19019

ASSIGNMENT

MUHAMMED ATHWIF C M.
AG19019
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FIDIC CONDITIONS OF CONTRACT

The Federation Internationale des Ingenierurs- Conseils (FIDIC) is
the international federation of consulting engineers. FIDIC is best
known as the organisation that publishes standard forms of contract
documents related to the procurement of engineering works. These
standard forms include those for use by consulting engineers and
other forms that are suitable for the procurement of building and
engineering works. FIDIC’s previous standard forms of contract
documents for building and engineering works have been known by
the colours of their respective covers.

Conditions of Contract for Works of Civil Engineering Construction,

Fourth Edition 1987, Reprinted 1992, also known as the “Red Book”;

Conditions of Contract for Electrical and Mechanical Works, Third

Edition 1987, Reprinted 1988, also known as the “Yellow Book”;

Conditions of Contract for Design-Build Turnkey, First Edition 1995,

also known as the “Orange Book”.

The New Suite

Although the above standard forms are still used internationally,

FIDIC has replaced them by the following First Editions, published
in September 1999:

Conditions of Contract for Constructions, which FIDIC recommends

for building or engineering works where the Employer provides most
of the design. However, the works may include some Contractor-
designed civil, mechanical, electrical and/or construction works.

Conditions of Contract for Plant and Design-Build, which FIDIC

recommends for the provision of electrical and/or mechanical plant,
and for the design and execution of buildings or engineering works.

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The scope of these Conditions thus embraces both old Yellow and
orange Books, for all types of Contractor-designed works.

- Conditions of Contract for EPC/Turnkey Projects, which may be

suitable for the provision on a turnkey basis of a process or power
plant, of a factory or similar facility, or of an infrastructure project or
other type of development, where

(i) a high degree of certainty of final price and completion time is

required, and (ii) the contractor takes total responsibility for the
design and execution of the project.

CONDITIONS OF CONTRACT FOR CONSTRUCTION FOR

BUILDING AND ENGINEERING WORKS DESIGNED BY THE
EMPLOYER

The Fourth Edition of the FIDIC Conditions of Contract for Works of

Civil Engineering Construction, known as the “Red Book”, has been
updated and replaced with a new standard form. The title of the new
1999 First Edition construction book – which is red in colour – is
“Conditions of Contract for Construction for Building and
Engineering Works Designed by the Employer” (“New Red Book”). An
abstract of the New Red Book is presented below.

General Provisions The general provisions define the important

constituents of a contract such as the contract, the parties involved in
the contract, payments, contract agreement, etc. The Employer
Contractor’s right of access to site is not exclusive and is subject
performance security being provided. Contractor’s claims are
applicable in case of delay by Employer. Employer has to provide
reasonable assistance to contractor to obtain local permits/approvals
and to confirm financial arrangement for payment to Contractor
within 28 days of request for information. Also to convey any changes
in Employer’s financial arrangement. Employer’s claims ratified by
Engineer can be deducted from payment certificates issued to the
contractor.

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The Engineer The Engineer has no authority to amend the contract.
The Engineer’s authority & limitations can be defined in the contract.
The Engineer’s approval does not relieve the contractor from any
responsibility, he has under contract. Engineer shall consult both
parties to reach agreement on claims otherwise proceed to make a fair
determination in accordance with the contract. Employer can replace
the ‘Engineer’ by any other person against whom contractors does not
have any reasonable objections.

The Contractor

The contractor shall design if required to the extent specified in the

contract. The contractor shall deliver the performance security to
Employer within 28 days of receipt of the Letter of Acceptance. The
Employer shall return the Performance Security to the contractor
within 21 days of Performance certificates issued on completion of the
contract.

