FIDIC - Orange Book

FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS
GUIDE TO THE USE OF FIDIC

CERTIFIED FOR ONLINE READING ONLY
CONDITIONS OF CONTRACT FOR

DESIGN – BUILD AND TURNKEY
FIRST EDITION
Published by
Fédération Internationale des
Ingénieurs-Conseils (FIDIC)
P.O. Box 86
CH-1000 Lausanne 12 – Chailly
Switzerland
Phone +41 21 654 44 11
Fax +41 21 653 54 32
E-mail [email protected]
WWW http://www.fidic.org
© Copyright FIDIC 1996

All rights reserved
No part of this publication
may be reproduced
or transmitted in any
form or by any means without
ISBN 2 – 88432 – 012 - 1 permission of the publisher
© FIDIC © FIDIC
FOREWORD
Fédération Internationale des Ingénieurs-Conseils (FIDIC) has published

three forms of international conditions of contract, informally titled the
Red, Yellow and Orange Books. The Red Book is the "Conditions Of
FIDIC is an international federation of national associations of consulting Contract for Works of Civil Engineering Construction": the fourth edition
was published in 1987 and amended in 1988 and 1992. The Yellow Book
engineers.
is the "Conditions of Contract for Electrical and Mechanical Works": the
third edition was published in 1987 and amended in 1988.
FIDIC was founded in 1923 by three national associations of consulting
engineers within Europe. The objectives of forming the federation were to The Red Book is intended for the construction of works designed by (or
promote in common the professional interests of the member associations on behalf of) the Employer, with evaluation by measured quantities and
and to disseminate information of interest to members of its component contract rates. The Yellow Book is intended for the provision and erection
national associations. of plant, often for items which are to be part of a large project.
Recognising that some Employers wanted to procure the construction of

Today FIDIC membership numbers more than 60 countries from all parts of project works on a lump-sum contractor-design basis, FIDIC initiated the
the globe and the federation represents most of the private practice preparation of an appropriate form of contract: it became known as the
consulting engineers in the world. Orange Book.
In 1995, FIDIC published the Orange Book, the "Conditions of Contract
FIDIC arranges seminars, conferences and other events in the furtherance for Design-Build and Turnkey". It had been prepared by a drafting
of its goals: maintenance of high ethical and professional standards; committee referred to as the Orange Book Task Group, which consisted
exchange of views and information; discussion of problems of mutual of: Axel-Volkmar Jaeger (Task Group Leader), Schmidt Reuter Partner,
concern among member associations and representatives of the Germany. Peter L Booen, Sir Alexander Gibb & Partners Ltd, UK; Philip
international financial institutions; and development of the engineering Jenkinson, W S Atkins, UK; Bob Kavanagh, Stanley Industrial Consultants
profession in developing countries. Ltd, Canada; and Charles B Molineaux, Wickwire Gavin PC, USA. The
preparation was carried out under the general direction of the FIDIC
FIDIC publications include proceedings of various conferences and
Contracts Committee which then comprised: K B (Tony) Nomis,
seminars, information for consulting engineers, project owners and
Consulting Engineer. UK (Chairman); Michael Mortimer-Hawkins,
international development agencies, standard pre-qualification forms,
SwedPower AB, Sweden; and John B Bowcock, Sir Alexander Gibb &
contract documents and client/consultant agreements. They are available
Partners Ltd, UK.
from the secretariat in Switzerland.
Drafts of the Orange Book had previously been reviewed by the following
persons or organisations: Peter Batty, TAMS Consultants Inc., USA;
Geoffrey F Hawker, Consulting Engineer, UK; Joseph A Huse, Freshfields,
France; Gordon L Jaynes, Whitman Breed Abbott & Morgan, UK, A E J
(Tony) Sanders, Mouchel Management Ltd, UK; R J (Rob) Falcom, Delcan
Corporation, Canada., Harold Fairfull, European Capital, UK; Martyn J
Nixon, Willis Corroon, UK; Per Fagerholt, COWIConsult A/S, Denmark;
Christopher Wade, VBB VIAK AB, Sweden; Dr Grossekatthöfer, Germany;
Christopher R Seppala, White & Case, France; R Mark H Griffiths,
Griffiths & Armour, UK; A J M (Tony) Blackler, Rowe & Maw, UK; the
World Bank; and the International Bar Association. Many of these
© FIDIC © FIDIC 4
reviewers gave valuable advice on legal., financial or insurance aspects. CONTENTS
Immediately prior to publication, David R Wightman and Andrew Inkester
(Nabarro Nathanson, UK) carried out the final review to ensure legal
conformity of the entire document. FOREWORD 4
Subsequently, FIDIC published its "Model Terms of Appointment for a CONTENTS 6
Dispute Adjudication Board", which had been prepared by A J M (Tony)
Blackler and reviewed by Peter L Booen and the FIDIC Contracts INTRODUCTION 8
Committee listed above. These Model Terms are reproduced towards the 13
end of this Guide, after the comments on Clause 20.
TENDERING PROCEDURE
This Guide was prepared by Peter L Booen and reviewed by K B (Tony)

Norris, Charles B Molineaux, R Mark H Griffiths and the FIDIC Contracts 1 The Contract 17
Committee which now comprises John B Bowcock (Chairman), Michael 2 The Employer 38
Mortimer-Hawkins and Axel-Volkmar Jaeger. Immediately prior to
publication, David R Wightman and Andrew Inkester carried out a final 3 The Employer's Representative 41
legal review. 4 The Contractor 47

FIDIC wishes to record its appreciation of the time and effort devoted by 5 Design 68
all the above. 6 Staff and Labour 79
FIDIC Secretariat receives requests from time to time to assist in the 7 Plant, Materials and Workmanship 83
interpretation of individual contracts which are based upon conditions of 8 Commencement, Delays and Suspension 88
contract incorporating the FIDIC publications. It should be evident that, as 9 Tests on Completion 98
an international federation of consulting engineers, FIDIC cannot undertake
10 Employer's Taking Over 102
to (five legal advice. In any event, the legal interpretation of a contract will
depend upon such matters as its precise wording and the law governing 11 Tests after Completion 106
the particular contract. 12 Defects Liability 109
This Guide does not, therefore, attempt to give legal interpretations of the 13 Contract Price and Payment 116
Orange Book, although it does indicate some relevant legal issues. The 14. Variations 131
Guide also indicates what the drafting committees (the Orange Book Task 15 Default of Contractor 138
Group and the Contracts Committee) intended in drafting particular
clauses. The interpretation of individual clauses in a specific contract falls 16 Default of Employer 142
to be determined in accordance with the law applicable to the contract, 17 Risk and Responsibility 147
and may also be affected by other parts of the contract. 18 Insurance 151
The final section of this Guide contains a photo reproduction of FIDIC's 19 Force Majeure 158
Orange Book, the "Conditions of Contract for Design-Build and Turnkey, 20 Claims, Disputes and Arbitration 162
First Edition 1995". Within the text of this Guide, the various sub-clauses
FIDIC Model Terms of Appointment for a
from the Orange Book are copied and are shown in italics. The italicised
Dispute Adjudication Board 175
text should be identical to the corresponding text in the Orange Book as
reproduced in the final section. If any discrepancy is found between the
corresponding texts, the reader should refer to the photo-reproduced final
section in order to determine the authentic wording.
© FIDIC 5 © FIDIC 6
FIDIC publications on associated topics INTRODUCTION
Conditions of Contract for Design-Build and Turnkey,
(The Orange Book) First Edition 1995
Why Standard Documents?
FIDIC Tendering Procedure. Second Edition 1994
Standard Pre-Qualification Form for Contractors. Standardisation, both in technical and administrative matters, is desirable
Second Edition 1994 (pad of 5 complete forms) for the satisfactory execution of many, types of commercial projects. Major
projects, whether they are predominantly building, civil engineering,
Dealing with Risk - Managing Expectations (1994);
chemical engineering, electrical engineering, mechanical engineering, or
Amicable Settlement of Construction Disputes (1992). any combination, are frequently complex. With the resulting increased
The 1992 Report of the Alternative Dispute Resolution (ADR) Task complexity of contract conditions, it is becoming increasingly important to
Committee ensure that they, are based upon a standardised form of contract, with
Client / Consultant Model Services Agreement which the contracting parties and financing institutions are familiar, and
(The White Book) Second Edition 1991 which maintains a fair and reasonable balance between the differing
The White Book Guide objectives of these parties, allocating fairly the risks and responsibilities.
With other notes on documents for Consultancy Agreements) 1991

In the majority of cases, the contracting parties will react favourably to
Joint Venture (Consortium) Agreement 1992 such a standardised form of contract, which will do much to reduce the
Sub-Consultancy Agreement 1992 likelihood of unsatisfactory performance, increased costs and disputes.
Guide to Joint Venture and Sub-Consultancy Agreement 1994 With the contract being based on an acceptable standard form, tenderers
will be less inclined to make financial provision for unfamiliar contract
Professional Liability Insurance - A Primer (1991)
conditions, whose consequences they may have difficulty in assessing.
Conditions of Contract for Works of Civil Engineering Construction The widespread use of standard conditions also provides a stable base for
(The Red Book) Fourth Edition 1987 Reprinted 1992 training personnel in contract management, reducing the need for them
Conditions of Contract for Electrical and Mechanical Works having to work with ever-changing contract conditions.
(The Yellow Book) Third Edition 1987 Reprinted 1988
The Orange Book
Conditions of Subcontract for Works of Civil Engineering Construction
1994 The object of this Guide is to comment on the provisions contained in Part
I of the first edition of the "Conditions of Contract for Design-Build and
Guide to the Use of FIDIC Conditions of Contract for Works of Civil
Turnkey". Informally titled "the Orange Book", it was published by the
Engineering Construction
Fédération Intemationale des Ingénieurs-Conseils (FIDIC) in 1995. A Test
(The Red Book Guide) 1989
Edition had been published in 1994, and the many reactions to it were
Guide to the Use of FIDIC Conditions of Contract for Electrical and reviewed before the first edition was completed. This Guide (informally
Mechanical Works ( titled "the Orange Book Guide") is intended to assist the users of the
The Yellow Book Guide) 1988 Orange Book, namely those who write, and those who administer,
FIDIC List of potential arbitrators (with detailed CV's) Annual update contracts based on these Conditions of Contract. This assistance is
FIDIC International Directory Bi-annual update focused on particular features of the Orange Book: the Guide is not
intended to provide complete training material for the expertise required for
The above publications may, be purchased from FIDIC Secretariat the preparation of tender documents. Also, the comments are not
intended to provide an authoritative legal interpretation of every aspect of
P.O. Box 86, 1000 Lausanne 12, Switzerland, Phone ++4121 654 44 11, each subject, which must depend on the law applicable to the particular
Fax ++4121 653 5432, or from other authorised distributors contract.
It is envisaged that the Orange Book can be the basis of all contracts Project Procurement Options
which involve the provision of facilities designed by the Contractor,
At the inception stage of a project. procurement options should be
whether such facilities comprise building, civil engineering, chemical
reviewed and a decision made as to the most appropriate option.' FIDIC's
engineering, electrical engineering, mechanical engineering, or any
publication of the Orange Book does not constitute any, indication of a
combination. Throughout the drafting, the intention was to incorporate
preferred option. The Employer should first analyze the project financing
provisions applicable to (for example) housing, roads, refineries,
arrangements, their consequences, the risks inherent in the type(s) of
generators, turbines, treatment works, etc. However, the Orange Book is
works and the other factors which affect the procurement process. After
not appropriate for the provision of facilities designed by the Employer or
that analysis, decisions can be made as to which procurement option is
his consulting engineer, or for similar arrangements where the Contractor
appropriate; and as to which standard form of contract is closest to the
is not to be responsible for design.
Employer's requirements and will thus require less text in Part II than would
Project Procurement - the Design-Build Option be the case if another form were to be used.
Under the Orange Book design-build form of contract, design is the FIDIC publishes three forms of international conditions of contract,
responsibility of the construction organisation. This arrangement reduces informally titled the Red, Yellow and Orange Books:
the problems which may on occasions arise from the division of
The Red Book is the "Conditions of Contract for Works of Civil

responsibility between designer and constructor. Design-build may also
Engineering Construction", the fourth edition having been published
encourage economies, not only in terms of price, but at the expense of
in 1987 and amended in 1988 and 1992. It is intended for the
quality. Therefore, it is considered essential that the Employer has (or
construction of works which are mostly, designed by, (or on behalf
procures) expert technical services, in order to ensure that his
of) the Employer. Interim and final payments for the works are
requirements are elaborated in the tender documents and are achieved in
evaluated by, an impartial Engineer appointed by the Employer, the
practice. If expertise is unavailable, problems may arise, particularly in
evaluation being based on measured quantities and contract rates.
respect of the need for variations.
Part I of the Red Book does not include specific arrangements for
Ideally, variations under a design-build contract should be instructed by, the Under the Tests on Completion and does not mention any tests
reference to requirements (not by a redesign by the Employer); and their after completion. The defects liability period is of fixed duration.
costs and other consequences should be agreed in advance, in order to
The Yellow Book is the "Conditions of Contract for Electrical and
minimise disputes. In practice, these aspects can make the design-build
Mechanical Works", the third edition having been published in 1987
process appear somewhat inflexible. The design-build process is thus less
and amended in 1988. The Yellow Book is intended for the provision
amenable to variations initiated by, the Employer, compared with the
and erection of plant, often for items which are to be part of a large
alternative where the designer is separately, employed by, the Employer
project. Interim payments, including the cost of shipped Plant, are
and is independent of the Contractor.
evaluated by an impartial Engineer appointed by the Employer; the
The design-build option prevents the Employer from having a close final payment for the works is also evaluated by the Engineer, but
involvement in the design process. However, it enables him to have the the method of evaluation is not defined (if not lump-sum, Part II text
benefits of lump-sum pricing, of the Contractor's undivided liability for the would be required). Part I of the Yellow Book contains specific
works (including design), and of the potential savings (in cost and time) arrangements for the provision of facilities by the Employer, for the
due to a degree of overlap of design and construction. The latter overlap prior agreement of variations and for Tests on Completion; it does
may (or may, not) lessen the total period between the commencement of not mention any tests after completion. The defects liability period is
the preparation of tender documents and the completion of construction. extended in certain circumstances.
The saving in time due to this overlap may, be offset by, the effects of the
The Orange Book is intended for the provision and erection of plant and
lack of continuity, of the design processes during the pre-contract stages.
for the construction of works which are designed by (or on behalf of) the
Contractor. Except as may be defined in a schedule of payments, interim
and final payments for the works are evaluated by the Employer's
Representative, but the method of evaluation is not defined (if not lump- (ii) references to "the published Part II" refer to the "Guidance for
sum, Part II text would be required). Part I of the Orange Book contains the Preparation of Conditions of Particular Application" as
specific arrangements for copyrights, for progress reporting, for the published in the Orange Book,
provision of facilities by the Employer, for the prior agreement of variations
(iii) references to "the contract Part II" refer to the Part II as written
and for Tests on Completion and Tests after Completion. The defects
for the particular contract.
liability period is extended in certain circumstances.
(iv) references to Clauses and Sub-Clauses refer to Clauses and
If the result of the above analysis is a decision to procure the works on the
Sub-Clauses in the Part I as published in the Orange Book,
basis of design-build or turnkey, the Orange Book provides an
internationally acceptable basis for the contract. The Orange Book may be (v) the commentary, relates to the Part I text, which is shown in
used for projects constructed under a single contract and also for a italics.
contract (for the provision of plant or for construction) which is part of a
multi-contract project, although the latter type of project may give rise to
significant co-ordination problems. The Orange Book may be used for
individual items of plant, for individual structures and for complete facilities,
including the provision of facilities under turnkey contracts.

