IN THE HIGH COURT OF LESOTHO
the matter between:-
CONSULTANTS & CONTRACTORS ….............................APPLICANT
Date of hearing : 6, 17
June and 20, 26 August and 6 Sept. 2010
Date of Judgment : 15th
: MR ACTING JUSTICE J.D. LYONS
Letsika for Plaintiff
Shale for Defendant
Contract – interpretation
of terms – performance bond – forfeiture factual dispute
– decided on facts.
The Plaintiff is a firm of general contractors. The Defendant is the
provider of electricity in the Kingdom of Lesotho.
As part of the electrification of Butha-Buthe village, the parties
entered into a written contract dated 10th October 2006
wherein the Plaintiff contracted to provide certain construction
services to the Defendant.
The length of the contract was 10 weeks. The Plaintiff commenced on
or about 3rd November 2006 with the projected finishing
date being 12th January 2007.
The contract price was M330,400.00. The contract was subject to the
Plaintiff per-paying a performance bond of 10% of the contract
I gather that this sum of M33,040.00 was paid, or at least
satisfactory arrangements were entered into.
At this point it may be useful if I set out the relevant provisions
of the contract.
Clause 5 of the General conditions of the contract reads:
5. Performance Security.
5.1 Within fourteen (14) days of signing of Contract the
successful Bidder shall furnish to the Employer a performance
in the amount of 10% of the bid price.
5.2 The proceeds of the performance security shall be payable to
the Employer as compensation for any loss resulting from the
failure to complete its obligations under the
The Plaintiff is defined as the Contractor and the Defendant is
defined as the Employer (clause 1 - General Conditions).
Clause 15 of the General Conditions reads:
15. Delays in the Contractor’s Performance.
15.1 Delivery of Services shall be made by the Contractor in
accordance with the time schedule prescribed in the quotation.
15.2 If at any time during the performance of the Contract, the
Contractor or its subcontractor(s) should encounter conditions
timely delivery of Services, the Contractor shall promptly
notify the Employer in writing of the fact of the delay, its likely
duration and its cause(s). As soon as practicable after the receipt
of the Contractor’s notice, the Employer shall evaluate
situation and may at its discretion extend the Contractor’s
time for performance, with or without liquidated damages,
case the extension shall be ratified by the parties by amendment of
15.3 A delay by the Contractor in the performance of its delivery
obligations shall render the Contractor liable to the imposition
liquidated damages unless an extension of time is agreed upon without
the application of liquidated damages.
Clause 16 of the General Conditions reads:
16. Termination of the Contract.
If the Contractor fails to deliver any or perform the Services
within the period(s) specified in the Contract, the Employer may,
without prejudice to its other remedies under the Contract, call up
the Contractor’s Performance Security and terminate this
In Part 8 – Installation Specifications – the Contractor
was required to order and collect materials from the Defendant’s
stores (8.1.2). The Defendant provided the materials on a ‘as
needed’ basis. When the Contractor reached a certain
the works where specific materials were required, he would put in his
order to the Defendant and then go and collect the
materials from the
stores. It was done on this basis to relieve the Contractor of the
need to provide storage facilities and to
minimize the likelihood of
damage or theft occurring if the materials were left idle in the
As relates to the handling of these materials, clause 8.3 of Part 8 –
Installation Specifications reads:
8.3 Material Handling.
All materials to complete the contract works as described in the
contract, will be provided by LEC. The contractor will be responsible
for the ordering from LEC stores, collecting, and arranging for off
loading of materials and equipment and shall include the cost
in the tender prices.
The contractor shall make the necessary arrangements for safe
storage on site, offering adequate protection against theft, damage
and weather. The responsibility for insurance of materials against
any form of damage, or theft after issue thereof, also rests
In cases where the contractor meets the required lead-time for
delivery of material on site and the material is not available, any
resultant standing time or additional expenditure incurred will still
be the responsibility of the contractor. The onus is thus
contractor to ensure timeous delivery of material on site.
Written notification shall be given to the Project Manager the
moment the contractor suspects a possible late delivery. Should late
delivery occur, due to a problem of national proportion then the
Project Manager will determine the extent of lost time, however
extension of time shall only be considered if the delay is on the
critical part of the contractor’s program.
The Plaintiff duly commenced the works on November 2006. Some delays
were occasioned due to weather, funerals and difficulty with
timely delivery of stores. The Plaintiff applied for, and was granted
extensions in respect of these delays.
