1.1 A Practical Approach To FIDIC Contracts - Accompanying Documentation PDF

FIDIC Module 1:
A Practical Approach to FIDIC Contracts

[ A Practical Approach
to FIDIC Contracts
]
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Table of Contents
1 Lesson 1 - Introduction and Overview: The Practical Use of FIDIC Contracts
5 Lesson 2 - Introduction to FIDIC Contracts: Plant and Design-Build, EPC/Turnkey

Contract, Design Build and Operate Contract
9 Lesson 3 – The Structure of FIDIC Contracts
13 Lesson 4 – Role Players and Parties to the Contract
17 Lesson 5 – Clause 1: General Provisions and General Issues Sub-clause 1.1
21 Lesson 6 – Clause 1: General Provisions and General Issues

Sub-clause 1.3 to 1.13
25 Lesson 7 – Clause 2: The Employer Sub-clause 2.1 to 2.5
31 Lesson 8 – Clause 3: The Engineer Sub-clause 3.1 to 3.5
35 Lesson 9 – Clause 4: The Contractor Sub-clause 4.1 to 4.4
47 Lesson 12 – Clause 5: Nominated Subcontractors Sub-clause 5.1 to 5.4
49 Lesson 13 – Clause 6: The Management of Projects: Staff and Labour

53 Lesson 14 – Clause 7: Plant Materials and Workmanship Sub-clause 7.4 to 7.7
57 Lesson 15 – Clause 8: Commencement of Work and Time for Completion

61 Lesson 16 – Clause 8: The Programme Sub-clause 8.3
65 Lesson 17 – Clause 8: Extension of Time for Completion Sub-clause 8.4
69 Lesson 18 – Clause 8: Other Time Related Clauses Sub-clause 8.5 to 8.7
73 Lesson 19 – Clause 8: Other Time Related Clauses Sub-Clause 8.8 to 8.12
77 Lesson 20 – Clause 9: Tests on Completion Sub-clause 9.1 to 9.4
81 Lesson 21 – Clause 10: Employer’s Taking Over Sub-clause 10.1 to 10.3
85 Lesson 22 – Clause 11: Defects Liability Sub-clause 11.1 to 11.4
89 Lesson 23 – Clause 11: Defects Liability Sub-clause 11.5 to 11.11
93 Lesson 24 – Clause 12 – Measurement and Evaluation

97 Lesson 25 – Clause 13: Variations and Adjustments
101 Lesson 26 – Clause 13: Variations and Adjustments

105 Lesson 27 – Clause 14: Contract Price and Payment



Sub-Clause 14.8 to 14.15
117 Lesson 30 – Clause 15 and Clause 16: Suspension and Termination


Sub-clause 15.2 to 15.5.

129 Lesson 33 – Risk Liability and Force Majeure –

Clause 17, Clause 18 and Clause 19
133 Lesson 34 – Risk Liability and Force Majeure – Clause 17

[Risk and Responsibility Sub-clause 17.3 to 17.6
137 Lesson 35 – Clause 18: General Requirements for Insurances

143 Lesson 36 – Clause 19: Force Majeure Sub-clause 19.1
147 Lesson 37 – Clause 19: Force Majeure

151 Lesson 38 – Clause 20: Claims, Disputes and Arbitration Overview

Sub-Clause 20.1

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

Lesson 1
Introduction and Overview:

The Practical Use of FIDIC Contracts
FIDIC represents Consulting Engineers worldwide through Member Associations in over 100
countries whose members are consulting engineering firms employing some one million staff.
FIDIC publishes standard forms of agreements between Clients and Consultants and standard
forms of Contracts between Employers, Contractors and organisations or joint ventures delivering
the three basic types of Works projects via design-bid-build, design-build or turnkey project
delivery.
Founded in 1913;
Encompassing most of the private practice consulting engineers;
Promotes and implements the consulting engineering industry’s strategic goals;
Members endorse FIDIC’s statutes and policy statements and comply with FIDIC’s Code of
Ethics;
Develops and promotes business practice: Business Integrity Management; Project

Sustainability Management; Quality Management; Risk Management.

2 | Introduction and Overview: The Practical Use of FIDIC Contracts
Introduction to Current FIDIC Contracts
FIDIC Short Form of Contract (Green Book, 1st Edition 1999)
The FIDIC Short Form of Contract (Green Book, 1st Edition 1999) has been prepared with short
sentences and simple straightforward language, and is suitable when the work is uncomplicated
and the parties do not wish the complexities of the forms for major Works. The Short Form
General Conditions are only ten pages in length and the simple language assists easy translation.
It is recommended for building or engineering Works of relatively small capital value and/or short
construction time. Depending upon the type of work and the circumstances, this form may also
be suitable for Contracts of greater value, particularly for relatively simple or repetitive work.
The minor Works form of Contract was originally developed by FIDIC for projects with capital
value under US$500 000, a construction time of not more than six months, and without the need
for specialist subcontracts.
Under the usual arrangements for this type of project:
The Employer provides the finance;
The works comprise construction but may include, or wholly comprise, electrical, mechanical
or other engineering work;
The contractor constructs the Works, irrespective of whether the design is provided by the
Employer or by his Representative (if any) or by the Contractor;
The Employer may wish to order Variations to the Works;
The Employer may wish to appoint an individual or firm as his Representative to carry out
certain duties; and
The Employer has optional choices for valuation and payment methods.

Introduction and Overview: The Practical Use of FIDIC Contracts | 3
FIDIC Construction Contract (1999 Red Book, 1st Edition 1999)
Larger and more complex than minor Works projects, traditional construction projects involve
civil engineering and building Works required by an Employer who, unless he carries out the
design in-house, would normally commission a Consulting Engineer to design the Works. It is to
be noted that traditional construction projects often also include some elements of Contractor
designed civil, electrical or mechanical engineering work.
When the Contract has been awarded and the work carried out, payment is made to the Contractor
on the basis of completed work. At the end of every month the work completed is measured and
then payment is calculated by multiplying the units of each work item satisfactorily completed by
the unit rate stated in the relevant Bill of Quantities. This type of Contract is often referred to as
a “remeasured work Contract”. Thus payment can also be said to be made on “inputs”, i.e. the
Contractor is paid against the inputs he delivers.
The Employer:
Provides the finance;
Appoints a Consulting Engineer to carry out the design work and prepare the Bill of
Quantities;
Appoints the Engineer to administer the Contract, monitor the construction Works and
certify payment;
The Engineer (on behalf of the Employer) may initiate Variations;
The Employer wishes to be kept fully informed;
Payment to the Contractor will be according to a Bill of Quantities or lump sums for
approved work done;
The Employer seeks to ensure an equitable sharing of construction risks in the contractual
arrangements, e.g. he takes the risk of unexpected adverse ground conditions and, owing
to the decision to carry a part of the construction risk, the Employer accepts that the
quantities are estimated and overruns may occur to the original Contract sum and, possibly,
the completion date.

4 | Introduction and Overview: The Practical Use of FIDIC Contracts
Notes

Lesson 2
Introduction to FIDIC Contracts:

Plant and Design-Build, EPC/Turnkey
Contract, Design Build and Operate
Contract
Plant and Design-Build Contract

(1999 Yellow Book, 1st Edition 1999)
Electrical and Mechanical Plant Designed by the Contractor
Contracts for the supply and installation of Plant and equipment, as opposed to civil Works
construction, involve the design, manufacture, supply, installation and commissioning of specially
engineered Plant and equipment.
However, the FIDIC Yellow Book is being used more and more on Civil Engineering Projects where
the Employer requires the Contractor to undertake the design.
Larger and more complex than minor Works projects, traditional Plant projects involve the design,
manufacture, delivery, erection, testing and commissioning of mechanical and electrical Plant by
a Contractor to an outline or performance Specification prepared by the Employer.
The procurement of Works covering the supply and installation of Plant and equipment has
traditionally closely followed the same procedure as for construction Works described above,
however, with certain significant differences. The differences are due to the disparity between
the two types of projects:

6 | Plant and Design-Build, EPC/Turnkey Contract, Design Build and Operate Contract
Much of the Plant is manufactured off Site at a factory whereas, for construction work, the
execution of the work is for the most part carried out at Site;
The detailed design of the Plant is the responsibility of the Contractor with, usually, only
concept or preliminary design being done by the Employer;
The Contractor is usually associated with a Plant manufacturer or supplier alone or

associated with a civil Works Contractor;
Payment is mainly on a schedule of payments based on achievement of predefined

measurable progress or milestones;
Testing and commissioning are more comprehensive and stringent on a Plant project.
With regard to the design of the Plant and/or equipment, this is the responsibility of the
Contractor, who will design his Plant or equipment to fulfil outline or performance Specifications
set by the Employer or his consultant, normally contained in the document entitled “Employer’s
Requirements”.
The Employer:
Provides the finance; and
Will appoint the Engineer to administer the Contract, monitor the design and manufacturing
activities, the installation and erection on Site and construction work and to certify payment;
and
The Engineer may initiate Variations; and
The Employer wishes to be kept fully informed; and
Payment to the Contractor will be according to achieved milestones generally on a

lump sum basis;
The Employer seeks to ensure an equitable sharing of construction risks in the

contractual arrangements such as unforeseen physical conditions which may be
encountered during construction;
Owing to a decision to carry a part of the construction risk, the Employer accepts that
overruns may occur to the original Contract sum and, possibly, the completion date.

Plant and Design-Build, EPC/Turnkey Contract, Design Build and Operate Contract | 7
EPC/Turnkey Contract (1999 Silver Book, 1st Edition 1999)
In recent years there is a need for Contract forms where the emphasis is on a fixed final price
and time as an alternative to the traditional forms where the final price and time are somewhat
variable.
Also owners, investors and developers, who do not have their own technical staff capable of
designing the facility in question or who do not wish to take the responsibility of designing their
own facility, go directly to suitable Contractors to design and construct their project on a “turnkey”
basis.
Some also believe that the total implementation time can be shortened if the design work is
carried out by the Contractor during the early stages of the Contract, e.g. partly in parallel with
his mobilisation work.
The Specification provided by the Employer will be a performance type Specification, i.e. defining
the output and performance to be achieved by the facility with very little, if any, detailed
requirements.
However, turnkey projects do also include the whole range of projects from those with minimum
Specification by the Employer right through to those with very detailed and complex requirements
being specified by the Employer.
Normally the majority of the design in a turnkey project is carried out by the Contractor but, on
occasion, a substantial part of the design is provided to the Contractor by the Employer. The term
“turnkey” can perhaps be said to be more used in Europe while the substantially equivalent term
used in the US and elsewhere is “EPC”, meaning “Engineer-Procure-Construct”.
Note: For this type of project the Contractor is responsible for all the Engineering,
Procurement and Construction (“EPC”) to provide a fully equipped facility ready
for operation (at the “turn of the key”).

8 | Plant and Design-Build, EPC/Turnkey Contract, Design Build and Operate Contract
The Employer:
Provides the finance for the project;
Wishes the Contractor to take total responsibility for the design and construction of the
facility and to hand it over ready to operate “at the turn of a key”;
Wishes a high degree of certainty that the agreed Contract Price and time will not be
exceeded; and
Wishes the project to be organised on a strictly two Party approach, i.e. without an Engineer;
Does not wish to be involved in the day-to-day progress of the work, provided the end
result meets the performance criteria he has specified;
Is willing to pay more for the construction of his project (than would be the case if the
Construction or Plant Contracts were used) in return for the Contractor bearing the extra
risks associated with enhanced certainty of final price and time.
Design, Build and Operate Contract (2008 Gold Book, 1st Edition)
The Design-Build-Operate (“DBO”) approach to contracting combine’s long term operation and
maintenance of a facility into one single Contract awarded to a single Contractor. The Contractor
will usually be a joint venture or consortium representing all the skills called for in a DBO
arrangement.
The Contractor will be responsible, not merely for providing the facility, but in fact for providing
a lasting service.
FIDIC has chosen to adopt the green-field DBO, with a twenty year operation period, and has
selected the single Contract awarded to a single contracting entity (which will almost certainly be a
consortium or joint venture) to optimise the co-ordination of innovation, quality and performance,
rather than award separate Contracts for design-build and for operation. The Contractor has no
responsibility for financing the project nor for its ultimate commercial success.
FIDIC recognises that the successful performance of a long term DBO Contract requires that the
Parties fully understand the overall time framework and the need for a long term commitment by
both the Employer and the Contractor. In trying to achieve this understanding and commitment,
it has been necessary to introduce new procedures and new terminology which are not found in
the other FIDIC Contracts.

Lesson 3
The Structure of FIDIC Contracts
Introduction
Each of the 1999 FIDIC Contract documents includes:
General Conditions (first part);
Guidance for the Preparation of the Particular Conditions (second part);
Forms (third part), e.g. Letter of Tender, Contract Agreement and Dispute Adjudication
Agreements.
General Conditions
The General Conditions are intended to be used unchanged for every project. The Particular
Conditions are prepared for the particular project to include any changes or additional clauses to
suit the local and project requirements.
Follow 20 clause layout;
Use the same definitions and terminology wherever relevant;
Provide sample forms of guarantees, certificates and other documents;
Provide flow charts where relevant; and
Are backed up guidance documents;

10 | The Structure of FIDIC Contracts
Particular Conditions
Ideally a Contract is an agreement freely negotiated between two parties of equal bargaining
power with equal access to legal advice and assistance. Where there is an imbalance of bargaining
power between the parties there is a danger that the terms and conditions of the Contract become
unbalanced.
The Particular Conditions generally include the Appendix to Tender which gives essential project
information, some of which must be completed by the Employer before issuing the Tender
Documents, together with some information which must be added by the Tenderer.
Contract Data/Appendix to Tender;
Special Provisions.
Preparing Particular Conditions

The guidance notes give sample clauses for correctly altering the Contract. If appropriate the
parties can, for example, easily change the Construction Contract from a re-measurement
Contract into a lump sum Contract. However, care has to be taken when doing so.
Some specific issues are:
Definitions
It is crucial to always have in mind the definitions and to use them carefully. When, for
example, using the word “works” the draftsmen should take into consideration that
“Works” means a different and defined thing;
Cross References
FIDIC Conditions contain many cross references which should be taken into account.
For example, it makes a great difference whether an additional claim of the Employer
has to be notified according to Sub-clause 2.5 or not. Only by reference to Sub-
clause 2.5 it is ensured that the Employer is not allowed to withhold payments out of
the certification procedure which is ruled by the Conditions;
Legal Meaning
Users should carefully check the legal meaning of any word which becomes inserted
in the Contract, if the ruling language is English. Under all circumstances it should be
checked whether the used expression is suitable for the particular circumstances;
Necessary
Any amendments to the Contract should first be examined as to whether they are
necessary or not. It happens quite often that the parties add milestone clauses to the
Contract, which are unsuitable.

The Structure of FIDIC Contracts | 11
Local Requirements
The Particular Conditions are prepared for the particular project and should include any
changes or additional clauses which the parties have decided to include for adaptation
for the local and project requirements.
A serious pitfall is to ignore the local requirements.
Applicable Law
The Governing Law should be stated in the Contract.
Language
Priority of Documents
It is strongly recommended to recognise and take into consideration that Sub-clause 1.5
rules the priority of the Contract documents.
The Special Provisions are the Clauses in the Contract which have been altered by the drafter of
the Contract – generally the Employer. It is not recommended to change too many clauses in FIDIC
as the Clauses are interlinked and by changing one clause will result in many other clauses having
to be changed as well.
For the 1999 Editions:
Defined terms are in CAPITALS in the General Conditions;
It is important to use defined (capitalised) terms when preparing Specifications, Bill of

Quantities, Particular Conditions and Employer’s Requirements.
Contract Agreement
Similar defined words and phrases are used in all 1999 Editions, the main exception being their
respective descriptions of the documents comprised in the Contract:

12 | The Structure of FIDIC Contracts
Commercial and Other Forms

Included in the 1999 Editions are:
Forms of Security and Forms of Letter of Tender, Contract Agreement and Dispute
Adjudication Agreement;
There are example texts for six forms of securities, which are available in electronic form so
that users can conveniently use them when preparing the Tender documents:
Parent Company Guarantee;
Tender Security;
Performance Security, with alternative examples;
Advance Payment Guarantee;
Retention Money Guarantee; and
Payment Guarantee by Employer.
In the Construction and Plant (and DBO) Contracts, the Appendix to Tender(Contract Data)
provide a convenient checklist of all the essential data required for the various Sub-clauses;
At the end of all the 1999 Editions, the Dispute Adjudication Agreements are quite short,
because they incorporate (by reference) the General Conditions of Dispute Adjudication
Agreement appended to the General Conditions.

Lesson 4
Role Players and Parties to the

Contract
Role Players to the Contract
Parties to the Contract
Parties to the Contract

Only two parties sign the Contract and are thereby bound by the terms of the Contract. They are
the Employer and the Contractor.
They each have obligations, duties and rights towards one another under the Contract and each
of these obligations, duties and rights is governed by the use of the word “shall” or “may”.
Neither Party may assign the whole or any part of the Contract to a third Party, without the prior
written agreement of the other Party to do so.
“Assignment” means the transfer of rights under a Contract to a third Party.
Neither party may alter the Contract unilaterally once it has been entered into.
It is essential that each Party is a legal person or entity under the law of the Country under which
it has been constituted, as only legal persons or entities can enter into Contracts.

14 | Role Players and Parties to the Contract
Other Defined Parties – Role Players
Contractor’s Representative
The Contractor’s Representative is appointed by the Contractor to represent the Contractor on
Site in the day-to-day running of the Contract.
Certain jurisdictions require the Contractor’s Representative to possess a kind of licence or specific
experience. Should this be the case, the Particular Conditions shall incorporate these additional
requirements.
Most Contractors refer to their representative as “Site Agent”, “Site Manager”, “Project Manager”,
“Construction Manager” or some similar title. Whatever title they choose to use, the person
concerned has the complete duties and responsibilities which are assigned to the Contractor’s
Representative in the Contract and it must be made quite clear where the lines of communication
and responsibility lie.
Dispute Adjudication Board (“DAB”)

The role and appointment of the DAB is covered in detail in Lesson thirty-eight.
Engineer or Employer’s Representative

An important member of the Employer’s team is the Engineer or Employer’s Representative.
Under the Red and Yellow Book Contracts the Employers Agent is called the
Engineer. Under the Silver and Gold Book the Employer may use an Employer’s
Representative.
This Engineer or Employer’s Representative is appointed by the Employer and should be named in
the Appendix to Tender or Contract Data so that tenderers know, when preparing their Tenders,
who the Employer is intending to appoint as his representative.
Whoever the Employer appoints must have a clear understanding of his role which is to “act for
the Employer” and in the best interests of the Employer but, at the same time, he must act with
fairness and integrity when making determinations under Sub-clause 3.5 [Determinations].
The Employer may split or divide the role of his representative but, if he does, for example, by
appointing a Design Engineer to review the design of the Works and a Supervision Engineer to
oversee their construction or installation, then each of these persons must be clearly named and
identified in the Contract and their role and authority carefully described.

Role Players and Parties to the Contract | 15
Subcontractors – The FIDIC Approach

It is more than likely that the Contractor will wish to engage one or more Subcontractors to
help him during the execution of the Works. However there are strict regulations regarding the
appointment of Subcontractors.
The Contractor is not permitted to subcontract the whole of the Works and, if he does, then
these are grounds for the Employer to terminate the Contract;
The Contractor must obtain the consent of the Employer’s Representative prior to engaging
any Subcontractor.
Note: This is “consent” not “approval” and reinforces the point that the Contractor
is fully responsible for any actions, omissions or failures of his Subcontractors,
notwithstanding any consent.
If the Employer wishes the Contractor to use a particular Subcontractor or supplier for a particular
part of the Works (a Nominated Subcontractor) – for example to give work to a local Contractor or
to standardise on the use of equipment with other similar facilities owned by the Employer – then
he can require the Contractor to engage such persons by naming them in the Contract.
However, the Employer cannot force the Contractor to accept a Nominated Subcontractor against
whom the Contractor raises reasonable objection.
Financiers
Financiers are not a Party to FIDIC Contracts.

It is the Employer’s responsibility to arrange adequate and available financing to pay the Contractor
for performing the Contract and he is required to provide evidence that such financing is available
when issuing Tender documents and inviting Tenders. Tenderers will need reassurance when
tendering that financing will be available for the complete project. In the 2008 DBO Contract the
Employer is required to provide a Financial Memorandum.
Thus, whether financing for the project is being provided by one of the International Financial
Institutions (such as the World Bank) or governmental loans or grants, the Employer must attach
evidence of his financial arrangements to the Employer’s Requirements. Such evidence could
be in the form of copies of financing agreements or irrevocable letters of credit, sufficient for
tenderers to have confidence that funding is, or will be, in place for the complete project.

16 | Role Players and Parties to the Contract
Insurers
Insurers are not Party to the FIDIC Contracts.

FIDIC Construction, Plant and DBO Contracts assume that all the insurances required will be
provided by the Contractor.
Notes

Lesson 5
Clause 1 [General Provisions and

General Issues]
Sub-clause 1.1
Introduction
Definitions for the (capitalised) defined terms in the 1999 Editions of the FIDIC contracts are
extensive;
Definitions are identical across all the FIDIC forms of contract, are grouped not alphabetically but
in six different categories:
Parties to the contract;
Dates, Tests;
Periods and completion;
Money and payments;
Works and Goods;
Other definitions.

18 | Clause 1 – General Provisions and General Issues
Sub-clause 1.1.1.3 [Letter of Acceptance]

The Letter of Acceptance brings the Contract into being.
For a valid contract there must be “Offer and Acceptance”. The Contractor’s Tender or Bid is his
Offer and the Employer Accepts the Bid by means of a Letter of Acceptance – never use Letters
of Intent!!!!!!!!!!!!
Sub-clause 1.1.3.1 [Base Date]

The Base Date assumes that tenderers will not have had the opportunity, from a practical point of
view, to take account of any events which may have an effect on their Tender and which occur less
than twenty-eight days before the date by which Tenders have to be submitted. Any such events
occurring after the Base Date will normally allow the Contractor to claim additional time and/or
compensation of Costs (plus reasonable profit), if appropriate.
Sub-clause 1.1.3.2 [Commencement Date]:

The Time for Completion is calculated from the Commencement Date and not from the date on
which the Letter of Acceptance is issued or the Contract Agreement is signed.
Sub-clause 1.1.3.9 [day]:

It should be noted that all references to days are in calendar days, i.e. easily convertible to weeks.
However, weeks and months are not used as measurements of time.
Sub-clause 1.1.4.1 [Accepted Contract Amount]:

It is important that the “Accepted Contract Amount” is stated in the Letter of Acceptance.
Sub-clause 1.1.4.2 [Contract Price]:

The Contract Price is the amount which the Contractor is actually paid and should not be confused
with the Accepted Contract Amount.
Sub-clause 1.1.4.3 [Cost]:

The definition of the word “Cost” means all expenditure reasonably incurred (or to be incurred)
by the Contractor, whether on or off the Site, including overhead and similar charges, but does
not include profit.

Clause 1 – General Provisions and General Issues | 19
Sub-clause 1.1.6.5 [Laws]:

“Laws” covers all manner of Laws, by-laws, regulations and “other Laws” which the parties have to
abide by and of which they must be aware. Very often, but not always, the Laws are those in the
Country, so that it will be the Laws of the Country which will rule.
The Country whose Laws will govern the Contract will normally be selected by the Employer and
will usually be his Country. It is assumed that the Contractor will have familiarised himself with
such Laws, since:
Ignorance of the Laws is no excuse for failing to abide by them; and
If there is an ambiguity between the Laws and the Contract the provisions of the Laws,
where they are of a mandatory nature, will overrule Contract provisions.
Sub-clause 1.1.6.8 [Unforeseeable]:

This is one of the more difficult and controversial definitions. The definition of “Unforeseeable”
is of particular relevance to Sub-clause 4.12 [Unforeseeable Physical Conditions] and
Sub-clause 8.4. [Extension of Time for Completion].
Note: It is also important to note that events will only be regarded as

“Unforeseeable” when adequate precautions could not reasonably have been
taken by an experienced Contractor.
Including the words “agree”, “agreed” or “agreement” require the agreement to be recorded
in writing can be a trap for the unwary and would be interpreted literally in some jurisdictions.
However, absent an agreement in writing, if one Party acts on an oral agreement to their detriment
with the knowledge of the other Party, this may give rise to an estoppel.
The Statement that headings are not relevant to the interpretation of the Contract is a useful
reminder not to take them literally. Indeed, a number of Sub-clauses relate to far more than the
topic indicated by the heading. For example, Sub-clause 4.8 is headed “Safety Procedures” but
also deals with Site security and the impact of the Works on the surrounding areas. Thus, the
heading of Sub-clause 1.3 [Communications] is the cover for the only place in the Contract which
sets any time requirement for the making of a determination for the issuing of certificates.