Turnkey contracts include most or all of the fixtures, fittings and equipment
(f.f.e) required for the provision of a fully-equipped-facility, ready for
operation (at the turn of the "key"). The Orange Book is equally appropriate
for all design-build contracts, but the particular features of the actual
project may have a major effect on the drafting of the contract Part II and
the other tender documents.
The tender documents must be drafted with care, particularly in respect of
quality, performance criteria and tests. If the tender documents are
deficient, the Employer may pay an exorbitant price for unacceptable
works. He must therefore ensure that adequate resources are allocated to
the skilled tasks of drafting the technical and commercial aspects of the
tender documents, and of analysing the tenderers' proposals.
Notes for Clarification (except where the context requires otherwise)
(a) In Part I of the Orange Book and in the Tender and Appendix:
(i) references to "Part II" refer to the Part II as written for the
particular contract, and
(ii) references to Clauses and Sub-Clauses refer to Clauses and
Sub-Clauses in the Conditions of Contract for the particular
contract, which will consist of the published Part I and the
contract Part II.
(b) In the comments contained in this Orange Book Guide:
(i) references to "Part I" refer to the Part I as published in the
Orange Book,
TENDERING PROCEDURE directed to the tenderers and would instruct them regarding such
requirements as:
(i) the extent of detail to be included in the preliminary designs in
FIDIC has published a document entitled "Tendering Procedure" which the Proposals, and
presents a systematic approach to the selection of tenderers and to the (ii) filling-in the Schedules.
obtaining and evaluation of tenders; the second edition was published in
1994. The document is intended to assist the Employer to receive sound (c) Tender form and Appendix to Tender: these would be based on the
example form in the third part of the Orange Book, as reproduced at
competitive tenders without deviations. Its Introduction concludes with the
the end of this Guide, taking account of the comments (in this Guide
comment that it can be readily adapted to any acceptable contract form.
and in the published Part II) on the various sub-clauses listed in the
Therefore, its advice is not repeated here; the following comments only
elaborate on the procedures applicable to the Orange Book. Appendix to Tender.
(d) Schedules, which might include questionnaires and/or tables: see
Experience has shown that, for contracts which include design,
the comments on Sub-Clause 1.1.1.6 in this Guide.
prequalification of tenderers is particularly desirable. It enables the
Employer to establish the competence of a known number of firms who (e) Conditions of Contract.
are subsequently invited to tender, and it encourages the better qualified (f) Employer's Requirements, which specify the Works, and which
firms to tender in the knowledge that they have a reasonable chance of should not instruct tenderers: see the comments on this important
success. Unrestricted tendering does not promote appropriate document in the published Part II, and throughout this Guide.
competition. Although the Employer can specify what will constitute a (g) Information and data on hydrological and sub-surface conditions at
responsive tender, tenderers will be reluctant to carry out their preliminary the Site, studies on environmental impact, and reports on any other
design to an adequate extent of detail if they consider that the number of investigations initiated by the Employer, all of which would normally
other tenderers gives them little chance of recovering their costs through not form part of the Contract.
being awarded the contract (especially if they feel entitled to suspect that
others may benefit from their design efforts). A technical requirement may be either objective or subjective. An objective
requirement is one which is precise, the requirement being defined in such
Unless tendering procedures are governed by the rules of a financing a way that it does not require the application of opinion or judgement: for
institution, the invitation to prequalify should ideally specify how many example, it may specify that an item of Plant shall maintain a defined area
prospective tenderers will be invited to submit tenders. This number within certain temperature limits. A subjective requirement is one which is
should be determined carefully, taking account of the amount of work imprecise, the requirement being defined in such a way that the
which could be required for the preparation of a compliant tender: whereas application of opinion or judgement is necessary: for example, it may
six might be appropriate for "simple" projects, three might be reasonable specify that an item of Plant is to use "the most up-to-date technology", a
for complex or major projects. very vague phrase.
The tender documents issued to the prequalified firms will normally include The Employer's Requirements should not contain subjective requirements,
the following, in the sequence listed: which tenderers would find difficult to interpret to the precision necessary
(a) Letter of invitation to tender. when designing and pricing the works. If the Employer's Requirements
(b) Instructions to Tenderers, including submission procedures and include a subjective requirement, a tenderer would probably wish to avoid
proposal requirements, all of which should not form part of the the problems which could arise due to possible differing interpretations of
Contract. These proposal requirements should define the such a requirement. It might be possible for the tenderer to ensure that the
documents to be included in each tenderer's Proposal. Whereas the details in the Proposal and/or Schedule are sufficiently clear, and to ensure
requirements which are to be applicable to the Contractor and/or to that these details are to be the binding interpretations of the requirement.
the Works (after the Contract becomes effective) must be included However, it is preferable to avoid this type of potential disagreement by
in the Employer's Requirements (f), these proposal requirements are ensuring that the Contract does not contain subjective requirements,
whilst ensuring that the Proposal contains sufficient information for the
Employer to verify that the tenderer is offering to provide Works which will Part II, not in an amended and/or retyped Part I, so that tenderers can
comply with the Employer's subjective requirements. If the Employer rapidly identify any changes and assess their effects.
wishes to specify subjective requirements, they may be included in In the preparation of the Orange Book, it was recognised that, while there
Instructions to Tenderers. The Employer's Requirements should contain are many sub-clauses which will be generally applicable. there are some
his objective requirements ' including the location of the Site, the definition sub-clauses which must necessarily vary to take account of the
and purpose of the Works, quality and performance criteria, and details circumstances relevant to the particular contract. A policy was therefore
such as those listed on page 3 of the published Part II. adopted in writing Part I, namely:
Each tenderer prepares a Proposal, as required in (b), showing how he (i) interim payments will be made as construction proceeds, but
proposes to satisfy the Employer's Requirements (f). The Proposal is then example wording for contractor-financed contracts is included in the
submitted, together with (c) and (d) duly completed, in accordance with published Part II;
any procedures instructed in (b). If the tenderer also issues a covering
(ii) if the wording in Part I necessitates further information., the sub-
letter, it should not contain anything relevant to an eventual contract,
clause makes reference to that information being contained in the
unless there is a statement in the Tender that this letter is part of the
Appendix to Tender: it does not specify whether the information has
Proposal.
been prescribed by the Employer or inserted by the tenderer,
Evaluation and comparison of tenders may be a major task, depending on because this aspect may be affected by tendering requirements;
the degree of detail ' in the Proposals and on the degree of precision and
(iii) if a sub-clause in Part I concerns a matter on which different terms
objectivity in the requirements contained in the tender documents, (b) and
could apply were:
(f). The Employer will need to study, evaluate and compare all aspects of
the Proposals, especially if they are very detailed. (a) users would find it more convenient to delete (or not invoke)
provisions which they did not want to apply, than to write
Unsuccessful tenderers will retain the copyright of their Proposals, unless
additional text, for incorporation in the contract Part II, if Part I
and until they dispose of it. The Employer must return their designs,
did not cover their requirements: therefore, as much text as
without copies being retained and without releasing details to the
possible was included in Part I;
successful tenderer, the Contractor.
(b) in cases where the application of (a) was thought to be
The Conditions of Contract
inappropriate, the sub-clause contains the provisions which
In the tender documents, the Conditions of Contract will be in two Parts, I were considered to apply to the option most often used; this
and II. Part I will incorporate the Orange Book, as published. There are two conclusion was often subjective, in part because of the
alternative ways to achieve this; either the actual published pages can form intention to prepare a Part 1 which could be adopted for a
part of the tender documents, or the following text can be used: wide variety of types of projects.
The Conditions of Contract Part I - General Conditions - shall be Elaborating on (a), it would be incorrect to assume that each and every
those forming Part I of the "Conditions of Contract for Design-Build provision in Part I is recommended as being applicable for most contracts.
and Turnkey", First Edition 1995, prepared by the Fédération In order to provide Conditions of Contract for use on the wide variety of
Internationale des Ingénieurs-Conseils (FIDIC), and shall be works mentioned above, it has been accepted that the Orange Book may
amended and added to in accordance with the following Part need to be adapted for each project. The latter process should not be
entitled "Conditions of Particular Application". used to prejudice the fair balance of responsibilities contained in the
The Conditions of Particular Application (the contract Part II) has to be published Part I, but merely to address those issues which inevitably relate
written for the particular contract, taking, account of the Orange Book to such matters as the law applicable to the contract, and the type and
(Including its Part II), any relevant comments in this Guide, and any location of the works. By, incorporating as much text as possible in Part I,
particular requirements of the project financing institution/bank(s), who less text should be necessary in the contract Part II. A smaller Part II
may have particular preferences and/or mandatory requirements. Any should be of benefit to tenderers and other users: there should be less to
amendments and additions to Part I should be contained in the contract write, and tenderers should have less new text to analyze.
Clause 1 The Contract Requirements is the base document which includes: the definition of the
location of the Site, the definition and purpose of the Works, quality and
performance criteria, details such as those listed on page 3 of the
1.1 published Part II, and the Contractor's particular obligations (training of
Definitions personnel to operate the Works, for example), in addition to any
prescribed in the Conditions of Contract. If these matters are specified
In the Contract (as defined below.) the words and expressions
elsewhere (in the Instructions to Tenderers, for example), and are therefore
defined below, shall have the meanings assigned to them, except
not contractually binding, they would be superseded by the Proposal.
where the context requires otherwise:
The Employer's Requirements should define the Site and the Works, which
Sub-Clause 1.1 consists of a number of definitions used throughout the
may require the inclusion of drawings. If the proposed Works are outlined
contract documents, set out in six groups by subject matter. The defined
on drawings, either dimensioned or otherwise, the Employer's
terms are readily identifiable by their capital initial letters. All tender
Requirements should define the extent to which (for example) the Works to
documents should be consistent in their use of these defined words and
be executed by, the Contractor must comply with the outline. The
expressions.
incorporation of design aspects into this document should be carried out
1.1.1 Documents with care, with full consideration being given to the consequences,
including any ultimate responsibility, for this design by the Employer.
1.1.1.1 "Contract" means these Conditions of Contract (Parts I
and II), the Employer's Requirements, the Tender, the The Employer's Requirements should include all relevant criteria, including
Contractor's Proposal, the Schedules, the Letter of quality, performance and testing., but need not specify, any, matters which
Acceptance, the Contract Agreement (if completed) would be imposed on the Works by, the applicable law. Quality should be
and such further documents as may be expressly specified in terms which are not so detailed as to reduce the Contractor's
incorporated in the Letter of Acceptance or Contract design responsibilities. not so imprecise as to be difficult to enforce, and
Agreement (if completed). not reliant on the future opinions of the Employer's Representative, which
tenderers may consider impossible to forecast. For example, specifying
This first definition prescribes which documents are to form the Contract,
"best quality", or other imprecise standards of quality, can give rise to
unless it is otherwise defined in the Contract Agreement; the order of
dispute, because the parties may, interpret these standards differently.,
precedence is specified in Sub-Clause 1.6. The contract documents are
see the above comments on Tendering Procedure (page 12). Further
then defined, in terms which indicate what they are expected to contain.
guidance relevant to the preparation of the Employer's Requirements is
However, mentioning these expected contents may have little effect. When
included in the published Part II, and throughout this Guide.
the Contract comes into force, the Contract consists of the actual
documents, and it is their contents which are relevant, not the contents The Employer's Requirements may also (but need not) include a
indicated in these definitions. Thus, for example, these definitions cannot "programme of work", if the Employer actually requires the Contractor to
prescribe the extent of detail required in the Proposal, which comes into adhere to particular programme requirements. For example, if the Works
existence before this Clause comes into effect. include work on an existing facility, the Contractor might he required to
phase the work in a particular way in order to minimise the disruption to
1.1.1.2 "Employer's Requirements" means the description of
the continuing operation of the facility (which might be a process plant);
the scope, standard, design criteria (if any) and
programme of work, as included in the Contract, and see also Sub-Clause 2.2. For most works on previously- unoccupied
any alterations and modifications thereto in (green-field) sites, there may be no need for this type of requirement, the
accordance with the Contract. time constraints being those arising from Clause 8.
The Employer's Requirements is the document where the Employer Prior to accepting the Tender, the Employer should consider whether there
specifies precise requirements for the completed Works, including all is any inconsistency between any tender documents; if so, it should be
matters not covered by the Conditions of Contract. The Employer's resolved. In particular, if there are any details in the Proposal or Schedules
which are inconsistent with particular aspects of the Employer's
Requirements, the inconsistency should be resolved by an agreed 1.1.1.5 "Contractor's Proposal" means the preliminary design
amendment. Anticipating, this possibility, each of definitions 1.1.1.2, submitted with the Tender, as included in the Contract.
1.1.1.5 and 1.1.1.6 refers to the version of the document "as included in
The Contractor's Proposal is the document containing the tenderer's
the Contract".
preliminary design, which he prepared and submitted with his Tender.
1.1.1.3 "Tender" means the Contractor's priced offer to the There is no indication whether the preliminary design is only a small-scale
Employer for the Works, as accepted by the Letter of outline, or includes fully detailed working drawings. The Employer cannot
Acceptance. insist on either, because a contract has not become effective, but he may
define (in the Instructions to Tenderers) what will constitute a responsive
1.1.1.4 "Appendix to Tender" means the completed appendix
tender. Either party might, on the one hand, prefer an outline, in order to
comprised in the Tender.
minimise the costs of tendering and/or of the adjudication of tenders; on
The Tender, and the Appendix to Tender, should be based on the example the other hand, either party might prefer detailed drawings, in order to
form in the third part of the Orange Book, as published and as reproduced reach agreement on the details. Although the Employer can specify what
at the end of this Guide. The Tender constitutes the tenderer's offer to will constitute a responsive tender, tenderers will be reluctant to carry out a
enter into a legally-binding contract. It is not a lengthy, document, but is costly, detailed preliminary design if they, consider that they have little
important because, as agreed by the Letter of Acceptance, it is the means chance of recovering their costs through being awarded the contract.
by which a legally-binding Contract comes into effect, unless and until the
The tenderer should identify any aspects where he proposes not to comply
Employer and Contractor enter into a Contract Agreement.
with any, particular aspect of the Employer's Requirements, so that these
The main page of the Tender starts by, identifying the tender documents deviations can be resolved before the Tender is accepted. If deviations are
(including any Addenda thereto) and the fixed lump sum price, which may not identified, and thus are not clarified in the Contract, the Employer's
he a total of a breakdown in a Schedule. In many, countries, the written Requirements take precedence: see Sub-Clause 1.6. However, if the
price will prevail over the amount expressed in figures. Contractor's Proposal includes clarification of any, matter (for example,
quality assurance details) which is incorporated into the Contract and is
The second paragraph refers to the appointment of the Dispute
consistent with the other Contract documents, the matter becomes an
Adjudication Board: see Sub-Clause 20.3.
obligation and either party can enforce it.
The third paragraph states the date up to which the Tender is valid for
Prior to accepting the Tender, the Employer should consider whether there
acceptance. This validity date should be assessed by the Employer, taking
is any inconsistency between any, tender documents; if so, it should be
account of his procedures and the time necessary for adjudication of
resolved. In particular, if there are any, details in the Proposal or Schedules
tenders, including studying tenderers' design proposals. In some
which are inconsistent with particular aspects of the Employer's
countries, the validity, undertaking may be unenforceable, other than
Requirements, the inconsistency should be resolved by an agreed
through the calling of the tender security.
amendment. Anticipating this possibility, this (and the next) definition refers
The Appendix to Tender is referred to in the many, Sub-Clauses which to the version of this document "as included in the Contract".
require specific data in order for them to become effective: this data
1.1.1.6 "Schedules" means in the information and data
includes the parties' names and various amounts and percentages. There
submitted with the Tender, as included in the Contract.
is no indication whether data is to be provided by the Employer, prior to
issuing the tender documents., or by, the tenderer. When preparing the 1.1.1.7 "Schedule of Payments" means the Schedule
Appendix to Tender, the Employer has to decide what items to complete. designated as such (if any), referred to in Sub-Clause
Generally, he would include data for Sub-Clauses 1.1.2.1, 1.1.2.3, 1.4, 13.4.
1.8, 2.2, 4.2, 8.6, 11.4, 18.1 and 18.3 as a minimum, and would probably,
The Schedules may include a questionnaire, tables and/or lists prepared
include (in the Instructions to Tenderers) any, criteria relevant to the
by the Employer, issued with the tender documents and completed by the
completion of some of the other items. However, he might prefer to
tenderer. The form of the Schedules will depend on the type of Works and
complete all items other than 1.1.2.2 and the tables.
the information and data which the Employer requires, both for the
adjudication of tenders and for inclusion in the Contract. Typically, the post-tender discussions and correspondence, including clarification of any
Schedules might include some of the following: inconsistency between tender documents.
Schedules of Technical Particulars When the Contract becomes effective, the tenderer becomes the
"Contractor", and his Proposal becomes the "Contractor's Proposal",
Schedule of Designers
subject to any accepted changes thereto which are incorporated in the
Schedule of Subcontractors Letter of Acceptance.
Schedules of Supply-Only Materials/Plant/Spares/ Even if the applicable law does not necessitate a Contract Agreement, the
latter is often considered advisable, in order to record what constitutes the
Tools/etc
Contract. A hasty award may give rise to problems (in the event of a future
Schedule of Payments dispute) over the meaning and inter-relationship of post-tender pre-award
communications. Although neither party can insist on a change in the
Schedule of Provisional Sums
Contract, they should be able to agree how these communications may be
Schedule of Insurances (General Terms) consolidated into coherent documentation.
Schedule of Dispute Adjudication Board membership 1.1.2 Persons

If the Schedules, as incorporated into the Contract, define any matter 1.1.2.1 "Employer" means the person named as such in the
consistent with the other Contract documents, the matter becomes an Appendix to Tender and the legal successors in title to
obligation and either party can enforce it. such person, but not (except with the consent of the
Contractor) any assignee of such person.
1.1.1.8 "Letter of Acceptance" means the formal acceptance
by the Employer of the Tender. 1.1.2.2 "Contractor" means the person whose Tender has
been accepted by the Employer and the legal
1.1.1.9 "Contract Agreement" means the contract agreement successors in title to such person, but not (except with
(if any) referred to in Sub-Clause 1.5. the consent of the Employer) ally assignee of such
The Letter of Acceptance is the document whereby the Employer accepts person.
the Tender. In some countries, if it only says "For and on behalf of . . . . we 1.1.2.3 "Employer's Representative" means the person
accept your Tender reference . . . . . the Contract may become effective appointed by the Employer to act as Employer's
immediately, unless the tenderer had included more than one option, with Representative for the purposes of the Contract and
the result that the quoted words would not make it clear what was being named as such in the Appendix to Tender, or other
accepted. person appointed from time to time by the Employer
The Contract Price is defined (in 1.1.5.1) as the sum stated in the Letter of and notified as such to the Contractor.
Acceptance. The Letter must therefore specify, the Contract Price, identify 1.1.2.4 "Contractor's Representative" means the person (if
which of any options are to apply, and list the documents which are to any) named as such in the Contract or other person
constitute the Contract. This wording may actually constitute a "counter- appointed from time to time by the Contractor under
offer", because it incorporates changes which have only been agreed Sub-Clause 4.3.
tentatively: it is not accepting the original Tender as submitted. Following a
counter-offer Letter of Acceptance, the Contract only becomes effective The parties to the Contract are the Employer and the Contractor, and not
when it has been unreservedly accepted by the tenderer. any assignee to which the other party has not given prior consent. Under
Sub-Clause 1.8, consent shall be in writing and not be unreasonably
In the event of protracted negotiations, it may be necessary for a withheld or delayed. It is advisable to take legal advice before seeking or
memorandum of under-standing to be jointly agreed, for inclusion in the giving consent to an assignment.
Letter of Acceptance. The memorandum would record the outcome of any
Each party will have its Representative, who may be named in the tender Three dates are defined, on which all time-related matters are to be based.
documents and thus in the Contract. The Employer should name his Administration of the Contract may be facilitated by, redefining these
Representative in the Appendix to Tender; the tenderer may propose his dates, in the Contract Agreement, as particular calendar dates. Part I
Representative in his Proposal or Schedule. Each party can appoint a generally refers to the Base Date as the reference date of the information
replacement Representative, but the appointment of the Contractor's available at time of tender.
Representative is subject to the prior consent of the Employer's
In many countries, the Effective Date will be when the Letter of Acceptance
Representative under Sub-Clause 4.3.
is issued. However, Part I does not incorporate this definition in case it is
Each party could be a firm, corporation or other “legal person”, under Sub- inconsistent with the laws of other countries; under any law, the Effective
Clause 1.3. Similarly, the Employer's Representative may be an individual or a Date will be definable precisely. FIDIC acknowledges that some provisions
firm or corporation: for example, a firm of independent consulting engineers. in Part I may, have different consequences in different legal jurisdictions.
1.1.2.5 "Subcontractor" means any person named in the 1.1.3.4 "Time for Completion” means the time for completing
Contract as a subcontractor, manufacturer or supplier the Works or a Section (as the case may be), and
for a part of the Works or any person to whom a part passing the Tests on Completion, as stated in the
of the Works has been sub-contracted in accordance Appendix to Tender (or as extended under Sub-Clause
with Sub-Clause 4.5, and the legal successors in title 8.3), calculated from the Commencement Date.
to such person, but not any assignee of such person.
1.1.3.5 "Contract Period” means the period from the
It is not envisaged that the Contract will necessarily identify every Commencement Date to the date 365 days after the
subcontractor, manufacturer and supplier, but some may need to be date on which the whole of the Works shall have been
recorded at this stage, when the parties enter into the Contract. Part I completed as certified by the Employer’
contains no provisions for the procedures under which the Employer Representative under Clause 10 (or as extended under
nominates a Subcontractor, because of the problems associated with Sub-Clause 12.3).
design responsibility and the perceived inconsistency between this
In some previous forms of contract, the period after completion was given
nomination procedure and contractor-designed works.
a name which gave an incorrect implication of the Contractor's
1.1.2.6 "Dispute Adjudication Board" means the person or responsibilities; the definition of "Contract Period" avoids any implication.
persons named as such in the Contract, or other The Contract Period is the actual period up to completion (not the Time for
person or persons appointed from time to time under Completion) of the whole of the Works, plus a defects liability period of 365
Sub-Clause 20.3. days. If the latter period is to be other than 365 days, the contract Part II
can amend this definition accordingly.
See the comments on Clause 20 and the Model Terms of Appointment
reproduced thereafter. The effect of this definition is that the defects liability period for completed
Sections will be more than 365 days, because the Contractor's liability to
1.1.3 Dates, Times and Periods
rectify a defective Section extends to the same date as applies to defects
1.1.3.1 "Base Date" means the date 28 days prior to the latest in the other parts of the Works. This extra liability period may seem
date for submission of the Tender for acceptance by onerous, but it removes some potential anomalies. If the Employer finds a
the Employer, tenderer keen to amend this provision, he may be suspicious that the
tenderer expects to provide a Section which contains defects which will
1.1.3.2 "Effective Date" means the date on which the Contract
not become apparent during the first 365 days after completion and taking
entered into legal force and effect.
over.
1.1.3.3 "Commencement Date" means the date on which the
Contractor receives the notice to commence issued by If the Employer requires to take over the Works in stages, he should define
the Employer's Representative under Sub-Clause 8.1. each Section in the Appendix to Tender. It is usually preferable for the
definitions of the Sections to be such that they do not together constitute
the whole of the Works; the Appendix to Tender would define (i) a Time for Employer., both types of tests would demonstrate whether their operation
Completion for each Section, and (ii) the Time for Completion of the whole complies with prescribed performance criteria, so they may all be called
of the Works. If the Works are divided totally into Sections, with every part "performance tests". The latter phrase is not used in Part I, which merely
of the Works being part of one or other Section, it is possible (but bad assumes the following sequence of events:
practice) for there to be no Taking-Over Certificate for the Works. In this
(i) the Contractor completes the Section or Works.
(avoidable) event, if a Taking-Over Certificate has been issued for each
Section, "the date on which the whole of the Works shall have been (ii) the Contractor carries out the tests defined as the Tests on
completed as certified by the Employer's Representative under Clause 10” Completion;
can be derived from the effect of all Taking-Over Certificates, thus defining
(iii) the Employer takes over the Section or Works., and
the Contract Period. However, it is advisable to avoid this method of
derivation, by the issue of a Taking-Over Certificate for the Works. (iv) the Employer carries out the tests defined as the Tests after
Completion.
1. 1. 3. 6 "day" means a calendar day and "year" means 365 days.
Put another way, it is necessary, to decide on the details and timing of
Since "day" means any (working or non-working) day from midnight to
each test, before deciding whether it is to be one of the Tests on
midnight, time periods specified in days commence on the beginning of
Completion or one of the Tests after Completion. For example, if the

the day following the date of the act which constitutes the starting-point.
Employer requires all performance tests to be passed before his Taking-
However, "year" is any 365 days, not the calendar year from 1 January to
Over, they, may all be classified as Tests on Completion; and either there
31 December: time periods specified in years commence on the beginning
might be no Tests after Completion. or they might be repetitions of (some
of the day following the date of the act which constitutes the starting-point,
or all of) the Tests on Completion. For some types of Works, it may be
and not from the beginning of the next calendar year.
appropriate for the Employer's Requirements to specify the extent of the
1.1.4 Tests and Completion Employer's participation in performing the Tests on Completion, and/or the
Contractor's participation in performing the Tests after Completion.
1.1.4.1 "Tests on Completion” means the tests specified in the
Contract and designated as such, and any other such When specifying these Tests, it may be necessary to consider the likely
tests as may be agreed by the Employer's effect of any relevant factors at the time of testing. For example, a Section
Representative and the Contractor or instructed as a may need to be tested when adjacent parts of the Works are incomplete,
Variation, which are to be carried out before the Works or testing may be required to be carried out at a time when conditions
or any Section are taken over by the Employer. (such as river flows) are below the design criteria.
1.1.4.2 "Taking-0ver Certificate” means a certificate issued 1. 1.5 Money and Payments
under Clause 10.
1.1.5.1 "Contract Price" means the sum stated in the Letter of'
1.1.4.3 “Tests after Completion " means the tests specified in Acceptance as payable to the Contractor for the
the Contract and designated as such, which are to be design, execution and completion of the Work-s and
carried out after the Works or any Section are taken the remedying of any defects in accordance with the
over by the Employer. provisions of the Contract.
1.1.4.4 "Performance Certificate" means the certificate issued by Since the "Contract Price" is defined as the amount agreed by the Letter of
the Employer's Representative under Sub-Clause 12.9. Acceptance, it will probably not be the final amount due under the
The Employer's Requirements should describe the Tests on Completion Contract (for example, because of Variations). Adjustments are described
and the Tests after Completion which he considers necessary to as being added to, or deducted from, the Contract Price.
demonstrate that the Plant and other Works satisfy the prescribed criteria: For this type of contract, the Contract Price is usually a lump sum and is
see Clauses 9 and 11. The Tests on Completion are the ones which will not subject to remeasurement: see Sub-Clause 13. 1. It is sometimes
demonstrate whether the Plant and other Works can be taken over by the considered appropriate for the lump sum to be two or more separate
sums, one in each of the currencies of payment. In this case, the Contract 1.1.5.9 "Final Statement" means the agreed statement,
Price may, actually be expressed as the total of these sums, without defined in Sub-Clause 13.11
converting them to a single currency amount using defined rate(s) of
Note that the "Final Statement" is defined as the agreed statement, not the
exchange: for example, six million francs plus two million dollars.
Contractor's draft final statement. .
1.1.5.2 "Local Currency” means the currency of the Country.
1.1.6 Other Definitions
1.1.5.3 "Foreign Currency” means a freely convertible
1.1.6.1 "Construction Documents" means all drawings,
currency, named in the Appendix to Tender as a
calculations, computer software (programs), samples,
currency in which part of the Contract Price is payable,
patterns, models, operation and maintenance
but not the Local Currency.
manuals, and other manuals and information of a
Currencies of payment, including Foreign Currency (or Currencies), are to similar nature, to be submitted by the Contractor.
be specified in the Appendix to Tender, either by the Employer or (subject
The Construction Documents are defined as all drawings, etc, which are
to the Instructions to Tenderers) by each tenderer.
"to be submitted by, the Contractor"; they may, include documents on
1.1.5.4 "Retention Money" means the accumulated retention paper and electronic media. The Employer's use of these documents is
monies retained by the Employer under Sub-Clause constrained by Sub-Clause 1.10. If the submission requirements of Sub-
13.3. Clauses 5.2, 5.5, 5.6 and 5.7 are to be fully effective, a more detailed
definition of the documents to be submitted must be included in the
1.1.5.5 "Provisional Sum" means a sum (if any) specified in the
Contract: either in the Employer's Requirements or in the Contractor's
Contract and designated as such, for the execution of
Proposal.
any part of the Works or for the supply of Plant.,
Materials or services The Employer's Requirements should describe the extent of detail required
for the submissions to the Employer's Representative, who may not want
Provisional Sums are the subject of Sub-Clause 14.5. which will only apply
to review every minor detail. For example, the Employer's Representative
if Provisional Sums are specified in the Contract: in the Employer's
may only want to receive the general arrangement drawings; he ma also
Requirements, the Contractor's Proposal or a Schedule.
want to review drawings of the reinforcement for concrete; and he might
1.1.5.6 ”Cost” means all expenditure properly incurred (or to even want to receive the bending schedules detailing this reinforcement,
be incurred) by the Contractor, whether on or off the although he would then have to ensure that sufficient staff were available
Site, including overhead and similar charges, but does to review them. See Sub-Clause 52
not include profit
1.1.6.2 "Variation" means any alteration and/or modification to
"Cost" is defined as including overhead charges, but profit is excluded. the Employer's Requirements, which is instructed by
Overhead charges may include reasonable financing costs incurred by, the Employer's Representative or approved as a
reason of payment being received after expenditure. In some countries, variation by the Employer's Representative, in
financing, costs might be due even though the Contractor had sufficient accordance with Clause 14.
funds at his disposal, and therefore had no need to borrow.
Variations are defined as any change to the Employer's Requirements, the
1.1.5.7 ”Interim Payment Certificate ”means any payment change having been instructed or approved under Clause 14. Therefore,
certificate issued by the Employer’s Representative Part I does not need to contain provisions empowering the Employer's
under Clause 13, other than the Final Payment Representative to change specific requirements (e.g., tests) which are to
Certificate. be specified in Employer's Requirements. Clause 14 provides the
1.1.5.8 "Final Payment Certificate" means the payment procedures for amending anything specified in the Employer's
certificate issued by the Employer’s Representative Requirements, and the consequences in respect of time and payment. It is
under Sub-Clause 13.13 advisable to seek prior agreement of the consequences of each Variation,
especially if it affects the scope or purpose of the Works, but it may not be When preparing the tender documents, the Employer may wish to
possible to do so. See comments on Clause 14. consider whether he will be taking over the Works in stages. If so, he
should define each Section in the Appendix to Tender, and include the
1.1.6.3 "Works" means the Permanent Works and the
table shown at the end of the example Appendix, as published and as
Temporary Works or either of them as appropriate.
reproduced at the end of this Guide. Precise geographical definitions of
1.1.6.4 "Permanent Works" means the permanent works to be Sections are advisable, so that the extent of the parties' responsibilities
designed and executed in accordance with the after taking over are clear.
Contract.
It is usually, preferable for the definitions of the Sections to be such that
1.1.6.5 "Temporary Works" means all temporary 14,orks of they do not together constitute the whole of the Works. The Appendix to
every kind (other than Contractor's Equipment) Tender would define (1) a Time for Completion for each Section, and (ii) the
required for the execution and completion of the Works Time for Completion of the whole of the Works. See the comments after
and the remedying of any defects. Sub-Clause 1.1.3.5, above.
1.1.6.6 "Plant" means machinery and apparatus intended to If no Sections are defined in the Appendix to Tender, the Part I provisions
form or forming part of the Permanent Works, relating to Sections will not apply.
including the supply-only items (if any) which are to be

