Professional Documents
Culture Documents
CONTENTS
Introduction FIDIC (What and Why?) FIDIC Publications FIDIC Conditions of Contracts for Works Contracts FIDIC Contracts Comparison Matrix Discussion on topics like;Limitation of Liability Third Party Liability Indemnity Delay Damages Defects Liability Termination of Contract Claims
Introduction
FIDIC is the International Federation of Consulting Engineers Its members are national associations of consulting engineers. Was founded in 1913 by Belgium, France and Switzerland HQs is in Genve, FIDIC membership covers 94 Countries as of today. FIDIC publishes international standard forms of contracts for works and for clients, consultants, sub-consultants, joint ventures and representatives, together with related materials such as standard pre-qualification forms. FIDIC also publishes business practice documents such as policy statements, position papers, guidelines, training manuals and training resource kits in the areas of management systems and business processes. Organises workshops and training programmes
IntroductionContn..
The first edition of FIDIC was published in 1957- subsequent edition in 1969 Third edition in 1977 Yellow book for mechanical and electrical works -1963- second edition in 1980 4th Edition (1987) Red Book required the Engineer to act impartially when taking action or decisions previous editions assumed implicitly. 1996 a Supplement was published option of DAB payment by lumpsum basis than by reference to BOQ 1995 Orange Book Conditions of Contract for Design Build and Turnkey Orange Book dispensed with the role of Engineer provided for Employer Representative
The express requirement for being impartial was relinquished- Employer representative had to determine the matter fairly, reasonably and in accordance with the contract. Archaic rule submission to Engineer for Decision was eliminated and DAB was introduced. 1994 FIDIC established a task group to update the Red and Yellow Book in light of development in International Construction Industry.
Role of Engineer -
Use of common definitions in Red and Yellow Book Balance the interest of familiarity with pre-existing terminology update.
In 1999 FIDIC introduced the new Red book, the new Yellow Book, Silver Book ( EPC/Turnkey Projects) and the Green Book (short form of Contract)
Why FIDIC
covers almost all the major issues that needs to be addressed under a contract have a consistent and easy to follow structure
Why FIDIC
FIDIC has committees formed of international members to improve its publications. Committees do continuous monitoring to improve and/or revise the existing publications (contract types, guidelines, etc.) and to introduce new books.
Very well known by international Contractors and Consultants, therefore creates confidence and encourages tenderers.
Contract Agreement;
Letter of Tender; Letter of Acceptance; Conditions of Contract; Specifications;
Drawings;
Schedules; Dispute Adjudication Agreement.
FIDIC Publications
Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer; 1999 Edition RED BOOK Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering, Designed by the Contractor; 1999 Edition YELLOW BOOK Conditions of Contract for EPC Turn-key Projects (First Edition, 1999) - SILVER BOOK EPC Turn-key : Engineering Procurement Construction Short Form of Contract 1st Ed (1999 Green Book) GREEN BOOK
FIDIC Publications
Conditions of Contract for Construction (Multilateral Development Bank Harmonised Ed. Version 3: June 2010). For Building and Engineering Works designed by the Employer. Harmonised RED BOOK
Conditions of Contract for Design, Build and Operate Projects (1st Ed, 2008) - GOLD BOOK
Business Integrity
Risk Management
Quality Management
Environment Management
Sustainability Guide FIDIC Contracts Guide to the Construction, Plant and Design-Build and EPC/Turnkey Contracts
RED BOOK
Design and Engineering (incl. BoQs) is done by Employer or Employers Representative. Tenderers fill in their unit prices into the existing BoQs. Final amount is not fixed, payments are done based on the real amounts executed. (Exceptions are available eg: lump-sum conracts)
RED BOOK
Employer carries the risk for contract amount increases. The better the design, the flawless the project implementation. Tender evaluations are relatively simpler.
YELLOW BOOK
Employer Requirements includes only; Draft layout, Operational Parameters, Technical Specifications and Financial Proposal Format (Schedule of Prices).
Tenderers submit their technical proposals together with their financial proposals. Technical proposals cover at minimum methodology, basic design and drawings, bill of and similar supporting documents.
YELLOW BOOK
Generally lump-sum price contracts are used. Price increase and other risks are distributed amongst both parties.
SILVER BOOK - 1
Two-party contracts (No Engineer)
SILVER BOOK - 2
More suitable for projects like; refinery, petrochemical facilities, power plants. Implemented if the employer foresees high risk for the supply and assembly of mechanical and electrical components. Tender evaluations are very complicated and requires continuous negotiations.
