Actions following termination of the contract

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After the termination of the contract, the Contracting Authority has the possibility to either complete itself the scope of the contract (case of service or public work contracts), or to conclude any other contract with a third party for the execution/ completion of the contract scope, with the Contractor covering any possible difference in the price. In a case where the Contractor is a consortium of physical and/ or legal entities and one or more of the reasons for terminating the contract which are given in the Table 6-10 refers to one of the members of the consortium, the other members of the consortium, as being responsible in solidarity, are required to complete the implementation of the contract scope without differentiation with regard to the contractual obligations of the Contractor.

At any rate, the Contracting Authority reserves the right to terminate the contract if the member of the consortium for which the reasons for exclusion apply is the leader of the consortium or if the participation percentage of this member creates grounds to suspect inability to fulfill the contractual obligations by the other members.

It is noted that especially in the case of public work contracts, the Contracting Authority or the new Contractor are entitled to use in the completion of the Project part of the machinery of the Contractor, Temporary Works and materials they deem suitable. Furthermore, as long as not prohibited by law, the outgoing Contractor is required, if instructed by the Engineer within 14 days (unless otherwise specified in the contract) from the entry to the construction site and solution of the contract, to assign to the Contracting Authority the privileges of any agreement which he had concluded for the supply of goods or materials or services or/ and the execution of any work for the purposes of the contract.

Upon the contract termination by the Contracting Authority, the Contractor ceases to have any responsibility for delay with the completion of the Project, without this meaning that he is relieved of any responsibilities that may had resulted before the solution of the contract. In the case of termination due to inability or non satisfactory performance of the Contractor in the execution of the contract, the Contractor may be devoid of the right to participate in future tenders, either permanently or for a specified period of time, pursuant to what is provisioned in the Regulation 25 of the KDP 115/2004 for the Contracting Authorities that are Ministries, Departments or Services belonging to a Ministry or Independent Office or Independent  Service of the Republic of Cyprus or the respective specified procedures for the other Contracting Authorities (for more information see paragraph 6.6.1).

In addition, in case of termination of the contract by the Contracting Authority, the latter must proceed with the forfeiture of the Performance Guarantee. If the damage incurred by the Contracting Authority exceeds the amount of the aforementioned guarantee, then the Contracting Authority reserves the right to take legal or other measures that deems necessary against the Contractor for the restoration of the situation.

As soon as possible after the termination of the contract, the Project Manager (or the Engineer in the case of public works) must certify the value of the services provided or products delivered or works executed and all of the amounts due to the Contractor up to the termination date. The Contracting Authority is not required to proceed with any further payments to the Contractor until the completion of the services or delivery of the products or, in the case of public work contracts, until the expiration of the Defects Liability Period and, following this, until the expenses for the execution, completion and repair of the defects, the liquidated damages or penalties for delay in completion and all of the expenses incurred by the Contracting Authority have been ascertained and the respective amount has been certified by the Project Manager (or the Engineer). Following their completion, the Contracting Authority is entitled to recover from the Contractor additional costs, if any, which will arise for the completion of the services or deliveries or works and, once these are offset against the amount due the Contractor, pay to him or require from him the amount of the difference.

Also, in a case where the Contracting Authority terminates the contract, it is entitled to recover from the Contractor any damage it has incurred up to the maximum amount specified in the contract. If the maximum amount is not specified, the Contracting Authority, without prejudice of the other remedies provisioned by the contract, is entitled to recover the part of the contract value that is ascribed to this part of services/ supplies/ works which have not been, due to omission of the Contractor, completed satisfactorily. On the other hand, the Contractor is not entitled to claim, beyond the amounts due to him for the work which has already been executed, compensation for any damage or loss he incurred, unless otherwise specified in the contract.

In a case though of termination of the contract by the Contractor, the Contracting Authority is required to compensate the Contractor for any loss or damage that he may incurred. This additional payment cannot be such that the total payments exceed the contract value.

When a contract is terminated without achieving the acceptance of its deliverables (e.g., due to non satisfactory performance of the Contractor), the Contracting Authority must examine the possibility of re-announcing the Tender. In this framework, on the one hand the needs identified originally and which would be covered by the said contract must be reviewed and on the other, identify any new additional needs or requirements. The Contractor's performance problems, any gaps in the contract that had been signed and all of the experience gained from the mistakes in contract management must be considered seriously during the preparation of the Documents for the new Tender as well as during the management of the new contract with the new Contractor in order to avoid repeating them.

© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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