supplied by, the Contractor as specified in the 1.2 Headings and Marginal Notes
Contract. The headings and marginal notes are not part of these Conditions,
1.1.6.7 "Materials" means things of all kinds (other than Plant) and shall not be taken into consideration in their interpretation.
to be provided and incorporated in the Permanent The headings and marginal sub-headings are inserted for the convenience
Works by the Contractor, including the supply-only of the reader, and do not influence the meaning of the text.
items (if any) which are to be supplied by the
Contractor as specified in the Contract. 1.3 Interpretation
1.1.6.8 "Contractor's Equipment" means all machinery, Words importing persons or pat-ties shall include firms and
apparatus and other things (other than Temporary corporations and any organization having legal capacity. Words importing
Works,) required for the execution and completion of the singular also include the plural and vice versa where the context
the Works and the remedying of any defects, but requires. Words importing one gender also include other genders.
does not include Plant, Materials, or other things Unless inconsistent with the context, the word "person", and other words
intended to form or forming part of the Permanent normally taken as indicating a person or persons, may refer to an individual
Works. or to a firm, corporation or other organization having legal capacity. This
1.1.6.9 "Section" means a part of the Works specifically principle applies throughout the Contract. Where reference is intended to
defined in the Appendix to Tender as a Section (if any). relate to an individual only, and where a reference is intended to relate to
either singular or plural (but not both), the references have to be expressed
1.1.6.10 "Site" means the places provided by the Employer clearly. The final sentence, which refers to the genders (masculine,
where the Works are, to be executed and to which feminine, neuter), takes account of grammatical variations between some
Plant and Materials are to be delivered, and any other of the various languages which may be used as contract languages.
places as may be specifically designated in the
Contract as forming part of the Site. 1.4 Law and Language
1.1.6.11 "Country "means the country, in which the Works are The law of the Contract is named in the Appendix to Tender.
to be executed and to which Plant and Materials are to Where versions of the Contract are prepared in different languages,
be delivered. the version which is in the ruling language named in the Appendix to
Tender shall prevail. The language for day to day communications 1.6 Priority of Documents
shall be as stated in the Appendix to Tender
The document forming the Contract are to be taken as mutually
These details must be included in the Appendix to Tender. The law of the explanatory of one another. If there is an ambiguity or discrepancy in
Contract may affect the interpretation of Part I, but should not cause the documents, the Employer's Representative shall issue any
ambiguity for any particular contract. It should be noted that, under some necessary clarification instruction to the Contractor, and the priority
jurisdictions, certain provisions may be implied into the Contract. FIDIC of the documents shall be as follows:
acknowledges that some provisions in Part I may have different
(a) The Contract Agreement;
consequences in different legal jurisdictions.
(b) The Letter of Acceptance;
1.5 Contract Agreement
(c) The Employer's Requirements;
Either party shall, if requested by the other party, execute a Contract
Agreement, in the form annexed with such modifications as may be (d) The Tender;
necessary to record the Contract. The costs of stamp duties and
(e) The Conditions of Contract, Part II;
similar charges imposed by law shall be borne by the Employer.
(f) The Conditions of Contract, Part I;

A hasty award may give rise to problems (in the event of a future dispute)
over the meaning and inter-relationship of communications exchanged (g) The Schedules; and
between the respective submission dates of the Tender and Letter of (h) The Contractor's Proposal.
Acceptance. Therefore, it is generally advisable to execute a Contract
Agreement, in order to record what constitutes the Contract. In some The order of precedence of the documents contained in the Contract can
countries, a Contract Agreement is an essential part of an enforceable have a significant effect on a party's obligations in respect of any matter
contract. However, it was not thought appropriate to include an obligation where he was not aware of an inconsistency when he entered into the
in Part I. Contract. This Sub-Clause provides for the possibility that discrepancies
may be discovered between contract documents, with the result that
Unless disallowed by law, the costs imposed by law on the execution of
some provisions may be invalidated by other provisions. Legal systems
the Contract Agreement are borne by the Employer. The law may require
differ in the extent to which the Courts will seek to interpret a contract so
each party to bear his own costs, with the possible exception of any
as to avoid totally invalidating particular provisions.
expensive procedures which one party seeks to impose on the other. For
example, it might be unreasonable for one party to require all the Under the Orange Book, the Contractor is responsible for design and
signatories to attend a Joint signing ceremony. takes the financial risk arising from the lump-sum pricing; he may therefore
have included many details in his tender Proposal. However, there is a
The form for the Contract Agreement should be appended, in the tender
possibility that (perhaps inadvertently) some parts of the Contractor's
document, to the contract Part II. An example form is included at the end
Proposal are inconsistent with some parts of the Employer's
of the Orange Book, and is reproduced at the end of this Guide. As
Requirements. In this event, this Sub-Clause resolves the problem in
mentioned in the published Part II, the parties may agree to include
favour of the Employer, by making the Employer's Requirements take
particular definitions: for example, the Contract Price and/or the dates
precedence over all documents other than those issued after receipt of the
defined in Sub-Clause 1.1.3.
Tender.
In some countries, the method of execution of the Contract Agreement
If the Employer's Requirements contain an imprecise requirement, a
affects the duration of the parties' liabilities.
tenderer may wish to avoid the problems which could arise due to possible
Under Sub-Clause 1.6, the Contract Agreement takes precedence over differing interpretations of such a requirement. For example, the
the terms of the Contract which became effective through the Letter of Employer's Requirements may specify that an item of Plant is to use "the
Acceptance. most up-to-date technology", a very vague phrase. In this case, if the
details in the Proposal and/or Schedule are sufficiently clear, there might
be neither an ambiguity nor a discrepancy for resolution under this Sub- all notices to be given to the Employer or to the Employer's
Clause, by reason of these details being knowingly agreed (by the Letter of Representative by the Contractor, shall either be delivered by hand
Acceptance) as being the most up-to-date technology against written acknowledgement of receipt, or be sent by airmail or
one of the agreed systems of electronic transmission. The
However. it is preferable to avoid this type of potential disagreement, by addresses for the receipt of such communications shall be as stated
ensuring that the Contract does not contain imprecise requirements, and in the Appendix to Tender.
by ensuring that the Proposal contains sufficient information for the
Employer to verify that the tenderer is offering to provide Works which will The first sentence requires formal communications to be in writing, and
comply with the Employer's actual (if imprecise) requirements. See the imposes the general obligation for promptness. Therefore, this obligation
above comments on Tendering Procedure (page 12). does not need to be repeated in the many relevant Sub-Clauses. In view of
recent developments in electronic communications, and the possibility that
If a problem arises from a discrepancy between two documents, there will one of the parties might not be equipped to receive certain types of such
usually be no change in the Contract Price, because Sub-Clause 1.6
communications, the systems agreed by both parties are to be stated in
prescribes how the discrepancy is to be resolved. If there is an ambiguity the Appendix to Tender. A possible procedure would be for the Employer
or discrepancy within one of the contract documents, the Employer's to name the systems which he is prepared to accept, and each tenderer
Representative may wish to consult with the Contractor in an endeavour to
could then delete the systems which he cannot utilise. The parties might
reach agreement. If agreement is not achieved, the Employer's need to consider how some of the available forms of communications can
Representative is required to issue a clarification or instruction, with which
be authenticated, or their source verified.
the Contractor must comply: see Sub-Clause 3.4.
1.9 Provision of Construction Documents
1.7 Documents on Site
The Construction Documents shall be in the custody, and care of
The Contractor shall keep on the Site one complete set of the the Contractor. Unless otherwise stated in the Employer's
documents forming the Contract, the Construction Documents, Requirements, the Contractor shall provide six copies for the use of
Variations, other given or issued under Sub-Clause 1.8 and the
the Employer's Representative and assistants (as referred to in Sub-
documents mentioned in Sub-Clause 5.4. The Employer, the Clause 3.3).
Employers Representative and assistants (as referred to in Sub-
Clause 3.3) shall have the right to use such documents at all As producer of Construction Documents, the Contractor bears ultimate
reasonable times. responsibility for their care, and should therefore ensure that back-up
copies are safely stored. Sub-Clause 18.2 requires Construction
This administrative provision may be most applicable if the Employer's
Documents to be insured.
Representative does not have his own facilities on the Site.
1.10 Employer's Use of Contractor's Documents
1.8 Communications
Copyright in the Construction Documents and other design
Wherever provision is made for the giving or issue of any notice,
documents made by or on behalf of the Contractor shall (as
instruction, consent, approval, certificate or determination by any
between the parties) remain the property of the Contractor. The
person, unless otherwise specified such communication shall be in
Employer may, at his cost, copy, use and communicate any such
writing and shall not be unreasonably withheld or delayed.
documents (including making and using modifications) the purposes
Wherever provision is made for a communication to be "written" or of completing, operating, maintaining, altering, adjusting and
"in writing", this means any hand-written, type written or printed repairing the Works. They shall not, without the Contractor's
communication, including the agreed systems of electronic consent, be used, copied or communicated to a third party by the
transmission stated in the Appendix to Tender. Employer or the Employer's Representative for other purposes.
All certificates, notices or written orders to be given to the Copyright is the intellectual property right of an originator to control the
Contractor by the Employer or the Employer's Representative, and copying and use of his work. Generally, contracts which include the
production of original designs should clarify the intellectual property rights (c) the Works will include process plant requiring some form of licence.
(copyright) of the parties, including the extent of one party's entitlement to see comments after Sub-Clause 5.9.
use the design produced by the other party as part of the contract.
1.11 Contractor's Use of Employer's Documents
Sub-Clauses 1.10 and 1. 11 set out the FIDIC policy: designers should be
Copyright in the Employer’s Requirements and other documents
able to retain the copyrights of their designs, and their clients should be
issued by the Employer or the Employer’s Representative to the
able to use their designs for the original project and its expansion. The
Contractor shall (as between the parties) remain the property of the
qualification "(as between the parties)" does not prejudice the intellectual
Employer. The Contractor may at his cost copy, use and
property rights, in respect of their designs, of third parties such as communicate any such document for the purposes of the Contract.
Subcontractors. They shall not, without the Employer's consent, be used, copied or
Under Sub-Clause 1.1.6.1, Construction Documents include drawings, communicated to a third party by, the Contractor, except as
calculations, computer software (programs), samples, patterns, models, necessary for the purposes of the Contract.
operation and maintenance manuals, and other manuals and information Sub-Clause 1.11 mirrors 1.10: the Employer is given rights, in respect of the
of a similar nature. When preparing the tender documents, the Employer documents he provides to the Contractor, which are similar to those which the
may wish to consider the future uses of these documents. For example,
Contractor receives in respect of the documents he provides. The qualification

certain projects may involve writing computer software which cannot be "(as between the parties)" does not prejudice the intellectual property rights, in
guaranteed free of errors; specific warranties and/or access to source respect of their designs, of third parties such as the Employer's
code may be appropriate. Representative. Under Sub-Clause 1.8, the Employer gives consent in writing,
Under Sub-Clause 1.8, the Contractor gives consent in writing, which shall which shall not be unreasonably withheld or delayed.
not be unreasonably withheld or delayed. It may be reasonable for the 1.12 Confidential Details
Contractor to withhold consent if the Employer declines to accept
reasonable conditions in respect of secrecy and restrictions on use. The Contractor shall not be required to disclose, to the Employer or
the Employer’s Representative, the confidential details listed in the
The Employer is entitled to use the Contractor's documents for the Works, Appendix to Tender.
but not for other purposes. Unless the Contractor consents, the Employer
is not entitled to use the Contractor's documents for the provision of Although the Employer might like to have all details of the Works/Plant
similar works, on the Site or elsewhere. In particular, if a further stage or which are going to be supplied to him, the Contractor and Subcontractors
expansion of the Works is executed, the Contractor's documents may be will wish to keep confidential certain processes which they regard as trade
used as records of construction in order to determine the details of the secrets. In order to reduce the likelihood of disagreement as to what is to
existing facilities, but should not be used as working drawings for be kept confidential, confidentiality is limited to the extent described
construction of identical facilities. (usually by the tenderer) in the Appendix to Tender.
Modification of this wording, taking account of the Country's law, may be 1.13 Compliance with Statutes, Regulations and Laws
necessary if: The Contractor shall, in all matters arising in the performance of the
(a) the Employer will require more use of the Construction Documents Contract, comply with, give all notices under, and pay all fees
than as permitted in this Sub-Clause: he should then indemnify the required by, the provisions of any national or state statute,
Contractor from liability which might arise from inappropriate use ordinance or other law, or any regulation of any legally constituted
(the design might be used for a purpose not envisaged by the public authority having jurisdiction over the Works. The Contractor
designer); shall obtain all permits, licences or approvals required for any part of
the Works, in reasonable time taking account of the times for
(b) the Construction Documents will include computer software delivery of the Plant and Materials and for completion of the Works.
(programs) which the Employer will use other than as permitted in The Employer and the Contractor shall comply with the laws of each
this Sub-Clause; or country, where activities are performed.
In order to facilitate the various administrative procedures imposed by the a relevant foreign law a breach of Contract. The party, in breach would
Country's law, the Employer may wish to complete any procedures which then be unlikely to be able to be protected from any effects of the breach
can be completed prior to the Contract becoming effective, and advise of the law, and might have to compensate the other party for these effects.
tenderers of the outcome. In particular, the Employer should apply for any
1.14 Joint and Several Liability
essential. licences which can be procured prior to inviting tenders: for
example, planning consents and building permits. Tenderers may be If the Contractor is a joint venture or consortium) or two or more
reluctant to incur expense in the preparation of their tenders if they are persons, all such persons shall be jointly and severally liable to the
uncertain whether statutory requirements can be satisfied, and there may Employer for the fulfilment of the terms of the Contract. Such
also be time-related constraints. Part 1 makes no reference to these pre- persons shall designate one of them to act as leader with authority
contract procedures because they are pre-contract and because of the to bind the joint venture (or consortium) and each of its members.
difficulty of referring precisely to Country- specific requirements. The composition or the constitution of the joint venture (or
consortium) shall not be altered without the prior consent of the
Thereafter, this Sub-Clause makes the Contractor responsible for Employer.
complying with the administrative procedures, many of which may require
information which originates from the Contractor. He becomes responsible for This Sub-Clause will only, be effective if the Contractor is a joint venture or
ensuring that the Works conform with any statutory requirements (under Sub- consortium, the precise definition of these terms being subject to the
Clauses 5.3 and 5.4), and that any statutory inspection requirements are applicable law. When preparing the tender documents, the Employer may
satisfied. Sub-Clause 8.4 entitles the Contractor to extensions of time for wish to assess his requirements, taking account of any information on the
unforeseeable delays caused by public authorities; their refusal of an essential status of the prospective tenderers. They may prefer some other
licence could constitute force majeure under Clause 19. arrangement, namely, the appointment of a delegated representative (an
individual) to act as leader, rather than one of the members.
If certain laws specifically relate to the Works, the Employer might wish to
consider drawing them to the attention of tenderers, and/or dealing with Sub-Clause 1.14 provides the minimum appropriate provisions, requiring
their effects in the Contract. For example, major works may require each of the members to be fully liable and to appoint and empower a
legislation before they can legally be initiated, and/or may require various leader, and giving the Employer some protection from changes in the
agreements with other affected parties. It is not envisaged that the status of the joint venture or consortium. Under Sub-Clause 1.8, the
Employer needs to list out all relevant legislation for the convenience of Employer gives consent in writing, which shall not be unreasonably
tenderers or the Contractor. If the Employer only lists some of the relevant withheld or delayed.
legislation, the limited extent of the list should be stated, for avoidance of
doubt.
Clause 2 The Employer
When preparing the tender documents, the Employer may also need to
consider what procedures are relevant to the continuing operation of the 2.1
Works, since they may not be covered by this Sub-Clause. For example, General Obligations
the wording may need to be amended if the Works include process plant
The Employer shall provide the Site and shall pay the Contractor in
requiring some form of operational licence (see comments under Sub-
accordance with Clause 13.
Clause 5.9). However, provision of a process licence may be a
requirement of any national or state statute, ordinance or other law, or any This wording emphasises the two main obligations, although they are
regulation of any legally constituted public authority having jurisdiction over subsequently repeated. Obligations also arise under other Clauses of the
the Works; if so, this Sub-Clause might be sufficient to impose an Conditions of Contract.
obligation on the Contractor to procure it, although possibly only for the
Contract Period.
Although the law applicable to the Contract would require the parties to
comply with it, the last sentence of Sub-Clause 1.13 also makes breach of
2.2 constructed. For example, if the Site is totally surrounded by land owned
Access to and Possession of the Site by third parties, the Contract should clarify how the Contractor is to be
granted right of access along their lands.
The Employer shall grant the Contractor right of access to, and
possession f, the Site within the time stated in the Appendix to The practical difficulties in getting to and from the Site are to be solved by
Tender. Such right and possession may not be exclusive to the the Contractor, who is held responsible for determining and maintaining his
Contractor. chosen access routes: see Sub-Clauses 4.12 and 4.13.
If the Contractor suffers delay and/or incurs Cost from failure on the 2.3
part of the Employer to grant right of access to or possession of' the Permits, Licences or Approvals
Site, the Contractor shall give notice to the Employer's
Representative. After receipt of such notice the Employer's The Employer shall, at the request and cost of the Contractor, assist
Representative shall proceed in accordance with Sub-Clause 3.5 to him in permits, licences or approvals, which are required for any
agree or determine: part of the Works for delivery (including clearance through customs)
of Plant, Materials and Contractor's Equipment, and for the
(a) any extension of time to which the Contractor is entitled completion of the Works. Such requests may, also include requests
under Sub-Clause 8.3, and for the Employer's assistance in applying for any necessary
(b) the amount of such Cost plus reasonable profit, which shall government consent to the export of Contractor's Equipment when
be added to the Contract Price, it is removed from the Site.
and shall notify the Contractor accordingly. Under the law of the Country, permits, licences or approvals may be
required for the design and execution of the Works (see Sub-Clause 1.
The Employer's first obligation is to make the Site available to the 13), and/or for imports and exports. For some of these matters, the
Contractor within a prescribed time, which is to be stated in the Appendix Contractor may need assistance from the Employer in the preparation and
to Tender. If the Contract does not specify otherwise, the Contractor will submission of his applications.
be entitled to possession of all of the Site from the end of the prescribed
period of time. If possession is not to be exclusive to the Contractor, the The Employer has no obligation under Sub-Clause 2.3 unless and until he
situation should be clarified in the Employer's Requirements. receives the Contractor's request for assistance. The Employer does not
then become liable in. any way for the success or otherwise of the
Although the Contractor may not require access for his (Contractor's) applications. The Sub-Clause does not relieve the Contractor from his
Equipment for some time, during the design period, he may require early responsibilities.
access to the Site for the purposes of carrying out surveys and other
investigations. 2.4
Employer's Entitlement to Terminate
In the event of failure to provide access, the Employer is held liable for the
The Employer shall be entitled to terminate the Contract, at the
Contractor's Cost plus reasonable profit. The latter Cost could be
Employer's convenience, at any time after giving 56 days prior
considerable, because of the consequential effects of the disruption. This
notice to the Contractor, with a copy to the Employer's
Cost is to be determined under Sub-Clause 3.5, and the extension of time
Representative, and returning the performance security, In the event
is to be determined under Sub-Clause 8.3. Both entitlements are
of such termination, the Contractor:
conditional upon the Contractor having given, under this Sub-Clause,
notice which must be in writing: see Sub-Clause 1.8. (a) shall proceed in accordance with Sub-Clause 16.3, and
Under Sub-Clause 2.2, the Employer is required to grant the Contractor (b) shall be paid by the Employer in accordance with Sub-Clause
the right of access to the Site. The word "right” indicates entitlement, not 19.6.
ability: the Contractor is entitled to go on to the Site, it being assumed that
After such termination, execution of the Works shall not be recommenced
there is a route by which such access is physically practicable or can be
within a period of six years without the Contractor's consent.
Before entering into the Contract, the Employer should ensure that, to the The Employer's Representative shall copy to the Employer all
best of his knowledge, there are no matters which seem likely to prevent communications given or received by him in accordance with the
him complying with his contractual obligations. However, he may wish to Contract.
have the entitlement under this Sub-Clause to bring the Contract to an
The Employer's Representative may be an in-house professional employee
end. For example, he may not wish to rely on any of the other termination
of the Employer, supported by the necessary resources. Alternatively, he
procedures in the event of unexpected financial difficulties or (in respect of
may be an independent firm of consulting engineers, appointed by the
the product created by the Works) in the event of reduced market demand
Employer. The terms of his appointment could be the Client / Consultant
or a change in technology.
Model Services Agreement; the second edition was published by FIDIC in
It is extremely rare for the Employer to have to operate this Sub-Clause; 1991.
prior to invoking it, legal advice may be appropriate. The Sub-Clause
The Employer's Representative is not required to act impartially in the role
provides that the Employer shall not recommence the Works, without the
commonly understood as that of "the Engineer", although fairness is
Contractor's written consent, within six years. If the Works are
stipulated in Sub-Clause 3.5. His role is to represent the Employer, which
recommenced within this period, the Contractor's entitlements may be
in many countries would be regarded as the role of an agent.
affected by the applicable law.
The Employer's Representative does not act as Employer: he cannot

