International Construction Law Review
FIDIC’S NEW STANDARD FORMS OF CONTRACT— FORCE MAJEURE, CLAIMS, DISPUTES AND OTHER CLAUSES
CHRISTOPHER R SEPPALA
Legal Adviser, FIDIC Task Group for updating the FIDIC International Conditions of Contract, partner, White & Case LLP, Paris
This article is divided into two parts. Part I discusses FIDIC’s three new Books for major works1
in relation to:
- 1. Contractor’s risk and “Employer’s Risk”2 ;
- 2. indemnities;
- 3. limitation of liability;
- 4. the new force majeure Clause; and
- 5. grounds and procedure for termination of the contract by the Employer and the Contractor.
Part II looks at:
- 1. the new procedures for claims of the Contractor and the Employer;
- 2. the procedure for the settlement of disputes by the Dispute Adjudication Board (DAB); and
- 3. very briefly, international arbitration.
Part I: Risks, Force Majeure and Termination
CONTRACTOR’S RISK AND “EMPLOYER’S RISK” (ALLOCATION OF RESPONSIBILITY FOR DAMAGE TO THE WORKS) (Sub-Clauses 17.2 to 17.4)
The basic allocation of risk between the Contractor and the Employer for damage to the Works before takeover is dealt with in Sub-Clauses 17.2 to 17.4 of the new Books. The principles are essentially unchanged from those in the old Red and Orange Books. These principles (it will be recalled) are as follows:
- 1. The Contractor is required to take full responsibility for the care of the Works, materials and Plant from the Commencement Date until the Taking-Over Certificate is issued for the Works.
- 2. If any loss or damage happens to the Works or materials and Plant, other than due to “Employer’s Risk” (as defined), the Contractor must “rectify” this loss or damage at the Contractor’s cost.
- 3. “Employer’s Risks” are generally events or circumstances over which neither party will have any control (e.g. war, hostilities and the like) or events or circumstances caused by the Employer, directly or indirectly.
Under the new Books, the Contractor’s responsibility before takeover now extends not merely to the Works, materials and Plant but, in addition, to:
- 1. “Goods”: a new defined term in the new Books—which would include Contractor’s Equipment, whether on or off the Site; and
- 2. “Contractor’s Documents”: also a new term—which would include computer software and documents of a technical nature supplied by the Contractor.
The Employer’s Risks in the new Construction Contract and Plant Contract, which are defined in Sub-Clause 17.3, are similar to those in the old Red and Orange Books:
| Employer’s Risks | Comment | ||
|---|---|---|---|
| (a) | “war, hostilities (whether war be declared or not), invasion…” | May happen anywhere in the world, e.g. if a war in Eastern Europe causes losses or damages to the Contractor’s Equipment or to Plant for use on a Site in China, then that is an Employer’s Risk and the Contractor is entitled to recovery for the same. | |
| (b) | “rebellion, terrorism, revolution…”, and | These are now all expressly limited to the country of the Works.(Note: “munitions of war” and “explosive materials” are new Employer’s Risks since the test editions.) | |
| (c) | “riot, commotion or disorder…”, and | ||
| (d) | “munitions of war, explosive materials, ionising radiation or contamination by radio-activity | ||
| (e) | “pressure waves caused by aircraft…” | No geographic limit.(Arguably, this could also have been limited to the country of the Works, but this was not done.) | |
| (f) | “use or occupation by the Employer…”, and | Basically, here talking of fault of the Employer. No geographic limit. | |
| (g) | “design…by the Employer’s Personnel…” | ||
| (h) | “operation of the forces of nature which is Unforeseeable” | Again, no geographic limit. | |
Pt. 2]
FIDIC’s New Standard Forms of Contract
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