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.
El efecto del coronavirus en la construcción es amplio y desconocido, en particular, en cómo evaluar el tiempo y el dinero perdido. Por fortuna, los contratos FIDIC proveen varias opciones a las Partes para manejar riesgos y proteger derechos. Este artículo analiza cómo se trataría la pandemia del Covid-19 bajo el Contrato de Construcción de Obras FIDIC 2010 armonizado por el Banco Mundial en español.
Covid-19 has had huge consequences around the world and unfortunately
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.
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.
Clause 9 deals with the Tests on Completion. Sub-Clause 9.1 requires the Contractor to give notice when it is ready to carry out the Tests on Completion. Tests on Completion are a defined term at Sub-Clause 18.104.22.168. Sub-Clause 9.2 deals with delayed testing caused by either the Employer or the Contractor. Sub-Clause 9.3 deals with retesting after a failure to pass the Tests on Completion. Sub-Clause 9.4 deals with a failure to meet the requirements of the contract after retesting.
What relief does FIDIC provide when bank accounts are frozen as a result of war, hostilities, rebellion, terrorism etc.? Maybe not as much as you think. Tensions in Africa and the Middle East have seen the implementation of numerous international financial sanctions. While these sanction regimes vary in execution and enforcement they often freeze assets and prevent financial transactions. These restrictions may impact on the Employer’s performance of its payment obligations under the Contract. This can have serious consequences where the Contractor is entitled to suspend or terminate on notice for non-payment. Many parties automatically assume that financial sanctions will be recognised as force majeure. However, this may not be the case.