amend the Contract, and in some cases he may be constrained by having
Clause 3 The Employer's Representative to obtain the specific approval of the Employer before exercising authority
under the Contract, as set out in the contract Part II. However, when the
Employer's Representative exercises his authority, the Contractor is
3.1 entitled to assume that the requisite approval has been obtained. This
Employer's Representative's Duties and Authority reduces the likelihood of delay whilst evidence of authority is procured,
and makes the Employer's Representative responsible for ensuring that he
The employer’s Representative shall carry out the duties specified in has the requisite approval.
the Contract. The Employers Representative shall have no authority
to amend the Contract. Approvals and similar acts by the Employer's Representative (including
absence of disapproval) shall not relieve the Contractor from any
The Employers Representative may exercise the authority specified
responsibility. The Contractor thus retains responsibility, for providing
in or necessarily to be implied from the Contract. If the Employer's
Works which comply with the performance and other requirements of the
Representative is required, under the terms of his appointment by
Contract. However, if the Employer's Representative seeks to direct the
the Employer, to obtain the specific approval of the Employer before
Contractor to execute the Works in a particular way, either by instruction
exercising such authority, such requirements shall be as stated in
or by, unreasonably withholding consent or approval, the Employer may
Part II. Any requisite approval shall be deemed to have been given
become responsible for the outcome. Note that the Employer's
by the Employer for any such authority exercised by the Employer's
Representative can only "withhold" a consent or approval which is required
Representative.
under the Contract.
Except as expressly stated in the Conditions of Contract, the
Under Sub-Clause 1.8, any notice, instruction, consent, approval,
Employer's Representative shall have no authority to relieve the
Contractor of any, of his duties, obligations or responsibilities under certificate or determination by, the Employer's Representative shall be in
the Contract. Any proposal, inspection, examination, testing, writing and not be unreasonably withheld or delayed.
consent, approval or similar act by the Employer's Representative 3.2
(including absence of disapproval) shall not relieve the Contractor Requirements for Employer's Representative
from any responsibility, including responsibility for his errors,
omissions, discrepancies, and non-compliance with Sub-Clauses The Employer’s Representative shall be a suitably qualified engineer
5.3 and 5.4. or other appropriate professional, having the experience and
capability necessary for compliance with this Clause, or shall employ manufacturers' works. Some of these persons may need to have authority
such suitably qualified engineers and other professionals and make delegated to them by the Employer's Representative in order for them to
them available for the Contract. operate effectively. The Employer's Representative should ensure that any
necessary assistants have been appointed, and appropriate authority
The Employer's Representative has various duties to perform under the
delegated, sufficiently in advance to avoid delay.
Contract, some of which will involve the application of expertise in the
technical aspects of the Works: for example, reviewing Construction The word "assistants" does not indicate a minor supporting role: the word
Documents. The Employer should therefore ensure that the Employer's is only used for flexibility. Generally, these persons have a major role in the
Representative has competence in all the relevant aspects. Under Sub- achievement of a successful project, and should therefore be selected with
Clause 3.2, the Contractor is entitled to expect the Employer's some care.
Representative to be an appropriately-qualified person.
Delegation and revocation cannot be retrospective: they do not take effect
The wording of this Sub-Clause seeks to achieve a reasonable balance until copies have been passed to the parties.
between the differing objectives of the parties. The Employer usually needs
When an assistant acts in accordance with a delegated power, the act has the
to retain the power to replace his Representative, without having to seek
same effect as though it had been performed by the Employer's
the Contractor's consent. The Contractor needs to have confidence in the
Representative. Under Sub-Clause 3.1, any proposal, inspection, examination,

competence of the Employer's Representative and in his ability to respond
testing, consent, approval or similar act by the Employer's Representative
rapidly, to queries of a technical or operational nature.
(including absence of disapproval) shall not relieve the Contractor from any
3.3 responsibility. Under Sub-Clause 3.3, a consent or approval under the
Employer's Representative's Authority to Delegate Contract (which must be in writing: see Sub-Clause 1.8), given by a duly
authorised assistant in accordance with the latter's delegated powers, has the
The Employer’s Representative may from time to time delegate any
same effect as an approval of the Employer's Representative.
of his duties to assistants, and may at any time revoke any such
delegation. Any such delegation or revocation shall be in writing and The Employer's Representative may reject any Plant, Materials, design or
shall not take effect until a copy has been delivered to the EmpIoyer workmanship in respect of which:
and the Contractor.
(i) the assistant gave oral approval, which is not in accordance with
Any determination, instruction, inspection, examination, testing, Sub-Clause 1.8;
consent, approval or similar act by any such assistant of the
Employer’s Representative, in accordance with the delegation, shall (ii) the assistant gave an approval which was outside the scope of the
have the same effect as though it had been (in act of the Employers assistant's authority;
Representative. However: (iii) the assistant has neither approved nor disapproved.
(a) any failure to disapprove any Plant, Materials, design or The Employer's Representative may reverse or vary any determination or
workmanship shall not be prejudice the right of the instruction of an assistant, if the Contractor refers the matter to him. This
Employer's Representative to reject such Plant, Materials, Sub-Clause does not specify the consequences of the reversal or
design or workmanship; variation. The consequences would depend on the nature of the
(b) if the Contractor questions any determination or instruction of determination or instruction, and on the actual events, particularly those
an assistant of the Employers Representative, the Contractor during the period between the respective actions of the assistant and the
may refer the matter to the Employer's Representative, who Employer's Representative.
shall confirm, reverse or vary such determination or
instruction.
The Employer's Representative may wish to appoint various "assistants",
including other professional staff on the Site and inspectors to visit
3.4 the Sub-Clause does not define the appropriate arrangements or their
Employer's Representative's Instructions duration.
Unless it is legally or physically impossible, the Contractor shall If agreement cannot be reached within a reasonable time, the Employer's
comply with Instructions given by the Employer’s Representative in Representative is required to determine the matter "fairly, reasonably and
accordance with the Contract in accordance with the Contract". These words require the Employer's
Representative to apply the provisions of the Contract when making his
The Contractor is required to act in accordance with instructions given by
the Employer's Representative. Under Sub-Clause 1.8, these instructions determination, and to make it within the time which is required (or implied)
must be in writing: Part I does not include provisions for oral instructions. in the Contract. There is no specific requirement for him to act "impartially",
but consistently failing to determine the matter fairly, reasonably, and in
The consequences will depend on the type of instruction. As stated above,
accordance with the Contract" could lead to disputes under Clause 20.
the Contractor does not have to verify that the Employer's Representative
has obtained any requisite approval from the Employer. Sub-Clause 3.5 is referred to in many, Sub-Clauses, mostly in respect of
Although the Contractor does not (under the Contract) have any obligation determinations of extensions of time (see Clause 8) and of Cost. The
to respond by advising the Employer's Representative of the procedures to determine Cost are not defined, other than in Sub-Clauses
3.5 and 20. 1.
consequences of compliance and awaiting confirmation of the instruction,

an obligation may be implied by the applicable law. Therefore, if the In some Sub-Clauses, the Contractor is also entitled to profit, although
consequences of compliance appear to be disproportionately onerous, it there are no provisions specifying what constitutes reasonable profit. Profit
might be advisable for the Contractor to notify the Employer's (where appropriate) is included within the meaning of the word "value",
Representative accordingly. However, the Contractor should not delay his which the Employer's Representative agrees or determines under Sub-
compliance with the instruction. Clause 3.5.
Sub-Clause 3.4 is not usually included in the list of Sub-Clauses delegated In Part I, profit is generally stated as being due where the cause was
to an assistant, so that the Contractor will not be required, or entitled, to initiated by, or the fault of. the Employer. Profit is generally not stated as
comply with an instruction of an assistant to the Employer's being due in circumstances where a risk eventuates without being initiated
Representative which was outside the scope of the assistant's authority. by either party, (Sub-Clauses 4.11 and 4.24, for example).
3.5
Employer's Representative to Attempt Agreement
Clause 4 The Contractor
When the Employer's Representative is required to determine value,
Cost or extension of time, he shall consult with the Contractor in an
endeavour to reach agreement. If agreement is not achieved, the 4.1
Employer’s Representative shall determine the matter fairly, General Obligations
reasonably and in accordance with the Contract.
The Works as completed by the Contractor shall be wholly in
Although the Employer's Representative acts as the representative (or accordance with the Contract and fit for the purposes for which
agent) of the Employer, he is required under the Orange Book to they are intended, as defined in the Contract. The Works shall
determine extensions of time and certain financial aspects. Generally, include any work which is necessary to satisfy the Employer's
these determinations will originally have been initiated by the Requirements
Contractor, by giving notice of a claim: see Sub-Clause 20.1. Sub-
Contractor’s Proposal and Schedules, or is implied by the Contract,
Clause 3.5 assumes that the Employer's Representative will consult
or arises from any obligation of the Contractor, and all works not
his principal (the Employer), and introduces the procedure of
mentioned in the Contract but which may be inferred to be
consultation and negotiation with the Contractor. The Employer's
necessary for stability, or completion or the safe, reliable and
Representative is required to initiate consultation and negotiation, but
efficient operation of the Works.
The Contractor shall design, execute and complete the Works, except to the usual professional level of skill, care and diligence see
including providing Construction Documents, within the Time for comments on Sub-Clause 18.1). Nevertheless, fitness for purpose is
Completion, and shall remedy any defects within the Contract considered to be the most appropriate duty for the Orange Book types of
Period. The Contractor shall provide all superintendence, labour, contract.
Plant, Materials, Contractors Equipment, Temporary Works and all
other things, whether of a temporary or permanent nature, required The Contractor is required, before commencing design, to review any
in and for such design, execution, completion and remedying of design criteria and calculations in the Employer's Requirements, and to
defects. check the accuracy of the items of reference from which the Works are to
be set out: tenderers may have started some of these activities during the
Before commencing design, the Contractor shall satisfy himself tender period. The detailed effects of these provisions could depend on
regarding the Employer's Requirements (including design criteria such matters as the nature of the Works, the detailed criteria, the
and calculations, if any) and the items of reference mentioned in Country's law, and previous assertions by the parties (including any
Sub-Clause 4.7. The Contractor shall give notice to the Employer's statements in the Tender). The Contractor is thus given the opportunity to
Representative of any error, fault or other defect in the Employer's verify that the Works can be provided in accordance with the Contract,
Requirements or such items of reference. After receipt of such and notify the Employer's Representative, who is empowered to resolve
notice, the Employers Representative shall determine whether any defects in the Employer's Requirements at the commencement of the
Clause 14 shall be applied, and shall notify the Contractor design stage. However, it is obviously preferable to resolve these defects
accordingly. before or during the tender stage. Design is covered in Clause 5; setting-
The Contractor shall take full responsibility for the adequacy, stability out is covered in Sub-Clause 4.7.
and safety, of all Site operations, of all methods of construction and Note the following aspects from other Sub-Clauses. Under Sub-Clause L8:
of all the Works, irrespective of any approval or consent by the the Contractor's notice shall be in writing and shall not be delayed. Under
Employer’s Representative. Sub-Clause 14.1: the Employer's Representative may vary the Employer's
The first paragraph specifies that the Works shall be fit for purpose, and Requirements; it is advisable to seek prior agreement of the consequences
that the purpose is ascertainable from the Contract. In many countries, the of each Variation, especially if it affects the scope or purpose of the Works,
obligation of fitness for purpose would be implied under the law. Generally, but it may riot be possible to do so.
the initial purpose should be obvious from the scope defined in the 4.2
Employer's Requirements, but matters such as ease of maintenance and Performance Security
expected life may need to be specified, unless implied by law. The basic
presumption is that the Contractor has to provide fully operable Works, The Contractor shall obtain, at his cost, a performance security from
including everything necessary except as may be stated elsewhere in the a third party, in the amount and currencies specified in the Appendix
Contract. Sub-Clause 1.6 defines which document takes precedence in to Tender, and deliver it to the Employer by the date 28 days after
the event of the Contract containing conflicting requirements. the Effective Date. The performance security shall be provided by
entity approved by the Employer and shall be in the form annexed,
Fitness for purpose is thus the basic criterion with which the Works must or in another form approved by the Employer.
comply. It is therefore not essential, for example, for a contract document
to specify that roofs must be resistant to local weather conditions (sun, The Performance security shall be valid until the Contractor has
rain, snow, etc): obvious requirements are imposed on the Works by this executed and completed the Works and remedied any defects. It
Sub-Clause, and are probably also implied by law. The basic criterion of shall be returned to the Contractor within 14 days of the issue of the
fitness for purpose relates to the Works irrespective of the level of skill, Performance Certificate. Prior to making a claim under the
care and diligence expected of the Contractor's designers. Throughout the performance security, the Employer shall, in every case, notify the
preparation of the Orange Book, it was recognised that there would be Contractor stating the nature of the default for which the claim is to
differences of view on this important aspect: Employers would want their be made.
Works to be fit for purpose, but professional designers are unable to insure In international contracts, where the Employer may wish to anticipate the
potential problems of default by the Contractor, a security is a common 4.3
requirement for the protection of the Employer and/or the project financing Contractor's Representative
institution/bank. If a security is required, proposed form(s) should be included
Unless the Contractor's Representative is named in the Contract,
in the tender documents and the amount of the security must be specified in
the Contractor shall, within 14 (lays of the Effective Date, submit to
the Appendix to Tender: see the published Part II and example Appendix both the Employer's Representative for consent the name and particulars
of which are reproduced at the end of this Guide. Usually, the amount is of the person the Contractor proposes to appoint. The Contractor
specified as a percentage of the Contract Price, payable in the same shall not revoke the appointment of the Contractor's Representative
proportions as those in which the Contract Price is payable. If no amount is without the prior consent of the Employer's Representative.
specified in the Appendix to Tender, this Sub-Clause will not apply.
The Contractor's Representative shall give his 14, hole time to
The security may be in one of two types: "on-demand", which can be directing the preparation of the Construction Documents and the
called (cashed) by the Employer without proof of Contractor's default; and execution of the Works. Except as otherwise stated in the Contract,
"conditional" securities, which require certain evidence, such as an arbitral the Contractors Representative shall receive (on behalf of the
award. Although "on-demand" conditions have their proponents and Contractor) all notices, instructions, consents, approvals,
advantages, FIDIC recommends "conditional" securities as being fairer (as certificates, determinations and other communications under the
between the parties) and thus more conducive to keen tendering. Contract. Whenever the Contractor’s Representative is to be absent
Securities must be drafted with care and appropriate advice, especially if from the Site, a suitable replacement person shall be appointed,
the Employer wishes to enforce them without having to resort to extensive and the Employers Representative shall be notified accordingly.
legal procedures. The wording of the security should take account of the The Contractor's Representative may delegate any of his powers,
law under which it would be called, and of the conditions entitling the call. functions and authorities to any competent person, and may at any
Example wording is included in the published Part II, which is reproduced time revoke any such delegation. Any such delegation or revocation
at the end of this Guide. However, being legal documents, it may be shall be in writing and shall not take effect until the Employer's
appropriate for them to be drawn up by lawyers familiar with the law under Representative has received prior notice signed by the Contractor's
which they will be called. Under Sub-Clause 1.8, the Employer's approval Representative, specifying the powers, functions and authorities
shall be in writing and not be unreasonably withheld or delayed. being delegated or revoked. The Contractor’s Representative and
The security is required to be valid until the Works are complete and such persons shall be fluent in the language for day to day
defects have been remedied. Whilst it is desirable for the security not to communications defined in Sub-Clause 1.4.
state its expiry date, the issuing institution may seek to insist on a stated The role of Contractor's Representative is of much more importance than
expiry date. Any expiry date must be sufficiently in the future to take might be inferred from the few mentions, in Part I, of this person. The
account of the possibility of: Contractor's Representative is the individual responsible for the
(a) extensions to the Time for Completion, performance of the Contractor's obligations under the Contract, including
directing the personnel, Subcontractors, etc. Therefore, the Employer's
(b) the Contractor failing to complete within the Time for Completion, and Representative will wish to be assured, before giving his consent, that the
(c) defects being identified on the last day of the Contract Period, and proposed individual appears competent for the task. Under Sub-Clause
the Contractor failing to remedy them within a reasonable period 1.8, the Employer's Representative's consent shall be given in writing and
thereafter. shall not be unreasonably withheld or delayed.
Before calling the security, the Employer is required to notify the For major works, it may, be appropriate for the Contractor's
Contractor of the nature of the default. The notice must be in writing, Representative to be named in the Contractor's Proposal or a Schedule,
describing the default in sufficient detail for the Contractor to know what is as envisaged in the first few words of the Sub-Clause. In the event of the
being alleged. named Contractor's Representative being unavailable by the time the
Contract has commenced (or subsequently), the Contractor would have to
seek consents, to a revocation and to a reappointment, in accordance contained in the contracts with these other contractors, which vest in the
with the first paragraph of Sub-Clause 4.3. Contractor the necessary authority to enable him to discharge the
responsibilities specified in the Employer's Requirements.
4.4
Co-ordination of the Works Because the involvement of other contractors is generally inappropriate for
design-build projects, Sub-Clause 4.4 only contains outline provisions for
The Contractor shall be responsible for the co-ordination and proper
the Contractor's co-ordination of other contractors. For example, these
execution of the Works including co-ordination f other contractors to
provisions do not specify what happens if the other contractors are
the extent specified in the Employer's Requirements. The Contractor
shall, as specified in the Employer’s Requirements, afford all unwilling to being co-ordinated. The provisions are based on the
reasonable opportunities for carrying out their work to: assumption that the other contracts would require these contractors to
comply with co-ordination instructions from the Contractor. He clearly
(a) any other contractors employed by the Employer and their cannot be held responsible for the consequences of any non-compliance
workmen by the other contractors, because he will have no method of enforcing
(b) the workmen of the Employer, and their compliance.
These and other aspects would all have to be taken into account when
(c) the workmen of any legally constituted public authorities

