FIDIC RED BOOK History and Comparison

FIDIC ‘99
The ‘Red’ Book - Introduction and

comparison
Indian Quantity Surveyors - CPD
7th May 2008
Guy Elkington
Delivering better value results for clients www.echarris.com

• Introduction to FIDIC ‘99
• Roles
• Control documents / Milestones
• Changes and consequences
• Contract Administration – overview
• Setting up
• Letters of intent
• Valuations / variations
• EoT’s / concurrency
• Force majeure / termination / suspension
• Claims / timebar
• Disputes

Introduction
• Background and History

• Why FIDIC ?
• Abu Dhabi context
• Types of FIDIC Contract
• Format of the ‘Red’ Book
• UAE & Abu Dhabi issues

History - FIDIC
• Federation Internationale Des Ingenieurs-
Conseil
• Formed in 1913 – Belgium, France &
Switzerland
• Expanded after WWII
• UK – 1949
• US – 1958
• Industrialised nations in 1970’s – became an
International organisation
• HQ in Switzerland – now 67 countries and their
national associations and also member firms

History – Red Book
• Origins – traditional employer designed / BQ based
Civil Engineering Contract
• ICE Form – 1945 (and 1973)
• ACE Form – 1956
• Conditions of Contract (International) for Works of
Civil Engineering Construction [known as the ‘Red’
Book]
– 1st Edition – 1957
– 2nd Edition – 1969
– 3rd Edition – 1977
– 4th Edition – 1987 (amended 1992)
• Conditions of Contract for Construction
– 1st Edition - 1999

Why FIDIC ?
• Independent
• Internationalised
• Well established / familiar to Contractors
• Used by the World Bank
• Fair ?
• Different forms available
• Standard form

Abu Dhabi context
• Govt. forms of contract often archaic / poorly
drafted
• FIDIC 4th Edition in use in Private sector
• Law No 21 of 2006
• Executive Decision No 1 of 2007
• Amended FIDIC 99 - Build only & D&B
• Applicable for all civil construction works entered
into by Govt Departments in Abu Dhabi
• Dubai ? (Nakheel – amended form)

1999 – Rainbow Edition
• Red Book – 1999 (1977, 1987) – Traditional
• Silver Book – 1999 (1995) – EPC / Turnkey
• Yellow Book – 1999 (1987) – M&E / D&B
• Green Book – 1999 – Minor Works
• White Book – 2006 - Consultant
• Construction MDB Book - ‘Pink’ Book ? – 2006
• Dredgers - 2006
• Gold Book – 2008 - DBO
• Subcontract – 1994 (needs update)
• Joint Venture Agreement – 1994
• Sub-consultancy - 1992

Types of Contract – Red Book
• Conditions of Contract for Construction – 1999

1st Edition
– ‘Red’ Book – previous editions still in use
– Now called ‘The Construction Contract’
– For where Employer / Engineer will do most of the
design – can include some Contractor design
– Engineer key role
– BQ
– Lump sum / re-measurable

Types of Contract – Silver Book
• Conditions of Contract for EPC / Turnkey

Projects – 1999 1st Edition
– Replaced the previous ‘Orange’ Book
– Use on complex plant where substantial amount of
Contractor specialist design
– No Engineer – an Employer’s Representative (ER)
– Most risk on the Contractor
– European International Contractors highly critical
– Employer not responsible for data provided by the
Employer

Types of Contract – Yellow Book
• The Plant and Design-Build Contract – 1999 – 1st
Edition
– ‘Yellow Book’ – replaces previous Yellow Book which was
for M&E
– Engineer retained by Employer to approve Contractor
Documents (incl design) but responsibility is with
Contractor.
– “Conditions of Contract for Plant and Design-Build for
electrical and mechanical plant, and for Building and
Engineering Works, designed by the Contractor”
– Where Contractor will do most of the design
– Perceived as similar to the Red Book in terms of fair
allocation of risk

Types of Contract – Green Book
• Short Form Contract - 1999

– To be used for simple / repetitive works / short
duration / low value
– Quite flexible but some drafting issues
– No Engineer or Employer’s Representative but an
authorised person – usually an employee of the
Employer but could be an independent person
– Similar clause structure to other contracts
– Some amendment required for Employer Risks etc.
as gap in allocation of risk – insurance pitfall

