History Repair "SOS Children's Village Russia" Lavrovo (History of deception LLC "Company LAD")

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Continuation, correspondence. The second letter to Construction adviser SOS Children’s Villages Inte
№ 01-04
as of 05.11.12

To: Construction adviser
SOS Children’s Villages International
Mr. Alfred Strommer

Dear Mr Strommer,

We have met during the signing of the contract, due to this I decided to write to you personally concerning the issue with cancellation of our contract (Contract P-1 dated 01.08.2012).
1st August 2012 our organization (Company LAD) won the tender for repairing works in SOS Children’s Village Lavrovo. First payment for works at the amount of RUB 1,770,000.00 was sent to us on 17.08.2012, the money were on our account on 20.08.2012.
The aim of the repairing works according to the Terms of Reference to the contract is “the cosmetic repairs” and in accordance with the budget estimate “Minor repairs and filling-up the walls”. But with the beginning of works it turned out that thick vinyl wall coverings concealed defects of the plaster and the existing interior finishing didn’t satisfy the requirements of the Construction Norms and Rules (SNiP 3.04.01-87). It was impossible to make the cosmetic repairs in accordance with the Clause 1.3 of the contract. Instead of the cosmetic repairs it was necessary to redo the finishing. Actually situation required amendment of the Clause 1.3 as the hours of labour increased in 3 times and consumption of materials in 4 times.
As soon as we found this out we informed on 05.09.2012 Mr Alexey S. Lubimov (in email) and then on 11.09.2012 Mr Nikolai Yu. Slabzhanin (in letter). Together with informing about the actual situation we requested to amend the terms of the contract. On 18.10.2012 we resent letter to Mr Slabzhanin with the same content.
In his email as of 13.09.2012 Mr Lubimov informed us that the terms of the Annex to the contract are being considered and requested that while they are considered to continue repairing works maintaining the necessary quality of these works. Actually we were forced to invest our own financial means into the works to reach the requested quality and amount of works as the initial advance payment at the amount of RUB 1,770,000.00 was spent
to pay the purchase and installation interior doors from the seller specified by SOS Children’s Villages
to purchase and install the balcony doors and linoleum.
We had to cover the charges for finish materials, the amount of which increased in 4 times, and the salaries to workers. As the result we invested RUB 1,500,000.00 of our own means and performed 50% of the works under the sum of the contract. During this time we received no instruction to stop works neither from Mr Lubimov nor from Mr Slabzhanin, so de facto they were satisfied with the quality and approved the performance of works. We continued working and investing our means and after 18.10.2012 (our second letter to Mr. Slabzhanin), and at the moment we are finishing works in family building 8. As of today we have finished the finishing works in buildings: 1, 2, 3, 4, 5, 9, 10, 11, we completed the installation of PVC-doors, the repairs of waste water disposal systems in all buildings, repairs of the roof on building 1. The amount of performed works including remainder of the bought materials extends the 50% of the total sum under the contract. As of today we have spent RUB 4,170,000.00.
According to Clause 8.1 of the contract “… All disputes or disagreements arising between parties to this contract or related to this contracted will be settled by negotiations between the parties”. Unfortunately we received no reply to all our letters and emails containing our reasonable suggestions.
We do not dispute your right to cancel the contract in accordance with the Clause 7.6 but request to settle in accordance with the Clause 7.4 the indebtedness resulted from covering from our own financial means the purchase of materials and charges for workы. The estimated total amount of means spent is RUB 4,170,000.00. Thus with the exclusion of the advance payment (RUB 1,770,000.00) the estimated amount of indebtedness is RUB 2,400,000.00. The exact amount of indebtedness together with the copies of proving documents can be provided upon request.
Nevertheless we are ready to continue works subject to settling all our disputes, including settling indebtedness and signing the Annex to the contract based on the real situation taking into account the increased hours of labour and charges for materials.
In our letters to Mr Slabzhanin on 11.09.2012 and 18.10.2012 we provided 2 options for the continuation of works. First option – by performing main works, i.e. works necessary for living in the buildings, and cancelling the less important works thus decreasing the total number of works but without increasing the sum under the contract; in this case finalization of works will be done on 25.12.2012. Second option – by performing all works, but increasing the sum under the contract and performing works in two stages, with main stage finishing by 25.12.2012, and the finalization of works with the beginning of warm season (i.e. start in April, finish at the end of May). Whichever option suits you better we will be happy to perform it to the mutual benefit. We are also open to any options from your side.

Looking forward to hearing from you,

Sincerely yours,

General Director Taisia I. Starostina
By power of attorney as of 14.08.2012 Igor P. Skorkov


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