14.,ho may be employed in the execution oil or near the Site specifying the Contractor's co-ordination activities in the Employer's
of any work not included in the Contract, which the Employer Requirements. Note that, under Sub-Clause 14.1, the Employer's
may require. Representative may vary the Employer's Requirements; it is advisable to
seek prior agreement of the consequences of each Variation, but it may
The Contractor shall obtain, co-ordinate and submit to the not be possible to do so.
Employer’s Representative for his information all details (including
details of work to be carried out off the Site) from Subcontractors. 4.5
The Contractor shall be responsible for the locations of their work or Subcontractors
materials, in order to ensure that there is no conflict with the work of The Contractor shall not subcontract the whole of the Works.
other Subcontractors, the Contractor or other contractors. Unless otherwise stated in Part II:
This Sub-Clause confirms the Contractor's responsibility for co-ordinating (a) the Contractor shall not be required to obtain consent for
his own personnel and those of his Subcontractors, who may include (for purchases of Materials or for subcontracts for which the
example) the workmen of any legally constituted public authorities which Subcontractor is named in the Contract;
the Contractor appoints to carry out particular elements of the Works.
(b) the prior consent of the Employer's Representative shall be
The Sub-Clause also requires him to co-ordinate other contractors obtained to other proposed Subcontractors;
employed by the Employer, to the extent specified in the Employer's
Requirements. If this co-ordination is not specified, the Contractor is not (c) not less than 28 days before the intended date of each
responsible for co-ordinating other contractors. Subcontractor commencing work on the Site, the Contractor
shall notify the Employer's Representative of such intention;
The extent of co-ordination activities in respect of other contractors must and
be carefully thought out by the Employer when preparing the tender
(d) where practicable, the Contractor shall give a fair and
documents, notwithstanding the difficulties: the details of the Works may
reasonable opportunity, ft)r contractors from the Country to
be unknown at that stage. He should consider how the Contractor can co-
be appointed as Sub-contractors.
ordinate the work of others. For example, is the Contractor to be
empowered to instruct other contractors to amend their works or activities The Contractor shall be responsible for observance by all
in co-ordination with those of the Contractor? If so, it may be preferable for Subcontractors of all the Provisions of the Contract. The Contractor
the Employer's Requirements to include copies of the provisions, shall be responsible for the acts or defaults of any Subcontractor,
his agent or employees, as fully as if they were the acts or defaults the assignment, in case it removed the Contractor's right to seek legal
of the Contractor, his agents or employees. redress from the Subcontractor for latent defects discovered
subsequently. If the Contractor is required to assign all benefits under the
"Subcontractors" include persons named in the Contract as
subcontract, including his right to make any future claim against the
subcontractors, manufacturers or suppliers, and persons to whom work
Subcontractor for defective performance, it may be appropriate for the
has been subcontracted in accordance with this Sub-Clause, but not their
terms of the assignment to entitle the Contractor to require the Employer
assignees. Manufacturers and other suppliers of Materials are
to make the claim on the Contractor's behalf, and/or to relieve the
Subcontractors for whom the Contractor is responsible, even if he finds
Contractor from any further liability in respect of any work carried out by
them difficult to control.
this Subcontractor.
The four criteria are considered applicable to many contracts but,
4.7
depending on matters such as the nature of the Works, some of the four
Setting Out
criteria may need to be amended in the contract Part II. Under Sub-Clause
1.8, the consent of the Employer's Representative under (b), and the The Contractor shall set out the Works in relation to original points,
notice from the Contractor under (c), shall be given in writing and shall not lines and levels of reference specified in the Employers Requirements
be unreasonably withheld or delayed. In respect of a design Sub- or, if not specified, given by the Employer's Representative in writing.
contractor, the prior consent of the Employer's Representative is required The Contractor shall rectify, at his cost, any error in the positions,
under Sub-Clause 5. 1. levels, dimensions or alignment of the Works.
Under Sub-Clause 7.6 (a), the Contractor relinquishes ownership of Plant These items of reference would normally comprise one point, one bearing
and Materials on delivery at Site. If he is not then to be in breach of the and a level. From these minimum survey data references, all setting out
Contract, he must ensure that the terms of his supply subcontract permit can be established.
him to do so.
Under Sub-Clause 4. 1, the Contractor is required to check these items
4.6 (the points, lines and levels) of reference, from which the Works are to be
Assignment of Subcontractor's Obligations set out, and to complete these checks before commencing design.
Thereafter, he is responsible for setting out from these items, which should
If a Subcontractor has undertaken a continuing and assignable
by then have been agreed with the Employer's Representative, and for
obligation to the Contractor for the work designed or executed, or
rectifying positional errors without additional payment.
Plant, Materials or services supplied, by such Subcontractor, and if
such obligation extends beyond the expiry, of the Contract Period, Alternatively, the Employer's Requirements might not contain particular
the Contractor shall, upon the expiry of the Contract Period, assign constraints on the exact position of the Works. For example, the scope of
the benefit of such obligation to the Employer for its unexpired the Contractor's design might include determining all positions. In this
duration, at the request and cost of the Employer. case, if the Employer prefers not to provide these items of reference, the
Employer's Requirements must be written accordingly.
There are no provisions in Part I requiring Subcontractors to undertake any
continuing and assignable obligation, nor for the Contractor to advise the 4.8
Employer of the possibility of this assignment: these provisions are rarely Quality Assurance
appropriate. The Sub-Clause would therefore only be likely to be enforced
Unless otherwise stated in Part II, the Contractor shall institute a
if circumstances brought the existence of the assignable obligation to the
qualify assurance system to demonstrate compliance with the
Employer's attention. For example, if the Contractor proposed a Variation
requirements of the Contract. Such system shall be in accordance
and the Employer considered it to be inferior to the details in the
with the details stated in the Contract. Compliance with the quality
Contractor's Proposal, the Subcontractor performing the Variation might
assurance system shall not relieve the Contractor of his duties,
be required to provide an extended guarantee for it.
obligations or responsibilities.
The Contractor and Employer might need to consider carefully the terms of
Details of all procedures and compliance documents shall be
submitted to the Employer's Representative for his information likelihood of the Works being economically advantageous), and studies in
before each design and execution stage is commenced. When any respect of hydrology, sub-surface conditions and environmental impact, all
document is issued to the Employer's Representative, it shall be of which could be essential to tenderers for their design and pricing of the
accompanied by the signed qualify, statements for such document, Works. In this Sub-Clause, the Employer asserts that all this data and
in accordance with the details stated in the Contract. The environmental studies were made available before the Base Date. Failure in
Employer’s Representative shall be entitled to audit ally aspect of this respect could have significant consequences, under the Contract in
the system and require corrective action to be taken. general and under Sub-Clause 4.11 in particular. In some countries, the
The International standard ISO 9001 introduces the concept of quality failure could entitle the Contractor to termination.
assurance, but Part 1 recognises that such a system may be inappropriate Although the Employer only asserts that he has made available data
for some Works or for work in some countries. If this Sub-Clause applies, "obtained by or on behalf of the Employer from investigations for the
details of the quality assurance system should be included in the Contract: Works", most experienced tenderers will normally wish to consult other
the Employer's Requirements could specify minimum requirements, and/or information, including that which is publicly available. For a successful
the Contractor's Proposal could describe his procedures. contract, it is in both parties' interests for them both to have as much
4.9 information, relevant to the Site and Works, as is available.
Site Data The Contractor is responsible for the interpretation of the Site data, and for
The Employer shall have made available to the Contractor, prior to obtaining other information, so far as was practicable. The practicability of
the Base Date, all the data on hydrological and sub-surface obtaining information will clearly depend on the time allowed for the
conditions at the Site, and studies on environmental impact, which preparation of the Proposal, and aspects such as the accessibility of the
have been obtained by or on behalf of the Employer from Site.
investigations for the Works. The Contractor shall be responsible for No specific provisions are made in respect of the possibility of
interpreting all data. encountering hazardous contaminants on the Site: for example, sub-
The Contractor shall be deemed to have inspected and examined surface chemicals or obnoxious wastes. These contaminants are not
the Site, its surroundings, the above data and other available explicitly made the responsibility of either party. If they are foreseen by the
information, and to have satisfied himself (so jar as is practicable, Employer, he is required under this Sub-Clause (and, possibly, the
taking account of cost and time) before submitting the Tender, as to: applicable law) to have made the information available. If they are
unforeseen, Sub-Clause 4.11 may, be applicable.
(a) the form and nature of the Site, including the sub-surface
conditions, Unlike the provisions in some other forms of contract, Sub-Clause 4.9
does not specify that the Tender was (or is deemed to be) “based on" the
(b) the hydrological and climatic conditions, data to which reference is made. Whilst the necessity, or consequences of
(c) the extent and nature of the work and Materials necessary for such a statement is debatable for other forms of contract, it was
the execution and completion of the Works, and the considered inappropriate for many contractor-designed works. Although a
remedying of any defects, and prudent Employer will have arranged for sub-surface and other
investigations to be carried out before inviting tenders, these investigations
(d) the means of access to the Site and the accommodation he may not have been the most appropriate investigations for the structural
may require. solution contained in the Contractor's design. In this case, it would not be
The Contractor shall be deemed to have obtained all necessary appropriate for his design or Tender to be regarded as being “based on”
information as to risks, contingencies and all other circumstances these investigations. For example, the data may be limited to boreholes at
which may influence or affect the Tender. certain locations (anticipated bridge pier positions) and the tenderer's
design may require data at different locations (new pier positions, or a new
For many types of Works, the Employer may have carried out many types alignment for a tunnel).
of investigations. The latter could include studies of feasibility (to verify the
4.10 other information which he has, relating to the Site. This Sub-Clause not only
Matters Affecting the Execution o the Works protects the Contractor if the actual conditions were not foreseeable; it also
protects the Employer by providing a method of dealing with the possibility of
The Contractor shall be deemed to have satisfied himself as to
inaccuracies in the data referred to in Sub-Clause 4.9.
correctness and sufficiency of the Contract Price. Unless otherwise
stated in the Contract, the Contract Price shall cover all his The conditions are stated as being those not foreseeable at the Base Date,
obligations under the Contract (Including those under Provisional because that is the date referred to in Sub-Clause 4.9. In the rare event of
Sums if any) and all things necessary for the proper design, data becoming available after the Base Date but before the Effective Date,
execution and completion of the Works and the remedying of any the parties should consider making specific provision, referring to the new
defects. information. If specific provision is not made, this Sub-Clause will have the
This Sub-Clause confirms the Contractor's responsibility for the adequacy effect that the Contractor's entitlement will have to be judged by reference
of the Contract Price. It will be noted that this Clause does not include any to the conditions anticipated at the Base Date,, which may (or may not) be
statement that he based his Tender on specific items such as the data the actual basis of the Tender.
referred to in Sub-Clause 4.9: see the above comments on Sub-Clause Having encountered the sub-surface conditions, the Contractor issues a
4.9. notice, which could also serve as the notice referred to in the first sentence
Unless otherwise stated in the Contract (which includes the Contractor's of Sub-Clause 20.1. This notice should be issued as soon as practicable,
Proposal), the Contract Price is deemed to cover all the Contractor's because the Employer's Representative:
obligations. Work carried out under Provisional Sums (see Sub-Clause (a) should be given the maximum opportunity to carry out an inspection
14.5) must therefore be covered under the Clause 18 insurances, for and assess for himself whether the sub-surface conditions were
example. foreseeable, and
4.11 (b) might wish to consider initiating a Variation, although there is no
Unforeseeable Sub-Surface Conditions obligation to do so.
If sub-surface conditions are encountered by the Contractor which in Sub-Clause 4.11 does not specify any procedures for the subsequent
his opinion were not foreseeable by an experienced contractor, the construction of the Works: the Contractor is still responsible. Some sub-
Contractor shall give notice to the Employer’s Representative so that surface conditions may involve no change in design; others may
the Employer's Representative can inspect such conditions. After necessitate revised details under Sub-Clauses 5.2(c) and/or 14.2.
receipt of such notice and after his inspection and investigation, the
Employer's Representative shall, if such conditions were not (by the Note that, under Sub-Clause 1.8, notices and determinations shall be in
Base Date) foreseeable by an experienced contractor, proceed in writing and not be unreasonably withheld or delayed.
accordance with Sub-Clause 3.5 to agree or determine: 4.12
(a) any extension of time to which the Contractor is entitled Access Route
under Sub-Clause 8.3, and The Contractor shall be deemed to have satisfied himself as to the
(b) the additional Cost due to such conditions, which shall be suitability and availability of the access mutes he chooses to use.
added to the Contract Price, and shall notify the Contractor The Contractor shall (as between the parties) be responsible for the
accordingly. maintenance of access routes. The Contractor shall provide any,
signs or directions which he may consider necessary for the
This Sub-Clause entitles the Contractor to an extension of time for delay, and guidance of his staff labour and others. The Contractor shall obtain
to reimbursement of additional Cost, which result from sub-surface conditions any permission that may be required from the relevant authorities for
which were not foreseeable by the Base Date. As asserted in Sub-Clause 4.9, the use of such routes, signs and directions.
the Employer will have made available all information he procured, and
(because of this Sub-Clause 4.11) he should also have made available any The Employer will not be responsible for any claims which may arise
from the use or otherwise of any access route. The Employer does Contractor shall also provide, at his own cost, any additional
not guarantee p the suitability or availability of any particular access facilities outside the Site required by him for the purposes of the
route, and will not entertain any claim for any non-suitability or non- Works.
availability for continuous use during construction of any such route.
This Sub-Clause similarly assumes that access to the Site is physically
Under Sub-Clause 2.2, the Employer is required to grant the Contractor practicable, but that the Contractor may require special or temporary
the right of access to the Site; in other words, the Contractor is entitled to rights-of-way, or additional facilities.
go on to the Site. It is assumed that there is a route by which access is
4.14
physically practicable; the word "route" implies an alignment which can be
Programme
represented as a line on a map (usually overland), but does not imply a
roadway. The Contractor is entitled to make use of the route without The Contractor shall submit a programme to the Employer's
negotiating with its owners, but this entitlement does not indicate that the Representative, for information, within the time stated in the
route is suitable for transport: he might have to construct a road along it. Appendix to Tender The programme shall include the following:
The practical difficulties in getting to and from the Site are to be solved by (a) the order in which the Contractor proposes to carry out the
the Contractor. Under Sub-Clause 4.12, he is held responsible for Works (Including each stage of design, procurement,
maintaining his chosen access routes. The reference "as between the manufacture, delivery to Site, construction, erection, testing
parties" recognises that the Sub-Clause may well apply to highways which and commissioning),
are the responsibility of third parties, but the Employer has no responsibility (b) all major events and activities in the production of
for any failure on their part. Construction Documents,
If the Site is totally surrounded by land owned by third parties, the Contract (c) the periods for the pre-construction reviews under Sub-
should clarify: Clause 5.2 and for any, other submissions, approvals and
(a) the alignment of the route through the third parties' lands, along consents specified in the Employer's Requirements, and
which the Employer will be granting the right of access, and (d) the sequence (~f all tests specified in the Contract.
(b) how the Contractor can gain access, for example, whether access Unless otherwise stated in the Contract, the programme shall be
will be hindered by third parties' control measures. developed using precedence networking techniques, showing early
If the Site is surrounded by private land, but there is a route to the Site start, late start, early finish and late finish dates.
along the Employer's land, it may be appropriate for the Employer's The Contractor shall, whenever required by the Employers
Requirements to include similar details to those of (a) and (b) above. In Representative, Provide in writing, for information, a general
some countries, it might even be appropriate (and in the interests of both description of the arrangements and methods which the Contractor
parties) for the Employer to be responsible for the maintenance of the part proposes to adopt for the execution of the Works. No significant
of the access road which is on his land, notwithstanding Sub-Clause 4.12. alteration to the programme, or to such arrangements and
For example, the Contractor may be installing Plant on a Site on which methods, shall be made without the Employer's Representative. If
most personnel are employed by an entity other than the Contractor; this the progress of the Works does not conform to the programme, the
entity, who might be the Employer or another contractor, may be the most Employers Representative may instruct the Contractor to revise the
appropriate maintainer of access roads. This aspect should be considered programme, showing the modifications necessary to achieve
by the Employer when preparing the tender documents. completion within the Time for Completion.
4.13 An experienced contractor will always prepare an up-to-date programme,
Rights of Way and Facilities and it will be required by the Employer's Representative so that he can
The Contractor shall bear all costs and charges for special or monitor progress and arrange his own activities. However, this Sub-Clause
temporary right-of-way required by him for access to the Site. The does not empower the Employer's Representative to give or withhold
consent to the programme, because the design, specification and (c) for the manufacture of each main item of Plant and Materials,
construction are all carried out by the Contractor. the name of manufacturer, manufacture location, percentage
progress, and the actual or expected dates of
Therefore, the Contractor cannot use the programme to impose
commencement of manufacture, Contractor's inspections,
constraints on the Employer's Representative, and cannot insist on the tests and delivery;
programme being used as a basis for calculating any extension of time. It
would not be reasonable for obligations to be imposed on the Employer by (d) records of personnel and Contractor's Equipment on Site;
reason of a document which was prepared after the Effective Date and to (e) copies of quality assurance documents, test results and
which he did not give his consent. He will, of course, be bound by any certificates of' Materials;
constraints (such as the periods for pre-construction reviews) contained in
the Contract; and the programme might be an appropriate basis for (f) safety statistics, including details of any hazardous incidents
calculating an extension of time. and activities relating to environmental aspects and public
relations; and
Precedence networking techniques are to be used unless otherwise stated
in the Contract, which includes the Contractor's Proposal. Tenderers may (g) comparisons of actual and planned pi-ogress, with details of
have more expertise than the Employer in the preparation of programmes any aspects which may jeopardize the completion in
for their particular fields of activity, and may wish to specify, possibly with accordance with the Contract, and the measures being (or to
examples, how they propose to comply with this Sub-Clause. be) adopted to overcome such aspects.
The final sentence of Sub-Clause 4.14 is an important provision for the This detailed report on the progress during the month is an essential part
Employer's Representative, who can apply it whenever actual progress is of the management of the project. Therefore, this Sub-Clause specifies
either behind or ahead of the current version of the programme. Note that that it is to be submitted by the fourteenth day of each calendar month,
Sub-Clause 8.5 requires the Contractor to revise the programme preferably before the application for payment.
whenever actual progress has fallen behind the current version of the Under Sub-Clause 13.3, the Contractor's application for payment has to
programme, without an instruction from the Employer's Representative in be submitted together with supporting documents which include the
accordance with Sub-Clause 1.8. report in accordance with Sub-Clause 4.15. The period for payment under
4.15 Sub-Clause 13.7 does not commence until the Employer's Representative
Progress Reports has received all these documents.
Monthly progress reports shall be prepared by the Contractor and 4.16
submitted to the Employer's Representative in six copies. The first Contractor's Equipment
report shall cover the period up to the end of the calendar month Unless otherwise stated in Part II, the Contractor shall provide all
after that in which the Commencement Date occurred; reports shall Contractor's Equipment necessary to complete the Works. All
be submitted monthly thereafter, each within 14 days of the last day Contractor's Equipment shall, when brought on to the Site, be
of the period to which it relates. Reporting shall continue until the deemed to be exclusively intended for the execution of the Works.
Contractor has completed all work which is known to be The Contractor shall not remove from the Site any such
outstanding at the completion date stated in the Taking-Over Contractor's Equipment without the consent of the Employer's
Certificate for the Works. Each report shall include: Representative.
(a) photographs and detailed descriptions of progress, including The programme, reports and other documents received under Sub-
each stage of design, procurement, manufacture, delivery to Clauses 4.14 and 4.15 may influence the Employer's Representative when
Site, construction, erection, testing and commissioning; considering an application for consent to the removal of an item of
(b) charts showing the status of Construction Documents, Contractor's Equipment. Under Sub-Clause 1.8, consent shall be given in
purchase orders, manufacture and construction; writing and shall not be unreasonably withheld or delayed.
4.17 may be available on the Site and on which details are given in the
Safety Precautions Employer's Requirements. The Contractor shall pay the Employer at
the prices stated in the Employer's Requirements. The quantities
The Contractor shall comply with all applicable safety regulations in
consumed shall be determined by the Employer's Representative,
his design, access arrangements and operations on Site. Unless
who shall include the amounts due as deductions in Interim and
otherwise stated in Part II, the Contractor shall, from the
Final Payment Certificates. The Contractor shall, at his risk and cost,
commencement of work on Site until taking-over, by the Employer,
provide any apparatus necessary for such determination and or his
provide:
use of these services.
(a) fencing, lighting, guarding and watching of the Works, and
This Sub-Clause includes basic provisions in respect of utility services on
(b) temporary roadways, foot-ways, guards and fences which may the Site, which are assumed to be under the control of the Employer. The
be necessary for the accommodation and protection of owners provisions entitle the Contractor to use these services and impose the
and occupiers of adjacent land, the public and others. obligation to make payment. The Sub-Clause does not apply to off-Site
services, nor to services which are not detailed in the Employer's
All these arrangements should be included in the details provided to the
Requirements. When preparing the tender documents, the Employer may
Employer's Representative under the final paragraph of Sub-Clause 4.14.
wish to consider whether it would be advisable to take any responsibility in