GREEN BOOK
Comparison Matrix -1
Parameters RED YELLOW SILVER GREEN Design Employer Contractor Employer Employer or Contractor
Design Approval
Financial Proposal
Unit Price
Lump-sum Price
Lump-sum Price
Payment Schedules
Payment Calendar / Measured quantities Measured quantities Payment percentages Payment percentages or Percentages No. Employer 21 representative may assign if needed.
Engineer
Yes
Yes
Generally No
Comparison Matrix-2
Parameters RED YELLOW SILVER GREEN
Significant number of Relatively less and Tests during Construction tests simpler
Generally no tests
Limited or no tests
Tests at completion
Limited or no tests
Risk Distribution
22
Exercise-1
Contract Clauses
Limitation of Liability
Clause 17.6 of FIDIC Limitation of Liability "Neither Party shall be liable to the other Party for loss of use of any Works, loss of profit, loss of any contract or for any indirect or consequential loss or damage which may be suffered by the other Party in connection with the Contract... Loss that can be recovered by Contractors under FIDIC direct loss and expense: if these fall within FIDIC's definition of 'cost' - "all expenditure reasonably incurred (or to be incurred) by the Contractor whether on or off the Site, including overhead and similar charges but [not including] profit" - and are directly linked to the clause giving rise to the claim, they can be claimed; preliminaries: as above, these are also recoverable; overheads: also recoverable the cost of running the business as distinct from general site costs is expressly allowed for in the definition of Cost; loss of productivity/disruption: in principle this is recoverable, but in practice proving this loss is difficult. The 'measured mile' approach compares work in disrupted and undisrupted conditions, with the difference between the two being the disruption factor;
profit: this is not recoverable, unless expressly allowed for in the Contract. Profit is excluded, from both the definition of Cost and by Clause 17.6; interest: recoverable; the Contractor has an express right to interest on any unpaid sums under the standard FIDIC forms; finance charges: recoverable - under English law, it is possible to claim finance charges as part of a claim for direct loss and expense; inflation/exchange rate fluctuation: not recoverable - increased costs resulting from inflation/exchange rate fluctuation are classed as 'consequential loss' and are therefore excluded by Clause 17.6; claims preparation costs: may be recoverable under English law, these can be recovered in principle but such claims are hard to establish; lost commercial opportunity and business interruption: generally not recoverable.
FIDIC exclusion clause expressly excludes "loss of profit". In addition, it excludes indirect and consequential loss The McCain Case In McCain, the purchaser had bought a system ("System") for removing hydrogen sulphide from the biogas produced by its waste water system, so that the biogas could be used to generate heat and electricity in a combined heat and power plant. In addition to using the electricity for its own purposes, the purchaser intended to generate revenue by selling Certificates of Renewable Energy Production to third parties. the System was found to be defective and McCain claimed damages from the supplier
McCain CaseCont
the cost of buying a replacement system; loss of revenue from the System (from selling Certificates of Renewable Energy Production); the extra cost of buying electricity (since the purchaser could not generate its own); the cost of contractors and other personnel; the cost of mitigation efforts; and various other smaller claims, including the cost of staff time to resolve the issues.
Indemnity
FIDIC '99 provides for a right of objection under Clause 5.2 that is conditional upon the contractor's receipt of an indemnity from the proposed nominated entity. indemnify the contractor against and from any negligence or misuse of goods... Silent on Salient Points;
What the key provisions of an indemnity requirement are? How it is called or triggered? Is there any limit on liability? For how long does it last? What about contributory negligence? Does the Engineer administer the process? (clearly not in the absence of clauses saying so) therefore; Who decides on the allocation of monies? Is the contractor effectively 'self insuring' and if so, is the company financially sound enough to do that?
The Defects Notification period as ruled in clause 11 of FIDIC is an additional period of time during which the duty to perform continues to exist. Clause 11.1 and 11.2 Contractor is under obligation to carry out any work which becomes instructed by the Engineer or Employer, to the extent that a defect occurs which is or is not attributable to the Contractor Legal Defect Liability only starts after acceptance of Works when the Engineer issues Performance Certificate. Eg. French Decennial Liability Clause The duration of the Defects Notification Period is stated in the Appendix to the Tender or Particular Conditions as the case may be. Ends automatically after the expiry of the fixed period of time even if Performance Certificate is not issued.
