Table Of ContentFIDIC CONTRACTS:
LAW AND PRACTICE
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FIDIC CONTRACTS:
LAW AND PRACTICE
By
ELLIS BAKER
BEN MELLORS
SCOTT CHALMERS
ANTHONY LAVERS
WHITE KCASE
© Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers 2009
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ISBN 978–1–84311–628–8
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publication is correct, neither the authors nor Informa Law can accept any responsibility
for any errors or omissions or for any consequences arising therefrom.
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FOREWORD
In 1999, three new conditions of contract were published by FIDIC, with their basic
structure and wording harmonised around the previous FIDIC Design-Build and Turnkey
Contract (the 1995 “Orange Book”) format. These conditions were the Conditions of
Contract for Construction, for Plant and Design-Build, and for EPC/Turnkey Projects.
The first one is intended for construction works where the Employer is responsible for the
design, similar to the old Red Book, and with an important role for the Engineer. The two
latter ones are intended for cases when the Contractor supplies the design. The Plant and
Design-Build Contract has the traditional Engineer while the EPC/Turnkey Projects
Contract has a two-party arrangement.
The 1999 Conditions of Contract for Plant and Design/Build retained the essential
elements of the earlier Orange Book. It had been noted, however, that new trends in project
financing and management, especially related to PFI and BOT, required a different set of
conditions, and the Conditions of Contract for EPC/Turnkey Projects were drafted to cater
for this. They complement but do not replace the Conditions of Contract for Plant and
Design/Build, in that they are intended to be used in a rather specific context, for
example:
u when greater certainty is sought that price and time will not be exceeded;
u when the Contractor is required to take total responsibility for the design and
construction of the infrastructure or other facility;
u when the Employer is willing to pay more in return for the Contractor bearing the
extra risks associated with this; and
u when uncertain or difficult ground conditions or other largely unforeseeable risks are
unlikely to be encountered.
The EPC/Turnkey Contract should not be used for design-build work in other circum-
stances. The decision about which form of contract to use should, therefore, always be taken
in full consideration of the particular characteristics of the project at hand.
While several guides to the 1999 editions have been published, only a few deal with the
whole suite of contracts, most notably the Contracts Guide published by FIDIC. For
FIDIC, this guide, with detailed guidance to the new contracts, remains the main reference
work, especially since it was written by the principal drafter of the three 1999 conditions
of contract. However, it aims mainly to explain the basis for interpreting the clauses. This
new guide—FIDIC Contracts: Law and Practice—is sure to become a leading industry
guide as it also covers the full suite of contracts but does so in a more detailed manner by
providing legal commentary and detailed analysis of the clauses for each of the different
forms, with relevant case law. Moreover, the guide examines the FIDIC suite of contracts
in relation to other organisations, such as the World Bank and the ICC, who are closely
involved in their use. This is especially important now that the Multilateral Development
Banks (MDBs) and an increasing number of bilateral development agencies have adopted
the MDB Harmonised Edition of the Construction Contract for their projects.
v
The authors have considerable experience in project procurement and international
dispute resolution, so they are able to explain and interpret the significance of the contract
clauses in the light of extensive use by a large user community that takes in engineers,
project managers, quantity surveyors, architects, contractors, and professional staff from
public authorities and procurement agencies. The new guide will certainly receive much
positive attention from all interested parties.
Philip Jenkinson,
Chairman of the FIDIC Contracts Committee
vi
FOREWORD
PREFACE
For a practising lawyer, a book is a daunting undertaking. In the course of producing this
one, I came to understand better why there was so little published assistance in use of the
FIDIC contracts. This is not to denigrate the work of other authors on FIDIC subjects:
grateful reference to their contributions has been made and recorded in many places within
this one. But it was not hard to see the incentive to limit the scope of coverage, for example,
to one form of contract.
And this was the gap which I, and colleagues, and indeed clients and others in the
industry, remarked over many years; the absence of a comprehensive legal text on the entire
FIDIC suite, reflecting the full range of options offered by the respective forms.
It is, of course, not possible to practise in construction law internationally without being
fully aware of the massive presence of the FIDIC contracts in the global construction and
engineering industries.
Apart from the numerous projects where one or other of the FIDIC contracts is selected
for use, there are indirect, often ‘unofficial’ influences, as in the adaptation of older FIDIC
editions for use as standard forms (e.g., in Eastern Europe or by State entities in the Middle
East) or in reference of terms of bespoke contracts to the FIDIC equivalent for comparison
with an international benchmark.