The subcontractor can be named in the tender for other sub-

contractors proposed during execution, the Engineer’s approval is
required. Though Employer shall be responsible for any error any
notified items of reference an experienced contractor should discover
the error in time and seek the amendment. Claims due to above errors
shall be entertained only if an experienced contractor could not have
foreseen these errors. The Employer provided site data to be checked
& interpreted by contractor before use. The contractor shall - comply
with applicable safety regulations. - institute a Quality Assurance
System to demonstrate compliance. The contractor shall not - revoke
the appointment of contractor’s representative without prior consent
of the Engineer. - subcontract the whole of works.

Compliance with Quality assurance system shall not relive the

contractor of any of his duties or responsibilities. The contractor to
ascertain all necessary information regarding risks & contingencies
including, nature of site & Subsurface conditions the laws,
procedures, & labour practices of the country. If the contractor
encounters adverse physical conditions, which were unforeseeable,

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the contractor to give notice to the Engineer. The contractor shall bear
all costs for special and or temporary rights of way & shall be deemed
to have been satisfied as to the suitability and availability of access
routes to the site. Contractor’s equipment when brought to site shall
be exclusively intended for the execution of the works & shall not be
removed without the Engineer’s consent.

Progress report

Report containing charts, photographs & other documents showing

progress of the works shall be prepared and sent monthly. The
progress report shall cover details of contractor’s personnel &
equipment, quality assurance documents, safety statistics and
comparison of actual & planned. Also measures adopted to overcome
delays are listed.

All articles of antiquity found at the site shall be placed under the
care & authority of Employer, if found by contractor, any delay and
extension of time due to delay on this account along with cost can be
claimed.

Nominated Subcontractor

In the Contract, “Nominated Subcontractor’’ means a subcontractor;

i. Who is stated in the contract as being a nominated

subcontractor, or
ii. ii. Whom the Engineer, instructs the contractor to employ
subcontractor

The contractor shall not be under any obligation to employ a

nominated subcontractor; against whom he raises reasonable
objection. The employer may pay direct to the nominated
subcontractor, if not paid by contractor without justification, and
deduct it from Contractor’s money dues.

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Staff and Labour

Contractor shall comply with all labour laws including those relating
to health, safety, welfare and immigration. No work shall be carried
out at site on locally recognised holidays unless specially permitted.
The contractor’s personnel shall be qualified & experienced in their
trades and provides necessary superintendence to manage the work.

Plant Materials and Workmanship

If contractor suffers delay due to delay by Employer’s Engineer,

claims can be raised. The contractor shall comply with the remedial
instructions within a reasonable time, otherwise Employer shall be
entitled to employ & pay other persons to carry out the work. The
contractor shall pay all royalties rents and other payments for natural
materials obtained from outside the site.

Commencement, Delays & Supervisions

The Engineer shall give the Contractor not less than 7 days’ notice of
the commencement date of work. Contractor should start the work
within 42 days from the Letter of Acceptance.

Contractor’s planning schedule is considered approved if not

commented by client’s engineer within 21 days. Contractor is entitled
to extension of time for variation of scope of work. For exceptionally
adverse climatic conditions, extension can be considered.

Any additional mobilisation for catching up with delayed project

execution by contractor is at the risk and cost of the contractor. If
contractor fails to comply with time for completion he shall pay delay
damages to the Employer for completion he shall delay damages to
the Employer for this default as per rate stated in the tender.

Suspension of work by Engineer is permitted. Contractor can claim

time extension and cost for complying with the Engineer’s
instructions provided suspension is not for reasons on the contractor’s
side. Contractor is entitled to pay the value of undelivered plant

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and/or Materials if work is suspended for more than 28 days. If work
is suspended beyond 84 days, the contractor may give 28 days’ notice
to resume the work, beyond which the work (whole/part) shall be
treated as omission or contractor may give notice of termination.

Test on Completion

Notice of 21 days from contractor is necessary for conducting Tests on

Completion. The test may be conducted within 14 days thereafter
even if client’s engineer is not available. If contractor fails to pass the
tests on Completion within 21 days of notice from Engineer to carry
out the test, client is free to proceed with tests at the risk and cost of
the contractor.