Types of Contract
• The White Book – Client / Consultant agreement
– Fairly widely used – some amendment required –
some say too easy on the Consultant (but drafted by
Consultants !)
• Construction Contract MDB Harmonised – Pink -
2006
– For use on development bank projects – amended
form of Red Book
• Dredgers – 2006
• Gold Book – 2008 ?
– BOT type contracts

Types of Contract
• Subcontract
– 1994 – Drafted for use with 4th Edition 1987 Red Book
– Similar – Part I and II
– Wide use in the region
– Also convertible into a nominated form
– Rumour that ’99 version being drafted
• Joint Venture agreement
• Sub-consultancy

Format of Red Book
• General Conditions – 20 clauses (reduced from

72 in previous edition – but more words)
• Has an index as well as contents
• Guidance for preparation of the Particular
conditions (same as before)
• Annexes which include standard bonds
• Standard Form of tender, letters and appendices

Format
• Conventional and sensible clause layout
– Definitions and housekeeping issues – Clause 1
– Roles and Obligations – Clauses 2 to 4
– Resources – Clauses 5 to 7
• Labour issues
• Standards
– Time – Clauses 8 to 10
• Commencement / Programme / delays
• Completion
– Defects – Clause 11
– Money – Clauses 12 to 14
– Termination / suspension – Clauses 15 & 16
– Risk / Insurance / Force majeure – Clauses 17 to 19
– Claims & Disputes – Clauses 20

Local issues
• The Law
– Federal Law
• Civil Code – Contract formation – meaning of words -
Muqawala – contract to do something – Decennial
liability – delay damages - penalties
– Laws at Emirate level
• Abu Dhabi amended Red Book
– Some good / some bad
– Overall a move forward

Roles and obligations
• Employer
• Engineer (and Representative)
• Contractor (and Representative)
• Subcontractors (Nominated / Domestic)
• Adjudicator (new)
• Arbitrator
• No Project Manager
• No QS

New Concepts from 4th Edition
• Role of Engineer – no longer impartial – 3.1 (a)
• Has to make determination fairly – 3.5
• Trade off is DAB – 20 (but often deleted in Dubai)
• Employer has to declare finance if asked (but not AD Govt)
• Fit for purpose obligations
• Unforeseeable – defined
• Employer Terminate for convenience
• Force Majeure replaces special risks
• Limitation of Liability on Contractor (UAE Law ?)
• Procedure for Employer’s claims
• Strict Timebars (UAE Law ?)
• Value Engineering
• Late payment clause

Contractor viewpoint - EIC
• Improvement from 4th Edition - likes

– Employer to provide financial data (AD deleted)
– Employers claims – now a procedure (AD OK)
– DAB (AD left in – Dubai often deleted)
– No longer fiction of impartial Engineer
– Call on bonds must be strictly in accordance with
Contract

Contractor Viewpoint - EIC
• Retrogressions - more risk on Contractor
• Don’t like
– Provision of confidential information – risk re. 3rd parties –
proprietary data
– Fitness for purpose – more of a common law problem
– Tests on completion – novel concept in build only contract –
better suited to plant contract – sanctions if failure – open to
abuse
– Uncertainty over unforeseen conditions
– Right to terminate for convenience – no loss of profit
– Notices / strict timebar – 1st time FIDIC has made so strict

Processes / Key Milestones
• Programme
– Notice to commence (8.1) – within 42 days of LOA (unless
otherwise stated) – 7 days notice by Engineer
– Site Access (2.1) – within time to comply with programme
submitted under clause 8.3 (problem ?)
– Obtaining of licenses / permits – need clarity in UAE
– Provision of timely data / instructions
– Provide financial data (2.4) – but no sanction if failure
– Submit programme (8.3)
– Notices of delay – future and past (8.3 & 20.1) – timebar
– EoT clauses
– Acceleration for Employer delay ? – 13.2 (f) ?

Acceleration ?
• Clause 8.6 – Can instruct if C. behind schedule

due to own fault / not entitled to an EOT. At C’s
cost.
• No express clause.
• ICE 5th Edition contains similar variation clause
as FIDIC (time and sequence of the Work) but
also contains acceleration clause – has to be
with C’s agreement – this would suggest not ?

