Clause 2 outlines key Employer obligations, including access rights, assistance with permits, and financial arrangements. Additional obligations include payment (Sub-Clause 14.7) and taking over the Works (Sub-Clause 10.1). Employer claims require notice and compliance with Sub-Clause 2.5.
If an Employer sets off certified but unpaid sums without following Sub-Clause 2.5, it may breach contract terms under FIDIC 1999. This article explores whether Employers can bypass the Engineer’s role and why the clause’s wording is crucial to both Contractors and Employers.
As one of the drafters of the Green Book 1999,
In March 2019, in the English Court of Appeal, Sir
A contract may require a party giving notice of a claim to specify the contractual or legal basis of that claim in the notice (or the supporting particulars). What if that party states a contractual or legal basis for the claim but later (perhaps with the benefit of additional information or because of advice from its lawyers) changes its mind or wants to include further contractual or legal bases? This was considered by the Hong Kong Court of Appeal in Maeda Corporation and China State Construction Engineering (Hong Kong) Limited v Bauer Hong Kong Limited [2020] HKCA 830. It found that a subcontractor could not change the contractual basis for its claim once the time period for providing such notice had expired. What, if any, impact will this decision have on the FIDIC forms of contract?
Airports Authority of Trinidad and Tobago v Jusamco Pavers Ltd[1]
Covid-19 has had huge consequences around the world and unfortunately
Contract clauses that deny a contractor entitlement to an extension of time for concurrent delays caused by both employer and contractor are valid in principle. In North Midland Building Ltd -V- Cyden Homes Ltd [1] the Court of Appeal of England and Wales has ruled that such clauses do not offend the common law prevention principle. Nor do they give rise to an implied term to prohibit the imposition of delay damages that may result.
In all construction contracts, one of the central principles is the Employer’s obligation to pay the contract price. The Contractor will be wary about the Employer’s financial standing and ability to pay and concerned to ensure that payments are made on time and that effective remedies are available in case of late or non-payment. The FIDIC standard forms of contract contain provisions dealing with these aspects.
Clause 14 covers payment aspects, including interim and final certificates, advance payments, retention monies, and the cessation of the Employer’s liability. It outlines the process for monthly payment applications, final settlement, and the Contractor's rights if payments are delayed.
Clause 3 outlines the Engineer's duties and obligations, including acting for the Employer, delegating authority (but not Determinations), issuing instructions, and handling Variations. It also covers Engineer replacement and making fair Determinations after consulting both Parties.
Clause 8 changes include enhanced Programme requirements, Advance Warning mechanism, no Sub-Clause 20.2 notice for extension due to Variation, further definition of adverse climatic conditions, acceleration methods under Sub-Clause 13.3.1, and a cap on Delay Damages lifted for severe misconduct.
Clause 2 now comprises 6 sub-clauses. New provisions, 2.5 and 2.6, have been introduced. The obligations and consequences remain unchanged. In Clause 2.4, the Employer can now specify financial arrangements, and the Contractor can request evidence under specific conditions.
Clause 15 covers Termination by the Employer, including notices to correct, grounds for termination, valuation at termination, payment after termination, and the Employer's entitlement to terminate at will with 28 days' notice.
Earlier this year, the English High Court considered a heavily amended FIDIC Yellow Book 1999. Whilst the case is specific to the particular contractual amendments it is worth review. The case is J Murphy & Sons Ltd v Beckton Energy Ltd. It proceeded in court and on an expedited basis as a matter of some urgency because a bond was about to be called for non-payment of delay damages. The Contractor claimed the call would affect his commercial reputation, standing and creditworthiness, and may well need to be disclosed in future tenders. He had not paid the delay damages because there had been no agreement or determination of the entitlement to such by the Engineer under Sub-Clauses 2.5 and 3.5.
In this article Corbett & Co. Director Andrew Tweeddale addresses whether sub-clause 20.5 is a condition precedent to the commencement of an arbitration or whether it is an obligation, the breach of which will not affect the jurisdiction of the arbitral tribunal to resolve the dispute.
How important is it for an Employer to give a Sub-Clause 2.5 notice of a set-off or cross-claim under the FIDIC Red Book form of contract? Very, according to the Privy Council in NH International (Caribbean) Limited v National Insurance Property Development Company Limited . It found that: o Sub-Clause 2.5 applies to any claims the Employer wishes to make. o The Employer must make such claims promptly and in a particularised form. o Where the Employer fails to raise a claim as required, the back door of set-off or cross-claims is firmly shut. The case also serves as a warning to Employers who take a relaxed view towards their obligation under Sub-Clause 2.4 to provide reasonable evidence of the financial arrangements they have made and are maintaining to pay the Contract Price. It doesn’t matter how wealthy or important the Employer is (it may be a Government, company or individual with very substantial funds) detailed financial information must still be provided.
Read the full article here.