Employer’s Taking Over

Employer is required to take over the work when completed according

to the contract within14 days of notice from contractor. The Engineer
is required to issue the Taking Over Certificates to the contractor
within 28 days of above notice or reject the application giving reasons.
If Engineer fails in either to take over or to reject, with 28 days, but
the work is substantially complete; the certificates shall be deemed to
have been issued on the last day of that period. If contractor is
prevented for more than 14 days from carrying out the Test on
Completion, the Employer shall be deemed to have taken over, the
works or section.

Defects Liability

Any work by contractor within Defects Notification Period as pointed

out by Employer, well within contract requirement is to be carried at
the risk and cost of the contractor. The Employer can seek extension
of Defects Notification Period if a major item of plant cannot be used
for purposes for which they are intended, but not exceeding Two years
in extension. If above remedy is not carried out, the Employer can
carry out the work himself or by others at contractor’s cost, but the

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contractor shall have no responsibility for this work. If employer
agrees, the defective material can be removed for the site for repairs.

The contractor can be asked by the Engineer to search for the cause
of any defect. The cost-plus profit shall be paid to the contractor
unless the cause noticed is due to defective workmanship of
contractor. Contractor’s obligations are not complete until Engineer
issued Performance certificates with 28 days of expiry date of Defects
Notification Period. Only the performance certificates constitute
acceptance of the work. Both parties are liable for any unperformed
obligation & contract remains in force to that extent.

Measurement and Evaluation

Evaluation of work shall be carried out by new rate other than agreed
in the BOQ if the quantity is increased by more than 10% and value
by more than 0.01% of accepted contract amount provided the rate
revision sought by contractor exceed 1% of the cost per unit quantity
as per rate schedule.

Variation and Adjustment

Variation of work can be initiated by the Engineer at any time upto

Taking over stage. Contract is required to execute each variation
unless contractor writes to Engineer about his inability to perform.
Contractor may propose improvement or changes if beneficial to
Employer due to lower value or better performance. The reduction in
cost to contract price due to above change shall be shared between
Employer to contract price due to above change shall be shared
between Employer & the contractor after adjusting for loss if any in
quality, life and operational performance. The provisional sum
available in the contract price shall be used as per Engineer’s
instructions, after obtaining quotations, invoices, vouchers and
receipts in substantiation.

The contract price is adjusted for any increase or decrease in cost

resulting from a change in the Laws of the Country made after the

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Base Date in the contract. Escalation clause applies only if provided
for in the contract. Such clause may or may not be sufficient for
compensation due to rise in costs, which have gone up compared to
‘Base Date’ data. If contractor fails to complete works within Time for
Completion adjustment of price will be linked to date 49 days prior to
Date of Completion or current prices whichever more favourable to
Employer under Escalation clause.

Contract Price and Payment

Any quantities as per BOQ are estimated quantities and are not being
taken as the actual & correct quantities. The Employer shall make an
advance payment as interest free loan for mobilisation, when
contractor submits. Advance payment guarantee, when such a
provision of advance payment is made in the Appendix to Tender. If
contract includes schedule of payment, it shall include an amount for
plant & Materials, which have been sent to the site for incorporation
in the permanent works. If contract does not include schedule of
payments, contractor to submit non-binding estimate of payment
during each quarterly period starting from 42 days after the
commencement date. The Engineer may make any corrections of
necessary to any previous payment certificates since payment
certificates shall not be deemed to indicate Engineer’s acceptance of
work. If contractor does not receive payments within 56 days of
submission to Engineer with necessary supporting document, he shall
be entitled to receive financing charges compounded monthly on the
amount unpaid. Financing charges for delayed payment is 3% above
central bank’s discount rate.

Termination by Employer

Employer can terminate contract on many grounds such as failure to

carry out the contract, subcontracting the whole of works or assign
the contract without agreement. The bribing for undue favour can be
the basis for Termination. Even Employer can terminate the contract
with 28 days’ notice without any reason but not for executing the work
himself or to appoint another contractor.