Defects Liability
Defects Liability
Commencement Date Taking Over Certificate Defects Notification Period
Performance Certificate
Defects Liability
The limitation period for remedies concerning defective works is
Germany
Poland France Decennial Liability Romania
Termination of Contract
Termination for Cause Contractor not entitled to terminate a Contract for convenience,
Termination
Sub-clause 9.4(b): failure to pass tests on completion. Sub-clause 11.4(c): failure to remedy defects.
a) The Employer shall be entitled to terminate the Contract if the Contractor: (a) fails to comply with Sub-clause 4.2 [Performance Security] or with a notice under Sub-clause 15.1 [Notice to Correct]. b) abandons the Works or otherwise plainly demonstrates the intention not to continue performance of his obligations under the Contract c) without reasonable excuse fails:
a) (i) to proceed with the Works in accordance with Clause 8 [Commencement, Delays and Suspension], or b) (ii) to comply with a notice issued under Sub-clause 7.5 [Rejection] or Sub-Clause 7.6 [Remedial Work], within 28 days after receiving it.
d) subcontracts the whole of the Works or assigns the Contract without the required agreement
Termination
e) becomes bankrupt or insolvent, goes into liquidation, has a receiving or administration order made against him f) gives or offers to give (directly or indirectly) to any person any bribe, gift, gratuity, commission or other thing of value, as an inducement or reward: In any of these events or circumstances, the Employer may, upon giving 14 days notice to the Contractor, terminate the Contract and expel the Contractor from the Site. However, in the case of sub-paragraph (e) or (f ), the Employer may by notice terminate the Contractimmediately.
The Employer shall be entitled to terminate the Contract, at any time for the Employers convenience, by giving 28 days notice termination to the Contract Employer to return the Performance Security.
After this termination, the Contractor shall proceed in accordance with Sub-clause 16.3[Cessation of Work and Removal of Contractors Equipment] and shall be paid in accordance with Sub-clause 19.6 [Optional Termination, Payment and Release].
Suspension by Contractor
16.1 deals with Suspension
If the Engineer fails to certify ( issue of interim payment), fails to comply with employers financial arrangement or payment give notice of 21 days suspend work or reduce rate of work Where the Contractor suffers delay and/or costs contractor entitled to EOT and payment of cost plus reasonable profit.
After receiving notice Engineer shall proceed in accordance with clause 3.5 [Determinations]
16.2
Termination by Contractor
a) Contractor does not receive the reasonable evidence within 42 days after giving notice under sub-clause 16.1 and 2.4 b) Engineer fails, within 56 days after receiving Statement and supporting documents, to issue the relevant Payment Certificates. c) Contractor does not receive Interim Payment with 42 days after the expiry of the time stated in 14.2 [payments] d) Employer substantially fails to perform his obligations under the contract e) Employer fails to with sub clause 1.6 [contract agreement] or 1.7 [assignment] f) A prolonged suspension 8.11 g) Employer becomes bankrupt or goes into liquidation
Exercise-2
Claims
FIDIC contracts are aimed at the early resolution of any queries at the time when the claim arises. Procedure involved is;-
Claim
to give notice (in time) to give particulars of the claim (in time) to wait for Engineers approval or disapproval to negotiate and settle the claim to wait for Engineers determination (in case of failure to reach settlement) to refer a dispute to the DAB (in case of dissatisfaction)
Claim
Cost is a defined term meaning all expenditure reasonably incurred (SubClause 1.1.4.3) including overheads and similar charges but no profit.
There is no express definition of a claim in FIDIC forms of Contract a claim in practice is generally taken to be an assertion for (additional)
The Contractor must provide to Employer's Engineer written notice of the claim for additional payment and time extension within 28 days after becoming aware of the occurrence of the event giving rise to claim (SubClause 20.1). If the Contractor fails to comply with this notice requirement, his entitlement to the claim shall lapse The Notice is Important because; everyone involved becomes aware that there is an event or circumstance where extra time or payment may be owed to the Contractor proper contemporary records must then be kept and agreed, to avoid future argument alternative measures may also be possible to reduce the effects the matter may possibly be resolved at an early date if the event or circumstance turns out to be of insignificant effect, then it is not necessary to follow up the notice with a formal claim.
Claim
Claim
If the contractor fails to give notice of claim within such period of 28 days, the time for completion shall not be extended, the Contractor shall not be entitled additional payment, and the Employer shall be discharged from all liability in connection with claim English Courts have confirmed their approval of the condition precedent. In the case of Multiplex construction v/s Honeywell Control Systems the Judge held that Contractual terms requiring a contractor to give prompt notice of delays serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.