20 | Clause 1 – General Provisions and General Issues
Notes

Lesson 6
Clause 1 [General Provisions and

General Issues Continued]
Sub-clause 1.3 [Communications]
All “approvals”, “certificates”, “consents” and “determinations” are to be in writing, are not to
be unreasonably withheld or delayed and the acceptable form and details of addresses are to be
specified. It is important that all parties are aware of the correct address to which communications
should be sent.
One of the few exceptions is instructions which, by Sub-clause 3.3, are to be in writing, “wherever
practical”.
It is recommended however, that all instructions should be in writing as this will eliminate any
possibility of misinterpreting an oral instruction. It is also good project management.
Care must be taken by both parties to ensure that those working at the place to which
communications are to be sent are also aware of this.
The accepted forms of electronic communication will be agreed upon in the Particular Conditions
of Contract.
The final part of this Sub-clause is of particular significance. Approvals, certificates and consents to
determination shall not be unreasonably withheld or delayed. In particular, where determinations
are required by the Engineer, they shall not be “unreasonably withheld or delayed”. This is
particularly important because, for example, Sub-clause 3.5 does not provide any time limit for
the Engineer to make his determinations.
The FIDIC DBO Contract published in 2008 has included “Notices” in the definition. A notice
is a special form of communication usually associated either with a Party establishing its right
to additional compensation or giving notice to the other Party of important requirements or
instructions affecting the structure or content of the Contract or the work to be done. That is
why “Notice” is a defined term in the DBO Contract. If it is intended that instructions or other
communications, given during a meeting and recorded in the minutes of that meeting, are
intended to be notices given by one Party to the other, this intention should be clearly stated in

22 | Clause 1 – General Provisions and General Issues Continued
the minutes. By signing the minutes both parties have then accepted this provision. If this is not
properly recorded the minutes may well be construed simply as a record of a Statement made
during the meeting and have no contractual weight.
Sub-clause 1.4 [Law and Language]

This is important because the parties should choose which law and language governs the Contract
and the performance of the Works.
The Appendix to Tender should set out the language of the Contract. The law of the Country is
also to be specified.
In the real World few Employers will agree to a governing law other than the law of their own
Country.
Sub-clause 1.5 [Priority of Documents]

The order of priority of the documents forming the Contract can be significant where complex
questions of interpretation arise. Such clauses are typically included in case there is a conflict in
meaning between the various Contract documents.
It is to be noted that the General Conditions is placed relatively low in order of priority, but this
itself reflects the common law position that the written words chosen by the parties ought to have
priority, on questions of interpretation, over the printed words (or standard wording) used by the
parties. Although the final paragraph of this Sub-clause sensibly suggests that, if necessary, the
Engineer should issue clarification, there is no sanction if no such instruction is issued.
Sub-clause 1.6 [Contract Agreement]

The parties are to enter into a formal Contract Agreement within twenty-eight days of the receipt
of the Contractor’s Letter of Acceptance.
Under the Laws of many countries the Tender and Letter of Acceptance will be sufficient to create
a binding Contract between the parties and the Contract Agreement will merely further record or
confirm the terms of that Contract.
The form of Contract shall be that annexed to the Particular Conditions.
Sub-clause 1.7 [Assignment]
Neither Party can assign its interest in the Contract without the prior written agreement of the
other.

Clause 1 – General Provisions and General Issues Continued | 23
Sub-clause 1.9 [Delayed Drawings or Instructions]

Very relevant to the responsibilities of the Employer and the Engineer and may justify
Contractor’s claims;
Provides for the giving of a notice by the Contractor if there is delay and/or where
information is not provided;
Provision for a further notice, after which, if there is continued default, the Contractor
is entitled to an extension of time and his Costs plus profit;
Contractor should provide the requisite notice where there is any realistic possibility of
delay or disruption resulting from late release of information.
Sub-clause 1.9 [Errors in the Employer’s Requirements]

(FIDIC Plant Contract):
Following the Commencement Date the Contractor has a specified period given in the Appendix
to Tender in which to scrutinise the Employer’s Requirements and other information provided
by the Employer to check for any errors or faults which he can find. By this Sub-clause, if the
Contractor finds errors or faults after the given scrutiny period, he is required to notify the
Employer’s Representative and ask for instruction as to how to deal with the alleged error or fault.
Sub-clause 1.10 [Employer’s Use of Contractor’s Documents]

The Contractor retains copyright in its own documents.
The Employer has a right to use and copy the Contractor’s Documents during the life of the project
provided that use relates to the project.
Sub-clause 1.11 [Contractor’s Use of Employer’s Documents]

The Employer retains copyright of his own documents.
As with Sub-clause 1.10 the Contractor may copy and use, for the purposes of the Contract only,
documents belonging to the Employer.
Sub-clause 1.12 [Confidential Details]

In this Sub-clause each Party undertakes to respect the confidentiality of documents supplied by
the other Party which have been designated as “confidential”. This is not intended as a blanket
clause to cover everything either Party may produce but recognises that there may be certain
processes or design criteria which the Contractor or his Subcontractors consider as trade secrets
and wish to keep confidential.

24 | Clause 1 – General Provisions and General Issues Continued
Sub-clause 1.13 [Compliance with Laws]

The Contractor must comply with the applicable Laws.
By definition Sub-clause 1.1.47 [Laws] means all national (or state) legislation, statutes, ordinances,
and other Laws, and regulations and by-laws of any legally constituted public authority. The
Contractor remains liable for the matters covered by the sub-clause and he must remember that
“ignorance of the law is no excuse”.
Notes

Lesson 7
Clause 2 [The Employer]

Introduction
The role of the Employer is dealt with in five Sub-clauses of Clause 2 of the 1999 Editions:
Sub-clause 2.1 [Right to Access to the Site];
Sub-clause 2.2 [Permits, Licences or Approvals];
Sub-clause 2.3 [Employer’s Personnel];
Sub-clause 2.4 [Employer’s Financial Arrangements]; and
Sub-clause 2.5 [Employer’s Claims].
Sub-clause 2.1 [Right of Access to the Site]

The Employer shall give the Contractor right of access to and possession of all parts of the
Site as stated in the Contract;
Such right to access to and possession of the Site may not be exclusive;
Access or possession to the Site may be withheld until the Contractor provides the
Performance Security required by Sub-clause 4.2.
If the Contractor suffers delay or incurs Costs due to:
The failure by the Employer to give access as set out in the Contract; or
If no time is specified within such time as may be required to enable the Contractor to
proceed in accordance with his programme, provided he gives notice to the Engineer the
Contractor, may be entitled to an extension of time pursuant to Sub-clause 8.4 and payment
of any Costs (including reasonable profit);

26 | Clause 2 – The Employer
No extension of time will be granted if the Employer’s failure to give possession or access
was caused by an error or delay by the Contractor, including delay in the submission of the
Contractor’s Documents;
The Employer has the responsibility to provide access to the Site in the time stated in
Appendix to Tender. If there is no time stated in Appendix to Tender the access must be
provided in such a manner to not delay the Contractor and his programme of Works (Sub-
clause 8.3);
It is not necessary for the Employer to grant access to the whole Site right at the start.
It is sufficient to enable the Contractor to proceed unhindered in accordance with his
programme;
A failure to make the Site available might lead to the Contractor being entitled to an
extension of time and consequential Costs. As recommended in the Particular Conditions
the prudent Employer, if he recognises that it may not be able to grant access early or
exclusively, should make this clear in the Specification;
It should be noted that the Employer is only required to give the Contractor the “right”
of access to the Site. It is up to the Contractor to ensure that the means of access is
either already available in conjunction with the “right” and, if so, that it is suitable for the
Contractor’s needs, or, if not, that suitable means of access can be constructed or otherwise
provided or found by the Contractor;
If the Employer fails to make the Site available, as required by this Sub-clause, the Contractor
is entitled to be reimbursed Cost Plus Profit.
Access:
The definition of the Site is a wide one. Under Sub-clause 1.1.6.7 the “Site” is defined
as the place not only where the permanent Works are to be executed, and to which
Plant and Materials are to be delivered, but also “any other places as may be specified
in the Contract as forming part of the Site”. Therefore, it is important that all parties to
the Contract understand where these “other places” may be;
The right of access referred to here is the right to enter the Site. This is not the same
as the “Access Route” which is referred to at Sub-clause 4.15. It is the Contractor’s
responsibility to satisfy himself as to the adequacy of any access routes to the Site;
Sub-clause 2.1 is carefully qualified in that it expressly states that the Contractor will
not necessarily have exclusive rights of access and possession of the Site. It is important
that the Contractor appreciates this.
The Contractor should try to establish as part of the Tender process to what extent his
access will not be exclusive.

Clause 2 – The Employer | 27
This Sub-clause also refers to the possibility of the Contractor being given access to
parts of the Site. It is important that the Contractor is aware of exactly which parts of
the Site will be available and when. The Contractor should check that this is made clear
in the Appendix to Tender;
As soon as the Contractor takes possession of the Site he becomes responsible for a
number of obligations whereby the Contractor becomes fully responsible for safety
and Site security.
Sub-clause 2.2 [Permits, Licences and Approvals]

To the extent that the Employer can, the Employer shall assist the Contractor:
In obtaining copies of the relevant Laws which are not readily available; and
In the making of any applications for permits, licences and approvals which the Contractor
will need to make in accordance with those Laws;
The Employer is only required to provide this assistance if so requested by the Contractor.
Sub-clause 2.3 [Employer’s Personnel]

The Employer shall be responsible for ensuring that the Employer’s Personnel and his other
Contractors:
Co-operate with the Contractor to the limited extent provided for in Sub-clause 4.6;
Comply with the health and safety requirements set out in paragraphs (a) to (c) of Sub-
clause 4.8;
Take all reasonable steps to protect the environment both on and off the Site as required
by Sub-clause 4.18.
Sub-clause 2.4 [Employers Financial Arrangements]

If the Contractor so requests, the Employer shall provide, within twenty-eight days,
reasonable evidence that financial arrangements are in place to pay the Contract Price in
accordance with Clause 14;
The Employer must give notice to the Contractor if he intends to make any material change
to his financial arrangements;
If that evidence is not provided the Contractor may, subject to the provision of the necessary
notices, suspend work or even terminate the Contract.

Thus the FIDIC Contract recognises the risk of whether the Employer is capable of paying
for the project and, in particular, for any Variations that he may order. His financial
arrangements may be requested by the Contractor and, upon such request, the Employer
should provide the information requested;
The Sub-clause thus provides a mechanism whereby the Contractor can obtain confirmation
that sufficient funding arrangements are in place to enable him to be paid;
The nature of the evidence may often depend upon the source of funding. If funding is
being provided as a loan or grant from an International Financing Institution (“IFI”), such as
one of the multilateral development banks, it should be possible to provide copies of loan
documentation evidencing the arrangements;
There is no definition, however, of what constitutes “reasonable evidence” and this may
become important in case of a dispute relating to its precise meaning due to serious
sanction that follows such failure. All that is said is that the evidence must show that the
Employer is able to pay the Contract Price in accordance with Clause 14
Simple consideration of the sub-clause in isolation suggests that there is little sanction
available to the Contractor as a result of any failure by the Employer to provide the
reasonable evidence requested. However, in accordance with Sub-clause 16.1, should the
Employer fail in the twenty-eight day period to comply with Sub-clause 2.4, the Contractor
may, after giving not less than twenty-one days’ notice to the Employer, suspend work. This
potentially gives a period of forty-nine (i.e. twenty-eight plus twenty-one) working days
before a Contractor is entitled to suspend;
If the Contractor does not receive reasonable evidence within forty-two days of giving
notice under Sub-clause 16.1 then, pursuant to Sub-clause 16.2, the Contractor is entitled
to terminate the Contract.

Clause 2 – The Employer | 29
Sub-clause 2.5 [Employer’s Claims]

If the Employer considers himself entitled to either any payment or an extension of the
Defects Notification Period under the Contract, the Employer or Engineer shall give notice
and particulars to the Contractor;
The notice relating to payment should be given as soon as practicable after the Employer
has become aware of the event or circumstance which gives rise to the claim;
Any notice relating to the extension of the Defects Notification Period should be given
before the expiry of that period;
The Employer must also provide substantiation including the basis of the claim and details
of the relief sought;
Once notice has been given the Engineer shall make a determination in accordance with
Sub-clause 3.5;
Any amount payable under Sub-clause 2.5 may be included as a deduction in the Contract
Price and Payment Certificates;
The Employer cannot make any deduction by way of set-off or any other claim unless it is in
accordance with the Engineer’s determination;
Notice is not required for payments due to the Employer for services under Sub-clause 14.19
or equipment under Sub-clause 4.20.

Notes

Lesson 8
Clause 3 [The Engineer]

Introduction
Once a Contract is placed with a Contractor, the promoter or developer of a project is called an
“Employer” and the Consulting Engineer is referred to as the “Engineer”.
Two Contracts are traditionally formed:
Between the Consulting Engineer and the Employer: the Contractor is not a Party;
Between the Employer and the Contractor: the Engineer is not a Party.
Engineer’s Duties
The concept of engaging a Consulting Engineer stems from the idea that, when a promoter initiates
a construction project, he is faced with many technical, commercial and legal considerations with
which he is not an expert. In civil engineering construction, in order to transform the promoter’s
ideas into reality, the method adopted by FIDIC is to engage a Consulting Engineer to carry out
the following duties:
The Engineer’s duties can be specified according to the phase of the project:

32 | Clause 3 – The Engineer
Before construction:
(a) Designer, Advisor and Consultant

Complete a skilful design of the project sought by the promoter. Such design includes:
33 Preparation of Drawings giving details of every aspect of the project;
33 Drafting a Specification of the Materials to be used and of the standard of the

workmanship to be achieved;
33 Prepare the Bill of Quantities.
(b) Employer’s Agent (Before Construction)

33 Prepare Tender and Contract, i.e. all documents necessary for obtaining a
competitive price for carrying out the work by a competent Contractor;
33 Advise the promoter on the Tenders received and on the selection of the Contractor.
During construction:
(c) Supervisor and Employer’s Agent

Supervise or to inspect the work carried out by the Contractor in order to ensure
quality and conformity with the design requirements;
(d) Administrator and Certifier

33 Administer the Contract;
33 Evaluate and certify work carried out;
33 Deal with situations as they arise.
Typical duties of the Engineer:

Design: implementing and augmenting the design;
Quality control;
Cost accountancy and certification;
Administration and management.

Clause 3 – The Engineer | 33
Monthly Payments:
Despite the diversity of the duties of the Engineer as a certifier, the most important of these is,
perhaps, his role under Clause 14 enabling him to certify monthly payments to be made to the
Contractor. These payments are essential for the smooth performance of the Contract as they
represent to the Contractor the lifeline with respect to the Contract.
Sub-clause 3.1 [Engineer’s Duty and Authority]

The Engineer is appointed by the Employer;
The Engineer is obliged to carry out the functions described in the Contract but he has no
power to amend the Contract;
The Engineer’s authority to act derives, in the first place, from the Contract documents,
whether by express words and by virtue of powers necessarily implied from the express
words;
For certain further acts specified authority is required and that permission, required by the
Engineer from the Employer, should be set out in the Particular Conditions;
The Engineer shall be deemed to act on behalf of the Employer;
Neither any act nor omission by the Engineer shall relieve either the Employer or Contractor
of any obligation or responsibility under the Contract;
The final paragraph of this sub-clause, in a clear attempt to limit liability on the part of the
Engineer, states that any act carried out by the Engineer shall not relieve the Contractor
from any responsibility he has under the Contract, including responsibility for errors,
omissions, discrepancies and non-compliances.
Sub-clause 3.2 [Delegation by the Engineer]

The Engineer can delegate functions to assistants or to a Resident Engineer;
These delegations must be in writing and must define the extent of the so delegated;
Unless agreed by both the Employer and Contractor, the Engineer may not delegate his
determination function under Sub-clause 3.5.

34 | Clause 3 – The Engineer
Sub-clause 3.3 [Instructions of the Engineer]

The Contractor is obliged to comply with instructions given by the Engineer (or his assistants
to whom proper authority under Sub-clause 3.2 has been delegated);
Where possible, these instructions should be in writing. It is recommended that the

Particular Conditions include that all instructions should be in writing;
Where the instructions are oral, if they are confirmed in writing by the Contractor within two
days, then they shall be deemed to be a written instruction unless the Engineer responds to
the contrary within two days;
If the Contractor considers that the instruction in fact constitutes a Variation then it should
respond in accordance with Sub-clause 13.3.
Sub-clause 3.4 [Replacement of the Engineer]

The Employer must give forty-two days` notice of any intention to replace the Engineer;
Some Commentators are of the opinion that this time of forty-two days is too long as it
could result in the Contractor having no means of communicating his problems to the
correct person;
It is therefore suggested that this time should be shortened to twenty-eight days;
If the Contractor raises a reasonable objection against the proposed replacement then the
Employer must find someone else.
Sub-clause 3.5 [Determinations]
Where the Engineer is required by the Contractor to reach a determination, the Engineer is
bound to consult with both parties in order to reach agreement- this effectively means he
should obey the first Rule of Natural Justice, namely, the Audi Alterem Partem Rule;
If no agreement is reached, the Engineer’s duty is to provide a fair determination in

accordance with the Contract and having regard to all the circumstances;
The Engineer must provide a reasoned notice of his determination;
That determination is binding unless revised in accordance with Clause 20.

Lesson 9
Clause 4 [The Contractor]

Introduction
In simple terms the Contractor’s obligations under the Construction Contract revolve around five
main areas:
Construction and completion of the Works with due diligence and within the Time for
Completion as contemplated in the Contract;
Use of Materials, Plant and workmanship as described in the Contract and in accordance
with the Engineer’s instructions;
Provision of securities, indemnities and insurances in respect of such work during the
Contract period;
Supply of information and notices required for the execution and completion of the Works
and also for alerting the Employer whenever an event occurs which is likely to increase the
Cost of the work or the Time for Completion;
Performance of certain administrative and other functions (including, if explicitly required,

the design of certain elements) to facilitate the process of construction and its various
activities.

36 | Clause 4 – The Contractor
Sub-clause 4.1 [Contractor’s General Obligations]

The Contractor’s primary obligation is to “execute and complete the Works” and “remedy
any defects” in accordance with the Contract and with the Engineer’s instructions;
The Contractor is responsible for ensuring the supply of the necessary Plant, personnel
and other Goods and services necessary for the completion of the Works in good time in
accordance with the requirements of the Contract;
The Contractor is responsible for all Site operations and construction methods. This includes
all design of Plant and Materials to the extent required by the Contract;
A Contractor must submit, whenever required by the Engineer, details of the methods
which the Contractor intends to adopt in carrying out the Works;
The Contractor must notify the Engineer of any alterations to that method Statement;
The Contractor only has design responsibility to the extent specified in the Contract;
If the Contractor undertakes any element of design that design must be fit for the purpose
for which the designed part is intended as specified in the Contract;
Design:
The FIDIC Construction Contract is intended for use where it is the Employer who
provides the design and where it is the Contractor who constructs according to that
design. Therefore, whilst it is unlikely that a Contractor will be required to carry out
any design, it is important that this is carefully checked. This means that it is important
that the Contract as a whole (including the Specification and any Drawings or Bill of
Quantities) is carefully checked to see if there are any design obligations contained
therein;
Where the Contract specifies that the Contractor shall design any part of the Permanent
Works then the Contractor must submit to the Engineer the Contractor’s Documents in
relation to the designed portion of the Works and the Contractor shall be responsible
for this design. Any Permanent Works designed by the Contractor must be fit for the
purpose for which the Works were intended as specified in the Contract. Where the
Contractor undertakes design, the Contractor will be responsible for the fitness for
purpose of that design. This absolute obligation obviously depends on the nature of
the definition of the purposes of the Works contained in the Contract;
An example of the Contractor’s design obligations could be
33 Concrete mix design
33 Asphalt mix design
33 Certain mechanical component design such as HVAC

Clause 4 – The Contractor | 37
For fitness for purpose obligation it is important to remember that, under common law,
the fitness for purpose duty is stricter than the ordinary responsibility of a consultant
carrying out design where the implied obligation is one of reasonable competence to
“exercise due care, skill and diligence”;
Sub-clause 4.1 attempts to clearly define where design responsibility lies. However, a

Contractor should always take care to consider the implications of the design even if he
thinks he has no design responsibility whatsoever. In some jurisdictions a Contractor is
under a duty to warn the Employer of any problems with the design.
Sub-clause 4.2 [Performance Security]

The Contractor must provide a Performance Security in the amount of the security required
as set out in the Appendix to Tender;
If Performance Security is required then the Contractor must, at his own Cost, provide
that security to the Employer no later than twenty-eight days after receiving the Letter of
Acceptance. A copy must be sent to the Engineer at the same time.
The Performance Security must be:
Be in the form annexed to the Particular Conditions. If it is not it must be in a form agreed
by the Employer;
Be issued by an entity and within a jurisdiction approved by the Employer;
Remain valid until the Contractor has completed the Works and remedied any defects;
If the Performance Security has not been received and accepted by the Employer, the
Engineer will not issue an Interim Payment Certificate (see Sub-clause 14.6);
The Employer may only make a call on the Performance Security if:
Failure by the Contractor to extend the Performance Security beyond the expiry date if
the Works are not complete at that date;
Failure by the Contractor to pay an amount to the Employer under Sub-clause 2.5 or

Clause 20;
Failure by the Contractor to remedy a default within forty-two days of being notified
of the defect;
When an Employer can terminate the Contract under Sub-clause 15.2.

38 | Clause 4 – The Contractor
Sub-clause 4.3 [Contractor’s Representative]

The Contractor must appoint a Contractor’s Representative who will either be named in the
Contract or approved by the Engineer prior to the Commencement Date;
If the Contractor wishes to replace the Contractor’s Representative the prior consent of the
Engineer must be obtained;
The Contractor’s Representative must devote the whole of his time on the Site to directing
the performance of the Contractor.
The Contractor’s Representative:
Receives instructions issued under Sub-clause 3.3 by the Engineer;
Must be fluent in whatever language is stated in the Appendix to Tender to be the

language the parties should communicate in;
May delegate his powers provided the Engineer receives prior notice.
Sub-clause 4.4 [Subcontractors]
Unless otherwise agreed, the Contractor shall not subcontract the whole of the Works;
If the Contractor is permitted to subcontract an element of the Works then the Contractor
remains wholly responsible to the Employer for the acts of that Subcontractor as if those
acts had been carried out by him;
The prior consent of the Engineer is required for all Subcontractors, apart from suppliers
and the Subcontractors named in the Contract;
The Contractor must give the Engineer twenty-eight days’ notice of both the intended and
actual Commencement Date of any Subcontractor’s work;
This sub-clause deals with the appointment of Subcontractors. It also makes it clear that
the Contractor is wholly responsible for the performance of the Subcontractors. This
obligation extends not only to the Subcontractors he chooses to appoint but also to the
Subcontractors nominated by the Employer in accordance with Clause 5;
It is important that the Contractor appreciates how wide the obligations here are. The
Contractor is responsible for all the acts and defaults of the Subcontractors.

Lesson 10
Clause 4 [The Contractor Continued]

Sub-clause 4.5 [Assignment of Benefit of Subcontract]

Where a Subcontractor’s obligations last beyond the Defects Notification Period, the
Employer (through the Engineer) can choose to instruct the Contractor to assign to him the
benefits of those obligations;
The Employer, and not the Contractor, will be responsible for work carried out after any
such assignment.
Sub-clause 4.6 [Co-operation]
The Contractor shall co-operate with the Employer’s Personnel, other Contractors and
personnel from public authorities to enable them to carry out their work on or near to the
Site;
If the Contractor is instructed by the Engineer to co-operate in such a way, this shall
constitute a Variation;
If the Contractor requires possession of any means of access, structure or foundation or

Plant, this must be set out in the Contractor’s Documents which must be submitted in
accordance with the Specification.
Sub-clause 4.7 [Setting Out]

It is the Employer’s responsibility to set out the original points, lines and levels of reference
specified in the Contract;
Subject to this the Contractor shall set out his Works from this data;
The Contractor has an obligation to check or use reasonable efforts to verify the accuracy
of the Employer’s setting out;

40 | Clause 4 – The Contractor Continued
If any error in the setting out causes delay or Costs then the Contractor should give notice
to the Engineer within the time limits prescribed within Clause 20 and may be entitled to
an extension of time and payment of any Cost plus reasonable profit;
It is for the Engineer to determine whether the error could have been found by “an
experienced Contractor” using reasonable efforts to verify the data.
Sub-clause 4.10 [Site Data]

The Employer must make available, prior to the Base Date (i.e. twenty-eight days prior to
the latest date for submission of the Tender), all relevant data in his possession on sub-
surface and hydrological conditions at the Site;
This is an ongoing obligation;
It is the responsibility of the Contractor to interpret the data;
It will be assumed that the Contractor has both examined and inspected the Site and all the
available information provided to the Employer about the Site and taken that information
into account in compiling and submitting his Tender.
Tender Information:
The second part of the Sub-clause provides that the Contractor is deemed:
To have obtained all necessary information to prepare his Tender;
Deemed to have taken into account all the risks which might impact on his Tender;
The only limit on the Contractor’s obligations, as provided by this Sub-clause, is that
the Contractor will be deemed to have obtained all necessary information “to the
extent” it was “practicable (taking account of Cost and time)”.
Sub-clause 4.11 [Sufficiency of Accepted Contract Amount]

The Contractor will be deemed to have based his Tender sum on the basis of:
The information provided by the Employer under Sub-clause 4.10; and
The Contractor’s own checks on that information as required by Sub-clause 4.10;
It is for the Contractor to ensure that his Tender sum covers everything the Contractor
needs to be able to carry out the Works as required by Sub-clause 4.1.