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Suspension & Termination by Contractor

Contractor is allowed to terminate the contract if contractor is not

provided

• Employer’s financial arrangement

• Lack of interim payment when due

• Prolonged suspension of work by Employer

• Bankruptcy or insolvent Employer

• Substantial failure of Employer to perform his obligation under

contract.

Risk & Responsibility

The contractor indemnifies and holds harmless the Employer on

following issues.

Injury, Disease or Death due to contractor’s execution of work

(including design if any) or during remedy of defects in works after
completion.

Damages or Losses to property arising out of execution of work

(including design if any) or attribute to negligence, wilful act or
breach of the contract by the contractor.

The Employer to indemnify and hold harmless the contractor for

similar actions carried out by Employer’s personnel during execution
or after completion during remedial work. The contractor takes full
responsibility for the care of the works from commencement Date till
taking over by client, after which the responsibility passes to the
Employer. In case of loss or damage during care of the works from
commencement Date will taking over by client, after which the

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responsibility on contractor continuous even after Hand over to
Employer, if some balance work is still being carried.

Employer is required to meet the risks out

War, Hostilities & invasion

Rebellion, Terrorism & civil war

Riot, Commotion or disorder (provided it is not caused by contractor’s

personnel)

Explosives, ionizing radiation or contamination by radioactivity

except for those caused due to use of such material by contractor, for
construction purposes.

Pressure waves caused by aircraft caused by sonic or supersonic

speeds.

Design of any part of works by the Employer.

Forces of Nature, which an experienced contractor could not have

foreseen.

Contractor is expected to make good loss or damage caused by above

issue but will be reimbursed for the same along with time extension
for delays. The Employer shall indemnify Contractor from any claim
arising out of compliance of the contract conditions or works being
used for the Employer. Similarly, Contractor shall indemnify
Employer for any claim arising out of design of supply of goods made
under the scope of the contract. The total liability of the Contractor
under above issue shall not exceed the value of contract except for in
case of fraud, misconduct & default.

Insurance

The Terms of Insurance to be affected by any Insuring Party shall be

consistent with any terms agreed by both parties before the date of
Letter of Acceptance. This type of agreement shall take precedence

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over the provisions of this clause. The relevant insuring party shall
within the respective periods stated in Tender Submit to other party
evidence of insurance being affected along with details of premium.
Neither party shall change terms of insurance without approval of
other party.

Also payment not made by one party despite being due, can be made
by other party and adjusted in contract value or adjusted against
payment due. Any insurance claim, uninsured obligation, not
received fully from insurance shall be borne by the party, which is
responsible for these issue as per contract. Payment by one party to
the other party shall be subjected to ‘Employer’s claim’ or ‘contractor’s
claim’ as applicable. Insurance for works & Contractor’s equipment
shall be affected by the contractor, as insuring party in the joint name
for the full value of cost or replacement. The Payment shall be jointly
received & allocated between the parties for the sole purpose if
rectifying the loss or damage. Such insurance excludes losses due to
defects in design, materials and workmanship. Such insurance cover
excludes part of work taken over by the Employer.

If one year after the Base date the insurance cover is not available at
commercially reasonable terms. The contractor shall give the notice
to the Employer with supporting particulars. The contractor shall
also insure against injury to persons & Damage to Employer’s
Property arising out of contractor is performance of the contract other
than already covered under Insurance of Works & Contractor’s
Equipment or personnel As stated earlier, the insurance will be in
joint name of both the parties. Similar to Works & Contractor’s
equipment, contractor’s personnel shall be insured by contractor for
injury, sickness, disease or death. The insurance shall be maintained
in full force in effect throughout the execution of works. For
subcontractor’s employees subcontractor may draw insurance, but
contractor shall be responsible for the compliance by the
subcontractor.