For me, at White & Case, this awareness was greatly enhanced by Christopher Seppälä,
in the Paris office. His work as Legal Adviser to the FIDIC Contracts Committee and as
author and presenter of papers was a constant reminder of the paramountcy of the FIDIC
contracts in international construction procurement and disputes practice and was one of
the inspirations for this book. Reference should also be made to FIDIC itself. This is in no
sense an ‘official’ publication. Indeed, individual aspects of the FIDIC contracts are
criticised where that is felt to be justified, but this does not reduce the gratitude felt for
encouragement received from Peter Boswell, as General Manager, and Philip Jenkinson, as
Chairman of the Contracts Committee. I have always taken the view that FIDIC is ‘big’
enough in attitude to accept differences of opinion and valid criticism and do not regard
these as being inconsistent with sincere respect for FIDIC’s many achievements. That the
opportunity ever arose to try to fill the perceived gap was due to the enterprise of Informa
in making the initial approach to us and the tenacity of Jessica Westwood and her colleagues
in seeing the project through. It is even more of a pleasure to record how much is owed to
them now that the debt no longer includes an undelivered manuscript.
While I have taken responsibility for all editorial judgements, including any errors in the
text, final delivery would never have been achieved without the sustained efforts of my
co-authors, all White & Case lawyers in the London Construction & Engineering Practice
Group. Ben Mellors has, in less than a year, project-managed the team effort from a part-
finished draft to an end product. Scott Chalmers combined preparation of draft chapters
with lengthy overseas business trips and a young family. Anthony Lavers brought experi-
ence of authorship as well as his substantive contribution to the collective effort.
vii
Formal acknowledgement is made throughout to the sources referred to, but more
general gratitude is also appropriate to the colleagues, senior and junior, in the Firm and
in the wider legal profession, clients and other FIDIC users. Their insights and comments
have often enriched my understanding of the forms in practice.
As I have indicated, the intention behind this book is to respond to a need which was
obvious to me and to many others. How completely it meets that need is for readers to say;
the team intends to listen to all constructive comment to factor into the preparation of any
future editions, which the publishers have been kind enough to anticipate.
What can be stated with certainty is that FIDIC Contracts: Law and Practice is offered
to FIDIC users and their advisers in the same spirit of sharing of knowledge and experience
from which I and my co-authors have benefited over the years. We hope it will make a
difference.
Ellis Baker
White & Case, London
viii
PREFACE
OUTLINE CONTENTS
Foreword
v
Preface
vii
Author Biographies
xxvii
Introductory Notes for Readers
xxix
Table of Cases
xxxiii
Table of Legislation
xxxvii
List of Tables
xxxix
CHAPTER 1. FIDIC
1
CHAPTER 2. THE FIDIC CONTRACT
17
CHAPTER 3. PRODUCT
57
CHAPTER 4. PRICE
157
CHAPTER 5. TIME
217
CHAPTER 6. CONTRACT ADMINISTRATION AND CLAIMS
267
CHAPTER 7. RISK, INSURANCE AND SECURITIES
343
CHAPTER 8. REMEDIES
401
CHAPTER 9. DISPUTE RESOLUTION
505
Index
555
ix
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DETAILED CONTENTS
Foreword
v
Preface
vii
Author Biographies
xxvii
Introductory Notes for Readers
xxix
Table of Cases
xxxiii
Table of Legislation
xxxvii
List of Tables
xxxix
CHAPTER 1. FIDIC
FIDIC
1
The meaning of FIDIC
1
The history of FIDIC
1
The FIDIC organisation and its activities
1
The FIDIC Contracts Committee
3
The background to FIDIC’s contracts
4
Collaborative work with other organisations
6
ICC
6
World Bank/Multilateral Development Banks
10
European International Contractors
12
Utilisation of the FIDIC contracts
13
FIDIC’s aspiration
13
The 1990s: the Reading University Study
14
FIDIC usage globally
14
CHAPTER 2. THE FIDIC CONTRACT
Introduction
17
The FIDIC Suite of Contracts
17
FIDIC current major project forms
17
Currently published prior forms
18
Other FIDIC construction forms
18
FIDIC consultant and consortium agreements
18
Rainbow Suite: major project forms
18
FIDIC’s general principles
18
FIDIC’s contract suite
19
Other FIDIC forms
22
The Contract
