This Practice Note is an introduction to the FIDIC Green Book 2021 (the Short Form of Contract). It is not a fully detailed clause-by-clause commentary. This article was first published by LexisPSL
The FIDIC 2017 forms first appeared at the December FIDIC Users’ Conference four years ago. No one has suggested that the FIDIC 2017 forms of contract did not rectify some of the problems in the FIDIC 1999 forms, and in Edward Corbett’s articles,[1] ‘Cherry Picking FIDIC 2017,’ and ‘FIDIC 2017 – First Impressions of the 3-Kilo Suite’, he considered some of these changes. This new suite of contracts had, at best, a lukewarm reception when they were first reviewed, with some commentators complaining about the length of these new contracts and that the contracts had not taken account of criticisms that had been made by reviewers. This article looks at the twelve worst ‘gifts’ that FIDIC gave to us for Christmas 2017.
Construction costs are escalating. Under existing contracts, an employer will not want to pay more for the works. But forcing a contractor to perform works that are unprofitable or causing a massive loss is unlikely to be in the best interests of the project. It may result in the insolvency of the contractor forcing the employer to abandon the contract or re-let it, probably at a premium. Is a mechanism for cost adjustment, such as FIDIC 1999 Sub-Clause 13.8 [Adjustments for Changes in Costs], an answer?
Unfortunately, under the FIDIC Red and Yellow Books 1999, the right of an Employer to set off from an amount already certified in a Payment Certificate but unpaid is inexplicit. Once the Employer has a Sub-Clause 3.5 determination, it may ask the Engineer to deduct the amount determined from the next Payment Certificate. This is clear. But rather than rely on the Engineer, can the Employer instead, itself, deduct by way of set off from an amount already certified in a Payment Certificate but unpaid? This is not clear.
In March 2019, in the English Court of Appeal, Sir
A contract may require a party giving notice of a claim to specify the contractual or legal basis of that claim in the notice (or the supporting particulars). What if that party states a contractual or legal basis for the claim but later (perhaps with the benefit of additional information or because of advice from its lawyers) changes its mind or wants to include further contractual or legal bases? This was considered by the Hong Kong Court of Appeal in Maeda Corporation and China State Construction Engineering (Hong Kong) Limited v Bauer Hong Kong Limited [2020] HKCA 830. It found that a subcontractor could not change the contractual basis for its claim once the time period for providing such notice had expired. What, if any, impact will this decision have on the FIDIC forms of contract?
Airports Authority of Trinidad and Tobago v Jusamco Pavers Ltd[1]
An issue that often arises in international arbitrations involving the FIDIC forms of contract is whether a claimant's failure to: (a) go through the dispute resolution provisions; or (b) comply with a time-bar clause gives rise to a question of admissibility or jurisdiction. Put another way, if a claimant has failed to issue a notice of claim within 28 days or failed to refer a dispute to a DAB, does the arbitral tribunal have jurisdiction to make an award on the merits or should the arbitral tribunal make an award stating that it lacks jurisdiction?
Covid-19 has had huge consequences around the world and unfortunately
FIDIC is concerned about its image. It says that heavily amending the FIDIC forms of contract impacts upon the FIDIC brand and that this is damaging FIDIC’s reputation. It seeks to address this with the introduction of five Golden Principles. But the Golden Principles are merely aspirational; they are not binding and have no contractual effect. Does this render them a pointless gesture ‘trying to hold back the tide’?
It has been suggested that FIDIC’s new Emerald Book may be “a contractors’ charter for riches”. 1 This article examines whether this new form of contract for underground works by FIDIC and the International Tunnelling and Underground Space Association is too contractor-biased or whether it provides a sensible and pragmatic risk allocation process, in an area of construction and engineering which is well known for claims. If more risks are placed on the Employer in this form of contract, what are the benefits of the contract compared to, for example, an unamended FIDIC Yellow Book?
In all construction contracts, one of the central principles is the Employer’s obligation to pay the contract price. The Contractor will be wary about the Employer’s financial standing and ability to pay and concerned to ensure that payments are made on time and that effective remedies are available in case of late or non-payment. The FIDIC standard forms of contract contain provisions dealing with these aspects.
Although Clause 17 is titled ‘Risk and Responsibility’ it also sets out other provisions relating to indemnities, limitation of liability and, unusually, the specific topic of intellectual and industrial property rights. The clause provides that the Contractor assumes responsibility and bears the risk for the care of the works during execution and for remedying any defects during the Defects Notification Period. Risk transfers to the Employer on issue of the Taking–Over Certificate to the extent of works defined as being completed. Generally, in construction contracts ‘risk’ is understood to mean an event or circumstance which causes delay, loss or damage to the Works. A risk can be said to be Employer caused, Contractor caused or neutral. The purpose of risk allocation is to determine which party bears the risk for such events. The Contractor may be required to remediate the damage at his own cost or the Employer may be required to pay for the damaged works. It has been stated that the “FIDIC standard forms are generally recognised as being well balanced because both parties bear parts of the risks arising from the project.”
