2.4 Archives - Howard Kennedy

FIDIC contracts – What protection do they give contractors for employer financial problems?

FIDIC contracts – What protection do they give contractors for employer financial problems?

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.

By HowardKennedy ITteam|21/05/2019|Dispute Boards, featured, Knowledge Hub|Comments Off

FIDIC 1999 Books – Commentary on Clause 14

FIDIC 1999 Books – Commentary on Clause 14

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.

By HowardKennedy ITteam|26/09/2018|featured, Knowledge Hub|Comments Off

Clause 2 – The Employer

Clause 2 – The Employer

Clause 2 now has 6 sub-clauses: Employer’s claims has been removed to clause 20; and new provisions 2.5 [Site Data and Items of Reference] and 2.6 [Employer-Supplied Materials and Employer’s Equipment] have been added. The obligations to provide possession, access and assistance with permits etc. are essentially the same, as are the consequences of failure to do so. The main change to clause 2.4 [Employer’s Financial Arrangements] is that the Employer now sets out his arrangements in the Contract Data; and the Contractor can only request evidence of ability to pay if those arrangements change, there is non-payment or there are variations in excess of 30% or a single variation over 10%.

By HowardKennedy ITteam|27/01/2018|Knowledge Hub|Comments Off

FIDIC 2017 – First Impressions of the 3-Kilo Suite

FIDIC 2017 – First Impressions of the 3-Kilo Suite

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.

By HowardKennedy ITteam|13/12/2017|Dispute Boards, featured, Knowledge Hub|Comments Off

Employers Beware

Employers Beware

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.

By HowardKennedy ITteam|16/12/2015|Knowledge Hub|Comments Off