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
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.
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.
Click through to read Corbett & Co.'s helpful commentary on FIDIC 1999 book Clause 15
Sub-Clause 13.1 deals with the right of the Engineer to vary the Contract. This right can be exercised at any time up to the issue of the Taking-Over Certificate. Sub-Clause 13.2 deals with value engineering and permits the Contractor to propose a change which will benefit the Employer. The proposal is prepared at the cost of the Contractor, who designs the change. Sub-Clause 13.3 deals with the procedure prior to the Engineer instructing a variation. The Engineer may request a proposal from the Contractor. However, while the Contractor is preparing the proposal it must proceed with the works. Sub-Clause 13.4 deals with payment in applicable currencies. Sub-Clause 13.5 deals with Provisional Sums and ought to be read with Sub-Clause 188.8.131.52 which defines Provisional Sum as follows:- “a sum (if any) which is specified in the Contract as a provisional sum, for the execution of any part of the Works or for the supply of Plant, Materials or services under Sub-Clause 13.5 [Provisional Sums].” The Provisional Sum can only be used where there is an Engineer’s instruction and the Contractor receives payment for only the work done to which the Provisional Sum relates. Sub-Clause 13.6 deals with daywork. This is where work of a minor or incidental nature is to be carried out. The work is then valued in accordance with the Daywork Schedule in the Contract or if there is no Daywork Schedule then the alternative method of payment as prescribed in the Contract. Sub-Clause 13.7 deals with the Cost arising from changes in the Laws of the Country which affect the Contractor in performance of his obligations under the Contract. Where the Contractor suffers delay or additional Cost then it must give notice under Sub-Clause 20.1 of the Contract. Sub-Clause 13.8 deals with adjustments for changes in cost. This Sub-Clause only applies where the “table of adjustment data” included in the Appendix to Tender has been completed. If the Sub-Clause does apply then the amounts payable to the Contractor for rises and fall in the cost of the Works are adjusted by a formula.
FIDIC 1999 is a re-measurement contract so that the Employer takes the risk of variations to the quantities and, in certain cases, to the rates and prices which may be applied for the work executed. If the Employer wishes to employ a Contractor on a lump-sum or cost plus basis then this clause needs to be deleted. Sub-Clause 12.1 deals with the measurement of the works. Sub-Clause 12.2 does not include a reference to any standard method of measurement but states that the works are to be measured in accordance with the Bill of Quantities or other applicable Schedules. The lack of reference to a particular standard method of measurement has been criticised. Sub-Clause 12.3 deals with evaluating the appropriate rate or price for the works. There are three methods of evaluating the works:- a) The rate or price specified for such item in the Contract; but if there is no such item b) The rate or price specified for similar work. c) However, in certain specified circumstances, a new rate or price shall be appropriate. Sub-Clause 12.4 deals with the valuation of omissions from the Work. As this is a re-measurement contract there is no warranty that the quantities measured in the Bill of Quantities are accurate. Nael Bunni suggests that when quantities within the Bill of Quantities are exceeded then payment should be at the rates set out in the Bill. There have been some cases where the courts have adopted differing approaches; however, in those cases the wording of the remeasurement clause differed to that within FIDIC. These decisions have been described by Dr. Bunni as being controversial.
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