-clause 70 (Changes in cost and legislation) reimburses the Contractor for

additional costs arising from price fluctuations or changes in the law.

The foregoing clauses represent a distribution of risk within the contract in line
with the philosophy that it is better for the Employer to take on those risks which
cannot readily be ascertained or priced. To do otherwise means that the lowest
tenderer is likely to be the Contractor who has most severely under-estimated the
possible problems with the project or who has taken the greatest risks. The
Employer will not be well served if his Contractor is forced out of business should
the risk eventuate. Nevertheless, an Employer on a large project which would
attract major international contractors and large performance bonds could well
decide that risks should be re-aligned in the Employer's favour.

In addition to the clauses listed above, the Engineer is empowered to order the
Contractor to "execute additional work of any kind necessary for the completion
of the Works" under clause 51.1 (Variations) item (e).

12.2 This edition departs from the 3rd Edition and ICE 5th by dispensing with
the word "artificial" to describe the obstructions which now need only to be
"physical". This plainly widens the scope beyond man-made obstructions to
anything material. The question of what is reasonably forseeable by an
experienced Contractor is a difficult question of fact which has and will continue
to occupy the attention of arbitrators worldwide.

Contractors bidding for a contract containing this clause have to decide which of
the most common risks to price for: the fewer allowed for, the lower their price
and the better their chance of winning the contract. Rock is a common example:
an everyday risk in civil engineering but slow and expensive to remove. If the
contract is silent, is the Contractor entitled to assume that no rock will be
encountered? Clause 11.1 (Inspection of site) would require the Contractor to
include in his tender for anything that practicable investigations should have
disclosed. Disputes are perhaps inevitable when the contractor to win the job
may be the contractor who has made the least allowance and thus is the most
dependant on a claim under this clause.

Notice must be given in writing in accordance with clause 1.5 (Notices, consents
etc) and must be correctly addressed in accordance with clause 68 (Notices).
Such notice must be given "forthwith", that is immediately. The only other
circumstances requiring such an instant reaction are clause 27 (Fossils) and
clause 65.5 (Increased costs arising from Special Risks). However a failure to
give such notice is not expressed to be a condition precedent to the Contractor's
recovery and the notice requirement may be contrasted with clause 52.2 (Power
of Engineer to fix rates) and with clause 44.2 (Contractor to provide notification
and detailed particulars).

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The lack of procedure following the discovery of a physical obstruction or
condition may give rise to difficulties. The question as to who is to decide what
steps should be taken to overcome the obstruction or condition is not answered.
The Contractor may ask for instructions of the designer of the project who will
doubtless reply that it is not for him to dictate to the Contractor his method of
working. In view of the likely critical nature of the problem, this impasse should
perhaps have been avoided by the draftsman, despite the wide variety of
possible circumstances giving rise to a claim under this clause. It is argued in the
commentary under clause 51.1 (Variations) that, although the Engineer is given a
broad discretion, when excercising that discretion as to whether or not to instruct,
he is subject to clause 2.6 (Engineer to act impartially), particularly when the
instruction would amount to a variation.

"...during the execution of the Works...": A Contractor who has received his Letter
of Acceptance but has not yet received his notice to commence under clause
41.1 (Commencement of works) would be well advised to avoid carrying out any
digging of trial pits or drilling of boreholes. If the unforeseen physical condition or
obstruction is discovered prior to the commencement of the execution of the
Works, the Employer may well be entitled to argue that clause 12.2 does not
apply. The Contractor would have to fall back upon clause 44.1 (Extension of
time for completion) and claim that the problem amounted to "special
circumstances". Whilst the Contractor would probably have the sympathy of the
arbitrator, his argument may well not succeed.

"...other than climatic conditions on the Site". For the other references to the
weather, see clause 11.1 (Inspection of Site), clause 40.1 (Suspension of work)
and clause 44.1 (Extension of time for completion); and see clause 20.4
(Employer's risks) for the phrase "any operation of the forces of nature". Clauses
20.4 and 44.1 are not limited to climatic conditions "on Site".

This is another example of a clause where the marginal note, "Adverse physical
obstructions..." is not reflected in the clause. The word "adverse" does not
feature in the clause and the obligation to give notice is not confined to adverse
conditions: the discovery of soil where rock was expected would technically
require notification. The Engineer may be reluctant to grant time or costs for such
good fortune but if the Contractor had to bring to site different equipment to
replace the rock-blasting arrangements he had prepared, there may nevertheless
be a claim. Clause 1.2 (Headings and marginal notes) makes it clear that
marginal notes are not to be considered when construing the contract.

