Page Corrigenda 146 For provisions referring to sub-clause 3.7, see
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.
The main changes in Clause 16 are the new grounds for suspension and termination: Non-compliance with a final and binding Engineer’s Determination and binding or final and binding DAAB decision, to the extent that such failure constitutes a “material breach” of the Employer’s obligations under the Contract. (Sub-Clauses 16.1(d) and 16.2.1(d)). What constitutes a “material breach” is likely to be the subject of many disputes (see the commentary on Clause 15). Non-receipt of a Notice of the Commencement Date under Sub-Clause 8.1 [Commencement of Works] within 84 days after receiving the Letter of Acceptance. (Sub-Clauses 16.2.1(f)). This is development to ground (h) in the FIDIC Pink (MDB) Book which states: “the Contractor does not receive the Engineer’s instructions recording the agreement of both Parties on the fulfilment of the conditions for the Commencement of the Works under Sub-Clause 8.1 [Commencement of Works]”. It protects the Contractor from the financial consequences of fluctuations in the rates and prices during an extended delay to the start of the Works, although the Contractor ould be entitled to damages for breach of contract in any event. More importantly, it gives the Contractor loss of profit on the entire project. Engagement in corrupt, fraudulent, collusive or coercive practice at any time in relation to the Works or to the Contract. (Sub-Clauses 16.2.1(j).) This introduces parity between the Employer and Contractor. The wording is identical to that under Sub-Clause 15.2.1(h). In the FIDIC 1999 editions, the Employer was entitled to terminate if the Contractor gave or offered an inducement or reward etc. but there was no recipricol arrangement.
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.
Clause 19 deals with two distinct events: (1) Force Majeure; and (2) release from performance under the law. Force Majeure is often narrowly defined under the laws of many countries; however, within the FIDIC 1999 forms of contract it has a much broader meaning. The terminology used by FIDIC has therefore sometimes been criticized as being misleading.