Is there a possibility that a DAB or Arbitral Tribunal might decline to construe the time bar as a condition precedent Applicable law- Civil Law Countries For instance, the time bars can be challenged under German Law, German courts will interpret the Contractors duty to give notice not as condition precedent but an obligation of the Contractor Art 246 (1) of the UAE civil code says that
The contract must be performed in accordance with its contents, and in a manner consistent with the requirement of good faith. The Answer is ..
Claim
The claim notice must indicate basic details, in order to inform the Engineer about the scope of the claim and to enable him to give instructions, if necessary. The notice shall therefore meet the following requirements:
describe the event or circumstance the notice need not state time or amount claimed or contractual basis of claim notice shall comply with Cl 1.3, i.e. in writing and properly delivered progress reports - Cl 4.21(f) - must list notices given
Claims
Claims
reported in the monthly reports reported in contemporary records reported in labour reports stated in the claim notification obtained at site visits and inspections reported in early warning notifications concerning probable future events which may effect progress of the works and the contract price reported in the Programme reported in its own records
Claims Procedure
give a notice of intention to claim within 28 days of the event giving rise to the claim keep contemporary records (by the contractor); inspect the records (by the engineer); provide authority to instruct the contractor to keep further contemporary records (by the engineer); within 28 days of the notice or an agreed period, submit particulars of the claim in respect of amount and grounds upon which it is based (by the contractor); interim and accumulated accounts to be submitted for continuing effects (by the contractor); final accounts to be submitted at end (by the contractor); a copy of accounts to be sent to the employer, by the contractor, if so required by the engineer .
Claims Procedure
1. Step 1: An event or circumstance occurs with the potential of a claim by the Employer against the Contractor under any clause of the Contract Conditions or otherwise in connection with the Contract. 2. Step 2: The Employer or the Engineer should give notice and particulars of the claim to the Contractor. This notice should be given with the following in mind: 2.1 It should be given as soon as practicable after the Employer became aware of the event or circumstance. 2.2 A notice relating to an extension of the Defects Notification Period should be given before the expiry of such period. 2.3 Notice is not required for payments due under Sub-Clauses 4.19, 4.20, or for other services requested by the Contractor. 2.4 Supporting substantiating particulars should also be submitted with the notice specifying the basis of the claim.
3. Step 3: The Engineer should then proceed in accordance with Sub-Clause 3.5 to agree or determine (i) the amount (if any) which the Employer is entitled to be paid by the Contractor, and/or (ii) the extension (if any) of the DNP in accordance with Sub-Clause 11.3.
4. Step 4: The Engineer should consult with each Party in an endeavour to reach agreement, failing which he is required to make a fair determination in accordance with the Contract.
5. Step 5: If agreement between the parties is achieved, the Engineer is required to give a notice with supporting particulars. Otherwise, he is required to give a notice of his determination with supporting particulars.
6. Step 6: The amount determined may be included as a deduction in the Contract Price and Payment Certificates. The Employer shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor.
7. Step 7: If the Engineers determination is not acceptable to any of the Parties, the dispute arising should be resolved in accordance with SubClauses 20.2 to 20.8.
6. Step 6: Substantiated amounts for any claim should be included in each Payment Certificate. It is to be noted that the requirements of Sub-Clause 20.1 are in addition to those of any other Sub-Clause which may apply to the claim and failure to comply preventing or prejudicing proper investigation should be taken into account by the Engineer.
7. Step 7: The Engineer should then proceed in accordance with Sub-Clause 3.5 to agree or determine (i) the extension of time (if any) and/or (ii) the additional payment (if any) to which the Contractor is entitled under the Contract.