Clause 8 contains all the fundamental provisions relating to the start of the Works, the Time for Completion, delays and the entitlement of the Contractor to an extension of time and of the Employer to delay damages, and finally the circumstances in which a suspension of the Works can occur and the implications for the Parties.
Much has been said about the new Red, Yellow and Silver Books 2nd Editions launched by FIDIC in December last year. The most obvious comment has been about their size, almost 50,000 words, which is some 60% longer than the 1999 forms. Although the 1999 forms were not perfect, most regular users seem to be agreed that they did not need 20,000 words to fix the issues. This consensus led this author to attempt to cherry-pick the good bits from the 2017 forms and to propose amendments to add the good ideas to the 1999 forms. The amendments apply to all three forms unless it is indicated otherwise.
MT Højgaard AS v E.ON Climate and Renewables UK Robin Rigg East Ltd & Anor is an important English case because it considered a fitness for purpose obligation in a design and build contract. In FIDIC’s Yellow Book contracts (1999 and 2017) there are also fitness for purpose obligations. This article examines the Supreme Court’s analysis of a fitness for purpose obligation in the Højgaard case and whether it would be applied to FIDIC’s Yellow Book contracts.
Much has already been written concerning the new FIDIC forms of contract published in December 2017. They are approximately 50 % longer and sought to set out the various procedure in much greater detail with the object of both encouraging good practice and reducing the scope for disputes. Numerous minor amendments have also been made. The purpose of this article is to look in more detail at the provisions dealing with Variations, these being amongst the most frequently scrutinised in practice.
FIDIC’s 2017 editions introduced a new Claims management system in clause 20 that channels Claims through two very different procedures. One of them is very simple and involves almost no risk whereas the other will require investment of significant project resources, will take the parties a considerable amount of time to resolve and carries fatal consequences if not followed properly. It has therefore become a priority for anyone handling this Claims management system to understand how clause 20.1 sorts the different types of Claims and to recognise that the classification scheme is not as straightforward as the wording of the Contract suggests, as explored in this article.
Clause 14 deals with all aspects of payment. It also deals with the Statement at Completion, the Final Payment Certificate, Discharge and Cessation of the Employer’s Liability. The Clause provides that this is a re-measurement contract and that the quantities stated in the Bill of Quantities are estimated. There is provision for an advance payment to be made to the Contract. Applications for Interim Payment Certificates are made monthly and these must be supported by documents and a report on progress. Unless the amount assessed is less than the minimum amount set out in the Appendix to Tender, the Engineer has 28 days to issue an Interim Payment Certificate, which states the amount the Engineer fairly determines to be due. The Employer thereafter has an obligation to pay the amount certified, in the currencies named in the Appendix to Tender. In the event that payment is not received the Contractor can claim financing charges compounded monthly. Fifty per cent of the retention monies are paid when the Taking-Over Certificate is issued. Where there are Sections then a proportion is paid. The balance of retention is paid on the expiry of the latest Defects Notification Period or, where there are Sections, a proportion at the expiry of the Defects Notification Period for that Section. Within 84 days of receiving the Taking-Over Certificate the Contractor submits a Statement at Completion. This must include an estimate of all sums which the Contractor considers due. Within 56 days of receiving a Performance Certificate, the Contractor submits a Final Statement. The Contractor must also submit with the Final Statement a written discharge which confirms that the total of the Final Statement represents full and final settlement of all moneys due. The Engineer then issues to the Employer a Final Payment Certificate. The Contract states that the Employer shall have no liability to the Contractor except to the extent that the Contractor has included an amount expressly for that matter in the Final Statement and also the Statement at Completion.
Clause 3 deals with the duties and obligations of the Engineer and his assistants. Sub-Clause 3.1 deals with the role and duties of the Engineer. The Engineer is deemed to act for the Employer. The Engineer has no authority to relieve the Contractor of his duties, obligations or responsibilities under the Contract; nor can the Engineer amend the Contract. Under Sub-Clause 3.2 the Engineer can delegate authority to any assistants; however, the Engineer cannot delegate the responsibility to make Determinations. Under Sub-Clause 3.3 the Engineer may issue instructions or modified Drawings at any time, which are necessary for the execution of the Works. If the instruction constitutes a Variation, then it is dealt with under Clause 13 [Variations and Adjustments]. The Contractor is required to comply with any instruction given by the Engineer or delegated assistant. Sub-Clause 3.4 deals with the replacement of the Engineer. The Employer must not replace the Engineer with someone against whom the Contractor raises reasonable objection. Sub-Clause 3.5 deals with Determinations. When making a Determination the Engineer should consult with each of the Parties and, if agreement cannot be reached, make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances. Both Parties are required to give effect to any Determination unless, or until, it is revised under Sub-Clause 20.1 [Claims, Disputes and Arbitration].
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