4.18 respect of existing services. For example, if the Site was a previously-
Protection of the Environment unoccupied (green-field) site, the Employer may prefer to let the Contractor
make any necessary arrangements direct with the providers of these
The Contractor shall take all reasonable steps to protect the
services, and not involve the Employer in the arrangements, nor in the
environment (both on and off the Site) and to limit damage and
nuisance to people and property resulting from pollution, noise and risks.
other results of his operations. The Contractor shall ensure that air If the Employer is to make any of these services available, the Employer's
emissions, surface discharges and effluent from the Site during the Requirements should specify the details, including prices and reliability. If
Contract Period shall not exceed the values indicated in the the Contractor needs to rely on the continued availability of a service, the
Employer's Requirements, and shall not exceed the values Contract should indicate who bears the cost of a failure in the supply. It is
prescribed by law. suggested that services over which the Employer has no control should be
After the Employer has taken over the Works, the Contractor is not in a at the risk of the Contractor, and other services could be at the risk of the
position to ensure that the Employer will operate the Works in compliance Employer, but it is advisable for the Contract to allocate the risk
with these criteria. Matters such as emission requirements for the specifically.
completed Works should be specified in the Employer's Requirements, 4.20
and could form part of the Tests after Completion. Employer Supplied Machinery and Materials
Note the following aspects from other Sub-Clauses. Under Sub-Clause The Employer undertakes to provide the items of machinery and
3.1: any proposal, inspection, examination, testing, consent or approval materials (if any) in accordance with the details given in the
shall not relieve the Contractor from any responsibility. Under Sub-Clause Employers Requirements. The Employer shall, at his risk and cost,
14.1: the Employer's Representative may vary the Employer's transport such machinery, and materials to the Contractor, at the
Requirements; it is advisable to seek prior agreement of the consequences time and place specified in the Contract.
of each Variation, but it may not be possible to do so.
The Contractor shall visually, inspect the machinery and materials
4.19 upon receipt at such place, and shall notify the Employer and the
Electricity, Water and Gas Employer's Representative of any shortage, defect or default; then,
either the Employer shall immediately rectify any shortage, defect or
The Contractor shall be entitled to use for the purposes of the
default, or the Contractor (if the Contractor and the Employer's
Works such supplies of electricity, water, gas and other services as
Representative so agree) shall carry, out such rectification as a The Employer's machinery and equipment for use in construction should
Variation. After visual inspection, this machinery and materials shall be of the specified capability and be available in accordance with the
come under the care, custody and control of the Contractor. The Employer's Requirements; the latter should specify the details, including
Contractors obligations of inspection, care, custody and control reliability and matters such as who will drive or operate the items, and who
shall not relieve the Employer of liability for any undetectable will be responsible for their care, custody, control and insurance.
shortage, defect or default.
4.21
The Employer also undertakes to operate the items of machinery Clearance of Site
Site
and equipment in accordance with the details, arrangements and
During the execution of the Works, the Contractor shall keep the Site
charges given in the Employer's Requirements. The Contractor shall
free from all unnecessary obstruction, and shall store or dispose of
pay such charges to the Employer; the amounts due shall be
any Contractor’s Equipment or surplus materials. The Contractor shall
determined by the Employers Representative and included as
deductions in Interim and Final Payment Certificates. clear away, and remove from the Site any wreckage, rubbish or
Temporary Works no longer required.
This Sub-Clause includes basic provisions in respect of two categories of
Upon the issue of' any Taking-Over Certificate, the Contractor shall
Employer's items made available to the Contractor:
clear away and remove, from that part of the Site and Works to
(a) free-issue machinery, plant and materials for incorporation into the which such Taking-Over Certificate refers, all Contractor's
Works, and Equipment, surplus material, wreckage, rubbish and Temporary
Works. The Contractor shall leave such part of the Site and the
(b) the Employer's machinery and equipment for use in executing the
Works in a clean and safe condition to the satisfaction of the
Works.
Employer's Representative. Except that, the Contractor shall be
The provisions entitle the Contractor to use these items and impose entitled to retain on Site, until the expiry of the Contract Period, such
obligations on the Employer (to provide the items in accordance with the Contractor's Equipment, Materials and Temporary, Works as
Contract) and on the Contractor (to inspect items (a) and to make payment required by him the purpose of fulfilling his obligations under the
for items (b)). Note that the Contract requirements in respect of Plant and Contract.
Materials, including fitness for purpose, do not impose obligations on the If the Contractor fails to remove, by 28 days after the issue of the
Contractor in respect of plant and materials provided by the Employer. Performance Certificate, any remaining Contractor’s Equipment,
When preparing the tender documents, the Employer may wish to surplus material, wreckage, rubbish and Temporary, Works, the
consider whether it would be advisable to take any responsibility for Employer may sell or otherwise dispose of such items. The
making any items available. It is usually preferable to let the Contractor Employer shall be entitled to retain, from the proceeds of such sale,
make all the arrangements direct with manufacturers and suppliers, and to a sum sufficient to meet the costs incurred in connection with the
let him choose and use his (Contractor's) Equipment. However, the sale or disposal, and in restoring the Site. Any balance of the
Employer may, for example, elect to provide the following, accepting the proceeds shall be paid to the Contractor. If the proceeds of the sale
risks of so doing: are insufficient to meet the Employer's costs, the outstanding
balance shall be recoverable from the Contractor by the Employer.
(a) certain items of plant and/or materials which will take so long to
procure that the Works would be completed sooner if they are The Contractor is held responsible for keeping the Site tidy, and for removing
ordered before the Effective Date; rubbish from a part of the Works for which a Taking-Over Certificate has
already been issued. Therefore, the Certificate cannot be withheld by reason
(b) any Employer's cranes which are permanently allocated to the Site. only of the outstanding removal of rubbish, unless the latter makes it
If the Employer undertakes to provide these items, he must be aware that impracticable for the Employer to take over the part and use it.
he takes on certain risks, including quality, and availability. The plant and Although it is not an obligation under this Sub-Clause (but may be implied
materials should be of the required quality and be delivered without delay. under the applicable law), the Employer should give reasonable notice to
the Contractor of his intention to apply the last sentence of this Sub- immediately upon discovery of such article or thing, advise the
Clause. The notice should identify the items concerned: the Contractor Employer's Representative, who may issue instructions for dealing with it.
may have no record of them having been left on the Site.
If the Contractor suffers delay and/or incurs Cost in following these
4.22 instructions of the Employer's Representative, and if such delay
Security of the Site and/or Cost was not (by the Base Date) foreseeable by an
experienced contractor, the Contractor shall give notice to the
Unless otherwise stated in Part II
Employer's Representative, with a copy to the Employer. After
(a) the Contractor shall be responsible for keeping unauthorised receipt of such notice, the Employers Representative shall proceed
persons off the Site, and in accordance with Sub-Clause 3.5 to agree or determine:
(b) authorised persons shall be limited to the employees of the (a) any extension of time to which the Contractor is entitled
Contractor, employees of his Subcontractors and persons under Sub-Clause 8.3, and
authorised by the Employer or the Employer's Representative.
(b) the amount of such Cost, which shall be added to the
On many sites, it is important (for legal and practical reasons) to allocate Contract Price,
responsibility for security. If not amended in the contract Part II, this Sub- and shall notify the Contractor accordingly.
Clause places responsibility on the Contractor. Typically, he may be the
only organisation whose personnel are on the Site full-time. When Although the mention of foreseeability might seem strange, it may be
preparing the tender documents, the Employer may wish to consider relevant. Usually, a foreseeable situation like this would have been covered
amending this Sub-Clause and accepting responsibility for security. by provisions in the Employer's Requirements. Note that, under Sub-
Clause 1.8, notices, instructions and determinations shall be in writing and
4.23
not be unreasonably withheld or delayed.
Contractor's Operations on Site
The Contractor shall confine his operations to the Site, and to any
additional areas which may be provided by the Contractor and Clause 5 Design
agreed by the Employer's Representative as working areas. The
Contractor shall take all necessary precautions to keep his
personnel and equipment within the Site and such additional areas, Part I makes no mention of the various stages in the design process,
and to keep and prohibit them from encroaching on adjacent land. which therefore were not defined. However, FIDIC envisages three stages:
These restrictions are usually necessary to facilitate inspection by the (a) conceptual design by (or on behalf of) the Employer, for inclusion in
Employer's Representative and to minimise inconvenience to the the Employer's Requirements, in order to demonstrate what he
occupiers of land which is adjacent to the Site. The Employer will, of expects to get; this might involve less than 10% of total design
course, wish to prevent claims from these occupiers, in preference to input, and it might be necessary to distinguish between early ideas
relying on Sub-Clause 17.1. and definite requirements;
4.24 (b) preliminary design by (or on behalf of) each tenderer for inclusion in
Fossils the Proposal; the Instructions to Tenderers should have indicated
All fossils, coins, articles of value or antiquity, and structures and the extent of detail required, taking account of tenderers'
other remains or things of geological or archaeological interest understandable reluctance to incur excessive tendering costs if the
discovered on the Site shall (as between the parties) be the property likelihood of success seemed low;
of the Employer. The Contractor shall take reasonable precautions (c) final design for the working drawings (Construction Documents),
to prevent his staff, labour or other persons from removing or which might involve two sub-stages: general arrangement drawings
damaging any such article or thing. The Contractor shall, and detailed drawings. Note that the second paragraph of Sub-
Clause 5.2 refers to documents being "ready for use", which could If the Employer retains the services of a consulting engineer, it is to be
cover the completion of a general drawing which is to be used for expected that the agreement between them would prohibit the engineer
the next design stage, but not for construction. subsequently accepting an appointment with any of the tenderers.
Similarly, the Employer should not require the Contractor to employ the
The basic principle behind the drafting of Part I was to avoid indicating that
Employer's designer, whose allegiance would thus be transferred from
there could be elements of the design for which. the Contractor would not
Employer to Contractor after the Effective Date. This latter arrangement
be responsible. Contractors may have difficulty in accepting the validity of
might cause problems:
this approach. They may ask why contractors should bear responsibility for
the Employer's conceptual design. Consulting engineers are more (a) for the tenderers, because they would each need a designer, and
accustomed to accepting the concept of taking responsibility for designs
(b) for the transferred designer, because of conflict of interest: initially,
carried out by others. Many Employers appoint designers to check the
whilst anticipating his role as Contractor's designer, and
current design, to take full responsibility for it (having had the opportunity
subsequently, because he had been the Employer's designer.
to substantiate any need for changes) and to prepare any further drawings
required for construction. Provision is made for the Employer's Requirements to specify criteria for
the selection of designers for particular parts, or all of the Works. These
The principle of the Orange Book is that design responsibility falls on the
criteria might, for example, be necessary for structures where the