Counter Claim
a good example of a counterclaim is where a delay event causes the contractor to claim that he has been wrongfully denied an extension of time by the engineer and the same delay event gives rise to the employers counterclaim for liquidated damages
Types of Claim
A claim under the principles of Applicable law A claim arising out of the principle of quantum merit
A claim for ex-gratia payment
Clause 3.5 Engineer to Agree or Determine Clause 3.5 Employer to Agree or Determine
Employer or Engineer gives notice and particulars to Contractor Clause 3.5 Engineer to Agree or Determine Agreement/Determination given effect unless revised under Clause 20
Clause 3.5 Employer to Agree or Determine Given effect unless Contractors Notice of Dissatisfaction 14 days of receipt
Clauses 20.2 and 20.4 (See previous diagram for full Clause 20.4 procedure) Clause 20.5 Clause 20.6
Reference to Dispute Adjudication Board (DAB) (1 or 3 people) Amicable Settlement stage ICC Arbitration within 56 days after Notice of Dissatisfaction
67
Clause 20.4
No Notice of Dissatisfaction within 28 days of Decision DAB Decision final and binding
Clause 20.5
Clause 20.6
Variation
Dispute Resolution
Employer is required to make available to the contractor all relevant data in his possession on sub-surface conditions before and after the Base Date Employers obligation to provide information does not end after the tender submission
Contractor is deemed to have inspected and examined the site only to the extent as far as practicable, with cost and time considerations
(b) have based the Accepted Contract Amount on the data, interpretations, necessary information, inspections, examinations and satisfaction as to all relevant matters referred to in Sub-Clause 4.10
Employer carries the risk of physical conditions that could have been unforeseeable by an experienced contractor at the date of tender
Unforeseen
Unforeseen
and
Unforeseeable
Unforeseeable
what an experienced contractor can reasonably foresee with the aid of investigative measures (desk studies, site inspections and ground investigations). ground conditions are often unforeseen because of incomplete assessment due to limited investigation, insufficient data available and limited resources.
a more risk-taking process than unforeseen relates to something that is technically beyond the contractors control Cannot be completely eliminated (regardless of how experienced the contractor is and/or how much investigations they carried out)
Cooperative Insurance Society Limited v Henry Boot Scotland Limited and Others [2002] EWHC 1270 (TCC)
The TCC was requested to rule on whether the site investigation (SI) reports formed part of the contract document. The contract defined Contract Document as:
the Contract Drawings, the Contract Bills, the Employers Requirements, the Contractors Proposals, the CDP Analysis, the Articles of Agreement and the Conditions, the Appendix and the Supplementary Appendix
Judge Richard Seymour Q.C. held: Such reports could not be incorporated into the contract by way of an implied term since it was not expressly incorporated as part of the contract document. No Entitlement
Contractors may recover loss incurred by incorrect subsoil information if such information was a condition or warranty in the contract.
Learning
Any SI documents must be expressly incorporated as part of the contract document in order for the Contractor to exercise his rights under the contract (implied term or warranty).
If the Engineer fails to issue the Drawings within a particular time according to the Contractors schedule, the Employer should be responsible to give compensation to the Contractor, providing that the Contractor has followed the procedure and fulfilled the requirements by giving notice to the Engineer and within the time frame stipulated in the Contract. This Sub-Clause only mentions within a time which is reasonable. Both parties should pay attention to this sentence as this might cause different interpretation lead to dispute.
They discover too late that a drawing or instruction is needed to complete the works. The contractor has to take into account lead times to procure certain items, the details of which may only be apparent in the drawing or instruction; They then do not draft a notice which sets out the details of the drawing or instruction, nor do they include details why and by when it should be issued; They generally do not allow the engineer a reasonable time to issue the drawing or instruction. This is a classic example where the contractor tries to make urgency on his part the engineers problem. Of course, the term reasonable denotes a more factual enquiry to establish whether the contractor is the author of its own misfortune or whether he was proactively managing the contract to avoid this risk.
Particular Conditions:
The parties should have the same interpretation on the applicable laws i.e. all regulations established by the law itself instead of the parties obligation under the contract. Parties should not only comply with the laws and regulations issued before the base date, but also to all laws and regulations issued during the course of the project. The FIDIC Contract allocate the risk of change of law to the Employer as far as such law and regulation affect the Contractor in performing their obligation, but the contractor should follow such law and regulation, and submit the notice on the incident (Sub-Clause 1.13 clearly specify that each party is responsible to comply with the applicable Laws).
Commencement of Work Except otherwise specified in the Particular Conditions of Contract, the Commencement Date
shall be the date at which the following precedent conditions have all been fulfilled and the Engineers instruction recording the agreement of both Parties on such fulfilment and instructing to commence the Work is received by the Contractor: (a) signature of the Contract Agreement by both Parties, and if required, approval of the Contract by relevant authorities of the Country; (b) delivery to the Contractor of reasonable evidence of the Employers Financial arrangements (under Sub-Clause 2.4 [ Employers Financial Arrangement ]); (c) except if otherwise specified in the Contract Data, and possession of the Site given to the Contractor together with such permission(s) under (a) of Sub-Clause 1.13 [Compliance with Laws ] as required for the commencement of the Works; (d) receipt by the Contractor of the Advance Payment under Sub-Clause 14.2 [ Advance Payment ] provided that the corresponding bank guarantee has been delivered by the Contractor. If the said Engineers instruction is not received by the Contractor within 180 days from his receipt of the Letter of Acceptance, the Contractor shall be entitled to terminate the Contract under Sub-Clause 16.2 [ Termination by Contractor ].