In civil law countries, with systems based on the French model, administrative
contracts including public works contracts would incorporate the Theorie des
sujetions imprevues.By this doctrine, a Contractor encountering an exceptional
and unforeseen physical obstruction which had not been caused by the relevant
Administration, might be entitled to compensation under administrative law. In
such a contract, therefore, clause 12.2 may not be strictly necessary. A question-
mark remains, however, as to whether compensation will be reduced or refused if
clause 11.1 (Inspection of site) is interpreted to mean that the Contractor has

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agreed to take on the risk of ground conditions. For an outline of the major
administrative law provisions, see under clause 5.1 (Languages and law).

CLAUSE 12.2 (Not foreseeable physical obstructions or conditions)

In the title of this sub-clause, the word "adverse" has been replaced with "not
foreseeable". It was a peculiarity of both the 3rd and 4th Editions that the word
"adverse" appeared in the title but not in the text of the sub-clause. It is only a
peculiarity as clause 1.2 (Headings and marginal notes) makes it plain that
headings and marginal notes shall not be taken into consideration in the
interpretation of the contract.

CLAUSE 13 : Instructions from the Engineer

The Contractor shall complete the project in strict accordance with the contract to
the satisfaction of the Engineer unless it is legally or physically impossible to do
so. The Contractor is to obey Engineer's instructions on any matter relevant to
the works but shall only take instructions from the Engineer or the Engineer's
Representative.

This clause is effectively the same as the 3rd Edition.

In relation to impossibility, this clause should be read in conjunction with clause

65 (Special risks) and clause 66 (Release from performance). Under clause 65,
the Contractor is released from performing, at the Employer's option, in the event
of war but otherwise is obliged to continue to use his best endeavours to
complete the works. If the works are damaged by one of the special risks such
as a bomb, the Contractor may be obliged to repair and replace the works at the
cost of the Employer. Thus, it is only where war or special risks render it legally
or physically impossible to carry on that the Contractor is released without the
Employer's consent. Clause 66 deals with any circumstance outside the control
of both parties "which renders it impossible or unlawful for either party to fulfil his
contractual obligations".

Legal impossibility would include an injunction or a change in the local legislation

which prevented the Contractor working at all or otherwise prevented the project
from proceeding. In this context, see clause 26.1 (Compliance with statutes,
regulations) and clause 70.2 (Subsequent legislation) which deals with local
legislation causing changes to the cost of the works.

There is a spectrum of physical impossibility: at one extreme, there is something

akin to frustration whereby circumstances beyond the control of either party
prevent further performance such as the permanent flooding of the site due to
some natural phenomenon. In the middle of the spectrum there would be projects
which are physically impossible to build: for example, ground conditions might
render the bridging of a river physically impossible so that the project would have
to be aborted in favour of a tunnel. At the other end of the spectrum, a part of the
particular design may be physically impossible to build. For example, it may be

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impossible to fit the specified reinforcement within a column of the size required.
It is submitted that all these types of physical impossibility to some degree relieve
the Contractor of his underlying obligation. In the third example, he is relieved
from complying strictly with the drawings and specifications and the Engineer will
be obliged to instruct pursuant to clause 51.1 (Variations) as a variation would
"in his opinion, be necessary". Unless the element of works had been designed
by the Contractor, the variation would be valued under clause 52.1 (Valuation of
variations).

Physical impossibility could also include circumstances where the site was too
small for the works designed or where clause 12.2 (Adverse physical
obstructions or conditions) circumstances were encountered that were so severe
as to prevent the completion of the works. It is submitted that this clause does
not cover circumstances where the completion of the works is simply more
difficult or expensive than anticipated; nor circumstances where methods or
machinery which the Contractor did not allow for in his tender are found to be
necessary. This situation is to be contrasted with the circumstances where the
relevant method or machinery is specified in the contract with the result that the
Contractor would be entitled to a variation if the relevant method or machinery
proved physically impossible. See the commentary under clause 14.1
(Programme to be submitted) in relation to specified methods of working.

