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Delayed Payments

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Delayed Payments

Post by leobcaleja on Wed Mar 16, 2011 4:56 pm

In the PDB there is a provision that states that unless otherwise indicated in the SCC, no payment of interest for delayed payments and adjustments shall be made by the Procuring Entity. Is the non-payment of interest by the PE due to delayed payment legal?
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Re: Delayed Payments

Post by RDV @ GP3i on Thu Mar 17, 2011 5:48 am

leobcaleja wrote:In the PDB there is a provision that states that unless otherwise indicated in the SCC, no payment of interest for delayed payments and adjustments shall be made by the Procuring Entity. Is the non-payment of interest by the PE due to delayed payment legal?

As a general rule, the GOP or the procuring entity is not obligated to pay interest due to delayed payment. That is why, in the PBD, specifically in the SCC, if the GOP/procuring entity will allow interest payment it has to be clearly stated in the SCC. Non-payment of interest by procuring entity is therefore legal, particularly if the SCC does not indicate so. Remember that the bidding document, which include the SCC, forms part of the contract. Since payment of interest is not part of the contractual agreement, it is therefore perfectly legal.
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Re: Delayed Payments

Post by leobcaleja on Fri Mar 18, 2011 1:37 pm

Article 1170 of the Civil Code of the Philippines provides that those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages. How can this reconcile with the such provision in the PBD?

Also, in FIDIC, if the Contractor does not receive payment in accordance with the specified time, the Contractor shall be entitled to receive financing charges compounded monthly on the amount unpaid during the period of delay.

For example, if our payment was delayed for 6 months, in view of which we could have opted for suspension (45 days delayed) or termination (84 days delayed). In case suspension, how can we be compensated for standby charges?
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Re: Delayed Payments

Post by RDV @ GP3i on Fri Mar 18, 2011 3:21 pm

leobcaleja wrote:Article 1170 of the Civil Code of the Philippines provides that those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages. How can this reconcile with the such provision in the PBD?

Also, in FIDIC, if the Contractor does not receive payment in accordance with the specified time, the Contractor shall be entitled to receive financing charges compounded monthly on the amount unpaid during the period of delay.

For example, if our payment was delayed for 6 months, in view of which we could have opted for suspension (45 days delayed) or termination (84 days delayed). In case suspension, how can we be compensated for standby charges?

Payment of "interest" is different from "damages". Payment of interest has to be agreed upon first by both contracting parties. On the other hand, damages has to be proven by the party suffering therefrom.

In the standard Philippine Bidding Documents (PBDs), which eventually form part of the contract with the winning bidder, there is this provision on Payment:

"10.3. Pursuant to GCC Clause 10.2, payments shall be made promptly by the Procuring Entity, but in no case later than sixty (60) days after submission of an invoice or claim by the Supplier."

Based on that provision, the procuring entity/GOP is also mandated to pay promptly (within 60 days) after submission of the claim for payment. If no payment is made within the period, the other party (after informing the GOP that it is already in delay), I suppose, can already claim for damages. Of course, it will be a long drawn process particularly of the GOP will contest the claim. Arbitration may also ensue if both parties could not settle the case amicably.
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Re: Delayed Payments

Post by godaloneisenuf on Mon Mar 21, 2011 9:40 am

RDV @ GP3i wrote:
leobcaleja wrote:In the PDB there is a provision that states that unless otherwise indicated in the SCC, no payment of interest for delayed payments and adjustments shall be made by the Procuring Entity. Is the non-payment of interest by the PE due to delayed payment legal?

As a general rule, the GOP or the procuring entity is not obligated to pay interest due to delayed payment. That is why, in the PBD, specifically in the SCC, if the GOP/procuring entity will allow interest payment it has to be clearly stated in the SCC. Non-payment of interest by procuring entity is therefore legal, particularly if the SCC does not indicate so. Remember that the bidding document, which include the SCC, forms part of the contract. Since payment of interest is not part of the contractual agreement, it is therefore perfectly legal.

I'm sorry sir, but what is the legal basis of that general rule? Isnt it that if the contract is silent on interest, the legal interest shall apply, as enunciated by the Supreme Court in Eastern Shipping vs. CA?

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Re: Delayed Payments

Post by leobcaleja on Tue Mar 22, 2011 4:46 pm

What constitutes a legal basis? Provisions in the Civil Code?
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Re: Delayed Payments

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