Clause 4 – The Contractor Continued | 41
It is only if there is an error in the Site data provided by the Employer, which is found out at
a later stage and which error it is held the Contractor could not have found out through his
own enquiries, that a Contractor may be able to make a claim for additional payment. This
is, of course, provided the Contractor has interpreted the data correctly;
The question of whether, as with Sub-clause 4.10 (and therefore unlike Sub-clauses 4.7 and
4.12), the relevant standard by which the Contractor will be judged is the “ordinary” or
the “experienced” Contractor” is a difficult one. There is nothing within the wording of the
sub-clause to suggest that the Contractor will be judged according to the standards of the
“experienced” Contractor.
Sub-clause 4.12 [Unforeseeable Physical Conditions]

The Contractor must give notice to the Engineer if he encounters adverse physical conditions
which he considers to have been Unforeseeable;
“Physical conditions” means both natural phenomena and manmade obstructions;
“Unforeseeable” is defined by Sub-clause 1.1.6.8 as being “not reasonably foreseeable by

an experienced Contractor by the date of submission of the Tender”;
The notice must describe the problem and demonstrate why it was Unforeseeable;
Upon receipt of such a notice the Engineer shall proceed to make a determination in
accordance with Sub-clause 3.5;
If the Engineer so determines the Contractor may be entitled to an extension of time under
Sub-clause 8.4 and to Payment of Cost;
Before the Engineer or Employer’s Representative finally agrees any Cost that may be due,
the Engineer must take account of whether any physical conditions were more favourable
to the Contractor than had been anticipated;
If the Engineer agrees that the physical conditions encountered were Unforeseeable,
and any instruction constitutes a Variation, then the Contractor is entitled to proceed in
accordance with Clause 13 [Variations and Adjustments] and claim additional time and
money, if appropriate;
Where the Contractor recovers additional Costs these Costs do not include an element of
profit, even though it is likely to have been necessary to carry out additional Works and
possibly to employ additional Plant and labour;
This Clause confirms the FIDIC principle of when profit is allowed. There is no profit if the
effect or circumstance was not due to the default of the Employer. In this case neither
party could have been aware of the “Unforeseeable Physical Conditions” therefore the
Contractor may only be awarded additional time and Costs.

Notes

Lesson 11
Clause 4 [The Contractor Continued]

Sub-clause 4.13 [Rights of Way and Facilities]

The Contractor is responsible for:
Site access;
Special and/or temporary rights of way. This includes those routes outside the Site but
which are necessary for access to the Site;
Obtaining any facilities outside of the Site which he needs to execute his Works at his
own Cost and risk.
Sub-clause 4.15 [Access Route]

It is for the Contractor to satisfy himself as to the suitability and availability of access to the
Site;
The Contractor is responsible for obtaining permissions to use the access route and all
necessary signage;
The sub-clause expressly provides that the Employer does not guarantee the suitability or
availability of particular access routes;
The Contractor bears all the Costs and risks associated with access.
Sub-clause 4.17 [Contractor’s Equipment]

The Contractor is responsible for his own equipment;
All the Contractor’s Equipment on Site is for the exclusive use of the Works on Site;
Major items of Contractor’s Equipment may only be moved off Site with the consent of the
Engineer.

Sub-clause 4.18 [Protection of the Environment]

The Contractor shall take all reasonable steps to protect the environment;
This obligation includes the environment both on and off the Site;
Emissions, surface discharges and effluent caused by the Contractor’s activities must not
exceed the greater of the values set out in the Specification or that allowed for by the
applicable Laws.
Sub-clause 4.20 [Employer’s Equipment and Free-Issue Material]

To the extent set out in the Specification, the Employer shall provide and the Contractor
may use the Employer’s Equipment;
The Contractor is responsible for the Cost of using such equipment at rates to be agreed or,
if not agreed, determined by the Engineer;
The Employer is responsible for the Employer’s Equipment except whilst the Contractor is
using or controlling it;
To the extent set out in the Specification, the Employer shall provide, and the Contractor
may use, “Free-issue Materials”;
“Free-issue Materials” shall be provided free of charge;
After the Contractor has inspected the “free-issue Materials”, he becomes responsible for
their use, custody and control;
A cause for concern is that Employer’s Free-Issue Material is often not provided in
accordance with the Contractor’s Programme. This Clause only gives the Contractor an
Extension of Time should this occur but does not allow the Contractor to claim “Standing
Time” while he waits for the Free-issue Material.

Clause 4 – The Contractor Continued | 45
Sub-clause 4.21 [Progress Reports]

If required by the Contract the Contractor shall provide regular progress reports;
The format of the progress reports shall be agreed with the Engineer or Employer’s
Representative or detailed in the Specifications;
The provision of the progress report amounts to a condition of payment;
These reports shall be in the detail outlined in this sub-clause;
Six copies of the report shall be provided to the Engineer;
The first report shall be produced at the end of the calendar month following the
Commencement Date;
Thereafter, the reports shall be provided on a monthly basis until the Contractor has
completed all the work listed as outstanding at the Completion Date;
One of the main reasons for providing Progress Reports is so that Person’s not involved in
the project on a day-to-day basis can get a good idea of the progress that the Contractor is
making;
It is also imperative that the Progress Reports copied to the DAB.
Sub-clause 4.22 [Security of the Site]

The Contractor is responsible for keeping unauthorised personnel off Site;
Authorised personnel are limited to the Contractor’s Personnel and the Employer’s
Personnel unless otherwise notified to the Contractor by the Employer or Engineer;
The Contractor’s obligation for Site Security reverts back to the Employer on Taking Over
of the Works.

Sub-clause 4.23 [Contractor’s Operations on Site]

The Contractor’s operations are confined to the Site and any additional areas agreed by the
Engineer;
The Contractor’s Equipment and Personnel should keep to these areas;
The Contractor is responsible for keeping the Site tidy and otherwise free from obstruction;
On issue of the Taking-Over Certificate, the Contractor should remove his equipment off
the Site;
When the Contractor removes his equipment he should leave the Site in a clean and safe
condition;
The Contractor is permitted to retain on the Site such Goods and equipment as are required
to enable him to fulfil his obligations under the Defects Notification Period.
Sub-clause 4.24 [Fossils]

All fossils and other antiquities are to be placed under the control of the Employer;
The Contractor shall promptly give notice to the Engineer of the discovery of any such
antiquity;
If the discovery of any such antiquity leads to delay or additional Cost, upon the determination
of the Engineer, the Contractor may be entitled to an extension of time or payment of any
Cost, but no profit.

Lesson 12
Clause 5 [Nominated Subcontractors]

Introduction
The use of Nominated Subcontractors is not recommended but because they are sometimes
necessary. There are three potential advantages to the Employer or Engineer:
Involvement in the choice of a specialist Subcontractor;
Involvement in the choice of Plant;
The avoidance of participation in the co-ordination of the interface between the Nominated
Subcontractors’ and the Contractors’ Works.
Sub-clause 5.1 [Definition of Nominated Subcontractor]

A Nominated Subcontractor is someone who is either so named in the Contract or who the
Engineer has instructed the Contractor to employ as a Subcontractor;
If there are to be Nominated Subcontractors it is preferable for the Employer to make this
clear in the Tender documents. Then the Contractor will know exactly where he stands
when pricing for the project. If there are to be no Nominated Subcontractors this clause
should be deleted;
However, an Engineer cannot unilaterally impose a Subcontractor as Sub-clause 5.2

provides that a Contractor can raise a reasonable objection by notice to the Engineer about
any proposed appointment.
Sub-clause 5.2 [Objection to Nomination]

If the Contractor objects to the employment of a Nominated Subcontractor, he must do so
by notice to the Engineer as soon as possible. An objection will be deemed to be reasonable
if:

48 | Clause 5 – Nominated Subcontractors
There are reasons to believe the Subcontractor lacks competence or sufficient finances
or resources.
The subcontract does not specify that the Subcontractor shall:
Provide the Contractor with an appropriate indemnity in relation to any negligence;
Undertake to perform its work in such a way so as to ensure that the Contractor will
discharge his obligations under the Contract;
Indemnify the Contractor in respect of any failure to perform its obligations.
Sub-clause 5.3: [Payments to Nominated Subcontractors]

Payments to Nominated Subcontractors is often the cause of disputes between the Subcontractor
and the main Contractor.
The process to be followed is as below:
The Engineer will certify sums due under any subcontract;
The Contractor shall pay the Subcontractor the sums certified;
Any sums certified will form part of the Contract Price;
The requirement to pay the sums certified by the Employer is a mandatory one. It is also
a requirement which is policed by the requirements of Sub-clause 5.4 which enable the
Engineer to require evidence of payment by the Contractor of sums previously certified.
Sub-clause 5.4 [Evidence of Payments]

The Engineer may request from the Contractor evidence that it has paid the Subcontractor
all sums due under previous Payment Certificates;
Unless the Contractor can provide evidence that the Subcontractor has been paid or
satisfies the Engineer that he is reasonably entitled to withhold money, and has notified
the Subcontractor of this, then the Employer will pay the Subcontractor direct;
If the Employer is forced to pay the Subcontractor direct then the Contractor must repay
that sum to the Employer.
Any payments made directly to a Nominated Subcontractor, pursuant to Sub-clause 5.4 are to be
deducted from the next Interim Payment Certificate from the main Contractor.
Obviously this is to avoid double payment to the main Contractor.

Lesson 13
Clause 6 [The Management of Projects:

Staff and Labour]
Introduction
This lesson covers the procedures during the construction phase of the Project. Under Lesson
Eight we will cover Clauses 6 and 7 and the very important “Time Clause – Clause Eight” is dealt
with separately in Lesson Nine.
In this Lesson we consider:
Staff and labour;
Plant, Materials and Workmanship.
Clause 6: Staff and Labour
Clause 6 covers the employment of staff and labour to carry out the Works, which is stated under
Sub-clause 6.1 to be the responsibility of the Contractor. It enumerates the Contractor’s basic
obligations with regard to the employment of labour, working hours and matters concerning
health and safety.
Sub-clauses 6.1 to 6.7 of this clause deal with the Contractor’s basic obligations with regard to the
employment of labour, working hours and matters concerning health and safety. Sub-clauses 6.8
to 6.11 cover the superintendence and behaviour of the Contractor’s staff and labour.
While all arrangements are the responsibility of the Contractor, there are certain restrictions
and conditions which he must abide by. In particular, he must comply in all respects with the
local labour Laws, which is a requirement consistent with the provisions of Sub-clause 1.14
[Compliance with Laws], which is the overall requirement for the Contractor to comply with all
Laws and regulations, etc.

50 | Clause 6 – The Management of Projects: Staff and Labour
Except as otherwise stated in the Specification (note that stating that Sub-clause 6.1 is subject
to the Specification means that the priority of documents in Sub-clause 1.5 is reversed), the
Contractor:
Is responsible for staff and labour;
Makes arrangements for the engagement of all staff and labour; local or otherwise;
Must comply with the relevant labour Laws, including Laws related to the employment,
health, safety and emigration and shall allow personnel all their legal rights;
Responsible for his personnel;
Shall ensure that his personnel are appropriately skilled, qualified and experienced for the
job that they were hired to do – the Engineer can request to the Contractor removal from
the Site of the unsuitable persons;
Shall submit to the Engineer the list of his personnel and equipment;
Shall provide and maintain all accommodation and welfare facilities for all of his personnel;
Shall pay his staff and is responsible for the staff’s housing, feeding and transport;
Shall ensure that no work is carried out outside normal working hours and on days of rest,
for the location of the Site, unless accepted by the Engineer;
Shall ensure the maintenance of all health and safety standards of his personnel;
Shall ensure that his personnel act in an orderly fashion and in no way act in an unlawful or
riotous fashion;
Shall supervise the plans, arrangements, directions, management, inspection and testing of
the Works, for the duration of the Works;
Shall ensure that all required and any other reasonable health and safety precautions are
taken;
Shall appoint an accident prevention officer.

Clause 6 – The Management of Projects: Staff and Labour | 51
Sub-clause 6.8 [Contractor’s Superintendence]

Throughout the execution of the Works, and as long thereafter as is necessary to fulfil
the Contractor’s obligations under the Contract, the Contractor shall provide all necessary
supervision to plan, direct and manage and test the work;
The supervision must be provided by enough number of people to ensure the satisfactory
and safe execution of the Works;
Those supervising must have adequate knowledge both of the language for communications
and of the likely work that will be carried out.
Subject to Sub-clause 4.3 the “whole of the time” of the Contractor’s Representative shall
be given to directing the Contractor’s performance of the Contract;
This superintendence obligation is a wide one and might be felt to be obvious. However, by
spelling out the obligations in the Contract, the Employer, through the Engineer, is provided
with a means to keep a check on the Contractor’s performance.
Sub-clause 6.9 [Contractor’s Personnel]

The Contractor’s Personnel shall be of the appropriate qualifications and experience in
their profession;
The Engineer may require the Contractor to remove any person employed on the Site or
Works, including the Contractor’s Representative if applicable, who:
Persists in any misconduct or lack of care;
Carries out duties incompetently or negligently;
Fails to conform with any provisions of the Contract;
Persists in any conduct which is prejudicial to safety, health, or the protection of the
environment;
If someone is removed, the Contractor shall then appoint a suitable replacement.
The sub-clause allows the Engineer to remove from Site any person employed on the Site who acts
in a way prejudicial to the carrying out of the Contract. As this sub-clause applies to “any person
employed on the Site”, it also is likely that the Sub-clause will relate to not only the Contractor’s
Personnel but also the Subcontractor’s personnel.

52 | Clause 6 – The Management of Projects – Staff and Labour
Sub-clause 6.10 [Records of Contactor’s Personnel and Equipment]

The Contractor shall submit, to the Engineer, details showing the number of each class of
Contractor’s Personnel and of each type of Contractor’s Equipment on the Site;
These details shall be submitted on a monthly basis until the Contract has completed all
work known to be outstanding at the completion as stated in the Taking-Over Certificate.
Sub-clause 6.11 [Disorderly Conduct]

The Contractor shall at all times take all reasonable precautions to prevent any unlawful,
riotous or disorderly conduct by or amongst the Contractor’s Personnel, and to preserve
peace and protection of persons and property on and near the Site;
The failure by the Contractor to ensure the good behaviour of his personnel could lead to a
claim in relation to Sub-clauses 4.14, 17.1 and 18.3.
Notes

Lesson 14
Clause 7 [Plant Materials and

Workmanship]
Clause 7: Plant, Materials and Workmanship
Clause 7 covers Plant, Materials, Workmanship and Testing. It deals with the requirements for the
items of Plant and Materials which the Contractor brings to the Site in order to execute the project.
It covers the Contractor’s obligations concerning the quality of his work and the procedures to be
followed for tests and in the event that an item of work fails the test. The matter of the time when
an item of Plant or Materials becomes the property of the Employer is covered at Sub-clause 7.7
and royalties are dealt with at Sub-clause 7.8.
Essentially:
The Contractor:
Is responsible for Plant, Materials and workmanship;
Shall provide all apparatus, fuel, personnel for testing the Works;
If the Contractor suffers delays and Costs owing to the Engineer’s instruction then Sub-
clause 20.1 applies allowing an Extension of Time with Cost and Profit.
The Engineer:
May vary the location of test or additional tests;
Shall give notice to the Contractor of his intention to participate at the tests.

54 | Clause 7 – Plant Materials and Workmanship
In summary:
Plant, Materials and execution of the Works are to be in accordance with the Contract and
in proper workmanlike manner;
Inspection and testing: Employer/ Engineer is entitled to inspect and test Plant and Materials
on Site or at the location for production;
Rejection: Plant and Materials may be found defective and will have to be rejected and
replaced;
Remove or re-execute all work not in accordance with the Contract;
Execute any work urgently required for safety reasons;
Ownership: all Plant and Materials are the property of the Employer at whichever is the
earlier of delivery to the Site or payment to the Contractor.
Sub-clause 7.4 [Testing]
FIDIC does not specify generally which tests are to be undertaken as this will vary from project to
project and contract to contract.
The tests will be specified in the Particular Conditions of Contract and in the Specifications.
Sub-clause 7.4 gives the procedures for tests that are specified in the Contract and additional
tests, which are instructed under Clause 13 (the Engineer may, under Clause 13, vary the
location or details of specified tests, or instruct the Contractor to carry out additional tests)
but does not cover Tests after Completion. Tests on Completion are covered at Clause 9
which refers back to Sub-clause 7.4;
The Contractor shall agree with the Engineer the time and place for the specified testing of
any Plant, Materials and other parts of the Works;
The Contractor shall provide all that is necessary (apparatus, assistance, documents
and other information, electricity, equipment, fuel, consumables, instruments, labour,
Materials, and suitably qualified and experienced staff, as necessary) to carry out the tests
specified;
The Engineer shall give the Contractor not less than twenty-four hours’ notice of the
Engineer’s intention to attend the tests. If the Engineer does not attend at the time and
place agreed, the Contractor may proceed with the tests unless, otherwise instructed by
the Engineer;

Clause 7 – Plant Materials and Workmanship | 55
If the Engineer does not attend the Contractor may proceed with the tests, unless otherwise
instructed by the Engineer, and the tests shall be deemed to have been made in the
Engineer’s presence and shall be deemed to be accurate. The Contractor shall immediately
forward to the Engineer duly certified reports of the tests;
If the Contractor suffers delay because of the tests he must give notice to the Engineer,
who will then determine whether or not to grant time and/or money to the Contractor in
accordance with Sub-clause 3.5 [Determinations];
The Contractor must forward certified test reports to the Engineer.
Sub-clause 7.5 [Rejection]
If, as a result of an examination, inspection, measurement or testing, any Plant, Materials
or workmanship is found to be defective or otherwise not in accordance with the Contract,
the Engineer may reject it by giving notice to the Contractor;
The Engineer must give reasons for the rejection;
The Contractor must remedy the rejected item so that it complies with the Contract;
The Engineer may require a retest. If the Engineer requires the Plant, Materials or
workmanship to be retested, the tests shall be repeated under the same terms and
conditions;
If any rejection or retesting causes the Employer to incur additional Costs these will be
borne by the Contractor, subject to Sub-clause 2.5;
If the Contractor fails to rectify the item as instructed, the Employer has the right to
terminate the Contract under Sub-clause 15.2 [Termination for Contractor’s Default].
Sub-clause 7.6 [Remedial Works]

The Engineer may instruct the Contractor to:
Remove from Site any Plant or Materials which are not in accordance with the Contract;
Remove and re-execute the Works which are not in accordance with the Contract;
Execute any Works required for the safety of the Works, whether because on an accident,
an Unforeseeable event, or otherwise;
The Contractor must, within a reasonable time, comply with any Engineer’s instruction;
The Contractor must comply immediately with any Engineer’s instruction to execute the
Works, which are urgently required for the safety of the Works;

56 | Clause 7 – Plant Materials and Workmanship
If the Contractor fails to comply with the Engineer’s instruction, the Employer will be
entitled to employ other persons to carry out the instruction and claim the Costs arising
from the failure to the Contractor under Sub-clause 2.5;
In the event the Employer employs other persons to carry out the instruction then, unless
the Works instructed by the Engineer would have entitled the Contractor to payment under
the Contract, the Contractor will pay the Cost of these Works.
Sub-clause 7.7 [Ownership of Plant and Materials]

This Sub-clause deals with what is commonly known as “materials on site”.
Provided the Laws of the Country do not provide otherwise, items of Plant and Materials
will become the property of the Employer either when:
They are delivered to the Site; or
The Contractor is entitled to payment for them in accordance with Sub-clause 8.10

[Payment in Event of Suspension], whichever takes place first.
Our law provides that a person may not sell something to another person if he does not
actually own the goods;
This can often lead to problems of ownership when Contractor’s request payment for
materials delivered to site and for which they have not paid their suppliers;
It is imperative that the Employer ascertains that the Contractor has a right to pass on
ownership of any materials claimed under this Sub-clause;
As a legal requirement it may be necessary to establish ownership of Plant and Materials at

some point in time during the Contract, particularly in the case of bankruptcy or liquidation
of one of the parties. Subject to what the Laws of the Country may prescribe in such a
situation, ownership passes from the Contractor to the Employer upon the earliest of the
three named occurrences.

Lesson 15
Clause 8 [Commencement of Work and

Time for Completion]
Introduction
This is one of the important Clauses in the FIDIC Suite of Contract Documents.
Clause 8 covers three essential subjects, all of which are related to the period during which the
Contractor will construct the Works:
The start and duration of the construction period, at Sub-clauses 8.1 to 8 3;
Programme, Delays and Extension of Time, at Sub-clauses 8.4 to 8.7;
Suspension of Work by the Engineer, at Sub-clauses 8.8 to 8.11.
In summary:
Commencement is within seven days’ notice and not later than forty-two days after
acceptance;
Completion date is the date for test on completion and “Taking-Over Certificate”. This is
followed by the “Defects Notification Period”. Following notification of defects there is a
period, to be agreed upon, for remedying defects and then the Performance Certificate is
issued and Performance Security is returned within twenty-one days;
Extension of time may be granted for:
Variations;
Exceptionally adverse climatic conditions;
Unforeseen shortage of manpower;
Any action caused by or attributable to the Employer or the Employer’s other Contractors
on the Site;

58 | Clause 8 – Commencement of Work and Time for Completion
Unforeseen delays caused by authorities;
Delay damages are payable by the Contractor for all delays exceeding the extension of time
granted, normally a percentage of the contract Price per day with an upper limit (often
known as “liquidated damages”);
Suspension of work may be requested by the Engineer and the Contractor shall be granted
extension of time and compensation for any extra Costs;
Prolonged suspension may give reason for termination;
Contractor’s programme for the Works is to be submitted by the Contractor to the Engineer.
Sub-clause 8.1 [Commencement of Work]

The Engineer shall give the Contractor not less than seven days’ notice of the Commencement
Date (the start of the “Time for Completion” which is the period within which the Contractor
has agreed to construct the Work);
The number of days in the Time for Completion is given in the Appendix to Tender or
Contract Data and may refer to the whole of the Works, or a designated Section of the
Works. “Day” is defined as a calendar day rather than a working day and so the number of
days includes weekends and holidays;
The Commencement Date, unless otherwise stated in the Particular Conditions, shall be
within forty-two days after the Contractor receives the Letter of Acceptance;
The Contractor shall commence the execution of the Works as soon, as is reasonably
practicable after the Commencement Date, and shall then proceed with the Works with
due expedition and without delay;
The Contractor shall proceed with his Works with due expedition and without delay.

