Contracts make Cevons, Puran Bros liable to compensate city for any termination

Cevons Waste Management Inc and Puran Brothers Disposal Services could find themselves liable to pay the city council for the purported termination of their five-year contracts for garbage collection in the city.

Royston King

After the two gave notice of their intention to suspend their services, owing to the failure of the city council to service its debts to them, they were both informed by Town Clerk Royston King that their actions were viewed as the “termination” of their contracts, based on the fact that there was no provision in their respective agreements for the suspension of services.

The city council subsequently resumed responsibility for garbage collection with the aid of three smaller contractors.

In a letter to both firms, King had said that, “recent actions… to withdraw garbage collection services (from 7th July to 11th July 2017) and the intended action to do so with effect from the 6th August, 2017 is viewed by the council as a termination of the current contract, since there is no provision within the current contract between the Mayor and City Council and your corporation for the suspension of garbage collection services.”

The letter further directed that the collectors “should not return to fulfill the contractual obligation of garbage collection until and unless the matter is resolved in its entirety.”

Based on the terms of the contracts, which have been seen by Stabroek News, the matter may not be “resolved in its entirety” until the city calculates just how much indemnity the two contractors owe them.

The five-year contracts, signed between City Hall and the two companies in 2015, stipulate that in the case of termination, the city administration is entitled to compensation from the contractors.

While Clause 16 of the contracts states that no party shall be liable for any failure to perform any obligation caused by a Force Majeure, the same section specifically notes that a boycott or strike on the part of the contractor or their staff does not constitute a force majeure. Such an action is instead deemed as a breach of obligations.

Clause 18 specifically provides for termination of the contract if any such breach occurs. This termination is to be done by notice in writing and having immediate effect.

After enacting such a termination, City Hall then “ceases to be under any obligation to make further payment until the costs, loss and/damage resulting or arising out of the termination shall have been calculated.” These payments also remain conditional on whether the previously mentioned calculations show a sum or sums due to the contractor.

King has said that all monies owed to, more than $300 million will be paid before the end of this year, 2017.

However, in the interim, the city is entitled under the contracts to employ and pay other persons to provide and complete the provision of the service using all of the contractors’ material, clothing, equipment, vehicles or other goods for this purpose.

Further the city is entitled to deduct from the contractors a debt equal to any loss or damage to the city solid waste department arising from the termination of the contractors’ employment. This includes the cost to the department of the time spent by its officer in terminating the contract and making alternative arrangements for the provision of the services.

The contracts include several other terms and conditions under which the city may terminate the contracts but none by which the contractors may do so. The contracts may be terminated by the city due to defaults in performance but not due to failure to pay for services granted.

Stabroek News was told that the contracts were not legally vetted before being signed by either company.

Speaking with this newspaper last week, Cevons’ Managing Director Morse Archer explained that his company at least was not exploring legal options; instead, it is awaiting a response to a letter written to President David Granger seeking his intervention.

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