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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.”
Click through to read Corbett & Co.'s helpful commentary on FIDIC Red Book 1999 book - Clause 7
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 17 - Care of the Works and Indemnities by
Clause 4 sets out various obligations which fall on the Contractor under the Contract and which cannot easily be classified elsewhere. The obligations under Clause 4 are of a wide range covering 24 different topics. Sub-Clause 4.1 sets out the Contractor’s general obligation to carry out his duties in accordance with the contract. Clause 4 of the FIDIC Red Book 1999 amalgamates various Contractor obligations under one provision. However this Clause 4 is not exclusive as there are also other Contractor obligations scattered throughout the Contract. Other significant general obligations which could equally have been included in Clause 4 (and which should be read in conjunction with this Clause 4) are as follows: • Sub-Clause 1.3 [Communications] • Sub-Clause 1.7 [Assignment] • Sub-Clause 1.8 [Care and Supply of Documents] • Sub-Clause 1.9 [Delayed Drawings or Instructions] • Sub-Clause 1.10 [Employer’s Use of Contractor’s Documents] • Sub-Clause 1.12 [Confidential Details] • Sub-Clause 1.13 [Compliance with Laws] • Clause 6 [Staff and Labour] • Clause 7 [Plant, Materials and Workmanship] • Sub-Clause 8.2 [Time for Completion] • Sub-Clause 8.3 [Programme]
Clause 11 requires that the Works shall be in the condition required by the Contract at the end of the Defects Notification Period. Where the Contractor carries out work in the Defects Notification Period, it is not entitled to receive payment if the work was a result of a defect in the design for which the Contractor was responsible. Similarly, if the Plant, Materials or workmanship are not in accordance with the Contract or there is a failure by the Contractor to comply with any other obligation then it is required to remedy the problem without payment. The Employer may obtain an extension of the Defects Notification Period if the Works, a Section or a major piece of Plant cannot be used during the Defects Notification Period. The Contractor is required to remedy any defect during the Defect Notification Period and, if it does not, the Employer may claim against the Contractor. Rights are given to the Contractor to undertake this work subject to the Employer’s reasonable security restrictions. Once the Defects Notification Period has expired the Engineer is required within 28 days, subject to receipt of the Contractor’s Documents and the completion of any tests, to issue a Performance Certificate. It is the Performance Certificate that is deemed to constitute acceptance of the Works. Sub-Clause 11.10 provides that after the Performance Certificate has been issued, each Party will remain liable for the fulfilment of any obligation which remains unperformed at the time. The extent and meaning of this clause is open to debate.
Clause 10 deals with the Taking-Over of the Works, Sections, or parts of the Works. Sub-Clause 10.1 deals with the Taking-Over of the Works and Sections. Taking-Over by the Employer happens when the Works (a) pass the Tests on Completion; (b) are substantially complete; (c) any contractual requirements relating to Taking-Over have been met; and (d) the Taking-Over Certificate has been issued or is deemed to have been issued. Sub-Clauses 10.2 and 10.3 deal with deemed Taking-Over where the Employer uses part of the Works or interferes with the Tests on Completion for more than 14 days. The failure to issue a Taking-Over Certificate by the Engineer, where the Employer has taken into commercial use the Works, will amount to a breach of contract.
Corbett & Co. has devised a helpful commentary on FIDIC 1999 books Clause 2. Clause 2 sets out certain obligations which are imposed on the Employer; however, this is by no means all the Employer’s obligations. The obligation to pay the Contractor, for example, is found in Sub-Clause 14.7 and the obligation to Take-Over the Works is found at Sub-Clause 10.1. The first obligation imposed on the Employer under this Clause is to give to the Contractor a right of access. Sub-Clause 2.1 needs to be read alongside Sub-Clauses 2.3 and 4.6, which make it clear that possession of the Site need not be exclusive. Sub-Clause 2.2 imposes on the Employer an obligation to assist the Contractor when requested to obtain permits, licences or approvals required by the laws of the Country. The obligation to reasonably assist is not an absolute obligation and generally will not mean the Employer will have to expend money on fulfilling the obligation. Sub-Clause 2.3 imposes on the Employer an obligation similar to that imposed on the Contractor under Sub-Clause 4.6. The Employer is responsible for any failure by its personnel to co-operate with the Contractor or to comply with safety regulations, take care of persons on Site, make sure the Site is reasonably free from unnecessary obstructions, and protect the environment. Sub-Clause 2.4 imposes on the Employer an obligation to show that financial arrangements have been made and are in place to enable it to pay the Contract Price. Sub-Clause 2.5 deals with the Employer’s Claims and requires that the Employer give notice and particulars of its claim before the Engineer makes a Determination under Sub-Clause 3.5. The Employer cannot set-off any claims it may have against the Contractor unless it complies with this Sub-Clause.
Clause 1 sets out many of the boilerplate clauses within the Contract and provides a number of definitions which are used thereafter. The Clause has been substantially changed from the Red Book 4th edn with a raft of new clauses added. Sub-Clause 1.3 deals with communications and states that approvals, certificates, consents and determinations shall not be unreasonable withheld or delayed. The assignment provisions in Sub-Clause 1.7 have now changed so that restriction on assignment applies to both the Contractor and Employer. Delayed Drawings and Instructions is dealt with at Sub-Clause 1.9. This was previously dealt with at Clause 6.4 of the Red Book 4th edn and it is unclear why such an important provision has now been rolled up in the General Provisions clause.
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