Could provisions in FIDIC contracts giving relief for ‘Force Majeure’ or ‘Exceptional Events’ provide relief to contractors suffering as a result of price escalation? It is well documented that construction and engineering projects around the globe are being affected by extreme and sometimes unprecedented price escalation. This is for many reasons including the Covid-19 pandemic and the Russo-Ukrainian conflict.
Covid-19 has had huge consequences around the world and unfortunately
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.”
“Exceptional Events” has replaced “Force Majeure” and the provision is now clause 18 rather than clause 19 but otherwise little has changed. FIDIC appear to have decided that the term “force majeure” brought with it too much baggage for those using it in civil law jurisdictions. Many users have pre-conceptions about what force majeure is and is not and perhaps did not consider what FIDIC meant by the term. With the new term, users should approach the provision with a more open mind.
Click through to read Corbett & Co.'s helpful commentary on FIDIC 1999 book Clause 15