Clause 8 Programme
• No requirement for type of programme eg. CPM

• Has to be
– a ‘detailed time programme’
– Set out order of work
– Timing of each stage of design
– Contractors documents
– Nom sub works
– Timing of inspections
• Is it enough ?

Completion
• Taking over Certificate

– Tests on Completion – make sure that these are
clearly specified as well as timing – relevant to
building works ?
– First submit As builts and O&M manuals
– 21 days prior notice to Engineer
– Make sure Clause 8 programme works

Variations
• Conventional variation clause
• Limited grounds to refuse (cannot readily obtain the goods
- but more likely in current climate)
• Can first request a proposal (C. to provide cost /
programme implication) and then instruct.
• C. cannot delay the (non-variation) work while waiting for a
response – circumstances could change ?
• Simply instruct without a proposal
• Valuation of variations is conventional approach
• Limit on quantity – can open up rates (12.3)

Force Majeure
• Change in 99 FIDIC – includes Force Majeure

• Wide definition – ‘may include but is not limited
to..’
• Generally get EoT but no cost
• But some provisions will get additional cost (see
19.4(ii))
• George Bush day ? – or clause 8.5 ?

Extensions of time / Claims
• EoT allowed for the following reasons (profit is change
from 4th Ed):
– 1.9 Delayed drawings – cost plus profit
– 2.1 Right of access – cost plus profit
– 4.7 Setting out – cost plus profit
– 4.12 Unforseeable conditions – cost
– 4.24 Fossils – cost plus profit
– 7.4 Testing – cost plus profit
– 8.5 Delays by Authorities – no cost
– 8.9 Suspension – cost
– 10.3 Tests – cost plus profit
– 13 Variations – Cost (profit in the VO ?)
– 13.7 Legislation – Cost
– 16.1 Suspension by C. – Cost plus profit
– 17.4 Employer’s risks – Cost plus profit
– 19.4 Force Majeure – some cost
Setting up
• Decision on form of Contract
• Who is responsible for design ?
• Status of design ?
• Lump sum or remeasurable ?
• Fixed price or fluctuating ?
• Procurement method
• Particular Conditions
• Nominated Subcontract
• Appendix to Tender / Contract

Setting up – Appendices
• Appendices
– Parties
– Time
– Defects
– Email / Acconex / web portal systems
– Law
– Language
– Access
– Bonds
– Damages
– Fluctuations

Setting up - Appendices
• Appendices (cont’d)
– Advance payment and repayment
– Timing of instalments
– Currencies ?
– Retention / bond
– Materials for the works
– Payment – minimum amounts
– Insurances
– DAB
– Sectional completion

Setting up - Price
• Lump sum or re-measurable ?

• Fixed price or fluctuations ?
• Employer requirements
• Legal and regulation requirements

Setting up - Re-measurable
• Clause 12 requires the Work to be measured
• Guidance notes say that ‘Lump sum contracts
may be suitable if the tender documents include
details which are sufficiently complete for
Construction….’ - but widely ignored in the UAE
• Some contracts are re-measurable where design
is provisional but the norm for the UAE is lump
sum – so amendment required.
• If Consultant then need to decide – at the outset
– will affect your fee and the tender price

Article 886
(1) If a contract is made under an itemised list on
the basis of unit prices and it appears during the
course of the work that it is necessary for the
execution of the plan agreed substantially to
exceed the quantities on the itemised list, the
contractor must immediately notify the employer
thereof, setting out the increased price expected,
and if he does not do so he shall lose his right
to recover the excess cost over and above the
value of the itemised list.

Article 886
(2) If the excess required to be performed in

carrying out the plan is substantial, the employer
may withdraw from the contract and suspend
the execution, but he must do so without delay
and must pay the contractor the value of the
work he has carried out, assessed in accordance
with the conditions of the contract.

Setting up - Lump sum
• If there are no variations then that is what the

Contractor gets paid
• No re-measurement
• BQ is a schedule of rates
• Contractor responsible for errors in the BQ
• Change is measured against the contract
drawings not the BQ

Lump sum
• Article 887 – Civil Code
(1) If a muqawala contract is made on the basis
of an agreed plan in consideration of a lump sum
payment, the contractor may not demand any
increase over the lump sum as may arise out of
the execution of such plan.
(2) If any variation or addition is made to the plan
with the consent of the employer, the existing
agreement with the contractor must be observed
in connection with such variation or addition.