Sub-Clause 2.1
The Employer shall give the Contractor right of access to, and possession of, all parts of the Site within the time (or times) stated in the Contract Data. If no such time is stated in the Contract Data, the Employer shall give the Contractor right of access to, and possession of, the Site within such times as required to enable the Contractor to proceed without disruption in accordance with the programme submitted under Sub-Clause 8.3 [Programme].
Possession of Site
Sub-Clause 8.1
Except otherwise specified in the Particular Conditions of Contract, the Commencement Date shall be the date at which the following precedent conditions have all been fulfilled ................ (c) except if otherwise specified in the Contract Data, and possession of the Site given to the Contractor together with such permission(s) under (a) of Sub-Clause 1.13 [Compliance with Laws ] as required for the commencement of the Works;
Sub-Clause 8.3
The Contractor shall submit a detailed time programme to the Engineer within 28 days after receiving the notice under Sub-Clause 8.1 [Commencement of Works].
Exercise-3
Parties to Contract
Defines the requirements and specifications Provides the construction site Provides the financial resources (usually) Provides the necessary conditions to the Contractor for the execution of works
91
Responsible from the quality of the executed works as well as the security of
the construction site
Name, contact information and authorities of an Engineer are stated in relevant parts of the Works Contract After consulting with the Employer and the Contractor, should propose fair and objective solutions for claims. Checks the quality of the appropriateness of the workmanship and the materials used Approves the payment certificates of the Contractor
93
Engineer Cont.
The parties must carefully note the limitations of the powers delegated by making cross-reference to other parts of the contract conditions The Term Fair Determination is Debatable Employer Engineer relationship is that of an Agent where the Agent has no discretion. This was discussed in JF Finnegan Ltd vs Ford Seller Morris Developments Ltd (No 1, 1991) 53 BLR 38, where the judge held that there was a difference between a certificate issued by an architect which has a binding effect unless and until it is overturned by arbitration or litigation, and the giving of a notice of failure to complete works given by the employer's agent which does not have a binding effect particularly when there is a bona fide dispute as to the validity of the notice.
Clause 1.3 Communication Should be revised in line with all the communication tools allowed for the specific project. It is important that all parties are aware of correct address to which communication needs to be sent. There is little point in using formal registered address if the registered office address is not used regularly. Care must be taken to ensure that proper procedures are in place to monitor fax machines and communication
Communications . Contn
Construction Partnership UK Ltd Vs. Leek Development Ltd
Judge held that delivery of contractual notice by fax constituted actual delivery for the purpose of contract. That notice had been served by fax on morning of December, 23 2005 and the office was shut that afternoon and owing to Christmas break the fax was not seen until January 3, 2006.
Communications . Contn.
Bermuth Lines V. High Seas Shipping
Arbitration proceedings were served at an email address which appeared in the Lloyds Maritime Directory and on the Company website. The email was received and then ignored by the clerical staff. The Judge held that the service was valid and failings of internal administration were the responsibility of the company concerned
Particular Conditions-Clauses which must be revised / added during the preparation of a PCs
If different languages will be used under certain circumstances this should be defined here
Key features of 1.4
The Appendix to Tender shall set out the law of the Contract The Appendix to Tender shall set out the language of the Contract Law and Language governs the Contract and Performance of Works
For this very reason Sub- clause 1.8 of the FIDIC Sub-contract 2011 makes it very clear that the Law of the Country which governs the Main Contract shall apply.
Particular Conditions-Clauses which must be revised / added during the preparation of a PCs
Amendments and additions can be made here. Please be extremely careful, and do not change unless you have to. The document forming the Contract are to be taken as mutually explanatory of one another. For the purpose of interpretation the priority of the document shall be in accordance with the following Sequence
If any ambiguity or discrepancy is found in the documents, the Engineer shall issue any necessary clarification or instruction.
h) Schedules and any other document forming a part of the Contract Agreement
The priority of documents unless stated otherwise is listed as items (a) to (h) The Engineer shall be responsible for resolving any discrepancy
Priority of Documents..Contn.
