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.
There is a substantial difference between the payment provisions of
Clause 16 addresses suspension and termination by the Contractor, including rights to suspend work, grounds for termination, cessation of work, and payment on termination. It specifies notice periods, conditions for immediate termination, and entitlements following termination.
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 6 covers Staff and Labour, requiring the Contractor to comply with local laws, pay fair wages, provide accommodation, ensure health and safety, and maintain proper records. It also restricts recruitment from the Employer’s personnel and mandates qualified supervision.
FIDIC’s 2017 editions introduced a new Claims management system in clause 20 that channels Claims through two very different procedures. One of them is very simple and involves almost no risk whereas the other will require investment of significant project resources, will take the parties a considerable amount of time to resolve and carries fatal consequences if not followed properly. It has therefore become a priority for anyone handling this Claims management system to understand how clause 20.1 sorts the different types of Claims and to recognise that the classification scheme is not as straightforward as the wording of the Contract suggests, as explored in this article.
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.
Corbett & Co. has published its selection of the best bits of the FIDIC 2017 2nd Editions adapted for use with the 1999 forms. With many people put off by the 50,000+ words of the new editions, the FIDIC 1999 Upgrade will permit users to benefit from FIDIC’s new ideas and improvements.
Clause 16 introduces new grounds for suspension and termination, including non-compliance with binding decisions and non-receipt of Commencement Date Notice. It addresses corruption, and clarifies termination grounds and procedures. Contractors gain protection against financial consequences and can claim profit loss.
Clause 19 covers Force Majeure and release from performance, with broader definitions than typical laws. It prescribes detailed insurance requirements, reducing flexibility. The Contractor bears most obligations, necessitating careful amendments and professional advice to avoid misunderstandings and ensure proper incorporation into contracts.
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.
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.
Rumour reaches us that the Multilateral Development Banks (MDBs) behind the Pink Book, FIDIC’s harmonised version of the 1999 Red Book, will discontinue the experiment. Should we be sorry to see the back of the Pink Book? We think not.
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