Setting up – Letters of Intent / Award
• What is the difference ?
• Letter of Intent
– Employer indicates intention to enter into a formal contract
to carry out the work in the letter
– Employer wants the Contractor to start work at once or
before execution of formal contract
– Temporary
• Letter of Award
– Employer accepts offer and awards contract
– Final
• What is stopping you getting a contract in place ? – a real
stumbling block in the future ?

Setting up - Letters of Intent
• Different types
– Notice – not intended to do any work
– Start work but capped at a $ limit or time limit or both
– Does not form a binding contract
– Does form a binding contract
• Dangers
– Often produced in a hurry and under pressure
– Have gaps in them
– Often cause of dispute particularly if contract halted /
not proceeded with or a falling out before the contract
is formalised

Letters of Intent - Tips
– Limit the period – breathing space while contract put

together
– Describe work in detail – refer to draft document / contract
– Payment mechanism must be certain
– Signed by both parties
– Don’t be all things to all men – decide the limits
– Is it intended to form a contract ?
– Inconsistency often of
You have agreed to sign a contract…The Form of Contract
will be…. In the event of our not entering into a formal
contract with you…

Valuations / Payment / Measurement
• Primary obligation of the Employer – to pay
• Obligation in law and in Contract
• Lump sum or re-measure
• Interim payments
• Errors in quantities

Payment procedure
• Clause 14.2 – Advance payment against
guarantee
• Clause 14.3 – Interim payments
– Contractor applies at the end of each month (in form
approved by Engineer – NB: not specified)
– Tied to progress report + items in 14.3 (a) – (g)
– Can have schedule of payments – Clause 14.4 –
milestones
– Plant & materials – materials on site – 14.5
– Engineer certifies within 28 days of receipt – 14.6
– Payment within 56 days of receipt (28 days from cert)

Pay when paid
• Common for Subcontractors and Subconsultants

• Don’t use ‘back to back’ – no equivalent in arabic
and not a term of art
• Dispute where Subcontractor not paid 5 years
after hand over because of pay when paid
• Court overruled – not consistent with ‘common
interest’ of contract - but could draft a clause
with this in mind ?

Late payment
• Interest provision – Clause 14.8
• Contract says Compound interest during period of delay –
3% above bank rate unless specified otherwise
• Amend if a bureaucratic client contract – grace period ?
• Tension with UAE law
• Federal law provides for interest on a crystallised sum -
limitation
• But courts inconsistent – varies between Dubai and Abu
Dhabi
• Rare that interest will run until judgement
• Compound interest is not awarded by Courts – may be
better to amend to simple interest

Late payment
Federal Supreme Court – 2001
‘It has long been an established practice of this Court that, if

the subject matter of an obligation is a monetary sum
which falls to be determined under the lower courts’
discretionary powers, any late payment interest awarded
should be calculated from the date on which judgement
determining the amount due becomes final as it is only on
that date that the sum becomes specific in amount.’
Could place a restraint on the recovery of interest.

Re-measurable / Lump sum
• Dealt with under Clause 12.1 – needs amendment if LS
Contract
• Work shall be measured and then valued – notice to
Contractor required
• Engineer must be fair (Clause 3.1) – particularly if his own
mistake !
• Measure to be checked by Contractor – period to object
(too short ?)
• Risk of quantities with Employer
• No finality of price
• Need a good BQ
• Lower price ?
• Tactical pricing ?

Re-rating – re-measure / variations
• Rates are generally inviolable

• But re-rating possible under Clause 12.3
• Must meet all the criteria in 12.3 (a) or 12.3 (b)
for re-rating
• NB – some Government regulations impose
different rules – eg. in Abu Dhabi, Govt. Depts
can bring in changes of quantities of up to 20%
and in Dubai up to 30%

Re-rating / no to lump sums ?
• The corresponding provision in the law applicable to
contracts with the Government of Abu Dhabi provides that
the relevant Government Department may increase or
decrease the value of the construction contracts by twenty
percent without entitling the contractor to any ‘increase in
the price or any compensation for the same’. In addition, it
is provided that the purpose of the bills of quantities is to
determine the general nature of the work and that payment
shall be calculated by reference to the executed quantities,
regardless of any discrepancy between bill quantities and
actual quantities
Construction Contracts and Disputes in the United Arab Emirates –
Michael Grose

Power to vary
UAE Civil Code –
‘…neither party shall be entitled to vary or cancel a

valid and binding contract save by agreement,
court order or a provision of law.’