The order of Priority documents forming the contract can be significant where complex questions of interpretation arise When there is a conflict in meaning between various contract documents General Conditions low in priority over Particular Conditions ( Common law position)
In Robertson V. French and Glynn Vs Margetson the Courts held that the contract-specific written word chosen by the parties ought to have priority, on questions of interpretation, over the printed words (or standard wording) used by the parties.
Particular Conditions-Clauses which must be revised / added during the preparation of a PCs
Clause 1.6 Contract Agreement Contract Agreement will also be referred as Letter of Acceptance Key features of 1.6
The Parties are to enter into Contract Agreement with 28 days of the receipt by the Contractor of Letter of Acceptance The form of the Contract shall be that annexed to the Particular Conditions. The Employer will be responsible for any stamp duties or other charges.
The general rule of offer and acceptance parties could find themselves under a binding contract without having entered into any of the formalities set out in 1.6.
Particular Conditions-Clauses which must be revised / added during the preparation of a PCs 1.7 Assignment
Neither Party can assign its interest in the Contract without the prior agreement of the Other
This Sub-clause includes a prohibition on assignment, save where (at its absolute discretion) the other party gives its consent, or where the Party interest under the Contract is offered to secure finance ( no consent required) Typically there is a prohibition is on the Contractor and Sub-contractor
Clause 2.1 Right of Access to Site If there are conditions (time constraints or other) related to this issue, this clause should be drafted accordingly. Clause 3.1 Engineers Duty and Authority
The limits of Engineers authority should be clearly defined here.. This article should be in line with the ToR for the Engineers service contract.
Clause 4.1 Contractors General Obligations
If the Contractor has additional obligations, these should be clearly defined here.
Clause 4.8 Safety Procedures If there are any additional procedures to be implemented because of local laws they should be defined here Clause 4.19 Electricity, Water and Gas This articled defines where and how the Contractor will obtain the necessary infrastructure. Clause 4.21 Progress Reports If additional reports other than the ones defined in General Conditions are requested, these should be defined here. Clause 7 / Sub Clause 7.9 Rules of Origin. This sub clause should be added in few projects. Please remember this is only for permanent works.
If there are different milestones for completion and/or taking over parts of the works these should be defined here. Clause 12.1 Works to be Measured
Only RED BOOK If measurements are to be done by records and/or reports, the details should be defined here.
Exercise-1
Volume 1: Instructions to Tenderers . Terminology should be adopted in line with FIDIC. Volume 2: Conditions of Contract FIDIC Volume 3: Technical Specifications / Employers Requirements Volume 4: Financial Offer Format, Schedule of Prices
Volume 5: Drawings
Volume 1:
Instructions to Tenderers (ITT) Tender Form and Annexes (Appendix to Tender) Tender Guarantee Format Forms Glossary of Terms Evaluation Grid
Volume 2:
Draft Contract
FIDIC General Conditions of Contracts (RED or YELLOW) for any type of project anywhere in the world. Contract will be customized by using the particular conditions of contract.
Clauses in Particular Conditions should not be conflicting with the clauses of the General Conditions. FIDIC Guidelines may be used while drafting Particular Conditions. Particular Conditions should be in line with the local law and law of the contract. Any revisions / additions / omissions done by the Particular Conditions should be based on rational reasoning.
Very complex PCs may harm the completeness and structure of a works Contract. PCs should be drafted by a team of experts who have relevant works and contract management experience.
PCs should be assessed / evaluated by local lawyers. Appendix to Tender may be used as control tool. Clause 1.5 of PCs; Priority of Documents is important and should be readdressed for every project.
Appendix to Tender 1
Appendix to Tender is prepared as a summary table. Includes Financial and Administrative / Contractual Information Administrative / Contractual Information
Contact Details of Parties Contract Duration Law and Language of the Contract Disputes and Arbitration
FIDIC Training 12-14 April 2011 116
Appendix to Tender 2
Financial Information:
Pre-Finance Payments
Retention Deductions Minimum Interim Payments Insurance Amounts
FIDIC Training 12-14 April 2011 117
Appendix to Tender 3
It includes summary of the information originating from the Particular and General Conditions of Contract. A different AtT should be prepared for each tender. May be used as a tool to check the completeness and consistency of the particular and general conditions. Numeric values or specific information should be indicated in Appendix to Tender to avoid confusion and mistakes between different values. Appendix to tender should be used to complement the Particular and General Conditions, not to amend or revise them.