Clause 8 – Commencement of Work and Time for Completion | 59
Sub-clause 8.2 [Time for Completion]

The Contractor shall complete the whole of the Works, and each Section (if any), within the
Time for Completion of the Works or Section (as the case be);
The obligation to complete includes:
33 The passing of any Tests on Completion; and
33 The completing of all Works stated in the Contract as being necessary for the
purpose of taking over under Sub-clause 10.1.
All Contractor’s Documents required under Sub-clause 5.2 [Contractor’s Documents] must

be delivered to the Employer’s Representative within this time, the Time for Completion.
The Time for Completion is stated in the Contract Data and is calculated from the
Commencement Date, as defined in Sub-clause 8.1, which has been established in
accordance with Sub-clause 8.1 [Commencement Date];
The Time for Completion of the Works will be inserted in the Appendix to Tender or Contract
Data. Both provide for the Time for Completion to be expressed in days. For certainty, the
parties should agree a calendar date;
The Works (or Section of the Works) will not be complete until all the necessary Tests on
Completion (as defined in Clause 9) have been successfully carried out and all the work
required for the issuing of a Taking-Over Certificate as provided for by Clause 10 has been
completed. Hence, under Sub-clause 8.2, the Contractor is obliged to complete all the work
which is required for taking over under Sub-clause 10.1, including passing the Tests on
Completion as Clause 9, before the expiry of the Time for Completion;
The reference to the completion of the Works means the completion of all the Permanent
Works and the Temporary Works as set out in the Contract. Provided these are adequately
described, all the parties to the Contract will understand what work needs to be carried
out;
If Sections of the Works are required to be completed before the overall Time for Completion
then the Sections must be described in the Appendix to Tender, together with the Time for
Completion and delay damages for each Section;
Care is required when talking about sectional completion. “Section” is defined in Sub-
clause 1.1.5.6 as being a part of the Works specified in the Appendix to Tender as a Section
(if any). Therefore, it is important that an appropriate description of any Section is set out
in the Appendix. This description should include a separate Time for Completion of that
Section together with details of the delay damages which may be allowable for failure to
meet the stated Time for Completion.

60 | Clause 8 – Commencement of Work and Time for Completion
Notes

Lesson 16
Clause 8 [The Programme]

Sub-clause 8.3
Sub-clause 8.3 [Programme]
The Contractor shall promptly give notice to the Engineer of any future events or
circumstances which may adversely affect the Works, increase the Contract Price or delay
the completion of the Works;
The Engineer may, if the Contractor gives such a notice, require the Contractor to submit an
estimate of the anticipated effect of the future event and a proposal to rectify the potential
effect under Sub-clause 13.3;
If the Engineer considers that a programme fails to comply with the Contract or is
inconsistent with actual progress, he may give due notice to the Contractor. If the Engineer
gives such a notice the Contractor must submit a revised programme to the Engineer.
The Contractor shall submit a:

Detailed time programme to the Engineer within twenty-eight days of receiving the
notice under Sub-clause 8.1 [Commencement of Works];
Revised programme whenever the previous programme is inconsistent with actual

progress or with the Contractor’s obligations.

62 | Clause 8 – The Programme
Contractor’s Programme:
The programme required under this sub-clause is one of the most important documents
which the Contractor is required to produce and sometimes the Contractor is very
slow in producing his programme. Not only does the programme give a detailed time
plan of how the Contractor intends to carry out the Works but it also gives a great deal
of information about the associated events such as tests, inspections, reports – all as
mentioned in this sub-clause. Furthermore, the Contractor’s programme often forms
basic supporting evidence according to which Contractor’s claims for time extension
can be evaluated. So it is in the Contractor’s interests to ensure that the programme is
properly prepared as required by this sub-clause;
The basic purpose of the programme is to set out how the Contractor proposes to
carry out the Works. The programme must be supported by a report setting out the
methods the Contractor intends to adopt together with an estimate of the personnel
and equipment required on Site for carrying out the major stages of the Works;
Under the 1987 Red Book programmes were submitted for approval to the Engineer.
This is no longer the case. There is no requirement for the Engineer or Employer’s
Representative to approve or consent to the programme. The only action required
from the Employer’s Representative is to give notice to the Contractor in the event
that the programme does not comply with the Contract (in which event the Contractor
must submit a revised programme). If no such notice is received within twenty-one
days, the Contractor shall proceed in accordance with this programme. Therefore,
the Engineer should be careful to remember that it will accordingly be open to the
Contractor to argue that, by not rejecting a programme, the Engineer has implicitly
given his approval to it;
Given the importance of the Contract programme as a management tool, many

Contracts will specify exactly what format the programme is to take. Thus, if the
Employer requires the programme to be in a particular format by, for example, showing
the critical path, he must state this requirement in the Specifications or Employer’s
Requirements with the type of programme presentation to be stated in Particular
Conditions, otherwise the Contractor will be free to choose the format;
Methodology and estimate of resources are required.
Thus, each programme shall include:

The order in which the Contractor intends to carry out the Works;
For each of the stages the work to be carried out by each Nominated Subcontractor;
The sequence and timing of inspections and tests;
A supporting report which includes:

Clause 8 – The Programme | 63
33 A general description of the methods which the Contractor intends to adopt; and
33 Details showing the Contractor’s reasonable estimate of the number of each class
of Contractor’s Personnel and of each type of Contractor’s Equipment, required on
the Site;
33 When deciding on the form of the programme and the detail to be included, the
Contractor should allow that the programme will be used to demonstrate whether
any delay situation will cause a delay to completion.
Actions:
The Contractor is required to proceed as set out by his programme, unless he receives
notice from the Engineer stating that the programme does not either reflect actual
progress on the Site or the requirements of the Contract. Obviously this programme
will not only be used to demonstrate progress but also to demonstrate whether any
delay may cause a delay to completion. Under Sub-clause 4.21 the Contractor must
submit monthly progress reports. These must include a comparison of planned and
actual progress;
The Contractor is required to give advance notice or early warning to the Engineer of
potential events which might adversely affect or delay the Works. There is no similar
obligation on the Engineer or Employer. This requirement has a far wider application
than just in relation to the programme. The purpose is to enable the Contractor and
Engineer to work together to minimise the effects of the potential delay event. The
Sub-clause 8.3 notice is in effect an “Early Warning Notice” and gives the Engineer
the opportunity to take action to overcome the problem before the Contractor incurs
delay or additional Cost. There is no requirement for the Contractor to meet with
the Engineer to discuss the problems and possible solutions but the sub-clause does
enable the Engineer to require the Contractor to submit estimates and proposals;
The notice must be given “promptly”. Therefore, consideration must be given when
submitting such a notice as to the potential impact, if any, on the claims procedure
required by Clause 20. In other words, giving of a notice under Sub-clause 8.3 might
not suffice as a notice as required by Clause 20;
The Contractor should remember that he must revise the programme whenever it is
inconsistent with actual progress. This will include when the Contractor is both ahead
or behind schedule;
The Engineer does not approve or consent formally to programme. The Engineer has
twenty-one days to comment on the Contractor’s programme as to what extent it does
not comply with the Contract and, if no objection is raised within twenty-one days of
receipt, the programme is to be followed;
For certainty, the Employer might want to consider requiring the Contractor to provide
a revised programme whenever an extension of time is granted.

64 | Clause 8 – The Programme
Notes

Lesson 17
Clause 8 [Extension of Time for

Completion]
Sub-clause 8.4
Sub-clause 8.4 [Extension of Time for Completion]

Conditions precedent to a claim for an extension of time. If (and only if) completion for the
purposes of Sub-clause 10.1 is or will be delayed by any one of the causes set out in Sub-
clauses 8.4(a) to 8.4(e) then the Contractor must give notice to the Engineer in accordance
with Sub-clause 20.1;
If the Contractor considers himself to be entitled to an extension of Time for Completion,

the Contractor shall give notice to the Engineer in accordance with Sub-clause 20.1
[Contractor’s Claims];
When determining each extension of time under Sub-clause 20.1, the Engineer shall review
previous determinations and may increase, but shall not decrease, the total extension of
time;
Events giving rise to an entitlement to an extension of time:
A Variation (unless an adjustment to the Time for Completion has been agreed under
Sub-clause 13.3) or other substantial change in the quantity of an item of work included
in the Contract under Clause 12;
A cause of delay giving an entitlement to extension of time under a sub-clause of the

Conditions of Contract. These are Sub-clauses 1.9 [Delayed Drawings or Instructions],
2.1 [Right of Access to the Site], 4.7 [Setting Out], 4.12 [Unforeseeable Physical
Conditions], 4.24 [Fossils], 7.4 [Testing], 10.3 [Interference with Tests on Completion],
13.7 [Adjustments for Changes in Legislation], 16.1 [Contractor’s Entitlement to
Suspend Work], 17.4 [Consequences of Employer’s Risks] and 19.4 [Consequences of
Force Majeure];

66 | Clause 8 – Extension of Time for Completion
Exceptionally adverse climatic conditions.

FIDIC does not give any guidance on what constitutes EXCEPTIONALLY ADVERSE CLIMATIC
CONDITIONS.
It is therefore suggested that the Contractor is informed in the Appendix to Tender what
the average conditions are that he could expect over, for example, over a ten year period.
Unforeseeable shortages in the availability of personnel or Goods caused by epidemic or

governmental actions;
Any act of delay, impediment or prevention caused by or attributable to the Employer, the
Employer’s Personnel, or the Employer’s other Contractors on the Site.
Sub-clause 8.4 sets out criteria under which Contractor shall be entitled to an extension of
the Time for Completion. It is not sufficient for the event to cause delay or disruption to the
Contractor’s work. The Contractor must demonstrate that it will actually delay completion.
If the Contractor fails to complete his Works within the agreed Time for Completion then
he will be in breach of Contract. Sub-clause 8.4 provides the mechanism by which the Time
for Completion can be extended, but only in certain clearly defined circumstances and only
if the Contractor takes certain steps to give notice of his considered entitlement;
It is thought that extension of time provisions are solely for the benefit of the Contractor
but in reality the opposite is often the true intent. The primary purpose of an extension
of time provision is to preserve the Contractor’s obligation to complete within a specified
time. Extending the completion date therefore preserves the Employer’s right to liquidated
damages or Delay Damages, even when by prevention the Employer has delayed the
Contractor and is responsible in part for late completion. If there is no completion date there
is no date from which Delay Damages can run. Sub-clause 8.4 only entitles the Contractor
to an extension of time, not to additional payment. Any extension of time granted will
relieve the Contractor of the obligation to pay Delay Damages to the Employer in respect
of the extension period;
There are two conditions precedent that the Contractor must comply with prior to making
a submission to the Engineer for an extension of time (i.e. if these conditions are not
complied with then any entitlement to an extension of time is lost):
It is mandatory that one of the events listed in Sub-clauses 8.4(a) to 8.4(e) must have
resulted in an actual delay in completion within the meaning of Sub-clause 10.1. It is
not good enough for the Contractor to say that there is a delay or disruption to the
Contractor’s programme;
The Contractor must give notice to the Engineer in accordance with the provisions and
time limits required by Sub-clause 20.1;

Clause 8 – Extension of Time for Completion | 67
The clear intent is that only a “Delay to Completion” not a disruption will afford the
Contractor a right to an extension of time (subject always to compliance with the provisions
of Sub-clause 20.l);
The Contractor should note that the grant of an extension of time does not always lead
to an award of Cost and/or reasonable profit and there is no automatic right to such an
award. This is dependent on the event that gives rise to a claim for an extension of time and
the relevant Sub-clause. If the Contractor also seeks a claim for additional payment, a claim
has to be made under that particular Sub-clause for that additional payment in addition to
the claim being made for an extension of time;

68 | Clause 8 – Extension of Time for Completion
Notes

Lesson 18
Clause 8 [Other Time Related Clauses]

Other Time Related Clauses
Sub-clause 8.5 [Delays Caused by Authorities]

The Contractor is required to follow any applicable procedures required by the public
authorities in the Country where the project is taking place;
If he has been delayed by the local authorities the Contractor may be entitled to an
extension of time (not Cost) pursuant to Sub-clause 8.4(b), provided the Contractor has
“diligently” followed the procedures of the local authorities and the delay or disruption
was Unforeseeable;
This sub-clause gives an additional entitlement to an extension of time under Sub-

clause 8.4(b). The sub clause does not require the Engineer to follow the procedures of
Sub-clause 3.5 in order to determine the extension but this will be required under the
provisions of Sub-clause 20.1;
A delay or disruption will be considered as a cause of delay (and qualifying for an extension
of time) under Sub-clause 8.4 if the following conditions apply:
The Contractor has diligently followed the procedures laid down by the relevant legally
constituted public authorities in the Country;
These authorities delay or disrupt the Contractor’s work; and
The delay or disruption was Unforeseeable;

70 | Clause 8 – Other Time Related Clauses
Sub-clause 8.4(b) refers to causes of delay giving an entitlement to an extension of time

under a sub-clause of the Contract. Sub-clause 8.5 is one example. By this sub-clause the
Contractor may claim an extension of time if a delay has been caused by a public authority
in the Country in which the Site (or most of it) is located;
The Contractor should note that, unless all three conditions apply, the Contractor will not
be entitled to an extension of time.
Sub-clause 8.6 [Rate of Progress]

Where actual progress is too slow to enable the Contractor to complete the project within
the Time for Completion or where progress has fallen behind the programme, the Engineer
may instruct the Contractor to submit a revised programme;
The Engineer can only do this where the reason for the delay is not for a reason which
would have granted the Contractor an extension of time as listed in Sub-clause 8.4;
The revised programme must set out the way the Contractor intends to deal with the
situation and complete within the Time for Completion;
If the Engineer does not object the Contractor shall adopt these proposals at his own risk
and Cost;
If the Employer incurs increased Costs as a result of the revised proposals, he may be
entitled to claim these Costs from the Contractor under Sub-clause 2.5;
Any Costs the Employer receives as a consequence of this sub-clause shall be in addition to
any entitlement for delay damages under Sub-clause 8.7;
This sub-clause aims to enable the Engineer to instruct the Contractor to recover time lost
and to ensure that the project is completed on time;
The Contractor is to adopt revised methods at his Cost and is liable for any Employer’s Costs
caused by revisions;
For the additional Costs incurred by the recovery measures, the Employer may submit
a claim under Sub-clause 2.5 and the Engineer will make a determination under the
procedures of Sub-clause 3.5.

Clause 8 – Other Time Related Clauses | 71
Sub-clause 8.7 [Delay Damages]

If the Contractor fails to complete his Works within the Time for Completion the Employer
is entitled to levy Delay Damages;
The Delay Damages shall be deducted at the rate provided for in the Appendix to Tender.
The Appendix to Tender provides for the maximum amount of Delay Damages to be capped;
Unless the Contract is terminated Delay Damages are the only remedy available to the
Employer prior to completion;
The Delay Damages do not relieve the Contractor of his other contractual obligations;
To recover Delay Damages the Employer must make an application in accordance with Sub-
clause 2.5;
No Delay Damages can actually be deducted until the Final Contract price has been
ascertained. Until that has been done the actual amount of the Delay Damages cannot
be known. Hence, the sum for Delay Damages cannot be determined finally until after
agreement of the Final Statement;
The total Delay Damages will be expressed generally as a percentage of the Accepted
Contract Amount or as a monetary sum – all set out in the Appendix to Tender.

72 | Clause 8 – Other Time Related Clauses
Notes

Lesson 19
Clause 8 [Other Time Related Clauses]

Sub-clause 8.8 [Suspension of Work]

The Engineer may instruct the Contractor to suspend the Works (partially or entirely);
During such suspension the Contractor shall protect, store and secure such part of the
Works against any deterioration, loss or damage. If the suspension is not the responsibility
of the Contractor then Sub-clauses 8.9, 8.10 and 8.11 shall not apply (they also provide the
process to be followed if it is the Contractor’s responsibility);
The Engineer is not obliged to give the reason for the suspension but “may” notify the
cause of the suspension. A reasonable Engineer should tell the Contractor the reason and
likely extent of the suspension in order that the Contractor can decide how to meet his
obligation to “protect, store and secure” that part of the Works;
During the period of the suspension it is the responsibility of the Contractor to “protect,
store and secure” the Works (or part of the Works if the suspension only relates to a part)
against any “deterioration, loss or damage”. The sub-clause does not say who is responsible
for the Costs of undertaking this protection work;
However, from Sub-clauses 8.9 to 8.11, if the reason for the suspension is related to a
reason for which the Contractor is entitled to an extension of time under Sub-clause 8.4
then the Contractor will be entitled to make a claim for these Costs. However, if the reason
for the suspension is the responsibility of the Contractor he will equally be responsible for
these protection Costs;
If the Contractor fails to provide adequate protection, which leads to a delay on resumption
of the Works, then in accordance with Sub-clause 8.9 he will not be entitled to an extension
of time;

74 | Clause 8 – Other Time Related Clauses Continued
In addition, once work resumes the Contractor might, again if the reason for the suspension
is related to a reason for which the Contractor is entitled to an extension of time under Sub-
clause 8.4, be entitled to make a claim for the Costs of resumption. These can often be
quite considerable;
One thing which Sub-clauses 8.8 to 8.12 do not do is to require the Contractor to maintain
its staff and labour resources ready to commence work when the period of suspension
his lifted. The Contractor has to take steps to protect the Works but an Employer might
want to consider how he can ensure that key personnel in addition to the Contractor’s
Representative (who will presumably be required by Sub-clause 4.3 to remain available)
are not moved from the project. Obviously, at the very least the Contractor would look to
recover its Costs in these circumstances.
Sub-clause 8.9 [Consequence of Suspension]

If the Contractor suffers delay or increased Costs as a result of a suspension notified by the
Engineer, he is entitled to make a claim and must give an appropriate notice to the Engineer
as required by Clause 20;
The Contractor will not be entitled to an extension of time and/or additional Cost if the
reason for the suspension is not covered by Sub-clause 8.4 and/or was a result of the
Contractor’s poor design, workmanship or Materials. The Contractor will not be entitled
to an extension of time and/or payment for Cost incurred as a consequence of any failure
on the part of the Contractor to protect the Works during the period of suspension in
accordance with Sub-clause 8.8.
Sub-clause 8.10 [Payment for Plant and Materials in the event of

Suspension]
If work or the delivery of Plant and Materials has been suspended for more than twenty-
eight days and if the Contractor has marked the Plant and Materials as the Employer’s
property then the Contractor shall be entitled to payment for Plant and Materials which
have not been delivered to Site;
The value of the payment will be the value of the Plant and Material as at the date of the
suspension.

Clause 8 – Other Time Related Clauses Continued | 75
Sub-clause 8.11 [Prolonged Suspension]

If the period of suspension runs for more than eighty-four days, the Contractor may seek
permission to proceed with the Works from the Engineer;
If the Engineer does not give permission within twenty-eight days of being requested to do
so, in respect of a suspension of the entire Works, the Contractor will be entitled to give
notice of termination under Sub-clause 16.2;
If the Engineer fails to respond within twenty-eight days of any such request, in respect of a
suspension of a part of the Works, the Contractor may treat the suspension as an omission
under Sub-clause 13.
Sub-clause 8.12 [Resumption of Work]

Once permission to proceed has been given, the Contractor and the Engineer shall carry
out a joint inspection of the Works affected by the suspension;
It is the responsibility of the Contractor to make good any damage in the Works which has
occurred during the period of suspension.

76 | Clause 8 – Other Time Related Clauses Continued
Notes

Lesson 20
Clause 9 [Tests on Completion]

Introduction
Clause 9 deals with the Contractor’s duty to carry out Tests on Completion of the Works. It also
provides for a situation where the carrying out of such tests has been delayed by the Employer
and/or the Contractor or where the Works have to be retested if they fail the test the first time
round.
Sub-clause 9.4 [Failure to Pass Tests on Completion] deals with the situation where the Works,
or a Section thereof, fail to pass the Tests on Completion, even after having been repeated under
Sub-clause 9.3. The Engineer is then entitled to:
(a) Order further repetition of Tests on Completion under Sub-clause 9.3;
(b) If the failure deprives the Employer of substantially the whole benefit of the Works or
Section, reject the Works or Section (as the case may be), in which event the Employer shall
have the same remedies as are provided in Subparagraph (c) of Sub-clause 11.4 [Failure to
Remedy Defects]; or
(c) Issue a Taking-Over Certificate, if the Employer so requests.
For (c) the Employer may demand a reduced price by an amount that would reflect the reduced
value to him as a result of this failure (last paragraph of this sub-clause provides alternatives for
calculating that reduction).
The most drastic alternative is (b) where the Contractor is unable or unwilling to resolve the
problems encountered in the testing programme and the parties are directed to paragraph (c)
of Sub-clause 11.4 [Failure to Remedy Defects] such that if the defect “deprives the Employer
of substantially the whole benefit of the Works or any major part of the Works”. The Employer
can terminate the whole Contract or the part “which cannot be put to its intended use” and
demand his money back together with interest and the Cost of dismantling the offending work
and returning it to the Contractor.

78 | Clause 9 – Tests on Completion
This solution is difficult to envisage for a civil engineering or a building project and is unlikely to
occur.
Sub-clause 9.1 [Contractor’s Obligations]

It is the responsibility of the Contractor to carry out the Tests on Completion. Before the
tests are carried out, the Contractor must provide the as-built Drawings and operations and
maintenance manuals;
The Contractor must give at least twenty-one days’ notice to the Engineer of the date on
which they will be ready to carry out the tests. Unless otherwise agreed, the tests will be
carried out within fourteen days after this date;
The Engineer must consider the tests and decide whether the Works tested have passed.
Sub-clause 9.2 [Delayed Tests]

If the Employer unduly delays the Tests on Completion then the provisions of Sub-clauses 9.2
or 7.4 or 10.3 apply and the Contractor may be entitled to additional time and Costs;
The Contractor will give notice to the Engineer under Sub-clause 7.4 and follow the Sub-
clause 20.1 procedure to claim for an extension of time and an additional payment;
If the delay lasts for more than fourteen days then, under Sub-clause 10.3, the Employer is
deemed to have taken over the Works or Section on the date when the Tests on Completion
would otherwise have been completed;
If the Tests on Completion are unduly delayed by the Contactor the Engineer may give
notice requiring the Contractor to carry out tests within twenty-one days;
If the Contractor fails to carry out the tests within the twenty-one days specified the
Employer’s Personnel can complete the tests;
If the Employer’s Personnel carry out the tests in these circumstances, they do so at the
Contractor’s risk and Cost, and will be deemed both to be accurate and to have taken place
in the presence of the Contractor.

Clause 9 – Tests on Completion | 79
Sub-clause 9.3 [Retesting]
If the Works do not pass the Tests on Completion, the Engineer can reject the Works and
require the tests to be repeated;
This sub-clause should be read in conjunction with Sub-clause 7.5 which provides that the
Contractor shall make good any defect and ensure that the rejected item complies with
the Contract. The tests can then be repeated. There is no limit set on how many times the
Works can be carried out.
Sub-clause 9.4 [Failure to Pass Tests on Completion]

If the Works do not pass the Tests on Completion, the Engineer can either:
Order the Tests on Completion to be repeated;
Reject the Works; or
Issue a Taking-Over Certificate.
There is no limit on the number of repetitions;
If the Works are rejected the Contractor’s Contract could be terminated;
If a Taking-Over Certificate is issued in these circumstances, the Contract Price shall be

reduced to take account of the consequential reduced value to the Employer.

80 | Clause 9 – Tests on Completion
Notes

Lesson 21
Clause 10 [Employer’s Taking Over]

Introduction
This clause gives the procedures to be followed when the Works are ready to be taken over by the
Employer. The procedure can apply to the Works as a whole or to any Section of the Works that
has been defined in the Appendix to Tender.
It is Sub-clause 10.1 that deals with the Employer’s taking over of any defined part or parts of the
Works, like most Contracts. However, Sub-clause 10.2 introduces a further right of takeover of the
Employer, namely a situation where the Engineer, with the permission of the Employer, may issue
a Taking-Over Certificate for any part of the Permanent Works.
Sub-clause 10.2 gives the Employer the right to take over any part of the Works at any time for
his convenience.
Sub-clause 10.1 [Taking Over of the Works and Sections]

Sub-clause 10.1 requires that the Works will be taken over when completed in accordance
with the Contract. This requirement specifically includes the matters described at Sub-
clause 8.2 which are:
33 Passing the Tests on Completion, as Clause 9; and
33 Completing all the work as required by the Contract.
The Works will be taken over by the Employer when:
33 The Works have been completed; and
33 A Taking-Over Certificate has been issued.
The Contractor may apply to the Engineer for a Taking-Over Certificate not earlier than
fourteen days before he anticipates completing the Works;

82 | Clause 10 – Employer’s Taking Over Sub-clause
Within twenty-eight days of receiving the Contractor’s application, the Engineer may either:
33 Issue the Taking-Over Certificate;
33 Reject (with reasons) the application.
If the Engineer fails to accept or reject the application within twenty-eight days and the
Works are substantially in accordance with the Contract then the Taking-Over Certificate
will be deemed to have been issued on the last day of the twenty-eight day period;
Minor outstanding work and defects may be completed after the certificate has been issued
if agreed by the Engineer;
Prior to commencement of the Tests on Completion, as required by Sub-clauses 4.1 and

9.1, the Contractor must submit to the Engineer the operations and maintenance manuals
in sufficient detail to enable the Engineer to operate the relevant part of the Works. The
Works or part thereof will not be considered complete for the purposes of taking over of
the Works until these manuals have been submitted in an acceptable form;
By Sub-clause 10.1(a) the Engineer cannot refuse to issue the Taking-Over Certificate
because of “any minor outstanding work” provided the minor defect does not “substantially
affect the use of the Works or Section for their intended purpose (either until or whilst this
work is completed and these defects are remedied)”;
With this specific exclusion it is now clear that any outstanding work or defects must not
substantially affect the use of the Works for their intended purpose. However, there is no
guidance given as to the meaning of “substantially” or “substantially affect” and it will
be left to the judgment of the Engineer. The question of whether a particular item will
“substantially affect” such use will be a matter for the Engineer to exercise his judgment
but the emphasis on the use of the Works gives a clear definition of when the Works are
ready to be taken over by the Employer;
If there is any minor outstanding work this must be completed by the Contractor during the
Defects Notification Period as instructed by the Engineer under Sub-clause 11.1(a);
If the Engineer decides to reject the Works he must give reasons. The Engineer must also
specify the work required to be done by the Contractor to enable the Taking-Over Certificate
to be issued. It is the responsibility of the Contractor to complete this work before applying
for a further certificate;
The Works will be substantially in accordance with the Contract if they are free from known
defects which would prevent the Employer from taking over and making use of the project.
The procedure to establish whether or not the Works are substantially in accordance with
the Contract, in the absence of a Statement by the Engineer, is unclear and could cause
problems. The Contractor would first refer the matter direct to the Employer and then, if
necessary, to the DAB.