Power to Vary
• Can’t have unilateral changes to contracts –
anarchy – so we have a mechanism – clause
13.1
• Variations may be initiated by the Engineer at
any time prior to issuing the Taking-Over
Certificate for the Works, either by an instruction
or a request for… a proposal.
• But Federal law also says where no mechanism
‘the existing agreement must be observed in
connection with such variation or addition’
• So no danger of anarchy in the UAE

Power to Vary
• Valuation process – Yes
• Grounds for an Extension of time ? – Yes
• Limit on authority ? – No ? – clause 13.1 (a) – (f)
• Only challenge is not being able to readily obtain the good
– Engineer can cancel, confirm or vary.
• Can only be initiated by the Engineer ?
• Value Engineering – Contractor cannot make a change
without an instruction
• Procedure for confirmation of verbal instruction in Clause
3.3

Power to Vary
• Clause 13.1 (a) – (f)
• Quantities (not automatically a variation)
• Quality / Characteristics
• Levels / Positions
• Omission (but cannot give to others)
• Additional Work necessary
• Sequence and timing – (how to value – prelims ?
acceleration ?) – clause 3.3 – may have to follow
instruction to accelerate – but no power to instruct
completion in advance of Time for Completion ?

Power to Vary
• Engineer can simply instruct

• Can request proposal – 13.3
• Contractor must respond – either with a proposal
or with a reason why he cannot submit a
proposal
• Value Engineering – must be of benefit to the
Employer – Time / Money (capital, life cycle or
value), other benefit

• EoT allowed for the following reasons:
– 1.9 Delayed drawings – cost plus profit
– 2.1 Right of access – cost plus profit
– 4.7 Setting out – cost plus profit
– 4.12 Unforseeable conditions – cost
– 4.24 Fossils – cost plus profit
– 7.4 Testing – cost plus profit
– 8.5 Delays by Authorities – no cost
– 8.9 Suspension – cost
– 10.3 Tests – cost plus profit
– 13 Variations – Cost (profit in the VO ?)
– 13.7 Legislation – Cost
– 16.1 Suspension by C. – Cost plus profit
– 17.4 Employer’s risks – Cost plus profit
– 19.4 Force Majeure – some cost

– 8.4(c)– Exceptionally adverse climatic conditions –
money ? No – not unless it satsifies 17.3 (h)
– 8.4(d) – Unforeseeable shortages… caused by
epidemic or governmental actions – cost ? – could be
force majeure
– 8.4 (e) – Delay or impediment caused by the
Employer – cost ? – damages at law ?

EoT – Principles / Methodology
• Contractor entitled to an extension of time ‘if and
to the extent that completion… is or will be
delayed by any of the following causes…
• Must cause a delay to completion – therefore a
critical delay
• Concurrency –
– First in line
– Dominant cause
– UAE law ?
– City Inn

EoT – Principles / Methodology
• As planned impacted
• As planned as built
• Collapsed as built
• Windows analysis / Timeslice
• Time impact analysis
• All need CPM – exception is ‘As planned as built’

EoT - Methodology
• City Inn Ltd v Shepherd Construction Ltd [2007]
The major difficulty, it seems to me, is that in the type of

programme used to carry out a critical path analysis any
significant error in the information that is fed into the
programme is liable to invalidate the entire analysis.
Moreover… it is easy to make such errors….
….necessary to revert to methods that were in use before
computer software came to be extensively used in the
programming of complex construction projects..
Those older methods are still plainly valid, and if computer-
based techniques cannot be used accurately there is no
alternative to using older, non computer based techniques’

EoT - Determination
• Engineer has to respond within 42 days – even if in
principle – unless an alternative time agreed (Clause 20.1)
• Cannot reduce time once awarded
• Often conservative !
• Prospective vs. retrospective
• Contractor needs award in a timely fashion in order to re-
programme and know where he stands
• Having to get Employer consent can delay issues
• Often awarded after completion – but wrong !
• Constructive acceleration

EoT – QS needs
• Period of delay – when ?

