difficult to stipulate that one may be best served by fixing the daily allowance to very specific amounts.
In addition, it follows from the provision that the daily allowance in case of exceeding the partial deadline must be at least NOK 1 500, -.
It follows from the standard provisions that total daily mulch is limited to 10% of the contract amount.
If the contractor is at most unlucky and incurs daily deductions on partial deadlines equal to 5% of the contract amount, only 5% of the contract amount will be left to claim during the day if the closing deadline is exceeded. This means that the day mulch stops after 50 days even if the contractor has not yet finished.
However, otherwise can be agreed, and both the builder and contractor should be aware of this.
A daycare liability can be very burdensome, and 10% of the contract amount is in itself sufficient for a contractor to lose any profit if one is properly unlucky.
In addition, we must clarify that the 10% limitation does not apply in any case if the contractor has committed a delay due to gross negligence or intent.
Finally, it is mentioned that Daymulkt runs on Saturdays, but not Sundays and also no other holidays. Furthermore, we must clarify that the value added tax is included in the concept of contract sum, cf NS 8407 paragraph 1.6.
What is written here also applies in contracts governed by NS 8405 paragraph 34.3 and NS 8406 paragraph 26.3.
6. Notification obligation
As a general rule, the builder has no obligation to notify the contractor that a day mulch will be required in case of delay. At the same time, it has been experienced that the dialogue between contractor and builder has been so good — despite expected delays — that the contractor has gained the understanding that the builder will not require daycare. For example, the builder may have sent signals that for him it is most important that the works are carried out in a qualitative way. In any case, this is how the contractor thinks the builder has expressed himself.
When the contractor has handed over the building belatedly, but with excellent work, then the builder has put forward a claim for daylight mulch.
In order to avoid such, or similar situations, the contractor has been given an opportunity to obtain clarity at an early stage, but only in the case of partial deadlines.
It follows from NS 8407 paragraph 40.4 that the contractor may make a written request to the builder if he will come to claim the day mulch, and then the builder is obliged to respond “without undue delay”. If he does not respond within the deadline, the builder loses the right to claim daymulch for the partial deadline.
Finally, we remind you that notifications, demands and responses to such shall be sent as a starting point to the parties' representatives, cf. NS 8407 paragraph 5.
In our view, there may be reason to extend the scope of this provision to cover the final deadline, but in that case it will have to be agreed separately. In NS 8405 paragraph 34.4, the range is not limited to partial deadlines, but applies “daymulched deadline” in general. Accordingly, we believe that this will also apply if the deadline is exceeded.
