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.
The main changes in Clause 15 are the new grounds for termination: Non-compliance with a final and binding Engineer’s Determination (Sub-Clause 15.2.1(a)(ii)) and a binding or final and binding DAAB decision (Sub-Clause 15.2.1(a)(iii)) to the extent that such failure constitutes a “material breach” of the Employer’s obligations under the Contract. Maxing out the Delay Damages (Sub-Clause 15.2.1(c)). There is no requirement for the Delay Damages to have been actually deducted. It is not clear what the position would be if the Contractor claims an EOT and it is granted by the DAAB or arbitrator after termination so that the Delay Damages are reduced below the cap. Would the termination then be unlawful?
The substance of this provision was already in Sub-Clause 17.6 in the 1999 edition and has now been separated from other provisions dealing with Risk and Responsibility. As before it generally exempts parties from liability to the other for “loss of use of any Works, loss of profit, loss of any contract or any indirect or consequential loss” except in respect of a list of identified Sub-Clauses. The list has been extended and several of the changes are very significant. It also limits liability to certain levels in some circumstances. Finally, it excludes parties from cover by the exemption and limits in certain circumstances. All three elements have changed.
In London last week, FIDIC launched its Second Editions of the Red, Yellow and Silver Books. They are big, weighing in at almost a kilo each. The general conditions cover 106 pages with more than 50,000 words, over 50% longer than the 1999 forms. Many improvements have been made, addressing issues that have emerged since 1999. Fans of Dispute Boards will be pleased to see that all three books now have standing boards with more emphasis on dispute avoidance; and that appointment of DB members and enforcement of their decisions have been made easier. Disputes and Arbitration are now dealt with in a separate chapter 21. Here are the most interesting changes to the Yellow Book.
Rumour reaches us that the Multilateral Development Banks (MDBs) behind the Pink Book, FIDIC’s harmonised version of the 1999 Red Book, will discontinue the experiment. Should we be sorry to see the back of the Pink Book? We think not.
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