Clause 10 – Employer’s Taking Over Sub-clause | 83
Sub-clause 10.2 [Taking Over of Parts of the Works]

The Engineer may, at the request of the Employer, issue a Taking-Over Certificate for any
part of the Permanent Works;
The Employer may not use any part of the Works until the Engineer has issued a Taking-
Over Certificate;
If the Employer does use any part of the Works prior to the issue of a Taking-Over Certificate
then:
That part shall be deemed to have been taken over;
The Employer and not the Contractor will be responsible for that part of the Works
which has been taken over; and
If the Contractor incurs any Costs as a result the Contractor shall give notice to the
Engineer and may be entitled to payment of these Costs to include reasonable profit;
If a Taking-Over Certificate has been issued for part of the Works, the rate of Delay Damages
for the remainder of the Works will be reduced;
Only the Employer has the right to decide that a certain part of the Works will be taken over
before the remainder of the Works. This discretion may be exercised when the Employer
wishes to use a part of the Works before the Works are complete. The Employer can then
require the Engineer to issue a Taking-Over Certificate and the Employer would then be
responsible for the care of that part of the Works;
The Contractor does not have a right to request that the Employer take over part of the
Works under this sub-clause. However, the Employer has the discretionary right to request
that the Engineer issue a Taking-Over Certificate for any part of the Works. The Employer
is not entitled to use any part of the Works (unless agreed as a temporary measure) unless
the Engineer has issued a Taking-Over Certificate;
The consequences of the Employer using any part of the Works before a Taking-Over
certificate is issued as set out in Sub-clauses 10.2(a) to (c) are:
That part shall be deemed to have been taken over;
The Employer will be responsible for that part of the Works which have been taken
over;
The Contractor may request that the Engineer issue a Taking-Over Certificate; and
If the Contractor incurs any Costs as a result, the Contractor shall give notice to the
Engineer and may be entitled to payment of these Costs to include reasonable profit;

84 | Clause 10 – Employer’s Taking Over Sub-clause
The other potential problem caused by the Employer taking over parts of the Works at
an early (and unanticipated stage) relates to Delay Damages (see sectional completion in
Sub-clause 8.7). Sub-clause 10.2 recognises that where a Taking-Over Certificate is issued
in respect of a part of the Works then the Employer’s entitlement to Delay Damages is
reduced proportionally. In other words, the daily rate for any Delay Damages will be reduced
in proportion to the value of any part of the Works for which a Taking-Over Certificate has
been issued. The figure will be determined by the Engineer under Sub-clause 3.5;
Sub-clause 10.2 has introduced a further right of takeover of the Employer, namely a
situation where the Engineer, with the permission of the Employer, may issue a Taking-
Over Certificate for any part of the Permanent Works. This means that the Contractor’s
possession and responsibilities for care, safety and insurance of that particular part of the
Works come to an end. However, it would appear that a corresponding Defects Notification
Period does not start for this part upon taking over since the definition of this term under
Sub-clause 1.1.3.7 refers only to taking over certified under Sub-clause 10.1 and makes no
reference to Sub-clause 10.2. The Contractor is entitled to recover any reasonable additional
Cost accrued to him as a result of such a takeover (subject to the claims procedure of Sub-
clause 20.1).
Sub-clause 10.3 [Interference with Tests on Completion]

If the Employer prevents the Contractor from carrying out Tests on Completion for more
than fourteen days, the Employer is deemed to have taken over the Works;
In these circumstances the Engineer shall issue a Taking-Over Certificate;
However, the Engineer shall still require the Contractor to carry out the Tests of Completion;
If the Contractor suffers delay or increased Costs he is entitled to submit a claim in

accordance with the provisions of Clause 20.

Lesson 22
Clause 11 [Defects Liability]

Introduction
Clause 11 deals with the procedures during the Defects Notification Period, immediately after the
Works have been taken over by the Employer, when the Contractor is responsible for correcting
any defects;
The length of the Defects Notification Period is stated in the Appendix to Tender.
While a period of one year will generally be suitable for civil engineering projects, a longer period
may be required for electrical, mechanical or building services work.
This is because the Employer has occupied the Works, will be aware of any defects or other
problems and the Contractor will need to liaise with the Employer in order to carry out repairs. The
Employer will need to make the appropriate arrangements to identify any defects and designate
a representative to liaise with the Contractor. In practice, it may be convenient for these tasks to
be delegated to the Engineer.
During this period the Engineer has certain powers and responsibilities, as stated in the sub-
clauses, but no longer has the power to issue instructions for Variations (under Sub-clause 13.1
Variations can only be issued prior to the issue of the Taking-Over Certificate).

86 | Clause 11 – Defects Liability
Sub-clause 11.1
[Completion of Outstanding Work and Remedying Defects]
All outstanding work should be completed by the end of the Defects Notification Period (or
as soon as is practicable thereafter);
The Contractor is obliged to:
Complete the work identified in the Taking-Over Certificate within the reasonable time
set by the Engineer;
Carry out all work required to remedy defects or damage identified by (or on behalf of)
the Employer, on or before the end of the Defects Notification Period.
Sub-clause 11.2 [Costs of Remedying Defects]

The risk and Cost of remedying defects is placed upon the Contractor in the case of:
Design work for which the Contractor is responsible;
Plant, Materials and workmanship not in accordance with the Contract;
Any other failure of the Contractor to comply with any obligation;
Remedial work attributable to any other cause is dealt with under Sub-clause 13.3 [Variation
Procedure];
The defect or damage is notified by the Employer under Sub-clause 11.1(b). If the Contractor
can prove that the remedial work is not his liability then the Employer must be notified
promptly and the Cost for the remedial work to be paid to the Contractor and is decided by
the Engineer as a Variation, using the procedures at Sub-clause 13.3;
While category (c) above may seem to cover a wide range of problems, it is still necessary for the
Employer to establish with which obligation the Contractor has failed to comply.
Sub-clause 11.3 [Extension of Defects Notification Period]

The Employer is entitled to an extension of Defects Notification Period if the Works or
major item of the Plant cannot be used because of a defect or damage;
The Defects Notification Period for the Works can be extended if the Works, a Section of the
Works or a major item of Plant cannot be used for the reason for which they are intended
as a result of defect or damage;
The Defects Notification Period may not be extended for more than two years;

Clause 11 – Defects Liability | 87
The extended period can never be greater than the original Defects Notification Period – in
other words if the original DNP was 365 days the Employer cannot get more that a further
365 days extension of the DNP;
If the Employer considers that he is entitled to an extension of the Defects Notification

Period then either the Employer or the Engineer must give notice to the Contractor;
The notice must be given, under Sub-clause 2.5, as soon as practicable after the Employer
became aware of the circumstances and before the expiry of the period. The Engineer will
then make a determination under Sub-clause 3.5;
To establish an entitlement to an extension, the Employer must prove that the whole or a
Section of the Works, or a major item of Plant, could not be used for the purpose for which
it was intended due to a defect or damage.
Sub-clause 11.4 [Failure to Remedy the Defects]

Where the Contractor fails to make good defects or damage within a reasonable time then,
provided reasonable notice is given, the Engineer may fix the time within which the defects
are to be remedied;
If the Contractor fails to carry out required work within the time notified (or at all) then
the Employer has a series of options and a choice of action depending on the details of the
defect;
The range of remedies provided for in the case of the Contractor’s poor performance is
extensive, although it may be rare for termination (c) to be used, particularly on the partial
basis which is permitted;
The choice of action will depend on the details of the defect. The Employer can:
(a) Make other arrangements to carry out the work and claim the Cost against the Contractor,
under Sub-clause 2.5; or
(b) Accept the work including the defect and reduce the Contract Price under the procedures
of Sub-clause 3.5. This is a practical procedure and can be used when the remedial work
would cause substantial inconvenience or damage and the Employer would prefer to
accept the out-of-Specification work; or
(c) Terminate the Contract as a whole or in respect of the relevant part of the Works. This
would be a very serious action and would result in the Employer claiming substantial
sums of money from the Contractor.
The need to notify the Contractor plays a critical role in Sub-clause 11.4 and the Employer
will be required to follow the procedures set out in Sub-clause 11.4 with care before
exercising the options at (a), (b) or (c);

Notes

Lesson 23
Clause 11 [Defects Liability]

Sub-clause 11.5 [Removal of Defective Work]

If defects or damage cannot be made good expeditiously on Site then the Contractor may
remove such items of Plant as need to be repaired;
The Employer’s consent:
Is required;
Cannot unreasonably be withheld;
An additional Performance Security might be required. If so, it should do so in

accordance with the provisions of sub-remedial work itself (Sub-clause 4.2).
Sub-clause 11.6 [Further Tests]

If the remedying of any defect or damage could affect performance then the Engineer can
require the repeating of any tests required under the Contract;
The requirement shall be made by notice within twenty-eight days after the defect or
damage is remedied;
The further testing shall be carried out in accordance with the Contract but at the risk and
Cost to the Party responsible for the defect or damage;
This sub-clause envisages retesting after the completion of remedial Works in circumstances
where the remedial Works could affect the performance overall;
The requirement shall be made by notice within twenty-eight days after the defect or
damage is remedied;
These tests shall be carried out in accordance with the terms applicable to the previous
tests, except that they shall be carried out at the risk and Cost of the Party liable, under
Sub-clause 11.2;

There are two important points to note:
The testing regime or Specification used for the retesting should be that which would
be attributed to any default of the Contractor;
The retesting Costs are to be borne by the Party responsible for the remedial work
itself under Sub-clause 11.2.
Sub-clause 11.7 [Right of Access]

The Employer is under an obligation to grant the Contractor access to remedy defects;
The Contractor has a right of reasonable access in order to comply within his obligations
under Clause 11;
The Contractor shall have such right of access to the Works as is reasonably required in
order to comply with this sub-clause until the Performance Certificate has been issued;
The right to access is subject to the Employers’ reasonable security restrictions.
Sub-clause 11.8 [Contractor to Search]

The Employer having notified the Contractor of a defect, the technical assessment of the
problem will be made by the Engineer;
The Engineer can require the Contractor to search for the cause of any defect, under the
direction of the Engineer;
The Costs of search is required to be paid by the Contractor where the defect is to be
remedied at the Contractor’s Cost (as per Sub-clause 11.2);
Alternatively, the Contractor is paid his Costs and reasonable profit, to be determined by
the Engineer under Sub-clause 3.5.

Clause 11 – Defects Liability | 91
Sub-clause 11.9 [Performance Certificate]

The issue of the Performance Certificate must occur before the obligations of the Contractor
are regarded as having been completed;
The Performance Certificate is to be issued by the Engineer within twenty-eight days of the
expiry of the latest of any Defects Notification Periods;
A copy of the Performance Certificate is to be issued to the Employer;
Only the Performance Certificate will constitute deemed acceptance of the Works;
The issue of the Performance Certificate is linked to the provision of the Contractor’s
Documents.
Sub-clause 11.10 [Unfulfilled Obligations]

Each Party remains liable for the performance of unfulfilled obligations after the issue of
the Performance Certificate;
For the purposes of the performance of any “unfulfilled obligations”, the Contract is
deemed to remain in force;
Sub-clause 11.10 does not provide a mechanism for dealing with these unperformed
obligations in a particular manner or timeframe;
In a complex project there will often be further outstanding obligations in spite of which the
Performance Certificate may be issued.
Sub-clause 11.11 [Clearance of Site]

Upon receiving the Performance Certificate the Contractor is obliged to clear the Site;
If any Plant, Materials, wreckage or rubbish remains after twenty-eight days of the
Employer’s receipt of its copy of the Performance Certificate, these can be sold or disposed
of by the Employer;
The dates of receipt must be recorded by the Engineer;
The Employer is entitled to recover from the Contractor the Costs of any such disposal, with
any surplus being paid to the Contractor;
The requirements for the Contractor’s final Site clearance may also be the subject of
regulations under the applicable law.

Notes

Lesson 24
Clause 12 – Measurement and

Evaluation
Introduction
This clause applies only to the Construction Contract. It is replaced in the Plant and Design-Build
Contract by the clause on “Tests after Completion”.
Clause 12 is based on the principle that the value of the Works under the Contract should be
established by gauging the amount of each item under the method of measurement referred
to in Sub-clause 12.2 (which, in turn, refers to the Contract Bill of Quantities or other applicable
Schedules of rates) and applying the appropriate rate per unit quantity or the appropriate lump
sum price under Sub-clause 12.3 [Evaluation].
So Clause 12 is written for a re-measurable Contract in which the Accepted Contract Amount is
based on estimated quantities where:
The Contractor is obliged to carry out all the work which is required by the Specification
and Drawings; and
The Contractor is paid for the actual quantities of work which he has executed;
Measurement is undertaken by the Engineer, giving notice to the Contractor’s Representative

to attend, etc.
The clause covers the procedures for the measurement and evaluation of the Works that have
been:
Executed; or
Omitted by a Variation.
If the Contract is based on a lump sum, or is on a Cost-plus or other basis, then Clause 12 must
be omitted from the General Conditions and alternative arrangements included in the Particular
Conditions.

94 | Clause 12 – Measurement and Evaluation
Entries under Sub-clause 14.1 of the Guidance for the Particular Conditions includes
recommendations for Contracts on a Cost-plus or lump sum basis.
Sub-clause 12.1 [Works to be Measured]

The procedure for measurement of the Works:
The Engineer decides that he requires a part of the Works to be measured and notifies
the Contractor;
The Contractor attends and assists the Engineer in making the measurement and
supplies any details requested by the Engineer;
If the Contractor fails to attend then the Engineer’s measurements are accepted as accurate.
Sub-clause 12.2 [Method of Measurement]

The method of measurement adopted shall:
Except where otherwise stated in the Contract, be the measurement of the net actual
quantity of each item of the Permanent Works;
Accord with the Bill of Quantities (or equivalent Schedules);
The procedure for the actual measurement of the different work items can be standardised
for different projects and for consistency within a project by the use of a published
standard method of measurement. The FIDIC Conditions of Contract do not require the
use of a standard method of measurement but Sub-clause 12.2 states that the method
of measurement will be in accordance with the Bill of Quantities “or other applicable
Schedules”. If a standard method of measurement is required to be used then this
requirement should be stated in the Particular Conditions.

Clause 12 – Measurement and Evaluation | 95
Sub-clause 12.3 [Evaluation]
If there is no rate or price for that item of work then the rate or price for similar work is to
be used;
However, a new rate or price will be appropriate if the circumstances described in Sub-
paragraphs (a) or (b) are fulfilled;
The new rates and prices are to be derived from any relevant rates or prices in the Contract,
with reasonable adjustments having regard to the matters set out in Sub-paragraphs (a)
and/or (b);
If no existing rates and prices are relevant for the purposes of the derivation of a new rate
or price then the new rate or price should be based upon reasonable Cost and reasonable
profit;
Sub-clause 12.3 requires the Engineer to agree or determine the Contract Price by applying
the measurement and the appropriate rate or price for each item. The appropriate rate or
price for the item shall be the rate or price:
Specified for such item in the Contract; or
For similar work, unless:
The measured quantity has changed by more than the amounts stated at Sub-
clause 12.3(a) and the item is not specified as a “fixed rate item”, or
The work is instructed as a Variation under Clause 13 and there is no appropriate rate
or price in the Contract for this item;
So a new rate or price shall be appropriate for an item of work if no specified rate or price
is appropriate because the item of work is not of similar character or is not executed under
similar character or conditions as any item in the Contract;
If no rates or prices are relevant for the derivation of a new rate or price, it shall be derived
from the reasonable Cost of executing the work, together with reasonable profit, taking
account of any other relevant matters;
Until such time as an appropriate rate or price is agreed or determined, the Engineer shall
determine a provisional rate or price for the purposes of Interim Payment Certificates.

96 | Clause 12 – Measurement and Evaluation
Sub-clause 12.4 [Omissions]
The Contractor must give notice where a Variation gives rise to an omission, or element of
omission;
If the omission:
Produces abortive work for the Contractor; or
Will result in a sum not forming part of the Contract Price; or
Has a Cost which is not part of replacement work,

Then, upon receipt of the notices, the Engineer shall proceed to “agree or determine” the
Cost flowing from the omission.
Sub-clause 12.4 therefore provides for possible compensation to the Contractor relating
to omissions to the Works. It enables the Contractor to give notice of a Cost that has been
incurred and will not be reimbursed owing to the omission of work by a Variation. The
Engineer then makes a determination under Sub-clause 3.5.
Notes

Lesson 25
Clause 13 [Variations and Adjustments]

Introduction
In any construction project there will be a need to change the initial requirements as the
construction proceeds on the Site. Very few Contracts run their course without the need to
introduce Variations, making changes to the form or nature of the Works as compared to what
was foreseen at the time the Contract came into force.
Clause 13 deals with the possibility that Variations and adjustments may be made to the original
scope of the Works under the Contract. It covers the procedures for work being added to, or
omitted from, the original Contract work, together with other matters that may increase or
decrease the Contract Price.
The three ways in which Variations may be introduced are:
They may be initiated by the Engineer giving an instruction to the Contractor; or
Initiated by the Engineer requesting a proposal from the Contractor; or
Proposed by the Contractor.
The Variation may be resultant from:

The Employer changing his mind about some requirement; or
The Engineer may need to issue further information that involves changes to the initial
requirements; or
It may be necessary to correct a mistake in the information that has been issued to the
Contractor.

98 | Clause 13 – Variations and Adjustments
The decision as to whether the Variation is to be executed lies with the Engineer. The Contractor
is not permitted to introduce Variations without an order or instruction in writing from the
Engineer (the Contractor is not permitted to change the Permanent Works unless the Engineer
has instructed or approved the Variation).
The Engineer, but not the Employer, can issue an instruction under Sub-clause 13.3. If the
Employer wants to make any changes he must request the Engineer to issue the instruction. If
the Employer gives an instruction direct to the Contractor then the Contractor must obtain the
Engineer’s confirmation and instruction before he executes the change. Strict adherence to these
requirements is essential for the Engineer to maintain technical and financial control over the
project.
Sub-clause 13.1 [Right to Vary]

Variations can be initiated at any time prior to the issue of the Taking-Over Certificate by
the Engineer;
The initiation of a Variation is either by way of instruction or the request for a proposal from
the Contractor;
The Contractor must perform unless he gives a notice stating that he cannot obtain the
Goods required for the Variation;
There is a wide definition of what a Variation may include;
The Contractor may not of himself execute any change to the Works;
Each Variation may include:
Changes to the quantities of any item of work included in the Contract (however, such
changes do not necessarily constitute a Variation);
Changes to the quality and other characteristics of any item of work changes to the
levels, positions and/or dimensions of any part of the Works;
Omission of any work unless it is to be carried out by others;
Any additional work, Plant, Materials or services necessary for the Permanent Works,
including any associated tests;
Changes to the sequence or timing of the execution of the Works;

Clause 13 – Variations and Adjustments | 99
The contractual procedures for additional and/or varied work is a difficult and important
area. There is often a complex question involved in determining in the first place
whether the work claimed by the Contractor is truly extra and/or varied, having regard
to all of the Contract Documents (and all of those things of which the Contractor is to
be regarded as having had notice when he made the Contract and put in his Tender).
The mere fact that a Contractor has carried out extra work is not itself sufficient to give
rise to a right to claim for additional payment;
A second difficult area is the question of written requests for additional work and/or
written orders, and then the consequential issue of whether and in what circumstances
the Contractor can recover payment for additional work without formal requests and/
or written orders. It will be a question of construction in each case but the requirements
for requests to be in writing – or some stipulation as to a proper written order – may
often be regarded as a condition precedent to the right to claim payments for extras.
Sub-clause 13.1 gives the Engineer the right to initiate a Variation at any time prior to the
issuing of a Taking-Over Certificate for the Works. However, the Engineer is not permitted
to initiate a Variation during the Defects Notification Period. There is no restriction on this
right to initiate a Variation (subject to the delay and/or disruptive effects of such Variation
being borne by the Employer) and the procurement of work through Variations ought to be
carried out in a particular way by the Engineer and/or the Employer;
The Contractor must carry out the Variation if instructed and has limited grounds to object.
The Contractor shall (must) comply with the instruction unless he can give good reason why
he cannot do so. The reasons for not complying are:
(i) He cannot obtain the Goods required;
(ii) The Variation will reduce safety or stability;
(iii) It will adversely affect the guarantees.
Even if the Contractor gives notice that he cannot readily obtain the Goods required, the
Engineer has the option of cancelling, varying or confirming the instructions (and thereby
ignoring the Contractor).

100 | Clause 13 – Variations and Adjustments
Sub-clause 13.2 [Value Engineering]

The Contractor may make a value engineering proposal at any time;
The proposal is prepared at the Cost of the Contractor and shall comply with the list of
requirements set out in Sub-clause 13.3 [Variations];
If there is a design element in the proposal then it is for the Contractor to ensure that the
design complies with Sub-clause 4.1;
If there is a resulting reduction in the Contract value then the fee is calculated in accordance
with the prescribed formula which clearly incentivises the making of savings;
Under Sub-clause 13.2 the Contractor may submit a written proposal to the Engineer in
respect of Value Engineering of the Works, detailing the ways in which he feels the Contract
may be completed sooner than originally planned, or the Costs of the Works may be
reduced or the efficiency may be improved;
The Value Engineering provision enables the Employer to benefit from the Contractor’s
experience and proposals;
The risk of the Value Engineering change is the Contractor’s one and any savings are split
50%/50% between the Contractor and the Employer;
Remember that Value Engineering is introduced after the contract has been entered into.
Any similar process made available to the Employer prior to the concluding of the contract
would constitute an alternative offer and not Value Engineering.
Notes

Lesson 26
Clause 13 [Variations and Adjustments]

Sub-clause 13.3 [Variation Procedure]

Prior to issuing a Variation, the Engineer may issue a request for a proposal to the Contractor;
The Contractor must respond to the request, either saying why he cannot comply or by
providing a proposal for the Works, a programme proposal and a proposed evaluation;
The Engineer is then to respond, either agreeing or setting out reasons for disagreement;
The Contractor is not to delay any work whilst awaiting a response;
The instruction is then to be issued by the Engineer and receipt acknowledged by the
Contractor;
Valuation of the Variation is to occur in accordance with the principles of Clause 12.
Sub-clause 13.4 [Payment in Applicable Currencies]

Where different currencies are specified for payments, the proportions of currency
payments should be specified;
Currency provisions in the Contract to be carried through into the evaluation of a Variation.

