Fraud by project owner: Defects in works

Example:  The contractor completes the road correctly and on time in accordance with the contract.  The Transport Minister instructs the Road Agency to make a retrospective 10% saving on the project cost. 

• The RA falsely informs the contractor that there are defects in the road, and that it will not pay the contractor its final 20% due, and will sue in court, unless the contractor agrees to waive 10% of the contract price.
• The contractor is short of cash, and does not want to go to court, so agrees.

Fraudulent acts by the RA:

• Creating a false claim that there are defects in the road.
• Using this false claim to threaten the contractor with litigation and non-payment.

Result:

• Contractor wrongfully has to waive 10% of the contract price.
• RA makes unlawful financial gain of 10%.