This Practice Note is an introduction to the FIDIC Green Book 2021 (the Short Form of Contract). It is not a fully detailed clause-by-clause commentary. This article was first published by LexisPSL
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.”
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 5 - Design by Taner Dedezade.
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 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]
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