Exercise-2
History of DAB
The first DB was called a Dispute Review Board (DRB) and it made recommendations rather than decisions. Major developments regarding DRBs were as follows: 1975 First Domestic DRB in U.S. (Eisenhower Tunnel).
1981
1995 World Bank makes DRBs mandatory for all IBRD-financed projects over US$50m.
1997
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History of DAB
Subsequently, the Dispute Adjudication Board (DAB), which made decisions rather than recommendations, developed internationally, as follows: 1995 1998 1999 FIDIC introduces DAB in its Orange Book England introduces mandatory statutory adjudication; subsequently, parts of Australia, New Zealand and Singapore do the same FIDIC adopts DAB in all contracts for major works
2000 World Bank adopts DB recommendations as binding and requires to give effect to them unless and until revised by an arbitral award
parties
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Dispute Boards
Timing of appointment of DB members Ad hoc v. standing Appointed when dispute arises (ad hoc) Appointed at start of project, for the duration (standing)
Nature of output of DB Decision v. Recommendation Dispute Review Boards (DRB) Dispute Adjudication Boards (DAB)
Dispute Boards
Dispute Boards DRB provides recommendations Art 4.2 , ICC Rules for DB: Upon receipt of a Recommendation, the Parties may comply with it voluntarily but are not not required to do so.
DAB renders contractually enforceable decisions Introduction, ICC DB Rules (2004) Determinations of Dispute Boards are not enforceable at law as such, although they may become contractually binding on the Parties as described below. Hence, Dispute Board Members do not act as arbitrators
Standing DAB
Ad-hoc
Under Yellow and Silver Books DAB appointed within 28 days of notice of intention to refer a dispute. Particular Conditions replace Appendix to Tender in Silver Book In Gold Book, notice of dissatisfaction with determination of Employers Representative within 28 days of determination. If no notice, determination deemed accepted. Referral within further 28 days
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Composition of DAB
One or three members as stated in Appendix to Tender (or equivalent in other forms) Default is three members Each party nominates one member for approval of other Parties consult these members and agree on third, who acts as chairman If Contract contains a list, member selected from that list, unless unwilling/unable to act 129
Appointment made by entity or person named in Appendix to Tender or equivalent in other forms in consultation with Parties who pay half of appointing fee each
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Procedure of DAB
Annex contains Procedural Rules which are not detailed. DAB shall (a) act fairly and impartially as between the Employer and the Contractor, giving each of them a reasonable opportunity of putting his case and responding to the others case, and (b) adopt procedures suitable to the dispute, avoiding unnecessary delay or expense.
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Procedure of DAB
DAB may conduct a hearing. May request written documents and
DAB may open up, review, revise, any certificate, determination, instruction etc.
of Engineer.
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Replacement of Member
Parties may appoint a replacement member at any time Unless otherwise agreed, appointment effective if a member Declines to act Dies Is disabled from acting in some way Resigns Appointment is terminated Appointment of replacement chairman again requires 141 consultation with other members
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Disputes to DAB
A dispute may be said to have arisen when : A final determination has been rejected
While an arbitrator is chosen to exercise a judicial function and to resolve a dispute based upon submissions by the parties, a Dispute Board is chosen for its expertise in a certain subject matter and often does its own investigation or appreciation of the issue, with or without submissions by the parties. While arbitral awards can be judicially enforced, a Dispute Board determination, unless re-qualified as an arbitration, is in some jurisdictions not enforceable in court. The enforceability issue is governed by local law, and is unresolved in 145 many jurisdictions.
Ensure understanding of process Ensure compliance with applicable legal system Jointly define procedures
Rules Establishing common culture
May be commenced prior to or after completion of the Works ICC Rules of Arbitration apply Three Arbitrators Language is that of language of contract communications (as stated in Appendix to Tender) Full power to open up, review, revise, any certificate, determination, instruction etc. of Engineer and decision of DAB Engineer may be witness Parties not limited to arguments and evidence before DAB DAB decision admissible in evidence
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But a lacuna in Red, Yellow, Silver books as to enforcement where decision not final and binding can probably be enforced by arbitration. Specifically dealt with in Gold Book. In the event that a party fails to comply with any decision of the DAB, whether binding or final and binding, then the other party mayrefer the failure itself to arbitrationfor summary or other expedited relief 148
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Exercise-3 &4