On 14th February 2007, the Defendant wrote to the
Plaintiff as follows:
Proposed Butha-Buthe electrification – project delays.
We acknowledge receipt of your letter dated 12th
February 2007, requesting two weeks contract extension to 23rd
February 2007. We would like to stress our disappointment in
the manner that you are executing this Project. Our personnel
the site meeting on the 17th
February 20007 that was arranged between LEC and yourselves,
but you failed to attend and did not apologize. We established during
the site inspections that you do not have resources like vehicles on
site, and also that the remaining activities cannot be completed
within two weeks, as conductor stringing has not started.
However we will grant you an extension of two weeks that you
requested, but be aware that we will impose penalties as per clause
15.3 of our contract agreement should you fail to complete the
remaining works by 23rd February
With this letter the defendant established that time was of the
essence for the contract. The date for completion was set as 23rd
The Plaintiff did not finish the contract until 21st July
2007. From 23rd February to 21st July, 2007 the
Plaintiff had not applied for any further extensions to the contract
time, nor was any notice given under clause
8.3 of the Installation
On 16th May, 2007, the Defendant did, however, write to
the Plaintiff. This letter addressed the issue of delay regarding the
project and two other projects the plaintiff was working
on. The letter reads:
Pending LEC jobs awarded to Tsoelopele.
LEC awarded you Butha-Buthe Electrification project on the 08th
September 2006 and according to the program you submitted to LEC,
you were supposed to have stared on the third week of October and
complete the Project by 22nd December 2006.
To-date you have not yet completed this project.
Again you have Lower Thamae and Roma System Improvement Projects
that were awarded to you in November 2006. These small works were
expected to be completed within three weeks after commencement.
Despite LEC efforts to urge you to complete these projects on
time, you failed to improve your performance. We give you up to the
25th May 2007 to complete all these
projects, otherwise the job orders for Lower Thamae and Roma will be
cancelled. The Butha-Buthe project
is under penalties as we warned
you on our letter dated 14th February 2007.
This letter confirmed that time was of the essence in respect of the
Butha-Buthe contract. The time for completion of that project
still set as 23rd February 2007. As this time had passed
by the time the above letter was written, the Defendant reminded the
Plaintiff that it (the
Defendant) had decided against terminating the
Butha-Buthe contract for non-performance (Clause 16 refers) and
instead was relying
on the penalty clause in the contract. This
clause I take to be clause 15.3.
On 4th June 2007, the Plaintiff replied to the letter of
16th May 2007 as follows (as relates to the Butha-Buthe
Botha Bothe: Work is complete except for some mostofer brackets
awaiting supply of materials from LEC.
Tsoelopele Consultants and Contractors wish to stress that the
delays in supply of materials are problematic for the cost efficient
implementation of the projects as these result in cost of labour and
transport being considerably higher than estimated. Our work
can not be utilized effectively and truck needs to be doubled as
transformers are not available as planned. For example the
boxes for Botha Bothe were only supplied two weeks go.
Provided the materials are supplied the projects can be
commissioned with one days notice.
To my mind this letter was setting up an excuse and gave an
indication of what the Plaintiff’s problem really was –
it had under-quoted on the job. It was also trying to set up as an
excuse for its delay that it was the Defendant who was responsible
because it had not had the materials available.
I note, again, that there was no prior correspondence from the
Plaintiff since the letter of 14th February 2007 seeking
and extension or complaining about delays being caused by the
Finally on 23rd July 2007 the Defendant wrote to the
Plaintiff as follows (as is relevant):
Proposed Butha-Buthe Village Electrification.
This letter serves as a follow-up of our letter dated 14th
February 2007 (copy attached). Please note that this project
commenced on the 03rd November 2007 and was
supposed to be completed by 12th January
2007. Time extension was granted to you up to 23rd
February 2007 without penalties, but clearly indicating that your
failure to complete will result in LEC applying penalties as per
clause 15.3 of our contract agreement. The total number of calendar
days from 23rd February 2007 to 21st
July 2007 (Project completion date) are 92 days (excl holidays,
rainy and stay-away).
The penalties are as follows: Amount per calendar day is M500.00 x
92 days = M46,000.00. Your net contract amount is M330,400.00,
therefore LEC will deduct maximum of 10% of the contract price i.e.
M33,040.00 from your remaining project funds.
……. Yours faithfully.
The Defendant did just as it said it would – from the final
payment to be made to the Plaintiff it retained M33,0400.00.