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Force Majeure

Force Majeure is an exceptional event or circumstances, which

concerned party could not have provided against & even could not
have avoided having arisen in the given circumstances. Force
Majeure includes, war, hostilities or invasion, rebellion, terrorism or
civil war. It also covers riots commotion, disorder or strike & lockout
other than those by contractor or subcontractor’s personnel. It
includes issue such as explosives, ionizing radiation or contamination
by radioactivity except those specially utilised by contractor for
construction. It does cover natural catastrophes, such as earthquake,
hurricane, typhoon or volcanic activity.

If a party is prevented from performing any of its obligations, a notice

shall be given within 14 days of the event constituting Force Majeure.
The party shall be excused from performance of its obligation as long
as Force Majeure persists except for obligation of the party to make
payments if due. If contractor suffers delays & costs due to Force
Majeure he shall be compensated by necessary time extension & cost
compensation. If force Majeure clauses for subcontractor are
broader/wider than contractor’s projections under this clause, then
those issue cannot be the excuse of contractor for non-performance or
basis for relief under the clause. If a single Force Majeure event
persists for 84 days or cumulatively for 140 days due to multiple
occasions, then either party may give notice to the other party a notice
of 7 days for termination of contract. In such situation further process
of determining the value of work done shall commence will include.

• Value of completed item of work which price is stated in the

contract.

• Cost of plant & Material delivered or which has left vendors for
delivery.

• Any other cost/liability reasonably incurred by the contractor for

completing the works.

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• Cost or removal of Temporary Works & Contractor’s Equipment.

• Cost of repatriation of the contractor’s staff & labour employed

wholly in connection with the work.

Notwithstanding above if any event outside the control of parties

arises, which makes it impossible or unlawful for either party to fulfil
its contract obligations, parties are entitled to be released from
further performance of the contract. Money payable to the contractor
by employer shall be same as stated above.

Claim, Disputes & Arbitration

If contractor considers himself eligible for any extension of the Time

and or additional payment, a notice shall be given within 28 days of
the event. Any claims beyond this period will not be effective and the
Employer shall be discharged of any liability on that account.
Contractor shall maintain all relevant and contemporary record to
substantiate his claims to the engineer. Without admitting the
Employer’s liability, the Engineer may inspect the record and seek
necessary details to verify such claims. Within 42 days of becoming
aware of claims, contractor shall send to the Engineer a fully detailed
claim, which includes full supporting particulars of the basis of the
claim. Further details, if any, can be provided within the time agreed
between Contractor & Employer.

The parties shall jointly appoint a DAB by the date stated in the
Appendix to Tender, Disputes shall be adjudicated by a Dispute
Adjudication Board consisting of one or three suitable qualified
persons. In case of three-member DAB, one member each shall be
appointed by the Employer and the contractor & third member shall
be appointed by mutual consultation to act as chairman. However, if
a list of potential members is included in the contract, the member
shall be selected from those on the list. In case of failure to appoint
DAB, due to any disagreements, the appointing entity or official

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named in the particular conditions shall appoint member/ members
of DAB. Appointment of any existing member of the DAB may be
terminated by mutual agreement of both the parties.