If the Engineer's design is incapable of being built, for example, because

structural elements as designed would be incapable of withstanding the loads to
be imposed upon them by other elements of the works, this could amount to
physical impossibility. The Contractor would be entitled to seek and obtain
instructions from the Engineer which would amount to variations under clause
51.1 (Variations). This situation is to be contrasted with a case such as Sharpe v
San Paulo Railway (1873) 8 Ch. App. 597 where a Contractor undertook to
construct a railway for a lump sum. When it turned out that the quantities stated
in the contract were substantially underestimated, it was held that, in the absence
of fraud, the contractor had taken that risk when tendering a lump sum.

"...in strict accordance with the Contract to the satisfaction of the Engineer". In
National Coal Board v William Neill & Sons (1985) QB 300; (1984) 26 BLR 81, an
English Court considered a similar phrase, "executed in the manner set out in the
specification, if any, and to the reasonable satisfaction of the Engineer". It was
concluded that these words imposed a two-fold obligation upon the Contractor to
achieve compliance with the specification and to obtain the reasonable
satisfaction of the Engineer. Both the ICE and FIDIC have removed the "and"
but, it is submitted, the obligation remains two-fold. The two requirements
contained in this phrase are not always easy to reconcile. If the Contractor has
complied with the letter of the contract but has not satisfied the Engineer, is he in
breach or is he entitled to a variation to cover the additional work required by the
Engineer? If the Contractor has not fulfilled the letter of the contract but the
Engineer indicates that he is satisfied with a lesser standard, is the Contractor
open to criticism? It must be borne in mind that the decisions of the Engineer are
open to review by an arbitrator under clause 67.3 (Arbitration) at the instance of

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both Employer and Contractor. As the Engineer is to give or withhold his
satisfaction impartially in accordance with clause 2.6 (Engineer to act impartially),
it is submitted that the Engineer is not acting as agent for the Employer in the
event that he expresses satisfaction in relation to works not strictly in accordance
with the contract. The Contractor is therefore not able to argue that the Employer
has, through his agent, waived or varied the contract. See also clause 2.1
(Engineer's duties and authority) at item (c) which states that the Engineer does
not have authority to relieve the Contractor of any of his contractual obligations,
"except as expressly stated in the contract".

The practical working interpretation should be that the Engineer is to be taken as

the arbiter of what amounts to "strict accordance with the Contract". Compare the
role of the Engineer as arbiter under clause 5.2 (Priority of contract documents)
in relation to ambiguities and discrepancies. How ever there is little support for
such an approach in the contract. The Contractor appears to be entitled to
execute the works to the letter of the contract and dispute at arbitration if
necessary the Engineer's decision to withhold his satisfaction. Similarly, a
Contractor would be unwise to act upon an Engineer's expression of satisfaction
where the works fall short of strict compliance with the contract as the Employer
would be equally entitled to challenge the expression of satisfaction before an
arbitrator and recover from the Contractor for breach of contract. It is therefore
necessary for a Contractor wishing to be secure to obtain an instruction
amounting to a variation or an indication that the Engineer, in waiving strict
compliance, is doing so as authorised agent for the Employer despite clause
2.1(c).

Elsewhere in the contract, the Engineer's satisfaction recurs most frequently in

relation to the rectification of defects and damage and in relation to the readiness
of the works or any part of the works for a Taking-Over Certificate. See for
example, clause 17.1 (Setting out) and clause 49.2 (Completion of outstanding
work and remedying defects).

The Engineer's power to instruct is very, perhaps absurdly, broad, limited only by
the requirement that such instructions must touch or concern the works. The
provisions in the contract covering instructions are widely dispersed and this
clause should be read in conjunction with clause 2.5 (Instructions in writing),
clause 7.1 (Supplementary drawings and instructions) and clause 51.1
(Variations). For a discussion of the Engineer's power to instruct variations, see
under clause 51.1.

The question arises as to the power of the Engineer to issue instructions after
substantial completion. There is no express limitation under clauses 2.5 or 7.1 or
under this clause or clause 51.1. On the contrary, clause 7.1 refers to the
remedying of defects and clause 49.2 (Completion of outstanding work and
remedying defects) and clause 50.1 (Contractor to search) contain express
references to instructions during the Defects Liability Period. Nevertheless, it
would come as a surprise to most people involved in a civil engineering project if
the Engineer sought to issue an instruction amounting to a variation after

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