The Plaintiff now sues the Defendant for this sum, saying that it was
wrongly deducted. As the Plaintiff says in the founding affidavit,
the court is ‘enjoined to adjudicate over this matter in
order to determine if LEC was entitled to impose a penalty or not’.
As this matter was originally commenced by Notice of Motion but
later, by consent, converted to a summons mater for trial with
affidavits to stand as both evidence (to be supplemented by witness
statement and viva voce evidence) and pleadings, the above
a very general and wide sense, as the nub of the Plaintiff’s
case as pleaded.
The Plaintiff says that the delays were caused by the delay in
getting stores from the Defendant’s stores. This it says was
the Defendant’s fault. As I have noted above, from the 23rd
February onwards, the Plaintiff made no written or verbal requests
for an extension. Nor did it make any written complaint to the
Defendant concerning the issue of the delay and that it was the
Defendant’s fault. Its letter of 4th June 2007
cannot be considered a complaint. It is more like an excuse. The
Plaintiff was well aware of the requirements for getting
or lodging a complaint about delays. It had used the correct
procedure very early in the piece (see its letter to
the Defendant of
12th February 2007). The Plaintiff has put a number of
waybill notes before the court as if to support its contention. These
me nothing other than that certain goods for certain jobs
were picked up from the Defendant’s stores at certain times.
do not tell me when these goods were requested and what the
state of the Plaintiff’s project was at that time. At best
bills are self-serving.
Furthermore the matching Picking Slips (Exhibit D3 - the documents
that generated the orders) showed that in fact there were no
between order and delivery. The best the Plaintiff could say was that
there was a 7-day break between the order for transformers
delivery. This was well after the set date for completion.
The Defendant presented evidence that pointed to the Plaintiff’s
state of unpreparedness and inability to do the works within
frame agreed upon. The Defendant says the delays were not caused by
unavailability of materials in its stores department.
contrary, it says the delays were as a result of the Plaintiff’s
inefficiency and tardiness.
Having heard the evidence and observed the demeanor of the witnesses,
I prefer the evidence of the Defendant and its witnesses
point. I find that the delays were on balance due to the Plaintiff’s
inability to properly perform the contract on
time and that this was
not caused by any fault of the Defendant.
Even if it were to be so, clause 8.3 of the Installation
Specifications (which form part of the contract) specifically says
the responsibility for the timely delivery of stores rests with
the Plaintiff. The Plaintiff could have given written notice if
suspected that there would be time delays which were not of its
doing. It served no such notice.
So far as the question of delays in delivery of materials is
concerned, it rests at the Plaintiff’s feet whichever way one
looks at it. The Plaintiff is clutching at straws in trying to pass
the blame for the delay in a timely completion of the Butha-Buthe
project on to the Defendant.
The question to be answered (as posed by the Plaintiff - see above)
is – ‘Was the Defendant entitled to impose a penalty,
if so, did it do so correctly within the terms of the contract?”
In answering this question, it must be noted that this is not a
matter akin to judicial review. It is a contract dispute brought
the Plaintiff. The onus is on the Plaintiff to prove its case. Thus
the Plaintiff must show that, as a matter of fact and/or
the Defendant wrongfully imposed a penalty upon the Plaintiff and
thus wrongfully deducted (or withheld) the sum of M33040.00
amount owing to the Plaintiff.
In submissions counsel for the plaintiff did not seriously contest
that, should it be found the plaintiff was at fault, then the
defendant was within its rights to forfeit the security/performance
security as damages. This was a sensible approach to take.
contract is very clear. In the event of non-performance, the
defendant is able to forfeit the 10% performance security. It
able, if so minded, to claim additional damages. It did not and
restricted itself to the performance security.
The plaintiff’s case revolves around two mutually destructive
versions. The plaintiff’s version is that the late completion
of the contract was due to delays in supply of materials from the
defendant. The defendant, (acknowledging some supply problem
early stages - which was compensated for by an extension), correctly
points out that the relevant period is post 23 February
2007. It says
there were no delays during that period for which it was responsible.
On my assessment of the evidence, the plaintiff
has failed to prove
Further, in terms of the contract, the liability for any delays in
delivery of materials falls on the plaintiff, unless it serves
written notice any problematic delays. As relates to the relevant
period under review, it served no such notice, because, I find,
were no such delays.
The case is dismissed with costs to the defendant to be taxed if not
I thank counsel for the high quality assistance.
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