102 | Clause 13 – Variations and Adjustments Continued
Sub-clause 13.5 [Provisional Sums]

Provisional sums must be expended in accordance with instructions issued from the
Engineer;
The Contract Price is then adjusted accordingly;
The powers of the Engineer in relation to the expenditure of Provisional Sums are
widely defined in Sub-paragraphs (a) and (b). Any expenditure by the Contractor shall be
substantiated as and when required by the Engineer;
A Provisional Sum can only be used for the specified purpose and any money that is surplus
to these requirements cannot be used for other work.
Sub-clause 13.6 [Daywork]
Provided a Daywork Schedule is attached as part of the Contract:
The Engineer may instruct Variations on a Daywork basis if the work concerned is of a
minor nature;
Such Daywork shall be valued in accordance with the Daywork Schedule;
The Contractor must deliver daily Statements of the work carried out, including details
of the personnel and Materials used. The daily Statements must be counter-signed and
agreed by the Engineer.
Sub-clause 13.7 [Adjustments for Changes in Legislation]

If there is a change in the law of the Country which affects the performance of the Contractor,
the Contract Price shall be adjusted;
If the Contractor considers that it will suffer delay or increased Cost it must give notice to
the Engineer within twenty-eight days as required by Sub-clause 20.1;
If the Engineer so determines, the Contractor may be entitled to an extension of time and
payment of Cost;
This sub-clause gives the possibility to increase or decrease the Cost owing to the changes
in legislation;
The sub-clause protects both parties in the event that there is a change in law (see
“Definition”), which occurs after the Base Date (see “Definition”) and which has an effect
on the Works and results in a change in Cost or programme. Normally such changes will
either increase the Cost of or delay the execution of the Works and the Contractor can
proceed according to Sub-clause 20.1 [Contractor’s Claim] to claim the extra, provided he
can substantiate his claim;

Clause 13 – Variations and Adjustments Continued | 103
Sub-clause 13.8 [Adjustments for Changes in Cost]

This is commonly known as the “escalation clause”;
This sub-clause only applies if the adjustment data table is part of the Contract;
If this sub-clause applies, the formulae set out must be used to adjust changes in the Cost
of labour and Materials;
This sub-clause provides extensive details for the use of formulae for Cost Variations during
the Contract period;
If the Contractor fails to complete the Works within the Time for Completion, adjustment
of prices thereafter shall be made using:
Each index or price applicable on the date forty-nine days prior to the expiry of the
Time for Completion of the Works; or
The current index or price. whichever is more favourable to the Employer;
The base rate reference is twenty-eight days prior to date of Tender submission.
If the Employer wishes to include provision to reimburse the Contractor for changes in
the Cost of labour, equipment, Materials, or other items then the table in the Appendix
to Tender must be completed in accordance with the provisions of Sub-clause 13.8. So
this sub-clause is applicable only if the table of price adjustment has been included in the
Appendix to Tender. Factors must be provided in Appendix to Tender for each project;
To decide on the various co-efficients to be included in the Cost adjustment formula,

together with the other information that is required, will not be a simple matter and will
depend on the information that is available for the Country, as well as on the details of the
project.

104 | Clause 13 – Variations and Adjustments Continued
Notes

Lesson 27
Clause 14 [Contract Price and Payment]

Introduction
The amount the Contractor is going to be paid, and the timing of the payment, is of fundamental
importance to both Contractor and Employer alike. The manner in which the payment is made is
traditionally dependent on the precise wording of the Contract.
Clause 14 provides the basis for the payment regime. It sets out when the amounts due are to
be paid out by the Employer. The timing of payment is primarily a commercial matter and it is
important both parties agree with the proposed procedures.
Clause 14’s fifteen sub-clauses that relate to the vital areas of price and payment cover:
Sub-clause 14.1: Contract Price may be represented through a Bill of Quantities (re-
measured) or Schedules;
Sub-clause 14.2: Anticipates that advance payment will be made and procedures provided;
Sub-clause 14.3: The Contractor to submit a Statement for application for interim payment.
Note: The crossreference to Sub-clause 4.21, plus requirement for six copies;
Sub-clause 14.6 sets out the procedure for the issue of an Interim Payment Certificate by
the Engineer;
Sub-clause 14.7: Payment duties of Employer plus under Sub-clause 14.8 the financial
charges to be paid if Employer is late in payment (3% above discount rate of the central
bank of Country of the currency of payment);
Sub-clauses 14.10, 14.11, 14.12, and 14.13 deal with the Statement on completion,
application for Final Payment Certificate, discharge and issue of Final Payment Certificate;
Sub-clause 14.15 sets out the procedures if the payments are to be made in more than one
currency;

106 | Clause 14 – Contract Price and Payment
Sub-clause 14.4 allows for Schedule of Payments. If no Schedule of Payments, the Contractor

is required to submit non-binding estimates of payments in quarterly periods;
Sub-clause 14.9 refers to Retention Money as stated in the Appendix to Tender. On issuance

of the Taking-Over Certificate the first half certified for payment by Engineer. On expiry of
the Defects Notification Period the balance is certified by the Engineer for payment;
Sub-clause 14.10 requires the Contractor, within eighty-four days of Taking-Over Certificate,

to submit a Statement showing:
(a) The value of all work done;
(b) Further sums considered due;
(c) Estimate of any other amounts considered due. The Engineer shall certify in accordance
with Sub-clause 14.6;
Sub-clause 14.11 requires the Contractor to submit Final Statement within fifty-six days of
receiving Performance Certificate;
Sub-clause 14.12: The Contractor to submit written discharge with Final Settlement;
Sub-clause 14.13 requires the Engineer to issue within twenty-eight days Final Payment
Certificate;
For a lump-sum Contract the references to measurement in Clauses 12, 13 and 14 must be omitted
or revised in the Particular Conditions. If the lump-sum form is to be adopted, the Particular
Conditions Guidance recommends several amendments.

Clause 14 – Contract Price and Payment | 107
Sub-clause 14.1 [The Contract Price]

The Contract Price shall be evaluated by the Engineer in accordance with the provisions of
Sub-clause 12.3;
It is the responsibility of the Contractor to pay all taxes and other fees as required. Any
quantity set out in the Bill of Quantities or other schedule is an estimated figure only;
It is the responsibility of the Contractor to submit, within twenty-eight days after the
Commencement Date, a non-binding breakdown of each lump-sum price shown in any
schedule;
Sub-clause 14.1 deals with the monetary value of the Contract;
The Contract Price is defined at Sub-clause 1.1.4.2 as “the price defined in Sub-clause 14.1”.

“Contract Price” must be distinguished from the “Accepted Contract Amount”, which is
defined at Sub-clause 1.1.4.1 as “the amount accepted in the Letter of Acceptance”;
The Contract Price is the amount which the Contractor actually receives and should not be
confused with the Accepted Contract Amount (see “Definition”). The Accepted Contract
Amount is fixed but the Contract Price can change and will probably increase, due to
the measurement of actual quantities, Variations and other adjustments. The Contract
Agreement states that the Employer will pay the Contractor “the Contract Price at the
times and in the manner prescribed by the Contract”.
Sub-clause 14.2 [Advance Payment]

Provided the Contractor submits a guarantee, which must remain valid until the lump-sum
is repaid to obtain the advance payment, the Employer shall make an advance payment for
mobilisation. The advance payment is an interest free loan;
The total advance payment shall be stated in the Appendix to Tender;
If the advance payment has not been repaid twenty-eight days prior to the expiry date, the
Contractor must extend the validity of the guarantee;
The advance payment is repaid through percentage deductions in the Payment Certificates,
which commence when the total of certified interim payments exceeds 10% of the Accepted
Contract Amount less any Provisional Sums;
It is very common for the Employer to make some form of advance payment (sometimes
called a “mobilisation payment” or “interest-free loan”) in order to help the Contractor
with some of his early Costs and expenditures before he has reached the stage where he
can submit an Interim Payment Certificate. The amount of the advance payment needs to
be given in the Contract Data and is very often (but not always) in the order of 10% of the
Accepted Contract Amount.

108 | Clause 14 – Contract Price and Payment
Sub-clause 14.3 [Application for Interim Payment Certificates]

• The Contractor must submit on a monthly basis six copies of its application for
interim payment;
• The application for interim payment must include the monthly progress report
prepared in accordance with Sub-clause 4.21;
• The application must also include the detailed supporting information set out at Sub-
paragraphs (a) to (g);
• The Statement is submitted “after the end of each month” and the sooner the
Contractor collects the necessary information and submits the Statement, the
sooner he will be paid.
Notes

Lesson 28

Sub-clause 14.4 [Schedule of Payments]

(Generally Yellow, Silver and Gold Books)
The Contract may include a Schedule of Payments detailing provisions for payment by
instalments;
If the schedule is included. The instalments must be estimated Contract values defined by
reference to actual progress;
If the Contract does not include a schedule the Contractor shall submit non-binding
estimates of the payments which he expects to become due;
The first estimate must be submitted within forty-two days after the Commencement Date;
Sub-clause 14.4 deals with a situation where the Contract states that the Contract Price is
to be paid in instalments;
If the Contract Price is to be paid in instalments, the Contract has the possibility to pay
based on Schedule of Payments. In this case the Contract must include a Schedule of
Payments, giving the timing and details of the instalments, subject to the provisions of Sub-
clause 14.1;
If the Contract does not include a Schedule of Payments then the Contractor must submit
non-binding estimates of the amount he expects will become due during each quarterly
period, with revised estimates submitted at quarterly intervals. Thus, the Employer has
an advance indication of what amounts will become payable and can arrange his finances
accordingly. Moreover, this can be very useful for the Contractor when planning and
analysing his cash flow;
Payments will generally be made on easily identifiable “milestones”.

110 | Clause 14 – Contract Price and Payment Continued
Sub-clause 14.5 [Plant and Materials intended for the Works]

This sub-clause will only apply if lists of relevant Plant and Materials as set out in Sub-
paragraphs (b) and (c) appear in the Appendix to Tender;
The Engineer will only certify additions for Plants and Materials for payment if the
Contractor’s records are adequate;
The additional amount to be certified will be up to 80% of the Engineer’s determination of

the Cost of the additional Plant and Materials;
Payment will be made in the same currency as for the rest of the Contract.
Sub-clause 14.6 [Issue of Interim Payment Certificates]

The Engineer must make a fair determination of the amount due to the Contractor;
The Interim Payment Certificate can be withheld in two circumstances only:
If the Employer has not received and approved the Performance Security; or
If, prior to issuing the Taking-Over Certificate, the amount to be certified would be less than
the minimum amount of the Interim Payment Certificate stated in the Appendix to Tender;
Sub-clause 14.6 deals with the issue of Interim Payment Certificates. The Sub-clause starts
by confirming the requirement expressed in Sub-clause 4.2 that the Contractor must provide
a Performance Security before the Employer is under any obligation to make payment. The
Sub-clause thereafter concentrates on the question of payments and the right, if any, for
payment to be withheld;
It is one of the roles of the Engineer to issue to the Employer an Interim Payment Certificate,
which details the amount that the Engineer believes is due to the Contractor every month,
along with any documents supporting his belief. A copy of this certificate should also be
issued to the Contractor;
This is a very important Sub-clause as it is the link between the Contractor’s application
to be paid and the Employer’s obligation to pay him, and it applies in respect of both the
Contractor’s application for payment of the Advance Payment and his applications for
interim payments;
The Engineer must decide the amount which is due to be paid to the Contractor and issue
an Interim Payment Certificate, including supporting particulars, within twenty-eight days
after receiving the Contractor’s Statement with particulars. The Interim Payment Certificate
shall state the amount due to the Contractor.
The Interim Payment Certificate, which is a “liquid document”, is binding upon the Employer
and he must make payment in full, subject to Sub-clause 14.7(b), regardless of any claim
that he may have against the Contractor.

Clause 14 – Contract Price and Payment Continued | 111
Thus, once the Employer’s Representative receives an application he must act expeditiously
to check the application and issue the Payment Certificate. For the Advance Payment he
has fourteen days after receiving the application to issue the certificate and, in respect of
interim payments, he has twenty-eight days.
During this time he must check the application for errors or for payments which in his (the
Employer’s Representative’s) opinion are not due and then prepare and issue a Payment
Certificate for the amount which he “fairly determines to be due”. So the certificate is for
the amount which the Engineer considers to be correct, except when any amount is due
following a decision of the DAB. In such cases the amount is not subject to the opinion of the
Employer’s Representative and he must include such amount as awarded, bearing in mind
that such a decision may be in favour of the Employer and be in the form of a reduction in
the amount due to the Contractor. (Although the sub-clause does not specifically mention
it, the same would apply for arbitral awards);
If the amount of the due payment is less than the minimum amount of Interim Payment
Certificates stated in the Contract Data, the Engineer does not have to issue a certificate.
Finally, under this sub-clause, the important point is made that certification of payment, or
indeed payment itself, does not mean that the Works have been accepted or approved and
the Engineer is permitted to make any correction to any previously issued certificate that
he finds to be necessary.
Sub-clause 14.7 [Payment]
The Employer must make payment to the Contractor in accordance with the timescales set
out in Sub-paragraphs (a) to (c);
Payment is to be made into the bank account as chosen by the Contractor, as specified in
the Contract;
The Employer’s obligation is to pay the sum that is certified by the Engineer, without any
deductions;
The Contractor is not obliged to give any notice in relation to this claim for interest;
Sub-clause 14.7 is a key sub-clause that sets out the method and the timescale in which the
Employer is to pay the Contractor for work done;
This sub-clause makes it clear that once the Engineer has certified an amount as being due
for payment then the Employer must pay;
The Employer also has strict time limits within which to pay and if he fails to meet these
dates then the Contractor has rights, under Sub-clauses 16.1 [Contractor’s Entitlement to
Suspend Work] and 16.2 [Termination by Contractor], to firstly suspend work until payment
is received and then, if payment has not been received within forty-two days after the
period stated in this Sub-clause 14.8, the Contractor may terminate the Contract.

Notes

Lesson 29

Sub-clause 14.8 [Delayed Payment]

If the Employer does not make payment in accordance with Sub-clause 14.7, the Contractor
shall automatically be entitled to finance charges on the unpaid amount;
If payment is not made within fifty-six days of the submission of the Contractor’s Statement
applying for payment, the finance charges shall be calculated at a rate of 3% above the IBL
or in South Africa it would be 3% above the bank Repo rate.
Sub-clause 14.9 [Payment of Retention Money]

The first 50% of the Retention Money shall be certified for payment to the Contractor after
the issue of the Taking-Over Certificate;
If the Taking-Over Certificate is for a Section or part of the work, 40% of the value of that
Section shall be released by way of retention;
The outstanding balance for Retention Money shall be certified for payment promptly after
the expiry of the Defects Notification Period;
If any work remains to be executed, the Engineer shall be entitled to withhold certification
of the estimated Cost of this work.

Sub-clause 14.10 [Statement at Completion]

Traditionally the Engineer would inform the Employer on a regular basis what he believes
the final Contract Price will be. This is to allow the Employer at all times to be aware of what
the Project is actually going to cost;
FIDIC takes the view that the Contractor should also give an indication of what he believes
the final Contract Price will be and this is provided for at Sub-clause 14.10;
The Contractor shall submit to the Engineer six copies of its completion Statement within
eighty-four days after receiving the Taking-Over Certificate;
The Statement at Completion shall show the value of all work done, any further sums
considered due and estimates of any other amounts which may be due;
The Engineer shall certify in accordance with the principles of Sub-clause 14.6, i.e. fairly;
When preparing the Statement the Contractor should consider Sub-clause 14.14 which
deals with the cessation of the Employer’s liability;
The Contractor does not have his “hand on his heart” when making this assessment and
cannot be in breach if his assessment is incorrect. Therefore Contractors will generally
include all potential claims which may still have to be submitted! – Regardless of their
success or otherwise.
Sub-clause 14.11 [Application for Final Payment Certificate]

The Contractor is to submit six copies of the draft Final Statement within fifty-six days after
receiving the Performance Certificate;
The draft Final Statement should show the value of all work done and the value of any
further sums which the Contractor considers due;
If the Engineer disagrees with this, the Contractor shall submit any further information as
may be reasonably required. After discussion, any disagreement must be resolved according
to the principles of Sub-clause 3.5 and Clause 20;
This important sub-clause which sets out the procedure the parties must follow in order to
settle issues of payment. As with all payment procedures, the timetable is initiated by the
Contractor.

Clause 14 – Contract Price and Payment Continued | 115
Sub-clause 14.12 [Discharge]
The Contractor must submit with the Final Statement a written discharge confirming that
the total of the Final Statement represents the full and final settlement of all monies due
to him, including claims;
This discharge becomes effective when the Contractor has received the Performance
Security and payment of any outstanding balance.
Sub-clause 14.13 [Issue of Final Payment Certificate]

The Final Payment Certificate is to be issued within twenty-eight days after receiving the
Final Statement and written discharge;
The Final Payment Certificate is issued to the Employer by the Engineer;
The Final Payment Certificate states the amount finally due and the balance, if any, due to
the Contractor;
If the Contractor does not apply for a Final Payment Certificate, the Engineer must request
one;
If the application is still not made within twenty-eight days, the Engineer must issue a final
certificate having determined the sum it believes to be due.

Sub-clause 14.14 [Cessation of Employer’s Liability]

The Employer will only be (potentially) liable for matters which the Contractor has made
specific provision for in the Final Statement;
The only exceptions relate to the Employer’s indemnity obligations or, in the cases of
deliberate default, reckless misconduct or fraud by the Employer.
This sub-clause refers to the cessation of the Employer’s liability and not that of the
Contractor;
The sub-clause limits the Employer’s liability to matters which the Contractor has raised in
his Final Statement. If they have not been mentioned the Employer has no liability in that
regard under the Contract (subject to the applicable law). It also means that the Employer
remains liable to honour any decision of the DAB regarding any matter which the Contractor
submitted to the DAB in respect of matters in the Contractor’s Final Statements, which were
not accepted by the Engineer and not included in the respective Final Payment Certificate;
In other words, the sub-clause refers to the Employer’s liability for any matter or thing
under or in connection with the Contract or execution of the Works. If the Contractor is not
satisfied with any valuation, the response to any claim or anything else whatsoever which
is related to the Contract then he must ensure that the matter is mentioned in the Final
Statement, together with an amount of money in compensation.
Sub-clause 14.15 [Currencies of Payment]

The intention of the Contract is that the Contract Price should be paid in the currency
named in the Appendix to Tender;
If no such currency is named then the default provisions Sub-paragraphs (a) to (e) will
apply;
This is a straightforward Sub-clause defining the currency in which payment is to be made;
The sub-clause must be read together with the Appendix to Tender and the FIDIC Contract
form for the Letter of Tender. These documents allow for different provisions for the
currency of payment and the documents must be clear as to the precise provisions that
will apply.

Lesson 30
Clause 15 and Clause 16

[Suspension and Termination]
Overview
Introduction
This section deals with Termination by the Employer and Termination and Suspension by the
Contractor.
There are many provisions in a FIDIC Contract where an obligation on one Party to act or perform
is directly followed by a remedy in the event that the Party fails to act or perform as required.
This is to provide the parties with a contractual solution to deal with common failures without the
need to consult the applicable law in order to resolve the problem. The answer is in the Contract.
However, the Contract cannot address all possible failures or serious failures where the only
solution is for the other Party to be able to terminate the Contract and the provisions of Clause 15
deal with commonly arising failures by the Contractor which give the Employer the right to
terminate the Contract. Clause 16 deals with commonly arising failures by the Employer and
those for whom the Employer is responsible which give the Contractor the right to terminate the
Contract.
In summary, Clauses 15 and 16 set out the grounds which will entitle the:
Employer to terminate the Contract;
Contractor to suspend or terminate the Contract.
Clause 15 [Termination by the Employer] covers the Notice to Correct [Sub-clause 15.1], the
reasons for termination requiring fourteen days’ notice by the Employer to the Contractor (Sub-
clause 15.2) and the Employer’s right to terminate for convenience at any time by giving twenty-
eight days’ notice (Sub-clause 15.5).
Clause 16 [Termination and Suspension by the Contractor] includes in Sub-clause 16.1 the
reasons for entitlement for the Contractor to suspend work (under Sub-clauses 14.6; 2.4 and
14 7) with twenty-one days’ notice to Employer (where the Contractor must give notice to the
Engineer for Costs and time), the reasons for termination by the Contractor (Sub-clause 16.2) and
the actions for Employer must undertake after Notice of Termination has been received from the
Contractor (Sub-clause 16.4).

118 | Clause 15 and Clause 16 – Suspension and Termination
Notes

Lesson 31

Sub-clause 15.2 to 15.5.
Sub-clause 15.1 [Notice to Correct]

The Engineer is empowered, but not obliged, to issue a notice in writing requesting that the
Contractor remedy any default under the Contract.
This sub-clause is simply a requirement for the Engineer to notify the Contractor by
written notice if the Contractor is failing to carry out any obligation under the Contract.
If the Contractor fails to carry out any obligation under the Contract, the Engineer may by
notice require the Contractor to make good the failure and to remedy it within a specified
reasonable time. In other words, the Engineer has the right to issue a notice to the
Contractor requesting that he rectify poor performance under the Contract;
Although the giving of a notice potentially has a very significant effect, the requirement on
the Engineer is an optional one – he does not have to issue such a notice;
The receipt by the Contractor of a notice under this sub-clause needs to be taken very
seriously, as failure to rectify the failure can lead to termination by the Employer under
Sub-clause 15.2 [Termination for Contractor’s Default];
Nevertheless, as the notice (and the failure to comply with any such notice) is one of the
precursors to termination, the notice should:
State that it is a notice under Sub-clause 15.1;
Describe clearly the nature of the failure; and
Specify what constitutes a reasonable time to rectify the failure;
State the time which the Contractor has to remedy the failure, under Sub-clause 1.3,
be in writing;

The reason for including an actual reference to Sub-clause 15.1 is to avoid disputes as to

the nature of notice. For example, the Engineer can issue instructions under Sub-clause 3.3
requiring the remedying of defects or serve a notice under Sub-clause 7.5 rejecting Works
carried out by the Contractor. The second item adds similar clarity, whilst the third is a
requirement of the sub-clause;
The sub-clause refers to a failure to carry out “any” obligation under the Contract. Given
that minor defects by themselves would be unlikely to amount to a sufficient breach of
Contract to justify termination, there might be thought to be a question mark over whether
the failure to remedy a minor defect will empower the Employer to exercise its right to
terminate under Sub-clause 15.2. However, it is not the nature of defect itself which
becomes relevant but the failure of the Contractor to remedy the defect when requested
to do so. The type of situation the sub-clause is attempting to deal with is not the defect
itself but the conduct in failing to remedy the defect that is important;
In common law the non-compliance with such a term after receipt of notice may amount to
repudiation regardless of the contractual effect set out in Sub-clause 15.2.
Sub-clause 15.2 [Termination by the Employer]
Termination and Suspension are very serious matters – Do not suspend or terminate
until you have consulted your legal team!!!
Termination is a very serious step. Parties should take legal advice whenever termination is
contemplated. Termination is likely to delay the completion and increase the Costs of the
project;
The Employer may use Sub-clause 15.5 to terminate at its “convenience”;
Sub-clause 15.2 deals with the mechanism of termination and sets out the circumstances
in which the Employer may terminate. The Employer shall be entitled to terminate the
Contract if the Contractor:
Fails to comply with Sub-clause 4.2 or with a notice under Sub-clause 15.1;
Abandons the Works;
Fails to proceed with the Works in accordance with Clause 8;
Fails to comply with a notice issued under Sub-clauses 7.5 or 7.6 within twenty-eight days
after receiving it;
Subcontracts the whole of the Works or assigns the Contract without the agreement;
Becomes bankrupt or insolvent;
Gives or offers bribes;

Clause 15 and Clause 16 – Suspension and Termination | 121
In the first five situations the Employer may terminate the Contract once he has given
the Contractor fourteen days’ notice of such an intention. In the last two situations the
Employer can by notice terminate the Contract immediately;
It is important that determination provisions are precisely followed. If a dispute arises

these procedures, particularly in relation to notices or time limits, will usually be carefully
considered and strictly applied;
The Employer must be very certain of his grounds for terminating the Contract as the
consequences of wrongful termination can be very serious. A wrongful termination may
result in a repudiation and the innocent party may find itself having to pay damages!
The Employer must therefore take care to follow any notice requirements in the Contract.
Who should the notice be served upon? Where should the notice be served? How should
the notice be delivered? The purpose of this contractual provision is to ensure that one
Party knows what the other wishes to communicate;
The contractual right to terminate exists in addition to the common law right to repudiation;
The Employer must remember that it may only terminate immediately in respect of the
insolvency or bribery as described in Sub-paragraphs (e) and (f);
For the other Sub-paragraphs (a) to (d) the Employer must give fourteen days’ notice
prior to termination. This thereby gives both parties a short period to try and resolve their
differences. The Contractor should be aware that there is nothing in Sub-clause 15.2 which
says that if the default specified in the notice is remedied then the Employer cannot still go
ahead and terminate;
Upon termination under Sub-clause 15.2 the Employer may complete the Works himself
or arrange for others (a third Party) to do so. He may also make use of the Contractor’s
Documents and Goods to effect completion. Under Sub-clause 1.1.5.2 Goods will include
equipment, Plant, Materials and Temporary Works. Provided the Contractor does not owe
the Employer any money, these must be returned to the Contractor once the Employer has
finished using them, although the Contractor must collect them at its own Cost;
There is no provision for what might happen if the Contractor refuses to comply with any
such instruction to collect his equipment. However, if the Contractor does owe money then
the Employer is entitled to sell them, accounting to the Contractor for any excess balance.

