William Godwin - The 2017 FIDIC Contracts

In what follows clause references will be to clause 3.7 of the 2017 Red and Yellow Books and the contract administrator will be referred to as ‘the Engineer’.

Clause 3.5 of the 1999 editions of the three contracts provides merely for the Engineer or Employer to consult each party in an endeavour to reach agreement. This quite often does not happen in practice, or, if it does, is often perfunctory. Clause 3.7.1 now requires the Engineer to consult both parties jointly and/or separately and to encourage discussion between the parties in an endeavour to reach agreement. The Engineer must commence such consultation promptly to allow adequate time to comply with the time limit for obtaining agreement under clause 3.7.3, which specifies a default period of 42 days from certain start points which are set out in that clause. 7 The Engineer must also provide the parties with a record of the consultation, unless this is agreed to be dispensed with.

If agreement is achieved within the time limit for agreement under clause 3.7.3, the Engineer must give a notice of the agreement to both parties, stating on its face that it is a notice of their agreement (which they must sign) and including a copy of it. If no agreement is achieved within the time limit, or both parties advise the Engineer that no agreement can be achieved within that time, whichever is the earlier, then the Engineer is to give a notice to the parties accordingly. He must then immediately proceed under clause 3.7.2 to a determination.

Under clause 3.7.2 the Engineer must make a fair determination of the matter or claim, in accordance with the Contract, taking due regard of all relevant circumstances. Within the time limit set out in clause 3.7.3 (see next section), he must give a notice to both parties of his determination. The notice must state on its face that it is a notice of the Engineer's determination and describe the determination in detail, with reasons and detailed supporting particulars.

Clause 3.7.3 sets out the time limits for the various stages in the agreement or determination process.

The Engineer must give notice of agreement, if agreement is reached, within 42 days, or within whatever other time limit he proposes and the parties agree, after:

1 in the case of a matter to be agreed or determined which is not a claim, whatever date of commencement of the time limit for agreement may be stated in the relevant Contract clause; or

2 where there is a claim by either party, for relief other than under clause 20.1(a) or (b), 8 the date the Engineer receives a clause 20.1 notice from the claiming party; or

3 where there is a claim under clause 20.1(a) or (b), the date the Engineer receives:a fully detailed claim under clause 20.2.4, 9 orwhere there is a claim of continuing effect under clause 20.2.6, 10 an interim or final fully detailed claim, as appropriate.

The Engineer must give the notice of his determination referred to in clause 3.7.2 within 42 days, or whatever other time he proposes and the parties agree, after either (a) no agreement is reached under clause 3.7.1 within the 42 days (or other agreed time limit) or (b) the parties advise that no agreement can be achieved within that period, whichever is the earlier.

If the Engineer does not give his notice, of either agreement or determination, within the relevant time limit then (a) in the case of a claim, the Engineer is deemed to have given a determination rejecting the claim, or (b) in the case of any matter to be agreed or determined other than a claim, a dispute is deemed to have arisen under clause 1.1.29 which may then be referred by either party to a Dispute Avoidance/Adjudication Board (DAAB) 11 for a decision under clause 21.4, without the usual notice of dissatisfaction (NOD) 12 being given.

Thus time limits reinforced by deeming provisions apply in order to seek to ensure both that adequate consultation takes place between the parties, facilitated by the Engineer, and that, if despite that process agreement cannot be achieved, the matter or claim is resolved within a defined period by the Engineer's determination, failing which it may be referred to a DAAB.

Clause 3.7.4 of the 2017 contracts provides that an agreement or determination is to be binding on both parties, and complied with by the Engineer, unless and until corrected or revised. As pointed out earlier, the parties are also bound by a determination until it is revised in the 1999 editions of the Red and Yellow Books, although not in the 1999 Silver Book, where the Contractor could avoid having to comply with a determination by notifying his dissatisfaction with it within 14 days. This difference may have been attributable to the fact that, in the 1999 edition of the Silver Book, the Employer is able to administer the Contract himself; in any event, the 2017 editions (in which the Employer is never able to administer the Contract himself) have adopted the Red and Yellow Book position.

The 2017 contracts contain a detailed procedure for correcting an agreement or determination for typographical, clerical or arithmetical errors. Clause 3.7.4 enables such errors to be corrected within 14 days after the giving or receiving of the Engineer's notice of agreement or determination. If the Engineer finds the error, he is immediately to advise the parties accordingly; if a party finds it he must give a notice to the Engineer stating that it is given under clause 3.7.4 and clearly identifying the error. 13 If the Engineer then does not agree that there was an error he is immediately to advise the parties accordingly.

Within seven days of his finding the error, or receiving a notice from a party notifying an error, the Engineer must give a notice to both parties of the corrected agreement or determination. Thereafter, the corrected agreement or determination is to be treated as the agreement or determination for purposes of the Contract conditions.

Although clause 3.7.4 thus refers to the Engineer's notifying the parties of the ‘corrected agreement or determination’ if, on receiving a notice of an error from one or other of the parties, the Engineer decides that there was no error then, as long as he advises the parties accordingly, he is free to decide that the agreement or determination does not require any correcting. Clause 3.7.4 does not deal explicitly with the notifying party's recourse in this situation, but he may be able, if he considers that the Engineer ought to have corrected the agreement or determination, to claim declaratory or other relief under clause 20.1(c) and/or if appropriate money and/or time under clause 20.1(a) and/or (b).

Note that if an agreement or determination concerns the payment of an amount from one party to the other then the Contractor is to include that amount in his next payment statement and the Engineer is to include the relevant amount in the next payment certificate (Red and Yellow Books)/the Employer is to include the relevant amount in his next payment (Silver Book).

Clause 3.7.5 deals with the procedure where a party is dissatisfied with the determination of the Engineer. In that event, the dissatisfied party may give a notice of dissatisfaction (NOD) to the other party, with a copy to the Engineer. This NOD must state that it is a notice of dissatisfaction with the Engineer's determination in so many words, and set out the reason(s) for the dissatisfaction. The NOD must be given within 28 days after receiving the Engineer's notice of the determination or, if applicable, his notice of the corrected determination under clause 3.7.4 (or, in the case of a deemed determination rejecting a claim, within 28 days after the time limit for determination under clause 3.7.3 has expired); thereafter, either party may proceed to obtain a DAAB's decision under clause 21.4.