24
Documents forming the Contract
25
Generally
25
Documents forming a FIDIC Contract
26
xi
Location of contractual information or data in the Contract
31
Incorporation of documents
32
The Conditions of Contract
33
Interpretation of the Conditions of Contract
34
Particular Conditions—‘Tailored’ Provisions
35
Priority of contract documents—Sub-Clause 1.5
36
Procurement and contract award
38
Procurement
38
Tender documents
40
Base Date
40
Administration of the tender process
41
Legislative regulation
41
Development of tender contracts
43
Contract award—formation of the Contract
45
Red, MDB, Yellow and Gold Books
45
Silver Book
46
Applicable laws and permissions
46
Laws relevant to the Contract
46
Law governing the Contract
47
Ruling language
48
Compliance with applicable Laws
49
‘‘Laws’’
50
Permissions, permits, licences and approvals
51
Indemnities
53
Change in laws
53
Changes in Laws of the Country
54
CHAPTER 3. PRODUCT
Introduction
57
The scope of work
59
Contractor’s general obligations: Red Book and MDB
59
Contractor’s general obligations: Yellow, Silver and Gold Books
60
Implied Works
61
Contractor’s general obligations: Gold Book—Operation Service
61
Permanent Works, Temporary Works, Goods, Plant and Materials
62
Manner of execution
62
Methods of construction
63
Contractor’s Documents
64
Red Book and MDB
65
Sub-Clause 5.2: Yellow and Silver Books
65
Contractor’s Documents submitted for review: Yellow and Silver Books
66
Contractor’s Documents submitted for approval: Yellow and Silver Books
67
Contractor’s Documents: Gold Book
68
Training
69
As-Built Documents
69
Red and MDB Books
69
xii
DETAILED CONTENTS
Yellow, Silver and Gold Books
70
Operation and maintenance manuals
71
Operation Service: Gold Book
71
Generally
71
General requirements
72
Commencement and carrying-out of Operation Service
74
Independent compliance audit
74
Delivery of raw materials
75
Delays and interruptions during the Operation Service
76
Failure to reach production outputs
77
Completion of Operation Service
77
Ownership of output and revenue
78
Site
78
Site and possession
78
Setting out
80
Access, transport and rights of way
80
Access and access routes
80
Transport
81
Security of the Site
82
Contractor’s operations on Site
82
Access after Taking Over
83
Clearance of Site
83
Red, MDB, Yellow and Silver Books
83
Gold Book
83
Site data and tender information
84
Red, MDB, Yellow and Gold Books
84
Site Data
84
All necessary information and sufficiency of Accepted Contract Amount
84
Silver Book
85
Adverse physical conditions
86
Red, MDB, Yellow and Gold Books
87
Physical conditions
87
Unforeseeable
87
Procedure and consequences
89
Risk sharing
91
Silver Book
92
Design obligations
92
Red Book and MDB
93
Errors or defects in documents prepared for the execution of the Works
94
Yellow and Gold Books
94
Errors in the Employer’s Requirements
95
Indemnity due to errors
96
Silver Book
96
Errors in the Employer’s Requirements
96
Fitness for purpose
98
Red Book and MDB
99
DETAILED CONTENTS
xiii
Yellow and Silver Books
99
Gold Book
100
Design compliance with law and standards
100
Standards and quality
101
Materials and workmanship
101
Generally
101
Samples: Red, MDB, Yellow and Gold Books
102
Samples: Silver Book
103
Royalties and material disposal
103
Quality assurance
103
Compliance with law
103
Generally
103
Gold Book: Operation Service
104
Permits, licences or approvals assistance
104
Working hours
105
Technical standards and regulations: Yellow, Silver and Gold Books
105
Safety, personnel and execution
106
Health and safety
106
Personnel
107
Labour and labour laws
107
Contractor’s Personnel
108
MDB obligations
108
MDB labour and social obligations
109
Employer’s Personnel obligations
110
Execution
110
Co-operation
110
Contractor’s superintendence
111
Rights of way
111
Avoidance of interference with public
111
Protection of the environment
112
Contractor’s Equipment
112
Facilities for staff and labour
113
Employer’s Equipment and free-issue materials
114
Employer’s Equipment
114
Free-issue materials
114
Electricity, water, gas and facilities
115
Books other than Gold Book
115
Gold Book
116
Variations
116
Definition of Variation
117
Who can order Variations?
121
Right to vary in the Red Book and MDB
122
Grounds for objection
123
Right to vary in the Yellow, Silver and Gold Books
124
Grounds for objection
125
Limits to the scope of Variations
125
xiv
DETAILED CONTENTS
