William Godwin - The 2017 FIDIC Contracts

This is a novel clause in the 2017 editions. It is intended to clarify the position on termination, and in particular that, unless the governing law imposes any mandatory requirements to the contrary, termination of the Contract under any of the provisions of the general conditions requires no action of whatever kind by either party beyond what is stated in the relevant sub‐clause. Thus no additional steps, such as giving additional notices or warnings, are required beyond (a) what the mandatory rules of the governing law require and (b) what is set out in the specific sub‐clause under which the Contract is terminated.

1 1The Contract Data in the 2017 editions are defined as the pages, entitled Contract Data, which constitute Part A of the Particular Conditions; in the 1999 editions there was no part of the Particular Conditions with this title, but instead in the Yellow and Red Books the relevant details were contained in the Appendix to Tender and in the Silver Book were contained in the Particular Conditions against the various clause numbers which required details to be inserted, such as the time for completion, the Defects Notification Period and the law and language of the Contract.

2 2In the FIDIC contracts the Contract Agreement has a different status depending on the form concerned.The Red and Yellow Books contemplate the Contract's being formed by the Employer's acceptance, by the Letter of Acceptance, of the Contractor's Letter of Tender, the date of formation of the Contract depending on the governing law; this might, for example, be the date when the Contractor receives the Letter of Acceptance. A Contract Agreement is, however, still required to be executed. That short document sets out the parties to the Contract, the basic terms including the works to be executed and the Contract Price together with other details. The Red and Yellow Books provide that, if there is no Letter of Acceptance, then references to it are to be taken to be references to the Contract Agreement and ‘…the date of issuing or receiving the Letter of Acceptance means the date of signing the Contract Agreement’(clause 1.1.50 2017 editions/1.1.1.3, 1999).The Silver Book in both editions, on the other hand, treats the Contract as being formed upon the signing of the Contract Agreement; there is no Letter of Acceptance/Letter of Tender in the Silver Book. The Contract Agreement may specify conditions remaining to be fulfilled before the Silver Book contract comes into full force and effect.

3 3The provisions are substantially the same in clause 1.9 of the 1999 Red Book.

4 4‘Gross negligence’ and ‘reckless misconduct’ are expressions which may not be very familiar to users of the contracts. ‘Gross negligence’ is usually taken to mean an extreme failure to take reasonable care, and is sometimes taken to imply a conscious and voluntary disregard for the need to take care; ‘reckless misconduct’ is usually taken to mean an intentional act or omission in breach of some duty without any regard for its likely injurious consequences. The interpretation of these and the other expressions used in this part of the clause, which are not defined in the contracts, will ultimately be a matter of the governing law.

5 5It is important to note that this exception is confined to the first paragraph of clause 17.4, which sets out indemnities provided by the Contractor in respect of personal injury and damage to property; it is only in respect of those indemnities that the Contractor cannot benefit from the limitation in clause 1.15/1.14. The second paragraph of clause 17.4 (to which we will return) provides for the Contractor also to indemnify the Employer in respect of failure to comply with the fitness for purpose obligation contained in clause 4.1; in the pre‐release version of the Yellow Book second edition this indemnity was also excepted from the limitation, but that position was reversed in the 2017 Books so that in respect of such failures the Contractor benefits from the limitation.

6 6In the House of Lords decision in The Achilleas [2008] UKHL 48 it was said (at [92]) that ‘…one must ask, not only whether the parties must be taken to have had this type of loss within their contemplation when the contract was made, but also whether they must be taken to have had liability for this type of loss within their contemplation then. In other words, is the [defendant] to be taken to have undertaken legal responsibility for this type of loss?’ Subsequent decisions have treated the Achilleas test either as not changing the law or as applying in relatively rare cases where the application of the general test may lead to a disproportionate liability or one which was contrary to market understanding and expectations (see A.S.M. Shipping Ltd of India v T.T.M.I. Ltd of England [2009] 1 Lloyd's Rep 293; Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd [2010] 2 Lloyd's Rep 81).

7 7Clause 1.1.4.1 of the 1999 editions contains similar definitions, but note that in the 2017 editions the words ‘… and the remedying of any defects’ are deleted.

8 8The Contractor is obliged under clause 19.2.3, for example, to insure against liability for breach of his design, including fitness for purpose, obligations under clause 4.1; see further Section 4.1.

The 2017 contracts have substantially redrawn the terms of clause 2 of the 1999 editions, dealing with the Employer. Most notably, clause 2.5 of the 1999 editions deals with Employers' claims whereas this has been deleted from the 2017 editions, under which both Contractors' and Employers' claims are dealt with in a new clause 20 in exactly the same way.

Clause 2 of the three 2017 contracts sets out the obligations of the Employer in substantially the same terms.

Clause 2.1 sets out the Employer's obligations to give the Contractor right of access to and possession of the site within the time or times stated in the Contract Data. Access and possession may not be exclusive to the Contractor, since he may, for example, be required to work with other contractors appointed by the Employer. If the Contract Data do not set times when possession or access are to be given to various parts of the site then the Employer's obligation is to give the Contractor right of access to and possession of those parts of the site within whatever times are necessary in order to enable the Contractor to proceed in accordance with the programme (or, if there is no programme at that time, the initial programme submitted under clause 8.3: see Section 7.3 below). If the Employer fails to provide the required access or possession then the Contractor may claim an appropriate extension of time and/or payment of cost plus profit if delay or cost was incurred in consequence; with the proviso that if the Employer's failure was itself caused by any error or delay by the Contractor, including in the submission of appropriate Contractor's documents, the Contractor will not be entitled to an extension or additional payment.

In the Yellow and Silver Books, if Contractor's documents are needed before the Employer can give possession of any foundation, structure, plant or means of access, the Contractor is obliged to submit such documents to the Engineer or Employer in whatever time or manner is stated in the Employer's Requirements.

Clause 2.2 in all three 2017 contracts provides for the Employer, at the Contractor's request, promptly to provide reasonable assistance so as to enable the Contractor to obtain copies of relevant laws of the country where the project is taking place, and any necessary permits, permissions, licences or approvals required by the applicable law which the Contractor is required to obtain under clause 1.13. Such assistance is also to be provided for the delivery of goods and for export of Contractor's equipment when removed from the site.