If a dispute arises between parties under the contract, either party

can refer the disputes to DAB for its decisions with copies to other
party. Within 84 days of such reference or such other period as may
be proposed by the DAB & approved by both parties, DAB shall give
the reasoned decision. The decision shall be binding on both parties
who shall act on it unless it is revised in an amicable settlement or
arbitral award. If either party is dissatisfied with decision, then
within 28 days of decision shall give notice to the other party of its
dissatisfaction. Also, if DAB fails to give decision within above
stipulated period, then within 28 days of expiry of the period, notice
of dissatisfaction can be issued. DAB’s decision is final & binding if
no notice of dissatisfaction is issued by either party. If notice of
dissatisfaction is issued in time, Parties shall attempt to settle the
dispute amicably before the commencement of arbitration.
Arbitration shall be carried out as per rules of arbitration of the
International Chamber of Commerce. Arbitrators shall give full
power to open up, review & revise any decision by DAB or engineer.
Neither party shall be limited by the arguments previously put before
the DAB. Arbitration may commence prior to or after completion of
works. The obligation of all parties shall not be altered by reason of
any arbitration being conducted during the progress of works. In case
of award of DAB not being implemented without giving notice of
dissatisfaction, the failure can be referred to arbitration. In case of
any dispute not getting resolved due to absence or expiry of DAB
arrangement, the matter may be referred directly to arbitration. In
the preparation of these Conditions of Contract for Construction, it
was recognised that, while there are many sub-clauses which must
necessarily vary to take account of the circumstances relevant to the
particular contract. The sub-clauses which were considered to be
applicable to many (but not all) contracts have been included in the
General conditions, in order to facilitate their incorporation in each
contract.

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 -2-
New provisions made in new Red book for contractor

I. In terms of Cost plus Profit for relief events, unless stated otherwise, a
Contractor will be entitled to a 5% profit (while under the 1999 Red Book,
there was no stated figure). The 2017 Red Book also specifically entitles
the Contractor to “any loss of profit or other losses and damages suffered”
for variations and termination for convenience.
II. Employer has to provide reasonable assistance to contractor to obtain
local permits/approvals and to confirm financial arrangement for
payment to contractor within 28 days of request for information. Also to
convey any changes in Employer’s financial arrangement. Employer’s
claims ratified by Engineer can be deducted from payment certificates
issued to the contractor.
III. For the first time, the 2017 red book introduces advance warning
provisions, which require each party to advise the other in advance of any
known or probable future events which may adversely affect the work of
the contractor’s personnel, adversely affect the performance of the works
when completed, increase the contract price or delay the execution of the
works or a section (if any). There is no time limit for giving an advance
warning, nor is there any explicit sanction for failing to do so.
IV. At least four important changes have been made to the Extension Of
Time (EOT) provision. First, unlike the 1999 Red Book, the Contractor is
not required to give a separate notice of a claim for an EOT for a delay
caused by a variation (as this notice has been built into the Variation
clause at 13.3). Second, delay for exceptionally adverse climatic
conditions has been qualified to be unforeseeable having regard to
climatic data. Third, the Contractor has an explicit entitlement to an
EOT if the delay is caused by an increase of more than 10% of an
estimated quantity. Fourth, the clause specifically contemplates the
parties adopt provisions in respect of concurrent delay.
V. The provisions relating to Claims and Disputes have been separated and
redrafted substantially. Clause 20 (Claims) sets out a procedure for
either one of the party or together against a common relief. Notably, the

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 existing 28-day time requirement for notifying claims now applies to the
Employer as well, and the old 42-day timeframe for the fully detailed
claim has been increased to 84 Days.
VI. The newly introduced DAAB, which stands for Dispute Avoidance /
Adjudication Board (in contrast to the previous DAB), brings with it a
number of important procedures. First, unless the Parties agree
otherwise, the DAAB members are to be appointed within 28 days after
the Contractor receives the Letter of Acceptance; there are also detailed
procedures for resignation, termination and new appointments. Second,
the DAAB may provide informal assistance if jointly requested by the
Parties, who are not bound to act on the DAAB’s advice. Third, in terms
of time-bars i.e., the DAAB must give its decision within 84 days after
receiving the reference, a Party must refer a Dispute to the DAAB within
42 days after giving or receiving a Notice of Dissatisfaction with the
Engineer’s determination, and a party that is dissatisfied with the
DAAB’s decision must give an NOD to the other within 28 days or else
the decision becomes final and binding on both Parties. Fourth, arbitral
tribunals are empowered to order the enforcement of a DAAB decision,
by way of summary or other expedited procedure, whether by an interim
or provisional measure or award.

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