Contractor, who must therefore check the Employer's Requirements in
consequences of failure might be catastrophic. In addition, the Employer
accordance with Sub-Clause 4.1.
might require the Contractor's principal designers to be fluent in a
5.1 particular language.
General Obligations
The Contract does not establish a contractual relationship between the
The Contractor shall carry out, and be responsible for, the design of the Employer and an individual designer. However, the applicable law may impose
Works. Design shall be prepared by qualified designers who are duties of care. The law may also affect the Contractor's liability if his designers
engineers or other professionals who comply with the criteria (if any,) do not, in fact, have the experience or capability necessary for the design.
stated in the Employer's Requirements. For each part of the Works, the
5.2
prior consent of the Employer's Representative shall be obtained to the
Construction Documents
designer and design Subcontractor, if they are not named as such in
the Contract. Nothing contained in the Contract shall create any The Contractor shall prepare Construction Documents in sufficient
contractual relationship or professional obligations between any detail to satisfy all regulatory approvals, to provide suppliers and
designer, or a design Subcontractor, and the Employer. construction personnel sufficient instruction to execute the Works,
and to describe the operation of the completed Works. The
The Contractor holds himself, his designers and design
Employers Representative shall have the right to review and inspect
Subcontractors as having the experience and capability necessary
the preparation of Construction Documents, wherever they are
for the design. The Contractor undertakes that the designers shall
being prepared.
be available to attend discussions with the Employer’s
Representative at all reasonable times during the Contract Period. Each of the Construction Documents shall, when considered ready
for use, be submitted to the Employer's Representative for pre-
Although this Sub-Clause sets out the general design obligations, it does
construction review. In this Sub-Clause, "review period" means the
not specify the standard for any design, because of the overall requirement
period required by the Employer's Representative, which (unless
in Sub-Clause 4.1 that the Works are to be fit for the purposes for which
otherwise stated in the Employer's Requirements) shall not exceed
they are intended. Designers (individuals and Subcontractors) are subject
21 days, calculated from the date on which the Employer's
to the consent of the Employer's Representative, if not named in the
Representative receives a Construction Document and the
Contract: in a Schedule or the Contractor's Proposal, usually. Under Sub-
Contractor's notice that it is considered ready, both for a pre -
Clause 1.8, consent shall be given in writing and shall not be unreasonably
construction review in accordance with this Sub-Clause, and for
withheld or delayed.
use. If the Employer's Representative, within such review period, be produced in the initial stages. Although these design development
notifies the Contractor that such Construction Document falls (to the documents may not be required for construction, they would (if specified
extent stated) to comply with the Employer’s Requirements, it shall as being required for review) become Construction Documents and have
be rectified, resubmitted and reviewed in accordance with this Sub- to be submitted "when considered ready for use" for the subsequent
Clause, at the Contractors cost. stages of design development.
For each part of the Works, and except to the extent that the prior The purposes of the pre-construction review are:
consent of the Employer's Representative shall have been obtained:
(a) to permit the Employer's Representative to verify that Construction
(a) construction shall not commence prior to the expiry of the Documents comply with the Contract, and
review periods for the Construction Documents which are
relevant to the design and construction of such part; (b) to give him the earliest possible opportunity to consider whether the
proposed works are what the Employer actually requires; if not, it
(b) construction shall be in accordance with such Construction may be necessary to initiate a Variation.
Documents; and
The pre-construction review is specified in Sub-Clause 5.2 in such a way
(c) if the Contractor wishes to modify, any design or document as not to impose on the Employer's Representative any duty to approve or
which has previously been submitted for such pre- consent, although it does not prevent him doing so if it is appropriate.
construction review, the Contractor shall immediately notify, Equally, it does not authorise him to withhold consent, but envisages that
the Employers Representative, and shall subsequently submit he would notify the Contractor of any non-compliance with the Contract. A
revised documents to the Employer's Representative for pre - notification of non-compliance with the Employer's Requirements entitles
construction review. the Employer to reimbursement of the costs of the subsequent review,
If the Employer's Representative instructs that further Construction assuming the cost is ascertainable.
Documents are necessary for carrying out the Works, the Before the expiry of the review period for Construction Documents which
Contractor shall upon receiving the Employer's Representative’s are relevant to the design and construction of a part of the Works, the
instructions prepare such Construction Documents. Employer's Representative may either give prior written consent to
Errors, omissions, ambiguities, inconsistencies, inadequacies and construction commencing, or notify the Contractor that the review period
other defects shall be rectified by, the Contractor at his cost. is shorter or has expired. Note that the review period is defined as the
period required by the Employer's Representative, but not exceeding 21
The Construction Documents are all the drawings, calculations, computer days. Alternatively, he may do neither, in which case the Contractor can
software (programs), samples, patterns, models and manuals, including commence construction when the specified review period expires.
the items specified in Sub-Clauses 5.5 to 5.7. The Employer's
Requirements should describe the extent of detail required for the With a review procedure, it is possible that the Contractor may submit
submissions to the Employer's Representative (who may not want to Construction Documents which he knows do not comply with the
review every minor detail) and the procedures and periods for the pre- Contract. In effect, he would be proposing a Variation, without including all
construction reviews; different procedures and/or periods may be the items listed in Sub-Clause 14.3. Such a careless disregard for the
appropriate for different types of documents. For example, the Contractor Contract is fraught with risks, irrespective of whether the Employer's
may be required to submit drawings of the reinforcement for concrete, for Representative notifies non-compliance. The Works must nevertheless
which the review period would be one week (because the Employer's comply with the Contract.
Representative will not be carrying out a detailed check), but not to submit Sub-paragraph (c) requires the Contractor to notify the Employer's
the bending schedules detailing this reinforcement. Representative if a Construction Document, which was previously subject
For some types of Works, it may be appropriate for the Employer's to a review, is to be amended. This notice should be accompanied by an
Requirements to refer to the various stages of design development and to explanation of the need for amendment; prompt correction of errors
specify pre-construction reviews for certain types of documents which will should be encouraged.
The penultimate paragraph of Sub-Clause 5.2 empowers the Employer's specifications, technical standards, building, construction and
Representative to request further Construction Documents, if necessary. environmental regulations, regulations applicable to the product
He should consider carefully whether they are actually "necessary" (and being produced from the Works, and the standards specified in the
not just of interest), preferably by reference to the extent of detail Employer's Requirements, applicable to the Contractors Proposal
prescribed in the Employer's Requirements. If he requests further and Schedules, or defined by law. References in the Contract to
Construction Documents, and they are not "necessary" under the such specifications and other matters shall be understood to be
Contract, the request would probably constitute a Variation. references to the edition applicable on the Base Date, unless stated
otherwise. If substantially changed or new applicable national
Under Sub-Clause 1.8, notices and consents shall be given in writing and specifications, technical standards or regulations come into force
shall not be unreasonably withheld or delayed. after the Base Date, the Contractor shall submit proposals for
5.3 compliance to the Employer’s Representative. In the event that the
Contractor's Undertaking Employer's Representative determines that such proposals
constitute a variation, he shall then initiate a Variation in accordance
The Contractor undertakes that, if legally and physically possible, with Clause 14.
the design, the Construction Documents, the execution and the
completed Works will be in accordance with the following, in order Sub-Clause 1.13 requires the Contractor to comply with, and give notices
of priority: under, all relevant regulations, including payment of fees. In Sub-Clause
5.4, the first sentence specifies various criteria for the design, Construction
(a) the law in the Country, and Documents and Works. If any of these conflict, it will be necessary to
(b) the documents forming the Contract, as altered or modified ascertain their order of precedence. Under Sub-- Clause 5.3, the law takes
by Variations. priority over other requirements; however, some of the criteria included in
the first sentence of Sub-Clause 5.4 may also be legal requirements. The
This Sub-Clause defines the precedence of the criteria with which the order of precedence of contract documents is specified in Sub-Clause 1.6.
Works must comply: the law, Variations, and the Contract documents in
the order of precedence specified in Sub-Clause 1.6. If certain laws In some countries, certain types of work may have to receive statutory
specifically relate to the Works, the Employer might wish to consider approval. and/or certification. The Sub-Clause imposes on the Contractor
drawing them to the attention of tenderers, and/or dealing with their effects the responsibility to comply with these statutory requirements. However,
in the Contract. For example, major works may require legislation before the Employer's Requirements should take account of statutory
they can legally be initiated, and/or may require various agreements with requirements which are applicable to the operation of the Works.
other affected parties. It is not envisaged that the Employer needs to list If substantially changed or new criteria are promulgated, they may be legal
out all relevant legislation for the convenience of tenderers or the requirements (see Sub-Clause 13.16), or they may be optional. The
Contractor. If the Employer only lists some of the relevant legislation, the Contractor is required to prepare and submit proposals for compliance,
limited extent of the list should be stated, for avoidance of doubt. but the proposals need not include all the items listed in Sub-Clause 14.3:
Note that the Contract is not itself changed by a Variation, which is the final sentence of Sub-Clause 5.4 clarifies that Clause 14 need not be
instructed by the Employer's Representative: he is not empowered to initiated until the Employer's Representative determines, following receipt
change the Contract. Although a Variation constitutes an amendment to of the proposals submitted under Sub-Clause 5.4.
the document entitled "Employer's Requirements", it is the original version Note the following aspects from other Sub-Clauses. Under Sub-Clause
of the latter document which was, and still is, part of "the Contract". 3.1: any, proposal, inspection, examination, testing, consent or approval
5.4 by the Employer's
Technical Standards and Regulations
Representative shall not relieve the Contractor from any responsibility.
The design, the Construction Documents, the execution and the Under Sub-Clause 14.1: the Employer's Representative may vary the
completed Works shall comply with the Country’s national Employer's Requirements; it is advisable to seek prior agreement of the
consequences of each Variation, especially if it affects the scope or drawings", and any further Construction Documents specified in the
purpose of the Works, but it may not be possible to do so. Employer’s Requirements. The Works shall not be considered to be
completed for the purposes of taking-over under Sub-Clause 10.1
5.5
until such documents have been submitted to the Employer’s
Samples
Representative.
The Contractor shall submit the following samples and relevant
The Contractor is required to prepare various documents under this Sub-
information to the Employer's Representative for pre-construction
Clause, which may need to be amended in the contract Part II (for
review in accordance With the procedure for Construction
example, to change the numbers of copies) and/or to be elaborated in the
Documents described in Sub-Clause 5.2:
Employer's Requirements.
(a) manufacturer's standard samples of Materials,
The Employer's Representative is to receive these Construction
(b) samples (if any) specified in the Employer's Requirements, and Documents before issuing the Taking-Over Certificate for the Works: see
Clause 10. It may appear onerous to require these documents to be
(c) additional samples instructed by the Employer's
submitted before taking-over, but the Employer usually requires the
Representative under Clause 14.
information at that stage. In respect of subsequent changes to these
Each sample shall be labelled as to origin and intended use in the Works. documents, the Contractor must rectify errors under Sub-Clauses 5.8 and
12. 1 (a), and the Employer's Representative can require amendments
The Contractor is required to submit samples in accordance with the
under Sub-Clauses 12.1 (b) and 14.1.
procedure specified in Sub-Clause 5.2 and any details specified in the
Employer's Requirements. The "relevant information" would depend on the 5.7
Material, but typically could include details relevant to the use (application) Operation and Maintenance Manuals
of the Material and to maintenance requirements.
Prior to commencement of the Tests on Completion, the Contractor
5.6 shall prepare, and submit to the Employer's Representative,
As-Built Drawings operation and maintenance manuals in accordance with the
Employer's Requirements and in sufficient detail for the Employer to
The Contractor shall prepare, and keep up-to-date, a complete set
operate, maintain, dismantle, reassemble, adjust and repair the
of "as-built” records of the execution of the Works, showing the
Works. The Works shall not be considered to be completed for the
exact “as-built" locations, sizes and details of the work as executed,
purposes of taking-over under Sub-Clause 10.1 until such operation
with cross references to relevant specifications and data sheets.
and maintenance manuals have been submitted to the Employer's
These records shall be kept on the Site and shall be used
Representative.
exclusively for the purposes of this Sub-Clause. Two copies shall be
submitted to the Employer's Representative prior to the As with Sub-Clause 5.6, further details should be specified in the
commencement of the Tests on Completion. Employer's Requirements, and the Employer's Representative is to receive
these Construction Documents before issuing the Taking-Over Certificate
In addition, the Contractor shall prepare and submit to the
for the Works: see Clause 10. No provision is made for the "approval" of
Employer’s Representative "as-built drawings" of the Works,
showing all Works as executed. The drawings shall be prepared as these Construction Documents, except to the extent specified in the
the Works proceed, and shall be submitted to the Employer’s Employer's Requirements. It may appear onerous to require the manuals
Representative for his inspection. The Contractor shall obtain the to be submitted before taking-over, but the Employer usually requires the
consent of the Employer’s Representative as to their size, the information at that stage. In respect of subsequent changes to these
referencing system, and other pertinent details. documents, the Contractor must rectify errors under Sub-Clauses 5.8 and
12. 1 (a), and the Employer's Representative can require amendments
Prior to the issue of any Taking-Over Certificate, the Contractor shall under Sub-Clauses 12.1 (b) and 14. 1.
submit to the Employer's Representative one microfiche copy, one
full-size original copy, and six printed copies of the relevant "as-built
5.8 to the Employer, until the Contractor has given the Employer such
Error by Contractor reasonable security as the Employer may require. The security
shall be for an amount which is an assessment of the
errors are found in the Construction Documents, they and the
If
compensation, damages, charges and costs for which the
Works shall be corrected at the Contractor's cost.
Employer may become liable, and to which the indemnity under
This Sub-Clause makes no mention of any incorrect data provided by the this Sub-Clause applies.
Employer, much of which should have been checked (under Sub-Clause
The Employer shall, at the request and cost of the Contractor, assist
4.1) by the Contractor, who may therefore only be protected by Sub-
him in contesting any such claim or action, and shall be repaid all
Clause 4.11. In some countries, the law may impose a duty on the
reasonable costs incurred.
Employer's Representative to notify the Contractor of errors.
This Sub-Clause protects the Employer from any breaches of copyright or
5.9
of other intellectual property right arising from the Contractor's design of
Patent Rights
the Works, other than (for example) those arising from items specified in
The Contractor shall indemnify, the Employer against all claims of the Employer's Requirements: see sub-paragraph (d). In the event of a
infringement of any patent, registered design, copyright, trade mark third party making a claim in respect of any of the matters mentioned in
or trade name, or other intellectual property right, if: this Sub-Clause, the Contractor and the Employer should each consider
taking legal advice. In particular, the Sub-Clause does not specifically
(a) the claim or proceedings arise out of the design,
attempt to resolve the major problem of the Employer being prevented by
construction, manufacture or use of the Works;
a competent court from operating the Works by reason of the infringement
(b) the infringement (or allegation of infringement) was not the of a third party's alleged intellectual property right; the consequences
result of part (or all) of the Works being used for a put-pose would be determined by the applicable law.
other than that indicated by, or reasonably to be inferred
When preparing the tender documents, the Employer may need to
from, the Contract;
consider what procedures are relevant to the continuing operation of the
(c) the infringement (or allegation of infringement) was not the result of Works, since they may not be covered by this Sub-Clause. For example,
part (or all) of the Works being used in association or combination further wording may be required if the Works include process plant
with any thing not supplied by the Contractor, unless such requiring some form of operational licence authorising the Employer to
association or combination was disclosed to the Contractor prior continue using the Works after the Contract Period. Some processes are
to the Base Date or is stated in the Contract; and in the public domain: the supplier of a generator cannot expect a fee for
(d) the infringement (or allegation of infringement) was not the allowing it to be used to generate electricity. However, process plants
unavoidable result of the Contractors compliance with the which manufacture products from raw materials are usually protected by
Employer's Requirements. intellectual property rights, the owner of which would grant a licence to the
Employer, entitling him to use (and benefit from) the protected process.
The Contractor shall be promptly notified of any claim under this This licence is sometimes referred to as a process licence: it can only be
Sub-Clause made against the Employer. The Contractor may, at his granted by the owner of the intellectual property right (the process owner),
cost, conduct negotiations for the settlement of such claim, and any but can be granted to the Employer or to the Contractor.
litigation or arbitration that may arise from it. The Employer or the
Employer's Representative shall not make any admission which If the process owner grants the process licence directly to the Employer (or
might be prejudicial to the Contractor, unless the Contractor has plant operator), the Contractor will utilise it to design and construct the
failed to take over the conduct of the negotiations, litigation or Works based on the process design which would form part of the
arbitration within a reasonable time after haling been so requested. Employer's Requirements. The Contractor would then be reluctant to take
responsibility for process performance. The extent of the process owner's
Except to the extent that the Employer agrees otherwise, the liability to the Employer would depend on the terms of their agreement for
Contractor shall not make any admission which might be prejudicial the process licence. However, the Employer may prefer this option, having
a direct agreement with the process owner, with whom he could also If the Contractor falls to comply, with this Sub-Clause, the Employer might
arrange a long-term consultancy. This type of agreement would need to have difficulty enforcing it, but he would be able to resist claims from the
incorporate provisions covering the possibilities of the Contractor going Contractor in respect of events caused by the non-compliance.
into liquidation or of a termination of the construction contract.
6.3
If the Contract specifies that the Contractor is to grant the process licence Persons in the Service of Others
to the Employer (or plant operator), the liability of the Contractor may
The Contractor shall not recruit, or attempt to recruit, his staff and
include process performance and fitness for purpose of the process,
labour from amongst persons in the service of the Employer or the
giving the Employer undivided liability. However, this undivided liability Employer's Representative.
might be more onerous than the liability which the process owner would
accept in his agreement with the Contractor, who may therefore be See comments on Sub-Clause 6.2. The parties would be obliged to
reluctant to accept this liability to the Employer. The acceptability to the seek prior agreement to the recruitment of each other's
Employer of this option would therefore depend on the contract provisions personnel.
in respect of the Contractor's liabilities and on the potential consequences
of him going into liquidation or of a termination of the contract. 6.4
Labour Laws
All these aspects would have to be considered by the Employer, taking
account of the type of process and of the identity of process owner(s), The Contractor shall comply with all the relevant labour laws
before inviting tenders for a process plant. applying to his employees, and shall duly pay and afford to them all
their legal rights. The Contractor shall require all such employees to
obey all applicable laws and regulations concerning safety at work.
Clause 6 Staff and Labour See comments on Sub-Clause 6.2. The law of the Country would probably
also be relevant.
6.5
6.1
Working Hours
Engagement of Staff and Labour
No work shall be carried out on the Site outside the normal working
The Contractor shall make his own arrangements for the
hours stated in the Appendix to Tender, or on the locally recognised
engagement of all staff' and labour, local or otherwise, and for their
days of rest, unless:
payment, housing, feeding and transport.
(a) the Contract so provides,
In some countries, the Contractor may have other obligations under the
local law,, but this Sub-Clause removes any implication of obligation on the (b) the work is unavoidable, or necessary for the saving of life or
Employer. property or for the safety of the Works, in which case the
Contractor shall immediately, advise the Employers
6.2
Representative, or
Rates o Wages and Conditions of Labour
(c) the Employer's Representative gives his consent.
The Contractor shall pay rates of wages, and observe conditions of
labour, not less favourable than those established for the trade or This Sub-Clause may be applicable to either or both of two situations.
industry where the work is carried out. If no such established rates Firstly, the Employer may wish to specify maximum working hours in the
or conditions are applicable, the Contractor shall pay rates of wages Appendix to Tender, especially for work on an existing operational facility.
and observe conditions not less favourable than the general level (f Secondly, his Representative may simply wish to know the working hours
wages and conditions observed by employers whose trade or well in advance, so as to manage his own personnel. Under Sub-Clause
industry is similar to that of the Contractor. 1.8, the Employer's Representative's consent shall be given in writing and
shall not be unreasonably withheld or delayed.
6.6 the Contractor must overcome the shortfall. In certain circumstances, it
Facilities for Staff and Labour may be appropriate for him to provide a fully-equipped hospital.
Unless otherwise stated in Part II, the Contractor shall provide and 6.8
maintain all necessary accommodation and welfare facilities for his Contractor's Superintendence
(and his Subcontractor's) staff and labour The Contractor shall also
The Contractor shall provide all necessary, superintendence during
provide the facilities specified in the Employers Requirements, for
the design and execution of the Works, and as long thereafter as
the Employer's and Employer’s Representative’s personnel. The
the Employer's Representative may consider necessary for the
Contractor shall not permit any of his employees to maintain any
proper fulfilling of the Contractor's obligations under the Contract.
temporary or permanent living quarters within the structures forming
Such superintendence shall be given by sufficient persons having
part of the Works.
adequate knowledge of the operations to be carried out (Including
It may be difficult to establish what accommodation and facilities are the methods and techniques required, the hazards likely to be
"necessary" under this Sub-Clause, until the effects of their inadequacy encountered and methods of preventing accidents) for the satis-
have become apparent. In that event, the Employer cannot be held factory and safe execution of the Works.
responsible for these effects, which could include significant delay to the
Again, the questions of what is "necessary" and how many are "sufficient"
Works.
under this Sub-Clause could be difficult to establish. Failure to comply
6.7 might be evident by constructional problems, which might be serious
Health and Safety enough to entitle the Employer's Representative to suspend the Works
under Sub-Clause 8.7.
Precautions shall be taken by the Contractor to ensure the health
and safety of his staff and labour The Contractor shall, in 6.9
collaboration with and to the requirements of the local health Contractor's Personnel
authorities, ensure that medical staff first aid facilities, sick bay and
The Contractor shall employ (or cause to be employed) only
ambulance service are available at the accommodation and on the
persons who are careful and appropriately qualified, skilled and
Site at all times, and that suitable arrangements are made for all
experienced in their respective trades or occupations. The
necessary welfare and hygiene requirements and for the prevention
Employer's Representative may require the Contractor to remove (or
of epidemics. The Contractor shall maintain records and make
cause to be removed) any person employed on the Site or Works,
reports concerning health, safely and welfare of persons, and
including the Contractor's Representative, who in the opinion of the
damage to property, as the Employer's Representative may
Employers Representative:
reasonably require.
(a) persists in any misconduct,
The Contractor shall appoint a member of his staff at the Site to be
responsible for maintaining the safety, and protection against (b) is incompetent or negligent in the performance of his duties,
accidents, of personnel on the Site. This person shall be qualified for
his work and shall have the authority to issue instructions and take (c) fails to conform with any provisions of the Contract, or
protective measures to prevent accidents. The Contractor shall (d) persists in any conduct which is prejudicial to safety, health,
send, to the Employer's Representative, details of any accident as or the protection of the environment.
soon as possible after its occurrence.
If appropriate, the Contractor shall then appoint (or cause to be
This Sub-Clause sets out the Contractor's overall responsibility for health appointed) a suitable replacement person.
and safety. Liaison with local health authorities may result in their facilities
It is rare for the Employer's Representative to need to take action under
being used as ambulance service, for example. The importance of
planning for possible accidents must not be overlooked. If the local this Sub-Clause in circumstances where the Contractor would not wish to
facilities seem likely to be insufficient for the numbers of personnel on Site, take his own action, without instruction. Before taking action under this
Sub-Clause, the Employer's Representative should first seek to persuade If the Contractor wishes to use a Material which does not comply with
the Contractor to remove the person. Removal by agreement is preferable Sub-Clause 7.1, he may propose its use under the procedures specified in
to enforcement under this Sub-Clause. Sub-Clause 14.2, drawing attention to the hazards.
6.10 7.2
Disorderly Conduct Delivery to Site
The Contractor shall at all times take all reasonable precautions to The Contractor shall be responsible for procurement, transport,
prevent any unlawful, riotous or disorderly conduct by or amongst receiving, unloading and safe keeping of all Plant, Materials,
his staff and labour, and to preserve peace and protection of pet- Contractors Equipment and other things required for the completion
sons and property in the neighbourhood of the Works against such of the Works.
conduct.
Except as may be specifically stated otherwise in the contract Part II and
Again, it may be difficult to define "reasonable precautions". If they are not the Employer's Requirements (which, under Sub-Clause 1.6, take
taken, it might he necessary for the civil police to be involved. precedence over Part I), the Contractor is responsible for all arrangements
for Plant, Materials, etc.
7.3
Clause 7 Plant, Materials and Workmanship Inspection
The Employer and the Employer's Representative shall be entitled,
7.1 during manufacture, fabrication and preparation at any places
Manner of Execution where work is being carried out, to inspect, examine and test the
materials and workmanship, and to check the progress of
All Plant and Materials to be supplied shall be manufactured, and all manufacture, of all Plant and Materials to be supplied under the
work to be done shall be executed, in the manner set out in the Contract. The Contractor shall give them full opportunity to inspect,
Contract. Where the manner of manufacture and execution is not examine, measure and test any work on Site or wherever carried
set out in the Contract, the work shall be executed in a proper, out.
workmanlike and careful manner, with properly equipped facilities
and non-hazardous Materials, and in accordance with recognized The Contractor shall give due notice to the Employer's
good practice. Representative whenever such work is ready, before packaging,
covering up or putting out of view. The Employer’s Representative
The manner in which work is to be executed can be derived, in part, from shall then either carry out the inspection, examination, measurement
Sub-Clauses 4.1, 5.1, 5.3 and 5.4 of Part I, and probably also from the or testing without unreasonable delay, or notify the Contractor that it
Employer's Requirements and/or the Contractor's Proposal. This Sub- is considered unnecessary. If the Contractor fails to give such
Clause covers those aspects which cannot be derived from other notice, he shall, when required by the Employer's Representative
provisions in the Contract. uncover such work and thereafter reinstate and make good at his
The reference to "non-hazardous Materials" prohibits the use of materials own cost.
which may be hazardous, either in application or during their expected life, The Employer and his Representative are to be given all reasonable access
except to the extent that the use of particular Materials is "set out in the to inspect and test materials and workmanship. Note that they carry out
Contract". the tests covered in Sub-Clause 7.3: these tests might not be described
The Employer's Representative is not empowered to relax this provision of the anywhere in the Contract, because the Employer might find it difficult to
Contract. If he consents (under Sub-Clause 5.2 or 5.5) to the use of Material specify them when writing his Requirements. The tests referred to in Sub-
which is subsequently found to be hazardous, the Contractor will be in breach Clause 7.3 are thus in a different category to those covered in Sub-Clause
of this Sub-Clause and will have to replace the Material; see Sub-Clause 3. 1. 7.4 and Clauses 9 and 11:
Sub-Clause 7.3 relates to the testing by the Employer and/or his as specified in the Contract. The Employer's Representative shall give
Representative during execution of work; the Contractor not less than 24 hours' notice of his intention to attend
the tests. The Contractor shall provide sufficient suitably qualified and
Sub-Clause 7.4 relates to the specified testing by the Contractor
experienced staff to carry out the tests specified in the Contract.
during execution of work and/or upon completion;
If the Employer's Representative does not attend at the time and
Clause 9 relates to the specified testing by, the Contractor upon place agreed, or if the Contractor and the Employer's
completion, before the taking over; Representative agree that the Employer's Representative shall not
Clause 11 relates to the specified testing by the Employer, after his attend, the Contractor may proceed with the tests, unless the
taking over. Employer’s Representative instructs the Contractor otherwise. Such
tests shall be deemed to have been made in the Employers
Except for any details in the Employer's Requirements, the Contractor Representative's presence.
would not have made any allowance in the Contract Price for the tests
under Sub-Clause 7.3, such as the provision of test equipment or special The Contractor shall promptly forward to the Employers
access arrangements. Whilst he is obliged to give the Employer and others Representative duly certified reports of the tests. If the Employer's
an opportunity to inspect and test, this Sub-Clause assumes that no Representative has not attended the tests, he shall accept the
significant Cost will be incurred: delay, may, involve an extension of time readings as accurate. When the specified tests have been passed,
under Sub-Clause 8.3(e). If the Contractor is required to provide additional the Employer's Representative shall endorse the Contractor's test
facilities, these may be instructed under Clause 14. certificate, or issue a certificate to him, to that effect.
The Contractor is required to give notice (in writing: see Sub-Clause 1.8) Whereas the preceding Sub-Clause obliges the Contractor to give certain
when any Plant or Materials is about to be packaged or covered up. If he people an opportunity to carry out tests, some of which may not be
falls to notify, and proceeds with packaging and/or covering up, he must described in the Contract, Sub-Clause 7.4 refers to the Contractor's
unpack and uncover at his own cost, notwithstanding that the Plant or responsibility to carry out all the tests specified in the Contract, except for
Materials may be in accordance with the Contract. If the Contractor does the Tests after Completion (Clause 11). Sub-Clause 7.4 thus also applies
notify, the Employer's Representative must be reasonably prompt in to the Tests on Completion, and is referred to in Clause 9.
responding, by carrying out the inspection, examination, measurement or Sub-Clause 7.4 makes no specific mention of the possible addition of
testing without unreasonable delay, or by notifying the Contractor that it is tests not provided for in the Contract, because additional tests would be
considered unnecessary. In the event of unreasonable delay, the instructed as Variations under Clause 14. It is advisable to seek prior
Contractor may be entitled to an extension of time. agreement of the consequences of each Variation, but it may not be
In many countries, a delay, impediment or prevention by the Employer, possible to do so.
which might arise from the situation described in this Sub-Clause, would The Employer's Requirements will have defined most of the tests to which
entitle the Contractor to compensation under the law. Sub-Clause 7.4 applies. However, the Contractor may have specified
7.4 other tests in his Proposal.
Testing Tests may be required at many stages of manufacture, construction,
If the Contract provides for tests, other than the Tests after erection and commissioning, and could be significant in terms of verifying
Completion, the Contractor shall provide all documents and other that the Plant, Materials and Works are fit for their intended purposes. The
information necessary for testing and such assistance, labour, final paragraph therefore requires the outcome of the specified tests (i.e.,
materials, electricity, fuel, stores, apparatus and instruments as are those specified in the Contract) to be properly recorded in a Contractor's
necessary to carry out such tests efficiently. report and a certificate.
The Contractor shall agree, with the Employer's Representative, the
time and place for the testing of any Plant and other parts of the Works
7.5 of goods may be liable for the payment of taxes or duties, and ownership
Rejection may also be a factor in determining liability for care, custody and control.
If, as a result of inspection, examination or testing, the Employers Under sub-paragraph (a), the Contractor relinquishes ownership on
Representative decides that any, Plant, Materials, design or delivery at Site. If he is not then able to transfer ownership (because of the
workmanship is defective or otherwise not in accordance with the terms of his supply subcontract, for example), he is in breach of the
Contract, the Employers Representative may reject such Plant, Contract.
Materials, design or workmanship and shall notify the Contractor
promptly, stating his reasons. The Contractor shall then promptly Under sub-paragraph (b), payment follows ownership: see Sub-Clause
make good the defect and ensure that the rejected item complies 8.9.
with the Contract. Contractors are sometimes reluctant to have these provisions in the
If the Employer's Representative requires such Plant, Materials, Contract, because of the possibility of inconsistency with supply
design or Workmanship to be retested, the tests shall be repeated subcontracts. This Sub-Clause was nevertheless drafted as shown, with
under the same terms and conditions. If such rejection and retesting the intention that the supply subcontract should be drafted consistent with
cause the Employer to incur additional costs, such costs shall be Part I, not vice versa.
recoverable from the Contractor by the Employer, and may be

deducted by the Employer from any monies due, or to become due,
to the Contractor. Clause 8 Commencement, Delays and Suspension
The first paragraph applies if, as a result of the activities described in Sub-
Clause 7.3 or 7.4, the Employer's Representative decides that something 8.1
is defective. The Contractor is then required to rectify it; he may request Commencement of Works
clarification (in borderline cases) of the reasons why it is considered to be
defective, but the Employer's Representative need not identify the cause of The Contractor shall commence the design and execution of the
the defect. He may not wish to prescribe the method of rectification, which Works as soon as is reasonably possible after the receipt of a notice
must remain the Contractor's responsibility. to this effect from the Employer's Representative. Such notice shall
be issued within the time stated in the Appendix to Tender after the
7.6 Effective Date. The Contractor shall then proceed with the Works
Ownership of Plant and Materials with due expedition and without delay, until completion.
Each item of Plant and Materials shall become the property of the The Contractor is required to commence as soon as possible after receipt
Employer at whichever is the earlier of the following times: of notice from the Employer's Representative, but may want to start
(a) when it is delivered to Site: design immediately. No period is specified within which he has to
commence, because of the practical difficulties in defining what constitutes
(b) when by virtue of Sub-Clause 8.9, the Contractor becomes commencement. For the Employer, the completion date is more important
entitled to payment of the value of the Plant and Materials. than the commencement date.
In many countries, it may be important in law to establish the ownership of The wording of the notice should constitute an instruction to commence
Plant and Materials, particularly in the event of liquidation of the person the design and execution of the Works. The date on which it is received by
who is in possession of them. In some countries, the Employer may have the Contractor must be established: this date is defined as the
certain rights in respect of items for which he has paid, entitling him to take Commencement Date. The period within which the notice is to be issued
possession of them. must be stated in the Appendix to Tender.
The Sub-Clause does not transfer ownership upon payment, except in the Although the Employer should not issue the Letter of Acceptance until any
special case under sub-paragraph (b). Under the applicable law, the owner preconditions have been met, he may find it necessary to prevent
immediate commencement. Therefore, the Contractor is not entitled to (c) a cause of delay giving an entitlement to extension of time
start work on the Site until the date on which the Employer grants under a Sub-Clause o these Conditions, unless the
possession under Sub-Clause 2.2. This date is usually defined by Contractor has not complied with such Sub-Clause,
reference to the date of receipt of the notice (the Commencement Date):
(d) physical conditions or circumstances on the Site, which are
see the example Appendix to Tender, which is reproduced at the end of
exceptionally adverse and were not (by the Base Date)
this Guide. Generally, both parties will prefer a short time for the issue of
foreseeable by an experienced contractor, or
the notice: the Contractor would want an early start, reducing the time
between tendering and commencement (especially in respect of the limited (e) any delay, impediment or prevention by the Employer.
validity of subcontractors' offers); the Employer would want the earliest If the Contractor intends to apply for an extension of the Time for
completion under Sub-Clause 8.2. Completion, the Contractor shall give notice to the Employers
The importance of the last sentence of Sub-Clause 8.1 should not be Representative of such intention as soon as possible and in any
overlooked. Notwithstanding extensions to the Time for Completion, event within 28 days of the start of the event giving rise to the delay,
particularly for delays which only affect part of the Works, the Contractor together with any other notice required by the Contract and relevant
has to proceed expeditiously. This may, depending on the circumstances, to such cause. The Contractor shall keep such contemporary
oblige him to complete other parts (which were not affected by a delay records as may be necessary to substantiate any application, either
which entitled him to an extension of time) before the expiry of the Time for on the Site or at another location acceptable to the Employer's
Completion. However, the circumstances may give rise to practical Representative, and such other records as may reasonably be
difficulties in defining what constitutes "due expedition". requested by the Employer's Representative. The Contractor shall
permit the Employer's Representative to inspect all such records,
8.2 and shall provide the Employer's Representative with copies as
Time for Completion required.
The whole of the Works, and each Section (if any), shall be Within 28 days of the first day of such delay (or such other period as
completed and shall have passed the Tests on Completion within may be agreed by the Employer's Representative), the Contractor
the Time for Completion for the Works or such Section (as the case shall submit full supporting details of his application. Except that, if
may be). the Contractor cannot submit all relevant details within such period
This is the fundamental time-related obligation. Sub-Clauses 5.6 and 5.7 because the cause of delay continued for a period exceeding 7
specify obligations to be fulfilled before the Tests on Completion, and days, the Contractor shall submit interim details at intervals of not
hence within the Time for Completion. Although "completed" implies that more than 28 days (from the first day of such delay) and full and final
there are no outstanding works, Sub-Clause 10.1 pen-nits the subsequent supporting details of his application within 21 days of the last day of
execution, after substantial completion, of "Minor outstanding work that delay.
does not affect the use of the Works or Section for their intended The Employers Representative shall proceed in accordance with
purpose". Sub-Clause 3.5 to agree or determine either prospectively or
8.3 retrospectively such extension of the Time for Completion as may
Extension of Time for Completion be due. The Employer's Representative shall notify, the Contractor
accordingly.. When determining each extension of time, the
The Contractor may apply for an extension of the Time for Employer's Representative shall review his previous determinations
Completion if he is or will be delayed either before or after the Time and may revise, but shall not decrease, the total extension of time.
for Completion by any of the following causes:
Provisions for extension of time are for the benefit of both parties. This
(a) a Variation (unless an adjustment to the Time for Completion Sub-Clause entitles the Contractor to more time to carry out the Works,
is agreed under Sub-Clause 14.3), unless he does not apply for an extension or does not comply with
(b) a force majeure event (as defined in Sub-Clause 19.1), notification requirements; the Sub-Clause protects the Employer
(especially in the event of a delay, impediment or prevention by the down by the relevant legally constituted public authorities in
Employer) from the possibility of Sub-Clause 8.2 being invalidated under the Country,
the applicable law. This Sub-Clause does not include a complete listing of
(b) such authorities delay, impede or prevent the Contractor, and
the events which can give rise to an extension: the inclusion of a listing
would risk inconsistency with the Sub-Clauses referred to in sub- (c) the resulting delay to the Works was not (by the Base Date)
paragraph (c). foreseeable by an experienced contractor,
The Contractor is required to notify the Employer's Representative then such delay will be considered as a cause of delay giving an
promptly, so that he can carry out any investigations and so that both entitlement to extension of time under Sub-Clause 8.3.
parties can keep adequate records, preferably on an agreed basis. Man As with Sub-Clause 8.3, Sub-Clause 8.4 makes no mention of the financial
other Sub-Clauses require the Contractor to notify the Employer's consequences of delay. Financial entitlements may be affected by the
Representative, who then proceeds in accordance with Sub-Clause 3.5 to circumstances related to the authorities' involvement in the work: see Sub-
agree or determine an extension of time, and that notice may also Clause 5.4, for example. The Contractor would be well advised to keep
constitute the notice required by Sub-Clause 8.3. The Employer's meticulous records.
Representative can monitor these records without admitting any
entitlement to extension, although early agreement on the principles 8.5