Sub-clause 15.3 [Valuation at Date of Termination]

After termination the Engineer must agree or determine the value of any sums due to the
Contractor;
Any advance payment becomes immediately due and payable to the Employer. This must
be taken account of by the Engineer in his determination.
Sub-clause 15.4 [Payment After Termination]

The Employer does not have to make any immediate payment to the Contractor upon
termination;
No payment needs to be made until the Works are complete and account has been taken
of the Employer’s entitlement (if any) to claims;
Upon termination most Employers will, if they are able, call upon the Performance
Guarantee.
Under this sub-clause the Employer is entitled to recover from the Contractor all Costs,
losses and damages incurred or suffered by the Employer as a result of the termination
under Sub-clause 15.2 [Termination for Contractor’s Default]. Normally this amount will be
deducted from the amount determined to be due to the Contractor in accordance with Sub-
clause 15.3 [Valuation at Date of Termination], and the remaining amount will be certified
in a Payment Certificate by the Employer’s Representative and duly paid by the Employer;
If the amount due to the Employer exceeds the amount determined to be due to the
Contractor under Sub-clause 15.3 [Valuation at Date of Termination] then the balance due
to the Employer may be recovered by the Employer from the Contractor as a commercial
debt;
Thus, upon termination most Employers will, if they are able, call upon the Performance
Guarantee.
In summary, upon termination, the Employer may:
Claim under Sub-clause 2.5;
Withhold any payment until any other Costs incurred by him are established;
Recover from the Contractor any losses and damages. After recovering such losses the
Employer shall pay the balance.

Clause 15 and Clause 16 – Suspension and Termination | 123
Sub-clause 15.5 [Employer’s Entitlement to Termination]

The Employer may terminate at any time, in the absence of Contractor default, upon
twenty-eight days’ notice;
This termination is for the Employer’s convenience;
If the Employer terminates on this basis the Works cannot be completed by another. Thus,
this Sub-clause cannot be applied if the Employer’s intention is to remove the Contractor;
The Contractor is entitled to be paid in accordance with Sub-clause 16.3 and the Force
Majeure provisions of Sub-clause 19.6 (Engineer must determine the value of the Works
done and issue a Payment Certificate);
The most likely reason the Employer will choose to operate this sub-clause will be an
inability to fund and thereby finish the project. Such action could be for good reason (other
than Contractor’s default) such as economic restrictions or political decisions or it may be
for other reasons known only to the Employer;
The termination will take effect in twenty-eight days after the Contractor receives the
notification or the Performance Security (whichever is the latest);
This would not prevent an Employer from resuming the project at a later date if it had a
genuine alternative reason at the time of the operation of this sub-clause;
Note: The sub-clause does not refer to loss of profits.

Notes

Lesson 32

Clause 16: [Suspension and Termination by the Contractor]
Termination and Suspension are very serious matters – Do not suspend or terminate
until you have consulted your legal team!!!
Sub-clause 16.1 provides that the Contractor may suspend work when the Contractor:
Is not being paid amounts to which he is entitled (eg. certified amounts);
Where the Contractor does not receive from the Employer reasonable evidence, within
forty-two days after giving a notice to suspend on this account, that the Employer’s financial
arrangements have been made and are being maintained to enable the Employer to pay
the Contract Price in accordance with the Contract payment schedule (Sub-clauses 16.1,
14.6 and 2.4);
Where the Engineer fails, within fifty-six days after receiving a payment application and
supporting documents, to issue the relevant Payment Certificate.
If the Contractor suffers delay and/or incurs Cost as a result of suspending the work then, upon
giving notice to the Engineer (and subject to complying with the claims procedure of Sub-
clause 20.1), he shall be entitled to an extension of time for any such delay and/or payment of any
Costs that he has incurred, as well as a reasonable profit.

126 | Clause 15 and Clause 16 – Suspension and Termination Continued
Sub-clause 16.1 [Contractor’s Entitlement to Suspend Work]

The Contractor may only suspend work in the following circumstances:
If the Engineer fails to issue a timely interim certificate; or
If the Employer fails to provide financial information; or
If the Employer fails to pay any sums due.
Before the Contractor can suspend, he must give twenty-one days’ notice;
The notice must be in writing and must set out the grounds for the suspension;
If the default is remedied the Contractor must resume work as soon as possible;
Where the suspension is valid the Contractor is entitled to claim for delay or Cost plus
reasonable profit in accordance with Clause 20.
Sub-clause 16.2 [Termination by the Contractor]

The grounds under which the Contractor may terminate are:
(a) The Employer fails to provide reasonable evidence of his financial arrangements;
(b) The Engineer fails to issue a Payment Certificate on time;
(c) The Employer fails to make due payment on time;
(d) The Employer fails to perform its contractual obligations;
(e) The Employer fails to enter into the Contract Agreement or assigns its entire interest in
the project;
(f) There is a prolonged suspension;
(g) The Employer goes into insolvency;
In the case of Sub-paragraphs (f) and (g) the Contractor may give immediate notice to
termination;
In the case of Sub-paragraphs a) to (e) the Contractor must give fourteen days’ notice.
The sub-clause gives the grounds under which the Contractor is entitled to terminate the
Contract;
Termination of the Contract by either Party is a very serious step and the comments given
under Sub-clause 15.2 [Termination by the Contractor], in respect of the Employer’s right
to terminate the Contract, apply equally well to this sub-clause. In this case the Contractor
must be very certain of his grounds for terminating the Contract as the consequences of
wrongful termination can be very serious;

Clause 15 and Clause 16 – Suspension and Termination Continued | 127
A prudent Contractor should always seek legal advice before deciding to terminate the
Contract as the consequences of a wrongful termination can have important adverse
consequences for the Contractor;
Note: Termination is final and irrevocable. Once the Contract has been terminated
then, as a legal matter, it cannot ordinarily be unterminated or reinstated;
The ability to terminate if the Employer “substantially fails to perform” its obligations under
the Contract is likely to be the most contentious grounds for termination. The Contractor
will need to be especially sure of its grounds. The wording used is different to its counterpart
Sub-clause 15.2(b) which requires a simple demonstration of an intention not to continue
performing;
There is no definition of what “substantially fails” means. The Contractor should compare
what has been done against what the Employer has contracted to do. Of the Employer’s
contractual obligations, the most important one, as far as the Contractor is concerned, is
likely to be payment and there may be other conditions of the Contract which the Contractor
may be able to use with more certainty in the event of any failure to pay.
Sub-clause 16.3
[Cessation of Work and Removal of Contractor’s Equipment]
Upon termination the Contractor must cease work, hand over all Goods for which it has
received payment and remove any other Goods from the Site;
There is no need for the Contractor’s presence on the Site other than in the interests of
safety.
Sub-clause 16.4 [Payment on Termination]

After a notice of termination under Sub-clause 16.2 [Termination by Contractor] has taken
effect, the Employer shall promptly:
Return the Performance Security to the Contractor;
Pay the Contractor in accordance with Sub-clause 19.6, i.e. the amount of any loss of
profit or other loss or damage sustained by the Contractor as a result of the termination;
If there is any portion of the advance payment which has not been repaid to the
Employer at the time of the termination, this amount must be credited to the Employer.

128 | Clause 15 and Clause 16 – Suspension and Termination Continued
Notes

Lesson 33
Risk Liability and Force Majeure –

Clause 17, Clause 18 and Clause 19
Introduction
This section deals with the clauses that protect the parties of the 1999 FIDIC Contracts from
claims arising out of the project through indemnities and insurance.
Clauses 17 and 18 are closely related. They aim to protect both parties from claims arising out of
the project through indemnities and insurance.
Clause 17 [Risk and Responsibility] gives the basis for indemnities given by the Contractor and
the Employer (Sub-clause 17.1), the Contractor’s care of the Works (Sub-clause 17.2), Employer’s
risks (Sub-clause 17.3) and their consequences (Sub-clause 17.4), and the limitation of liability
(Sub-clause 17.6 ). Intellectual and industrial property risks covered in Sub-clause 17.5 fall outside
normal project risks and can be considered separately.
Clause 18 covers insurance, the last of the contractual provisions in the chain of risk, responsibility,
liability, indemnity, and insurance.
Throughout the Contract, the fact of a claim or an interim decision on a claim does not relieve
either Party of its obligations under the Contract. The justification for claims that acknowledges
some situations that were outside the control of either Party is covered by the Force Majeure
clause of Clause 19.

130 | Risk Liability and Force Majeure – Clause 17, Clause 18 and Clause 19
Clause 17: Risk and Responsibility
Introduction
Clause 17 covers a wide range of risks and responsibilities that lead to claims arising out of the
project which are covered by the indemnities and insurance.
The clause covers risk and responsibility but also encompasses other contractual provisions,
including indemnities, limitation of liability and the unrelated topic of intellectual and industrial
property rights. In fact the clause deals first with “Indemnities” and back tracks to “Responsibility”
and returns to “Risk” and finally turns to “Liability”. This illogical sequence has been adjusted in
the FIDIC DBO Contract published in 2008.
Sub-clause 17.1 [Indemnities]
Contractor will be held liable for the following risks:
Personal injury arising out of the Contractor’s design and/or execution of the Works
unless attributable to the negligence, wilful act or breach of Contract by the Employer;
Damage to property arising out of the Contractor’s design and/or execution of the
Works which is attributable to the negligence, wilful act or breach of Contract of the
Contractor or its Personnel.
Employer will be held liable for the following risks:
Personal injury arising out of his negligence, wilful act or breach of Contract;
Losses arising as a consequence of the Employer’s right to have work executed on and/
or to occupy any land as per Sub-clause 18.3(d)(i);
Damage which is the unavoidable consequence of the Contractor fulfilling its

contractual obligations, as per Sub-clause 18.3(d)(ii);
Losses arising as a consequence of items listed as Employer risks in Sub-clause 17.3, as

per Sub-clause 18.3(d) (iii).
Where a Party carries a risk he is required to indemnify or protect the other Party in respect
of any claims he may receive or damage or loss he may suffer as a result of such risk. Thus,
if a Party who is not liable for a risk under the Contract receives a claim from a third Party
or suffers loss or damage as a result of the risk eventuating, he is entitled to pass the claim
over to the other Party (the Party carrying the risk) to settle with the third Party or to claim
any loss or damage from the other Party or parties to the Contract;
So this is a clause of reciprocity;

Risk Liability and Force Majeure – Clause 17, Clause 18 and Clause 19 | 131
The Contractor shall indemnify and hold harmless the Employer, Employer’s Personnel, and
their agents;
The Employer shall indemnify and hold harmless the Contractor, Contractor’s Personnel
and their agents against and from all claims, damages, losses and expenses in respect of
bodily injury, sickness, disease or death which is attributable to any negligence of one Party
or the other;
While Sub-clause 17.1 defines the risks primarily in relation to loss and damage which the
Contractor and Employer will be held responsible for, the Contractor is responsible for the
majority of the risks;
Thus, in practice, the type of risks set out in the sub-clause are those for which the
Contractor and Employer are likely to obtain insurance;
Claims for personal injury will unsurprisingly be borne by the responsible Party. There
is however one significant difference in how this sub-clause treats the Contractor and
Employer. The Employer’s obligation to indemnify in respect of personal injury is subject to
default on the part of the Employer. The Contractor’s obligation is all embracing regardless
of fault.
Sub-clause 17.2 [Contractor’s Care of the Works]

Until the Taking-Over Certificate is issued the Contractor is responsible for:
The Works and Goods;
Remedying, at its own risk and Cost, any damage for which it is responsible.
Once the Taking-Over Certificate has been issued the:
Employer is responsible for the Works and Goods;
Contractor will remain liable for any loss or damage that arises from an event, prior to
the issue of the certificates, for which the Contractor was responsible.
The Contractor is responsible for the Works after the Taking-Over Certificate is issued for
damages caused by any actions done by the Contractor;
Once the Taking-Over Certificate has been issued responsibility switches to the Employer;
The practical importance of this is that insurance responsibilities may well switch as well.
It is important that enough time has been allowed to ensure that the project is not left
uninsured;

132 | Risk Liability and Force Majeure – Clause 17, Clause 18 and Clause 19
This sub-clause makes it clear that the Contractor is responsible for remedying, at its own
risk and Cost, any damage for which it is responsible. Those Costs might ultimately translate
into delay damages if progress is delayed as a consequence. Although the Contractor will
not be held responsible for damage caused by an Employer Risk, this and Sub-clause 17.4
make it clear that, provided the proper notice it given, the Contractor must rectify that
damage.
Notes

Lesson 34
Risk Liability and Force Majeure –

Clause 17 [Risk and Responsibility]
Sub-clause 17.3 [Employer’s Risks]

The risks for which the Employer is responsible, to the extent defined in Sub-clause 17.4;
Disorder or rioting on the part of the Contractor which arose from the conduct of the
Works is not an Employer risk.
Note that Employer’s Risks include:

War;
Hostilities;
Invasion;
Rebellion terrorism;
Revolution;
Civil war;
Riot;
Munitions of war;
Explosives;
Pressure waves caused by aircraft;
Use or occupation by the Employer of any part of the permanent Works;
Design by the Employer of any part;
Any Unforeseeable adverse operation of the forces of nature;

134 | Risk Liability and Force Majeure – Clause 17 – Risk and Responsibility
The consequences of Employer’s Risk are dealt with in Sub-clause 17.4:

It is possible that acts of terrorism or riots in countries other than where the project is
carried out will affect the Contractor’s progress. This is particularly the case if equipment,
which is being transported or manufactured in other countries, is destroyed or seized as a
consequence of civil war. It should be noted that the Country based restriction of the Sub-
clause does not appear in the definition of Force Majeure;
The exclusion whereby disorder on the part of the Contractor or its personnel is
understandably not an Employer risk remains;
Importantly, disorder or rioting on the part of the Contractor which arose from the conduct
of the Works is not an Employer risk;
The words “munitions of war” and “explosive Materials” have been added to the 1987
Red Book text, primarily as a reference to landmines which can take many years to be
removed;
Occupation of the Works and any design carried out by the Employer are Employer risks. It
is not immediately apparent what will constitute “use or occupation by the Employer”. The
Employer should take special care when he has more than one Contractor on Site, as this is
typically when such difficulties are likely to arise;
Forces of nature are events which are either Unforeseeable or against which the experienced
Contractor could not have been expected to take reasonable preventive measures. Sub-
clause 1.1.6.8 defines “Unforeseeable” as meaning not reasonably foreseeable by an
experienced Contractor by the date of the submission of the Tender.
Sub-clause 17.4 [Consequences of Employer’s Risks]

If the Contractor suffers loss or damage as a consequence of any item of Employer risk then
he must give prompt notice to the Engineer;
The Engineer may require the Contractor to remedy the loss or damage;
Although the Contractor can recover Cost in all cases, he is only entitled to reasonable
profit in respect of Sub-paragraphs (f) and (g) of Sub-clause 17.3, items which refer to
Employer responsibility and/or fault;
This sub-clause deals with how the Contractor must proceed if an Employer Risk causes loss
or damage;
The sub-clause provides for a two-part notice procedure:
The Contractor must give notice to the Engineer of the damage caused by the Sub-
clause 17.3 risk item. The notice must be in writing and ought to define the risk and
damage caused by that risk;

Risk Liability and Force Majeure – Clause 17 – Risk and Responsibility | 135
If the Contractor suffers loss as a consequence of rectifying the damage caused by a

Sub-clause 17.3 event, notice must be given to the Engineer, adopting the procedure
contained in Sub-clause 20.1.
Sub-clause 17.5 [Intellectual and Industrial Property Rights]

Where a claim is made alleging an infringement of copyright, the Party receiving the claim
must, within twenty-eight days, notify the other of that claim. If no notice is given then the
right to any indemnity is lost;
The Employer must indemnify the Contractor in respect of any such claim which was the
unavoidable result of the Contractor executing the Works or as a result of the Employer
using the Works for purposes not related to the Contract;
The Contractor must indemnify the Employer in respect of any such claim arising out of its
design or Works;
The parties must co-operate together to deal with any claims that may arise against one of
the parties.
Sub-clause 17.6 [Limitation of Liability]

This is known as the cap on liability and must be defined in the Appendix to Tender;
Claims for indirect or consequential loss or damage, loss of use of the Works, loss of any
Contract, or loss of profit can only be made in respect of Sub-clauses 16.4 and 17.1;
The Contractor’s total liability is capped and shall not exceed either the sum stated in the
Appendix to Tender. If there is no amount stated in the Appendix to Tender the cap on
liability is the Accepted Contract Amount;
There are no limitations on liability in cases of fraud or deliberate default or reckless

misconduct;
The limitations are affected by the chosen applicable law which might in particular impose
a higher or lower liability cap or may limit the duration of any such liability;
As with any Contract, care needs to be taken in agreeing the Contract terms that relate to
a contractual liability cap;
The limitations in this sub-clause are affected by the chosen applicable law, which might
in particular impose a higher or lower liability cap or may limit the duration of any such
liability.

136 | Risk Liability and Force Majeure – Clause 17 – Risk and Responsibility
Notes

Lesson 35
Clause 18 [General Requirements for

Insurances]
Introduction
Insurance is the last of the contractual provisions in the chain of risk, responsibility, liability,
indemnity, and insurance.
The provisions in Clause 19 are based on most of the required insurances being provided by the
Contractor. The Contractor will in the main be responsible for obtaining insurance cover. Insurance
is to be taken out for the benefit of the project rather than to protect a Party against the defaults
of the other.
As insurance is taken out in joint names there is little motivation for disputes to arise between the
parties as to matters covered by the policy. The same policy would pay in either outcome.
The reason that both the terms of the policies and the insurers which the Contractor intends
using must be approved by the Employer, not the Employer’s Representative, is that in most of
the policies the Employer is jointly insured so he is responsible for satisfying himself that he is
properly covered by the policy.
The requirement for the Contractor to take out insurance is an obligation, not an option since it
also provides for some of the indemnities which the Contractor is required to give the Employer.
In each case the wording “the Contractor shall effect and maintain ...”, and “shall” (see Sub-
clause 1.2 [Interpretation]) means he must take out the required insurances in accordance with
the provisions of each sub-clause.
The basic intention of the clause is that the Contractor is to arrange cover as the “insuring Party”,
unless stated otherwise in the Particular Conditions.

138 | Clause 18 – General Requirements for Insurances
The required insurances can be broadly categorised as:
Insurance against loss or damage to the Works, Plant, Materials, Contractor’s Documents
and Contractor’s Equipment;
Insurance against liability for personal injury to third parties and damage to property (other
than the Works);
Contractor’s insurance against personal injury of the Contractor’s Personnel (i.e. Employer’s

liability insurance);
The sub-clauses only set out the minimum insurances required under the Contract. In most
instances, the parties may also wish to effect other insurances or others may be required by
the applicable law, for example, decennial liability insurance in France. In addition, the insurance
cover that is available is ever changing and differs from Country to Country.
To this end, the FIDIC Contracts have included the insurance that is typically available and sought
to identify some of the risks (which are included in Employer’s Risks under Sub-clause 17.3) which
may be uninsurable, as possible exclusions from the required insurances, but require them to be
insured wherever possible.
The insurance requirements do not alter the parties’ liabilities under the Contract or otherwise.
Sub-clause 18.1 [General Requirements for Insurances]

Any insurance policy taken out by the Contractor must be in a form agreed with the
Employer;
Any insurance policy taken out by the Employer must be in a form set out in the Particular
Conditions;
Any insurance payment made for loss or damage must be utilised in respect of that loss or
damage;
The insuring Party must supply proof to the other, including evidence of payment of
premiums, that the policy has been taken out;
If either Party fails to do this the other may take out an appropriate policy and seek
reimbursement for this;
Each Party should comply with any insurance conditions;
Any dispute shall be decided in accordance with Sub-clauses 2.5 (although the Contractor
will in the main be responsible for obtaining insurance) and 20.1.

Clause 18 – General Requirements for Insurances | 139
Sub-clause 18.1 contains the general requirements for the insurances that must be effected
and maintained under Clause 18. The particular requirements regarding the scope, extent,
amount, period, permitted exclusions and deductibles for the specific insurances are then
set out in the subsequent sub-clauses, which variously require further information to be
stated in the relevant Contract Document;
Whichever Party is responsible for arranging the insurance, the other Party is likely to wish
to have details of the proposed insurer and insurance terms, including the conditions, limits,
exclusions and deductibles, during the Tender stage (or in any event soon after) so that it
can make its own arrangement for any other insurance it may require and, in the case of the
Contractor, may take these matters into account when submitting his Tender offer;
Wherever the Employer is the insuring Party, each insurance shall be put into effect with
insurers and in terms consistent with the details annexed to the Particular Conditions;
The relevant insuring Party shall submit to the other Party evidence that the insurances
have been effected, evidence of insurance and copies of the policies;
Neither Party shall make any alteration to the terms of any insurance without the prior
approval of the other Party;
Any terms in relation to insurance agreed by the parties before the Contract will override
this sub-clause;
The obtaining of insurance cover will not limit the obligations, liabilities or responsibilities
of either the Contractor or the Employer;
The insurance for Works and Contractor’s Equipment and the insurance against injury to
persons and damage to property are required to be in the joint names of the parties, unless
agreed otherwise in the Particular Conditions.
The consequences if the obligations in respect of insurances are not complied with are
also set out Sub-clause 18.1. If the relevant Party fails to effect and keep in force any of
the insurances required under the Contract or fails to provide the required proof that the
insurances have been effected or are being maintained, the other Party may effect and
keep in force the insurances and recover the amount of any premiums paid as a result from
the first Party.

Sub-clause 18.2 [Insurance for Works and Contractor’s Equipment]

The insuring Party in respect of the Works and Contractor’s Equipment will be the Contractor,
although the insurance must be in the joint names of both parties;
The Works must be insured for a sum not less than the full reinstatement value;
This insurance must be maintained until the date the Performance Certificate is issued;
The insuring Party shall put in place full replacement value insurance for equipment to
cover the entire period from while it is transported to the Site until it is no longer required;
The insurance must cover all loss and damage to the Works save for certain items listed as
an Employer Risk;
The insurance need not include loss or damage as a consequence of a defect in the
Employer’s design, Materials and workmanship, or parts of the Works taken over by the
Employer;
If certain insurance cover is not available at commercially reasonable terms, the Contractor
may be entitled to dispense with the requirement to insure;
The cover required until the date of issue of the Performance Certificate;
For the period after the Taking-Over Certificate has been issued for the Works, the
Contractor is required to maintain a reduced level of insurance cover for the Works, Plant,
Materials and Contractor’s Documents until the date of issue of the Performance Certificate,
i.e. during the Defects Notification Period.

Clause 18 – General Requirements for Insurances | 141
Sub-clause 18.3
[Insurance against injury to Persons and Damage to Property]
Insurance against injury to persons and damage to property shall be in joint names but
effected by the Contractor;
The insurance amount shall be limited as set out in the Appendix to Tender;
The insurance amount shall include cover for loss and damage to the Employer’s property.
The requirements for insurances against personal injury of persons other than the
Contractor’s Personnel and damage to property other than the Works are set out in this
sub-clause.
The insurances required:
Primarily relate to third Party liability. However, as with Sub-clause 17.1, these
insurances are required to cover damage to property of either of the parties other
than the Works and other property insured under Sub-clause 18.2;
Cover all property not insured under Sub-clause 18.2;
It is the Contractor who is the insuring Party, unless otherwise specified in the Particular
Conditions, and these insurance provisions only apply if the minimum amount of cover
per occurrence is specified in the Appendix to Tender.
Sub-clause 18.4 [Insurance for the Contractor’s Personnel]

The Contractor must take out insurance for personal injury, sickness and death for his
Personnel during the entire time they are working on the project;
The Contractor must indemnify the Employer and Engineer in respect of any such claims
that may arise, unless they arise as a consequence of any act or neglect on the part of the
Employer or Engineer;
The insurance covered in Sub-clause 18.4 is a typical legal requirement in many countries.