• Causes of each period of delay (Clause no)
• Whether any concurrency with Contractor
culpable delay

Prolongation Costs
• Do not use prelim price – unless conservatively

for interim purposes only (and advise Client that
does not conform with Contract)
• Core costs
• Non-core costs (can be prolongation / disruption)
• Resource records (at time of delay)
• Cost of resources (Contractor must provide)
• Profit – need to clause no ?

Prolongation costs
• Site costs – at time of delay
• Insurances / Bonds – overrun period
• Head office overhead / Loss of profit
– Caution
– Need to pass tests
– Not clear that UAE law will allow loss opportunity claim
– Formulae
• Hudsons
• Emdens
• Eichleays

Head office formulae – test for Emdens
Norwest Holst Construction v Co-operative Wholesale Society
1998
– The loss in question must be proved to have occurred
– The delay in question must be shown to have caused the
Contractor to decline to take on other work which was available
and which would have contributed to its overhead recovery in the
relevant financial year or years which would have been earned but
for the delay
– The delay must not have had associated with it a commensurate
increase in turnover and recovery towards overheads
– The overheads must not have been ones which would have been
incurred in any event without the Contractor achieving turnover to
pay for them
– There must have been no change in the market affecting the
possibility of earning profit elsewhere and an alternative market
must have been available. Furthermore, there must have been no
means for the contractor to deploy its resources elsewhere despite
the delay.

Disruption
• Very difficult to prepare claims

• Often notional / hypothetical
• Or Global
• Performance curves
• Labour norms
• Time & Motion studies
• Measured mile

Global claims
• Total cost spent less price
• No causation
• Usually a try on – covers a multitude of sins – tries to
reverse burden of proof
• Need to show that ‘a’ caused ‘b’ cost ‘c’
• Limited circumstances when may succeed – generally not
the case
• Has to be something so incredibly complex that can’t be
unravelled
• Must particularise to the degree possible

Timebar - Notice
• Clause 20.1
– If the Contractor considers himself entitled to any extension
of Time… and/or additional payment under any Clause of
these conditions or otherwise in connection with the
Contract…. the Contractor shall give notice… not later than
28 days after the Contractor became aware, or should have
become aware….
– If the Contractor fails to give notice of a claim within such
period of 28 days, the Time for Completion shall not be
extended, the Contractor shall not be entitled to additional
payment, and the Employer shall be discharged from all
liability in connection with the Claim.

Timebar - Notices
• Why time limit ?

– Alerts the Employer / Engineer so that they can
mitigate / change instructions
– Alerts Engineer so that he can observe / keep records
– Good practice – theoretically should lead to timely
EoT and cashflow
• Usually no reason why notices cannot be issued

within 28 days particularly if standard pro-formas

Timebar - Particulars
• Clause 20.1
– Within 42 days…of the event… or within such other
period as my be proposed by the Contractor and
approved by the Engineer, the Contractor shall send
to the Engineer a fully detailed claim…
– If the Contractor fails to comply… any extension of
time and/or additional payment shall take account (if
any) to which the failure has prevented or prejudiced
proper investigation of the claim…

Format
• Clause 1.3
Wherever these Conditions provide for the giving of or
issuing of… notices…, these communications shall
be:
(a)In writing and delivered by hand (against receipt),
sent by mail or courier, or transmitted using any of the
agreed systems of electronic transmission as stated
in the appendix to tender

Timebar
• Don’t reduce timebar clauses – dead giveaway

of a nasty employer !
“Within (3) working days of receiving a request to

change Work the Contractor shall forward to Owner
detailed cost estimate for changes including effects on
Execution Programme”
Bespoke EPC Contract

Timebar ?
• Article 473 – Civil Code
– A right shall not expire by the passage of time but no claim
shall be heard after the lapse of fifteen years without lawful
excuse, but having regard to any special provisions relating
thereto.
• Article 95 – Commercial transactions code
– Claims in connection with the obligations of traders towards
each other in connection with their commercial activity shall
not be heard, if they are denied, and if there is no lawful
justification, where 10 years have passed from the due date
for settlement of the obligation unless the law stipulates a
shorter period

Timebar ?
‘Over and above the time limits that are
described within a construction contract (none of
which is sufficient to bar a claim from being
heard before an arbitral tribunal or a Court under
UAE law) this ten year time limit usually forms
the basic time bar for most construction law
related claims’
UAE Construction Law and Dispute Resolution –