Notes

Lesson 36
Clause 19 [Force Majeure]

Sub-clause 19.1
Introduction
Throughout the Contract the fact of a claim, or an interim decision on a claim, does not relieve
either Party of its obligations under the Contract. A justification for claims that acknowledges
some situations that were outside the control of either Party is covered by a Force Majeure clause.
A Force Majeure clause is a common feature of international Contracts. Typically, where a Party
has been prevented from performing a Contract by an event beyond its control, it will be excused
for its delay in performing the Contract or, in an extreme case, it may be excused from having
to perform the Contract at all. In some cases such Party can recover any additional Costs it had
incurred as the result of the Force Majeure event as well.
The introduction of a Force Majeure clause is more recently seen as neither necessary nor
desirable because:
Most of the risks, which now come under the definition of Force Majeure in the 1999
Construction Contract, are insurable and are required to be insured. Therefore, there is no
benefit to the Contractor in being protected by such a clause;
While it is agreed that the treatment of the risks specified in Clause 19 should be a special
one, it is erroneous to swing to the extreme end of the scale and designate them in the
category of Force Majeure, particularly when that term has legal implications in certain
jurisdictions.
Thus, in editions of the FIDIC Contracts after 1999 (notably the FIDIC DBO Contract) is to
designate an exceptional set of risks with different treatment to that given to the normal
set of risks to which the project is exposed.
Returning to the 1999 Construction Contract, the Force Majeure clause (Clause 19) may be
broken down into the following parts:
A relatively broad definition of “Force Majeure” (Sub-clause 19.1);

144 | Clause 19 – Force Majeure
Force Majeure must “prevent” a Party from performing “any of” its obligations (thereby
expressly acknowledging the possibility of partial Force Majeure) (Sub-clause 19.2);
When this happens the Party affected must give notice within fourteen days after the
Party became aware, or should have become aware, of the event or circumstance said to
constitute Force Majeure (otherwise, the Party may have no right to claim Force Majeure)
(Sub-clause 19.2);
If execution of substantially all the Works in progress is prevented for a continuous period
of eighty-four days, or for multiple periods which total more than one hundred and forty
days, by Force Majeure, either Party may, after notice to the other, terminate the Contract
in which event the Contractor will be paid for work done only (Sub-clause 19.6); and
A Party must give notice when it ceases to be affected by Force Majeure (Sub-clause 19.3);
Sub-clause 19.7 further provides that, notwithstanding any other provision of the Contract
(including Sub-clauses 19.1 to 19.6), if:
Performance of the Contract becomes illegal (eg. as may happen should the Site
become a war zone); or
Impossible (e.g. as may happen where the Site is totally destroyed by an earthquake
or flood); or
The parties are released from performance under the applicable law (eg. under the
common law doctrine of frustration or the civil law doctrine of Force Majeure as
provided for in the applicable civil code).
Sub-clause 19.1 [Definition of Force Majeure]

The term “Force Majeure” is widely defined as meaning an exceptional event which satisfies
the criteria set out in Sub-paragraphs (a) to (d);
The term “Force Majeure” includes the list of specific events as set out in Sub-paragraphs (i)
to (v);
This list is non-exhaustive and the events specified are examples only.
Sub-clause 19.1 gives the four conditions that must be met for an event or circumstance
to qualify as Force Majeure. Force Majeure means an exceptional event or circumstance
which:
Is beyond a Party’s control;
Such Party could not reasonably have foreseen;
Having arisen, such Party could not reasonably have avoided or overcome and provided
against before entering into the Contract;

Clause 19 – Force Majeure | 145
Is not substantially attributable to the other Party;
A non-exclusive list of examples is given:
Which includes events such as war, revolution, riot or strike by persons other than the
Contractor’s Personnel, radioactive contamination; and
Certain operations of the forces of nature which are also listed at Sub-clause 17.3 as
“Employer’s Risks”;
Although examples of Force Majeure events are provided at Sub-paragraphs (i) to (iv),

they are specifically stated to be examples only. The key is that the various conditions
are satisfied;
The distinction is that:
Employer’s Risk relates to loss or damage to the Works, Goods or Contractor’s

Documents together with delay or Cost from rectifying this loss or damage;
Force Majeure refers to the situation when either Party is prevented from performing
any of its obligations under the Contract;
Thus, the contractual definition of Force Majeure provided in Sub-clause 19.1 has a

significant overlap with the Employer’s Risks specified in Sub-clause 17.3, although
elements which can be attributed to the fault of another Party, for example design,
have been omitted. Force Majeure does not arise if the event is largely attributable to
the other Party to the Contract;
There is a difference in the way that Force Majeure is treated in common and civil
law jurisdictions. While most civil codes make provisions for Force Majeure events, at
common law the meaning of Force Majeure is far from clear;
For Force Majeure the qualifying forces of nature are described in detail as “such as
earthquake, hurricane, lightning, typhoon or volcanic activity”. Also, an additional
event is included – a change in the Laws of the Country, or in the judicial or official
governmental interpretation of such Laws, made after the Contract becomes legally
effective. This circumstance duplicates the provisions of Sub-clause 13.7;
The sub-clause recognises that certain acts of terrorism or civil war outside of the
Country where the project is proceeding may still have a considerable effect on
progress;
Ultimately, what constitutes a Force Majeure event will depend on the circumstances
and thus the notice which the Party affected by the event is required to give by virtue
of Sub-clause 19.2 is of particular importance.

146 | Clause 19 – Force Majeure
Notes

Lesson 37
Clause 19 [Force Majeure]

Sub-clause 19.2 [Notice of Force Majeure]

If a Force Majeure event prevents a Party from performing any of its obligations, this Party
must give notice within fourteen days of becoming aware, or of the date when it should
have become aware, of this Force Majeure event;
With the exception of payment obligations, the delivery of a Force Majeure notice will
excuse the affected Party from performing its obligations for the duration of the Force
Majeure event.
Sub-clause 19.3 [Duty to Minimise Delay]

Each Party must minimise the delay caused by the Force Majeure event;
Envisages that the parties will work together to minimise any delay caused by the Force
Majeure event;
Using “reasonable endeavours” also includes working with the Engineer;
Notice must be given when the Force Majeure event is no longer of any effect.
Sub-clause 19.4 [Consequences of Force Majeure]

If the Contractor is the Party affected by the Force Majeure event, the Contractor may claim
an extension of time and, in certain circumstances, additional monies;
The definition of the category of war events includes hostilities (whether war be declared
or not), invasion and act of foreign enemies.

148 | Clause 19 – Force Majeure Continued
Sub-clause 19.5 [Force Majeure Affecting Subcontractor]

The Contractor cannot rely on a broader Force Majeure clause in a subcontract to claim
Force Majeure relief against the Employer;
Sub-clause 19.5 is an extension of Sub-clause 4.4, which provides that the Contractor shall
be responsible for the acts or defaults of any Subcontractor.
It is important that all subcontracts contain similar Force Majeure provisions to the main
Contract.
Sub-clause 19.6 [Optional Termination, Payment, and Release]

Any Party may serve a termination notice if the Force Majeure event prevents the execution
of substantially all the Works for:
(i) A continuous period of eighty-four days; or
(ii) Multiple periods of more than one hundred and forty days;
If such notice is served the Contractor will be entitled to specific payment.
Sub-clause 19.7 [Release from Performance Under the Law]

The parties will be released from performance (and the Contractor entitled to specific
payment) if:
Any irresistible event (not limited to Force Majeure) makes it impossible or unlawful
for the parties to fulfil their contractual obligations; or
The governing law so provides.
This sub-clause grants the Party seeking exoneration the right to rely on any alternative
relief mechanism contained in the law governing the Contract. Because of this legal
advice is indispensable to ascertain the precise boundaries of Sub-clause 19.7. In the
event of this sub-clause applying the Contractor will be entitled to payment under the
same terms as Sub-clause 19.6.
The sub-clause:
Is much wider than the Force Majeure provisions of Sub-clause 19.1 and acknowledges
that situations can arise when it is impossible for the Contract to continue;
Acts as a fall-back provision for extreme events (i.e. events rendering contractual
performance illegal or impossible) which do not fit within the strict definition of Force
Majeure of Sub-clause 19.1;

Clause 19 – Force Majeure Continued | 149
If any event or circumstance outside the control of the parties arises which makes it
impossible or unlawful for either or both parties to fulfil its or their contractual obligations
or which, under the law governing the Contract, entitles the parties to be released from
further performance of the Contract, then upon notice by either Party to the other Party of
such event or circumstance:
The parties shall be discharged from further performance;
The sum payable by the Employer to the Contractor shall be the same as would have
been payable under Sub-clause 19.6 [Optional Termination, Payment and Release].

150 | Clause 19 – Force Majeure Continued
Notes

Lesson 38
Clause 20 [Claims, Disputes and

Arbitration Overview]
This section covers the submission of claims and the settlement of disputes.
Introduction
Clauses 1-19 of the FIDIC Contracts deal with the rights and obligations of the Parties under the
Contract.
Clause 20 is a procedural clause and covers the submission of claims and the settlement of
disputes.
One of the principal ways that the Construction Contract covers the special contingencies of
construction projects is by providing for specified claim rights for the Contractor if and when such
contingencies arise.
While requiring the Contractor to execute the Works for an agreed price and within a specific time
period, they at the same time provide that the Contractor may have the right to claim additional
money or time or both from the Employer in specifically defined circumstances.
In addition to providing the Contractor with defined claim rights, they provide procedures for the
enforcement of those rights. For example, the Engineer has the power and authority to decide
on the Contractor’s claims in the first instance. If the Contractor is dissatisfied with the Engineer’s
ruling, the Contractor may thereafter refer it to a DAB and, if still dissatisfied, thereafter to
arbitration.
Clause 20 covers the various types of claims that the Contractor may assert under, or in connection
with, the Contract and the procedure that the Contractor is required to follow to assert claims and
to get them paid.

152 | Clause 20 – Claims, Disputes and Arbitration Overview
Essentially, a Contractor may assert two types of claims:
Legal claims, i.e. claims which the Contractor may be entitled to assert under the law
governing the Contract, the most obvious one being breach of Contract;
Contractual claims, i.e. claims which the Contractor is entitled to assert by virtue of the
specific provisions of the Contract.
However, as a general rule, during the execution of the Works it will be in the Contractor’s interest
to claim under one or more clauses of the Contract wherever feasible. This is because the Engineer
has the power and authority to decide the Contractor’s claims in the first instance.
For contractual claims there are about thirty sub-clauses specifying events which, should they
occur, will entitle the Contractor to claim from the Employer.
Regarding disputes where one or both parties do not agree with the Engineer’s determination of
a claim, early FIDIC Contracts:
Provided for administration of the Contract by the Engineer, who was required to act
impartially;
Included a requirement that any dispute must first be referred to the Engineer, as a
precondition to arbitration.
Only after the Engineer had made a decision on the dispute could it be referred to an outside
dispute resolver for amicable settlement or arbitration.
The 1999 Construction Contract has changed this procedure and introduced the DAB as the
standard procedure. Disputes have to be referred to an independent DAB as a precondition to
arbitration. The DAB renders a decision that is immediately binding on the parties whether one of
them is dissatisfied with the decision or not.
As well as covering Contractor’s Claims, Clause 20 covers the appointment and operation of the
DAB and amicable settlement and arbitration.
For the Construction Contract, the DAB is a standing (or permanent) one. In this case the DAB
must be jointly appointed by the parties within twenty-eight days of the Commencement Date.
In the case of a standing DAB, instead of seeking a decision from the DAB, the parties may also
jointly seek an opinion from the DAB on any matter relevant to the avoidance of a potential
dispute.
The latest thinking regarding DAB’s provides that this provision of a non-binding opinion is a
fundamental obligation of successful DAB’s.

Lesson 39

Sub-Clause 20.1
Sub-clause 20.1 [Contractor’s Claims]

The Contractor must give notice to the Engineer of time or money claims as soon as
practicable and not later than twenty-eight days after the date on which the Contractor
became aware, or should have become aware, of the relevant event or circumstance;
Any claim to time or money will be lost if there is no notice within the specified time
limit (time barred);
Supporting particulars should be served by the Contractor and the Contractor should also
maintain such contemporary records as may be needed to substantiate claims (not time
barred);
The Contractor should submit a fully particularised claim after forty-two days;
The Engineer is to respond, in principle at least, within forty-two days;
The claim shall be an interim claim. Further, interim updated claims are to be submitted
monthly. A final claim is to be submitted, unless agreed otherwise, within twenty-eight days
of the end of the claim event;
Payment certificates should reflect any sums acknowledged in respect of substantiated

claims.
Procedure:
This sub-clause sets the procedure to be followed by the Contractor when submitting his
claims. The procedure has three steps:
Notification of the claim;
Substantiation of the claim;
Engineer’s assessment.

154 | Clause 20 – Claims, Disputes and Arbitration Continued
Notification of the Claim:

If the Contractor considers himself to be entitled to any extension of the Time for
Completion and/or any additional payment, under any clause or otherwise in connection
with the Contract, the Contractor shall give notice in accordance with Sub-clause 3.1
[Communications] to the Engineer, describing the event or circumstance giving rise to the
claim;
The notice shall be given as soon as practicable and not later than twenty-eight days
after the Contractor became aware, or should have become aware, of the event or
circumstance;
If the Contractor fails to give notice of a claim within such period of twenty-eight 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.
Substantiation of the Claim:

For the event or circumstance that has occurred, is the event ongoing?
If no the Contractor has to submit a fully detailed claim in forty-two days;
If yes the Contractor submits a detailed claim in forty-two days that is considered as
an interim claim.
The Contractor submits each month further interim claims;
Final details are submitted twenty-eight days after the end of the effect resulting from the
event or circumstance;
There is no time-bar on the submission of the claim!
Engineer’s Assessment:
Within forty-two days after receiving the particulars of a claim, the Engineer shall respond
with approval or disapproval of the claim but shall nevertheless give the response on the
principle of the claim;
The Engineer shall proceed in accordance with Sub-clause 3.5 to agree or determine the
claim;
Sub-clause 20.1 only refers to claims by the Contractor. The equivalent provision for
Employer claims is at Sub-clause 2.5 which is much less stringent in its requirements. A
list of notices under Sub-clauses 2 5 and 20.1 is to be included in the Contractor’s monthly
progress report under Sub-clause 4.21;

Clause 20 – Claims, Disputes and Arbitration Continued | 155
When disputes do arise it is of crucial importance that both parties follow the provisions
of Sub-clause 20.1 with some care. A failure to do so could quite possibly prevent a Party
from bringing a claim.
Engineer’s Responsibilities:
Under Sub-clause 20.1 the Engineer has several responsibilities:
Although the burden of proof lies with the Contractor to prove his claim, the Engineer can
require that the Contractor submit additional particulars;
The Engineer can also inspect the Contractor’s records and instruct the Contractor to keep
further records;
The Engineer must also respond within forty-two days both to the Contractor’s claim and
to a further interim claim. At the very least the Engineer must provide his comments on the
principles of the claim;
The Engineer’s determination must be made in accordance with the principle of the Sub-
clause 3.5. Thus, it must be fair in accordance with the Contract and take due regard of all
relevant circumstances.
Notices:
Sub-clause 20.1 requires that the Contractor, if it considers it has a claim for an extension
of time and/or any additional payment, must give notice to the Engineer “as soon as
practicable” and not later than twenty-eight days after the event or circumstance giving
rise to the claim. So the:
Contractor must submit his claims during the course of the project;
Initial notice at first instance does not need to indicate (for the very good reason that
usually it cannot) the total extension or payment sought;
Compliance with the notice provisions is intended to be a condition precedent to

recovery of time and/or money and, without notices, the Employer has no liability to
the Contractor;
The Contractor also needs to remember that where the effects of a particular event
are ongoing then the Contractor is specifically required to continue submitting notices
at monthly intervals;
The Sub-clause 20.1 notice is in addition to the other requirements for notices in
similar circumstances, such as the Sub-clauses that refer matters to the Engineer for
a determination under Sub-clause 3.5 and the notice that is hidden in Sub-clause 8.3.

All these notices are important to:
33 Enable the Engineer to make his own observations and records of the problem;
33 Enable the Engineer to consider possible actions to overcome the problem;
33 Put the problem on record and make it possible for the Contractor to receive a
prompt decision on his entitlements.
Contemporary Records:
The Contractor is required to keep contemporary records to substantiate his claim. One
cannot attempt to get around this requirement by producing simple witness Statements
after the event;
Contemporary records are essential to substantiate any claim, regardless of whether it is

being considered sympathetically by the Engineer or if it will eventually be determined by
an arbitration tribunal;
The Engineer is entitled to inspect the contemporary records and to request copies. If the
Engineer has any doubts about the accuracy of the records then he should raise any queries
and give the Contractor the opportunity to discuss and justify the records.

Lesson 40

This section covers the submission of claims and the settlement of disputes.
Sub-clause 20.2 [Appointment of the Dispute Adjudication Board]
Sub-clause 20.2 establishes the DAB:

The DAB shall consist of one or three people who must be suitably qualified;
The composition of the DAB shall be by nomination and then joint selection;
DAB members are to be remunerated jointly by the parties with each paying half of any
fees;
DAB members can only be replaced by mutual agreement;
The DAB shall be constituted by the number of members stated in Appendix to Tender. If
not then three members;
Each Party shall nominate one member for the approval of the other Party;
Once the two members have been agreed than the members and the parties shall agree
upon the third member, the chairman.

Sub-clause 20.3 [Failure to Agree Dispute Adjudication Board]

Where the parties fail or are otherwise unable to agree upon the appointment, nomination
or replacement of any member of the DAB then the appointing official so named in the
Appendix to Tender shall make the appointment which will be final and conclusive if:
The parties fail to agree the sole member DAB;
Either Party fails to nominate a member for the other Party’s approval;
The parties fail to agree upon the third member, the Chairman;
The parties fail to agree upon the appointment a replacement in forty-two days after a
member or the whole DAB declines to act.
Sub-clause 20.4 [Obtaining Dispute Adjudication Board’s Decision]

If any dispute arises between the parties then either Party may refer that dispute to the
DAB;
The reference must be in writing and copies must be provided to the other parties and the
Engineer;
The DAB shall be entitled to whatever access it requires, including access to information
and the Site;
The DAB will not act as an arbitral panel;
Unless otherwise agreed, the DAB shall reach its reasoned decision within eighty-four days;
That decision shall be binding unless it is overturned by agreement or by the decision of an

arbitral panel;
If a Party disagrees with the decision of the DAB it should serve a Notice of Dissatisfaction;
If no such notice is served then the decision of the DAB shall become final and binding.
Sub-clause 20.5 [Amicable Settlement]

In the event that a Notice of Dissatisfaction is served both parties must try and resolve that
dispute amicably;
An arbitration may not be commenced until fifty-six days after the Notice of Dissatisfaction
has been served.

Clause 20 – Claims, Disputes and Arbitration Continued | 159
Sub-clause 20.6 [Arbitration]
If a dispute remains following the decision of the DAB, and any attempt at amicable
settlement, then that dispute is to be settled by international arbitration under the Rules
of the Chamber of Commerce or other rules specifically stated in the Particular Conditions
of Contract;
Any arbitral decision is to be final and binding;
The arbitral tribunal will have full powers to open up and revise any decision of both the
Engineer and the DAB;
The Engineer may be called as a witness;
Provided the necessary time limits have been complied with, an arbitration may take place
during the currency of the project.
Sub-clause 20.7
[Failure to Comply with Dispute Adjudication Board’s Decision]
If a Party fails to comply with a DAB decision then the other Party may refer the failure to
arbitration in accordance with Sub-clause 20.6;
The other Party may refer the failure itself to arbitration if:
Neither Party has given notice of dissatisfaction;
The DAB’s related decision (if any) has become final and binding;
A Party fails to comply with this decision.
Sub-clause 20.8 [Expiry of the Dispute Adjudication Board’s

Appointment]
Where no DAB exists then the parties may proceed directly to arbitration.

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1.1 A Practical Approach To FIDIC Contracts - Accompanying Documentation PDF

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FIDIC Module 1:

A Practical Approach to FIDIC Contracts

All rights reserved © 2017

5 Lesson 2 - Introduction to FIDIC Contracts: Plant and Design-Build, EPC/Turnkey

9 Lesson 3 – The Structure of FIDIC Contracts

13 Lesson 4 – Role Players and Parties to the Contract

17 Lesson 5 – Clause 1: General Provisions and General Issues Sub-clause 1.1

21 Lesson 6 – Clause 1: General Provisions and General Issues

25 Lesson 7 – Clause 2: The Employer Sub-clause 2.1 to 2.5

31 Lesson 8 – Clause 3: The Engineer Sub-clause 3.1 to 3.5

35 Lesson 9 – Clause 4: The Contractor Sub-clause 4.1 to 4.4

39 Lesson 10 – Clause 4: The Contractor Sub-clause 4.5 to 4.12

43 Lesson 11 – Clause 4: The Contractor Sub-clause 4.13 to 4.24

47 Lesson 12 – Clause 5: Nominated Subcontractors Sub-clause 5.1 to 5.4

49 Lesson 13 – Clause 6: The Management of Projects: Staff and Labour

53 Lesson 14 – Clause 7: Plant Materials and Workmanship Sub-clause 7.4 to 7.7

57 Lesson 15 – Clause 8: Commencement of Work and Time for Completion

61 Lesson 16 – Clause 8: The Programme Sub-clause 8.3

65 Lesson 17 – Clause 8: Extension of Time for Completion Sub-clause 8.4

69 Lesson 18 – Clause 8: Other Time Related Clauses Sub-clause 8.5 to 8.7

73 Lesson 19 – Clause 8: Other Time Related Clauses Sub-Clause 8.8 to 8.12

77 Lesson 20 – Clause 9: Tests on Completion Sub-clause 9.1 to 9.4

81 Lesson 21 – Clause 10: Employer’s Taking Over Sub-clause 10.1 to 10.3

85 Lesson 22 – Clause 11: Defects Liability Sub-clause 11.1 to 11.4

89 Lesson 23 – Clause 11: Defects Liability Sub-clause 11.5 to 11.11

93 Lesson 24 – Clause 12 – Measurement and Evaluation

101 Lesson 26 – Clause 13: Variations and Adjustments

105 Lesson 27 – Clause 14: Contract Price and Payment

109 Lesson 28 – Clause 14: Contract Price and Payment

113 Lesson 29 – Clause 14: Contract Price and Payment

117 Lesson 30 – Clause 15 and Clause 16: Suspension and Termination

119 Lesson 31 – Clause 15 and Clause 16: Suspension and Termination

125 Lesson 32 – Clause 15 and Clause 16: Suspension and Termination

129 Lesson 33 – Risk Liability and Force Majeure –

133 Lesson 34 – Risk Liability and Force Majeure – Clause 17

137 Lesson 35 – Clause 18: General Requirements for Insurances

143 Lesson 36 – Clause 19: Force Majeure Sub-clause 19.1

147 Lesson 37 – Clause 19: Force Majeure

151 Lesson 38 – Clause 20: Claims, Disputes and Arbitration Overview

153 Lesson 39 – Clause 20: Claims, Disputes and Arbitration Overview

157 Lesson 40 – Clause 20: Claims, Disputes and Arbitration Overview

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

Introduction and Overview:

 Encompassing most of the private practice consulting engineers;

 Promotes and implements the consulting engineering industry’s strategic goals;

 Develops and promotes business practice: Business Integrity Management; Project

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

Introduction to Current FIDIC Contracts

FIDIC Short Form of Contract (Green Book, 1st Edition 1999)

Under the usual arrangements for this type of project:

 The Employer provides the finance;

 The Employer may wish to order Variations to the Works;

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

FIDIC Construction Contract (1999 Red Book, 1st Edition 1999)

Under the usual arrangements for this type of project:

 Provides the finance;

 The Engineer (on behalf of the Employer) may initiate Variations;

 The Employer wishes to be kept fully informed;

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

FIDIC MODULE ONE: A PRACTICAL APPROACH TO FIDIC CONTRACTS

Introduction to FIDIC Contracts:

Plant and Design-Build Contract

Electrical and Mechanical Plant Designed by the Contractor

Encompassing most of the private practice consulting engineers;

Promotes and implements the consulting engineering industry’s strategic goals;

Develops and promotes business practice: Business Integrity Management; Project

The Employer provides the finance;

The Employer may wish to order Variations to the Works;

Provides the finance;

The Engineer (on behalf of the Employer) may initiate Variations;

The Employer wishes to be kept fully informed;

The Contractor is usually associated with a Plant manufacturer or supplier alone or

Payment is mainly on a schedule of payments based on achievement of predefined

Provides the finance; and

The Engineer may initiate Variations; and

Provides the finance for the project;

General Conditions (first part);

Guidance for the Preparation of the Particular Conditions (second part);

Follow 20 clause layout;

Use the same definitions and terminology wherever relevant;

Provide sample forms of guarantees, certificates and other documents;

Provide flow charts where relevant; and

Are backed up guidance documents;

Contract Data/Appendix to Tender;

Defined terms are in CAPITALS in the General Conditions;

It is important to use defined (capitalised) terms when preparing Specifications, Bill of

Role Players to the Contract

Parties to the Contract

Parties to the contract;

Periods and completion;

Money and payments;

Works and Goods;