Al Tamimi & Company

Timebar ?
Failure to give notice might preclude the Contractor’s
right to claim additional costs under the contractual
machinery but the contractor may still have a valid
claim at law. However, this proposition has not
been tested in the Courts and there are those that
argue that where a contract sets out in detail the
parties rights and remedies and specifies notice or
other requirements these should not be circumvented
by pursuing alternative claims for breach of contract
at law.
Mark Blanksby – Masons Galadari – Talk on Money Claims to the UAE

Society of Construction Law – 30 May 2006

Force Majeure / Suspension / Frustration
• Force Majeure – defined in the Contract

– Can be temporary – suspension
– Can be permanent – termination
• Suspension
– Starts as temporary – can lead to termination if not re-
started
• Frustration
– Leads to termination / cancellation - a cul de sac

Termination
• Can arise from

– Termination for convenience (by Employer)
– Repudiation (by either party – refusal to perform - so
don’t threaten)
– Fundamental breach – innocent party can refuse to
perform – suspend performance of obligations
(mitigated by late payment clause ?)
– Recission or annulment – mistake
– Default / Insolvency
– Usually need warnings etc.

Force Majeure – Article 273 – Civil Code
(1) In contracts binding on both parties, if force majeure
supervenes which makes the performance of the contract
impossible, the corresponding obligation shall cease,
and the contract shall be automatically cancelled.
(2) In the case of partial impossibility, that part of the contract
which is impossible shall be extinguished, and the same
shall apply to temporary impossibility in continuing
contracts, and in those two cases it shall be permissible
for the obligor to cancel the contract provided that the
obligee is so aware.

Force Majeure – Article 287 – Civil Code
Article 287 – Civil Code

If a person proves that the loss arose out of an
extraneous cause in which he played no part
such as a natural disaster, unavoidable accident,
force majeure, act of a third party, or act of the
person suffering loss, he shall not be bound to
make it good in the absence of a legal
provision or agreement to the contrary.

Dispute
• What is it ?
• Not defined
• When 2 parties cannot agree
• Determination not accepted
• Impasse in administration of contract
• Delaying tactics

Disputes and the DAB
• Dispute Adjudication Board – counterbalance to
loss of impartiality of Engineer
• Contractual adjudication
• Live dispute resolution
• Behaviour moderator ?
• Contractually binding result but can go to
arbitration
• Have to obey decision pending arbitration
• New to the UAE

DAB - Origins
• US invention
• Dispute Review Board Foundation
• 90% of DRB’s are in the US – usually not binding
• FIDIC list of adjudicators – only one resident in
UAE

DAB’s
• Choice – standing / ad hoc – cost
• 1 man / 3 man (default 3 man)
• Must give each party reasonable opportunity of presenting
its case
• 84 days – don’t shorten
• Ambush
• Can be a list – can be one from each party – elect a
chairman
• If failure to agree then appointing body can be given in
appendix
• Procedural rules

Arbitration
• The last resort ?

• Legally binding and enforceable
• New York convention – can enforce in treaty
countries
• 1 man or 3 man – need to say in the Contract
• Rules of arbitration – ADCC / DIAC / DIFC /
UNCITRAL / ICC / LCIA
• Lengthy – mimics litigation

Discharge letter
• A requirement for final settlement

• Abu Dhabi regulations – Govt Depts forbidden to
use as a pressure point.
• Can’t get final settlement until agreement
between parties (save a Dispute)

FIDIC RED BOOK History and Comparison

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FIDIC RED BOOK History and Comparison

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FIDIC ‘99

The ‘Red’ Book - Introduction and

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• Background and History

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• Conditions of Contract for Construction – 1999

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• Conditions of Contract for EPC / Turnkey

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• Short Form Contract - 1999

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• General Conditions – 20 clauses (reduced from

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• Improvement from 4th Edition - likes

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• Clause 8.6 – Can instruct if C. behind schedule

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• No requirement for type of programme eg. CPM

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• Taking over Certificate

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• Change in 99 FIDIC – includes Force Majeure

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• Lump sum or re-measurable ?

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(2) If the excess required to be performed in

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• If there are no variations then that is what the

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– Limit the period – breathing space while contract put

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• Common for Subcontractors and Subconsultants

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‘It has long been an established practice of this Court that, if

Could place a restraint on the recovery of interest.

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