usually simplifies resolution and minimises dispute. Rate of Progress
The inclusion of sub-paragraph (c) is intended to prevent Sub-Clause 8.2 If at any time, the Contractor's actual progress falls behind the
being invalidated by matters for which the Employer is responsible, such programme referred to in Sub-Clause 4.14, or it becomes apparent
as a delay by the Employer's Representative in taking an action (such as that it will so fall behind, the Contractor shall submit to the
the giving of a consent) which he is required to take under the Contract. Employer's Representative a revised programme taking, into
account the prevailing circumstances. The Contractor shall, at the
The Sub-Clause makes no mention of financial consequences of delay, so same time, notify the Employers Representative of the steps being
there is no entitlement to additional payment under this Sub-Clause; any taken to expedite progress, so as to achieve completion within the
entitlement can only be valid if explicitly stated in another applicable Sub- Time for Completion.
Clause. Most of the Sub-Clauses referred to in sub-paragraph (c) provide
for the financial consequences; 8.4 is one exception. As sub-paragraph (c) If any steps taken by the Contractor in meeting his obligations under
states, the Contractor must comply with the notification requirements of this Sub-Clause cause the Employer to incur additional costs, such
the applicable Sub-Clause. Also, although the circumstances mentioned in costs shall be recoverable from the Contractor by the Employer,
sub-paragraph (d) could give rise to significant additional cost, the and may be deducted by the Employer from any monies due, or to
Contractor could only seek to recover it if another Sub-Clause, such as become dive, to the Contractor.
4.11, was applicable. However, some of these circumstances may be The final sentence of Sub-Clause 4.14 empowers the Employer's
insurable risks. Representative to instruct the Contractor to revise the programme
In accordance with Sub-Clauses 1.8 and 3.5, the Employer's whenever it is inconsistent with actual progress; i.e., progress may be
Representative proceeds without unreasonable delay to agree or ahead or behind the programme. Under Sub-Clause 8.5, the Contractor
determine the extension of time, and to notify the Contractor and the must revise the programme whenever actual progress falls behind, or will
Employer of the agreement or determination (even if it is a nil extension). fall behind, the current programme; no instruction is required. The revised
programme will, of course, take account of any extensions of time
8.4 determined by the Employer's Representative.
Delays Caused by Authorities
8.6
If the following conditions apply, namely.. Liquidated Damages for Delay
(a) the Contractor has diligently followed the procedures laid If the Contractor fails to comply with Sub-Clause 8.2, the Contractor
shall pay to the Employer the relevant sum stated in the Appendix to In the rare event of a subsequent extension of time, the amount
Tender as liquidated damages for such default (which sum shall be recoverable has to be recalculated, and any over-payment refunded. No
the only monies due from the Contractor for such default) for every express provision is made for payment of financing charges in respect of
day or part of a day which shall elapse between the relevant Time this refund. The applicable law may entitle the Contractor to financing
for Completion and the date stated in the Taking-Over Certificate; charges, unless he is partly, responsible for the delay in the determination
except that the total payment shall not exceed the limit of liquidated of this subsequent extension.
damages (if any) stated in the Appendix to Tender
The Employer is entitled to deduct liquidated damages from moneys due
The Employer may, without prejudice to any other method of to the Contractor. Before so doing, he could consider whether the delay is
recovery, deduct the amount of such damages from any monies a reflection of cash flow shortfall from progress payments. If so, further
due, or to become due, to the Contractor. In the event of an diminution of cash flow (by the deduction of liquidated damages) could
extension of time being granted under Sub-Clause 8.3, the amount exacerbate the situation.
due under this Sub-Clause shall be recalculated accordingly, and
any over-payment refunded. The payment or deduction of such Liquidated damages are stated to be the only damages due to late
damages shall not relieve the Contractor from his obligation to completion; in other words, the Employer cannot recover his actual losses
due to late taking over. However, he can recover additional costs which
complete the Works, or from any other of his duties, obligations or

responsibilities under the Contract. arose directly from the steps taken by the Contractor to expedite progress,
At any time after the Employer has become entitled to liquidated
damages, the Employers Representative may give notice to the The final paragraph provides for the possibility that the Contractor may be
Contractor under Sub-Clause 15.1, requiring the Contractor to so late in completion that the Employer may realize that the limit of
complete within a specified reasonable time for completion. Such liquidated damages may be reached. The options open to the Employer
action shall not prejudice the Employer's entitlements to payment include a formal notice under this Sub-Clause and Sub-Clause 15. 1. The
under this Sub-Clause and to terminate under Sub-Clause 15.2. notice should specify a reasonably achievable date for completion: see
comments on Clause 15.
This Sub-Clause defines the extent of the compensation paid by the
Contractor to the Employer in the event that the Works, or a Section (if Note that Sub-Clause 8.6 applies notwithstanding that the Contractor is
any), are not completed within the Time for Completion. Although its not entitled (under Part I) to the payment of a bonus for accelerated
operation may be affected by the applicable law, the Sub-Clause generally completion. When preparing the tender documents, the Employer may
provides the mechanism for compensation, without the Employer having wish to consider incorporating arrangements for bonus payments: see
to demonstrate his actual loss. Note that the Contractor cannot prevent page 12 of the published Part II.
the deduction by submitting claims for extension of time. 8.7
The sum per day is to be stated in the Appendix to Tender. The sum may be Suspension of Work
expressed as a percentage of the Contract Price: see the example Appendix The Employer's Representative may at any time instruct the
reproduced at the end of this Guide. Typically, the sum could be calculated Contractor to suspend progress of part or all of the Works. During
by considering the Employer's losses or foregone benefits (which might be suspension, the Contractor shall protect, store and secure such
comparable with the financing charges for the Contract Price, per day); and part or the Works against any deterioration, loss or damage.
the daily cost of the Employer's Representative. For the limit of liquidated
damages, if stated in the Appendix to Tender, the usual percentage in The Employer's Representative is not required to give reasons for
international contracts generally varies between 5% and 15%. The instructing a suspension, but may do so in order to indicate how he
currencies of payment may affect the Employer's calculation of the sum per proposes to apply the subsequent Sub-Clauses. The instruction must be
day and the limit. When preparing their tenders, tenderers will wish to assess in writing: see Sub-Clause 1.8.
their potential liability to the Employer, and take account of the liquidated The suspension may have been necessitated by a situation for which the
damages specified in the Appendix to Tender. Employer is responsible, or by a situation for which the Contractor is
responsible. In the latter event, the Employer's Representative may defect or loss caused by faulty design, workmanship or materials, or
consider it advisable, if instructing a suspension, to ensure that the by the Contractor’s failure to take the measures specified in Sub-
Contractor's shortcoming is recorded as having necessitated the Clause 8.7.
suspension. His shortcomings may not necessitate a suspension,
This Sub-Clause sets out the procedure to deal with a suspension which is
particularly if they relate to manufacture off-Site. When contemplating
not due to the Contractor's shortcomings. Firstly. he gives notice to the
whether to instruct a suspension, the Employer's Representative should
Employer's Representative. Although no time is prescribed for him to give
consider all the alternatives carefully.
the notice (except in Sub-Clause 1.8), he should do so as soon as
The Employer's Representative does not have a duty under the Contract possible after receipt of the instruction to suspend, making reference to
to instruct a suspension, even if it is obvious that certain works must be Sub-Clauses 8.8 and 20. 1. The latter prescribes the procedure for
suspended: for example, because of a flood season. In these obvious submission of relevant records and evaluation.
cases, it is the Contractor who is at risk if he persists in executing work
The Contractor is not entitled to an extension of time for a delay, and/or to
which should obviously be suspended. In some cases, his persistence
payment of a Cost:
may make a suspension necessary for reasons attributable to the
Contractor, so Sub-Clause 8.8 would not apply. (a) if the suspension is due to a cause attributable to the Contractor,
No mention is made of the Employer's Representative having to instruct (b) if the suspension is necessitated by a Contractor's risk (his risks are
the Contractor's activities of protecting, storing and securing. However, he all risks other than the Employer's risks listed in Sub-Clause 17.3),
should be involved, because of the entitlement to reimbursement under
(c) in respect of the making good of any deterioration, defect or loss
Sub-Clause 8.8.
caused by faulty design, workmanship or materials,
8.8
(d) which was due to the Contractor's failure to take the measures
Consequences of Suspension
specified in Sub-Clause 8.7, or
If the Contractor suffers delay and/or incurs Cost in following the
(e) which was foreseeable by an experienced contractor.
Employers Representative's instructions under Sub-Clause 8.7, and
in resumption of the work, and if such delay and/or Cost was not It will be unusual for (e) to apply, unless (a), (b), (c) or (d) also applies.
(by the Base Date) foreseeable by an experienced contractor, the However, the provision gives further protection to the Employer in the
Contractor shall give notice to the Employer's Representative, with a event of the Contractor persisting in the execution of work which should
copy to the Employer. After receipt of such notice the Employer's obviously be suspended.
Representative shall proceed in accordance with Sub-Clause 3.5 to
agree or determine: 8.9
Payment for Plant and Materials in Event of Suspension
(a) any extension of time to which the Contractor is entitled
under Sub-Clause 8.3, and The Contractor shall be entitled to payment for Plant and/or
Materials which have not been delivered to Site, of the work on
(b) the amount of such Cost, which shall be added to the Plant or delivery of Plant and/or Materials has been suspended for
Contract Price, more than 28 days. This entitlement shall be to payment of the value
and shall notify the Contractor accordingly. Except that the of such Plant and/or Materials as at the date of suspension, if:
Contractor shall not be entitled to such extension and payment of (a) the Contractor has marked the Plant and/or Materials as the
Cost if the suspension is due to a cause attributable to the Employer’s property in accordance with the Employer's
Contractor, or is necessitated by a Contractor's risk as defined in Representative's instructions, and
Sub-Clause 17.5.
(b) the suspension is not due to a case attributable to the
The Contractor shall not be entitled to extension of time for, or Contractor
payment of the costs incurred in, making good any deterioration,
The Employer shall then, if requested by the Contractor, take over If the Employer has taken over risk and responsibility for the
the responsibility for protection, storage, security and insurance of suspended Works under Sub-Clause 8.9, risk and responsibility
such suspended Plant and/or Materials; the risk of loss or damage shall revert to the Contractor 14 days after receipt of the permission
to the suspended works shall then pass to the Employer. or instruction to proceed.
For a suspension which is not due to the Contractor's shortcomings, he For some types of Works, the Employer may be understandably reluctant
becomes entitled to payment for Plant and Materials, after 28 days, if they to allow the Contractor to resume his activities before risk and
become the Employer's property and are marked accordingly. In some responsibility revert after the 14 days.
countries, the law may require certain actions to be taken in order to make
No mention is made of any payment due for these activities, because the
the items the property of the Employer.
Contractor's entitlement to compensation for the Cost incurred "in
During these 28 days, the only entitlement to payment would be under resumption of the work” is included in Sub-Clause 8.8: see above.
Clause 13. An immediate entitlement to payment would not be reasonable,
because the suspension might only be a few days and might occur prior to
payment becoming due under Clause 13. If the Contractor then requests Clause 9 Tests on Completion
the Employer to take over responsibility, the Employer must comply, but
the Contractor must make the Plant and/or Materials available for these
purposes. 9.1
8.10 Contractor's Obligations
Prolonged Suspension The Contractor shall carry out the Tests on Completion in
If suspension under Sub-Clause 8.7 has continued for more than 84 accordance with this Clause and Sub-Clause 7.4, after providing
days, and the suspension is not due to a cause attributable to the the documents in accordance with Sub-Clauses 5.6 and 5.7. The
Contractor, the Contractor may by notice to the Employer's Contractor shall give, to the Employer's Representative, 21 days'
Representative require permission to proceed within 28 days. If notice of the date after which the Contractor will be ready to carry
permission is not granted within that time, the Contractor may treat out the Tests on Completion. Unless otherwise agreed, such Tests
the suspension as an omission under Clause 14 of the affected part shall be carried out within 14 days after this date, on such day or
of the Works. If such suspension affects the whole of the Works, the days as the Employer’s Representative shall instruct.
Contractor may terminate his employment, under Sub-Clause 16.2. In considering the results of the Tests on Completion, the
Clearly, a twelve week suspension brings into question whether it is Employer's Representative shall make allowances for the effect of
any use of the Works by, the Employer on the performance or other
reasonable to delay progress to this extent, unless it is due to the
characteristics of the Works. As soon as the Works, or a Section,
Contractor's shortcomings. No time limit is specified for the Contractor's
have passed the Tests on Completion, the Contractor shall provide
notice; under Sub-Clause 1.8, the notice shall be in writing and not
the Employer's Representative and the Employer with a certified
unreasonably delayed.
report of the results of all such Tests.
8.11
The Tests on Completion are the tests, defined in the Employer's
Resumption of Work
Requirements and (possibly) Contractor's Proposal. which are required by
After receipt of permission or of (in instruction to proceed, the the Employer in order to determine whether the Works (or a Section, if any)
Contractor shall, after notice to the Employer's Representative, and have reached the stage at which the Employer should take over the Works
together with the Employer's Representative, examine the Works and or Section. These Tests would normally include some performance tests,
the Plant and Materials affected by the suspension. The Contractor in order to determine whether the Works or Section comply with specified
shall make good any deterioration or defect in or loss of the Works or performance criteria. Clause 9 is intended to be applicable to any type of
Plant or Materials, which has occurred during the suspension.
tests which the Contractor is required to carry out at completion, before tests, but may be entitled to an extension of time under Sub-Clause 8.3(e),
the Employer takes over the Works or Section. and/or to recovery of damages for breach of Sub-Clause 1.8.
The Sub-Clause makes no specific mention of the possible addition of 9.2
tests not provided for in the Contract, because Tests on Completion are Delayed Tests
defined in Sub-Clause 1.1.4.1 as including, additional tests instructed as
If the Tests on Completion are being unduly delayed by, the
Variations under Clause 14. It is advisable to seek prior agreement of the
Contractor, the Employer's Representative may, by notice require
consequences of each Variation, but it may not be possible to do so. See
the Contractor to carry out such Tests within 21 days after the
comments on Sub-Clause 1.1.4, 7.3 and 11. 1. receipt of such notice. The Contractor shall carry out such Tests on
The Tests need not cover every aspect necessary to define completion. such day or days within that period as the Contractor may fix and of
Under Sub-Clause 10. 1, the passing of these Tests is only part of the which he shall give notice to the Employer's Representative.
criteria to be satisfied before taking over. However, since the Contractor If the Contractor falls to carry out the Tests on Completion within 21
has designed the Works, the Tests will probably be sufficiently detailed to days, the Employers Representative may himself proceed with such
necessitate the preparation of the report required by the last sentence. Tests. All such Tests so carried out by the Employer's
Particular requirements for this report may need to be included in the
Representative shall be at the risk and cost of the Contractor. These

Employer's Requirements. Tests on Completion shall then be deemed to have been carried out
Tests on Completion might include a combination of electrical, in the presence of the Contractor and the results of such Tests shall
hydraulic and mechanical tests, with the Works being operated be accepted as accurate.
continuously to determine their reliable output and efficiency. This Sub-Clause deals with the unusual situation of the Contractor
Specification of these performance tests may be made more difficult by delaying the Tests on Completion, giving the Employer's Representative
the Employer's Requirements having to be written before the details of the right to carry out these Tests. He is under no obligation to carry out the
the Works are known, and possibly some years before the Tests will be Tests, and may well consider that it would be unwise to do so. He should
carried out. advise the Contractor of the arrangements, so as to give him the
However, inadequate specification could give rise to dispute as to whether opportunity to rectify his default, or at least to be represented at the Tests.
completion of the Works has been achieved. Typically, the provisions However, the Contractor is nevertheless required to accept the results of
might have to take account of the quality and availability of feedstock and the Tests, although he is not entitled to receive a report.
other materials, the quality and production rates of the output (product) 9.3
and of by-products (including treatment and disposal of effluent), and Retesting
efficiency in the use of power, materials and other resources.
If the Works, or a Section, fail to pass the Tests on Completion,
The Contractor may act in advance of substantial completion; he is Sub-Clause 7.5 shall apply, and the Employer's Representative or
required to give three weeks' notice of when he will be ready to carry out the Contractor may require such failed Tests, and the Tests on
the Tests on Completion, after providing the documents in accordance Completion on any related work, to be repeated under the same
with Sub-Clauses 5.6 and 5.7. He then carries out the Tests, in terms and conditions.
accordance with the testing requirements of Sub-Clause 7.4, at times
agreed with the Employer's Representative, within 14 days after the If tests are repeated, usually after rectification work, other (related) work
notified date of readiness. may have been affected by the rectification, and may therefore need to be
retested.
Unless otherwise agreed, the Tests on Completion are to be carried out
(within the period of 14 days) on such days as the Employer's 9.4
Representative shall instruct. Under Sub-Clause 1.8, the instruction shall Failure to Pass Tests on Completion
be in writing and not be unreasonably delayed or withheld. If no instruction If the Works, or a Section, fail to pass the Tests on Completion
is given, the Contractor is not entitled to proceed with these important
repeated under Sub-Clause 9.3, the Employers followed by repetition under Clause 11 of the failed Tests on
Representative shall be entitled to: Completion; or
(a) order further repetition of Tests on Completion under Sub- (b) provisions similar to those in Sub-Clause 11.4, but applicable to the
Clause 9.3; Tests on Completion, assuming there are to be no Tests after
(b) reject the Works or Section (as the case may be), in which Completion.
event the Employer shall have the same remedies against the
Contractor as are provided under Clause 15; or
Clause 10 Employer's Taking Over
(c) issue a Taking-Over Certificate, if the Employer so requires:
the Contract Price shall then be reduced by such amount as
may be agreed by the Employer and the Contractor (in full 10.1
satisfaction of such failure only), and the Contractor shall then Taking-Over Certificate
proceed in accordance with his other obligations under the
Contract. Except as stated in Sub-Clause 9.4, the Works shall be taken over
by the Employer when they have been completed in accordance
There is no limit on the number of repetitions which may be ordered, with the Contract (except as described in sub-paragraph (a) below),
because (after any Test) it may appear that only minor rectification work have passed the Tests on Completion and a Taking-Over Certificate
will be required to overcome the apparent reasons for the failure. If for the Works has been issued, or has deemed to have been issued
rectification seems unlikely, the Employer may apply Clause 15 or seek in accordance with this Sub-Clause. If the Works are divided into
agreement to a reduction in the Contract Price. Typically, he might first Sections, the Contractor shall be entitled to apply for a Taking-Over
indicate the reduction he would require, and seek the Contractor's Certificate for each Section.
agreement prior to the issue of a Taking-Over Certificate; if agreement cannot
be reached prior to the issue of the Taking-Over Certificate under sub- The Contractor may apply by notice to the Employer's
paragraph (c), the Employer may prefer to apply sub-paragraph (a) or (b). Representative for a Taking-Over Certificate not earlier than 14 days
before the Works or Section (as the case may be) will, in the
Since this Sub-Clause gives no indication that the Test is deemed to have Contractors opinion, be complete and ready for taking-over. The
been passed, no Retention Money would be released under Sub-Clause 13.9, Employer's Representative shall, within 28 days after the receipt of
unless the parties agree otherwise (under 9.4(c)). If the whole of the Works the Contractor's application:
failed the Test, the first half of Retention Money might then not be due for
(a) issue the Taking-Over Certificate to the Contractor, stating
release until the same time as the second half of the Retention Money.
the date on which the Works or Section were completed in
Sub-Clause 9.4 does not contain all the provisions of Sub-Clause 11.4, accordance with the Contract (except for minor outstanding
although they both cover performance tests. In the event of a failure to work that does not affect the use of the Works or Section for
pass the Tests on Completion, the Contractor cannot simply pay their intended purpose) including passing the Tests on
liquidated damages (as he can for the Tests after Completion): he should Completion; or
rectify problems and repeat the Tests. For some types of Works, it may be
(b) reject the application, giving his reasons and specifying the
appropriate for the Tests after Completion to be repetition of some of the
work required to be done by the Contractor to enable the
Tests on Completion, possibly with more onerous acceptance criteria. Taking-Over Certificate to be issued: the Contractor shall
When preparing the tender documents, the Employer may wish to then complete such work before issuing a further notice
consider incorporating in the contract Part II, in respect of a failure to pass under this Sub-Clause.
the Tests on Completion: If the Employer's Representative falls either to issue the Taking-Over
(a) provisions entitling the Employer's Representative to issue a Taking- Certificate or to reject the Contractors application within the period
Over Certificate as in sub-paragraph (c), but which would be of 28 days, and if the Works or Section (as the case may be) are
substantially in accordance with the Contract, the Taking-Over the provisions of Sub-Clause 3.5. The provisions of this paragraph
Certificate shall be deemed to have been issued on the last day of shall only apply to the rate of liquidated damages under Sub-Clause
that period. 8.6, and shall not affect the limit of such damages.
The Employer is required to take over the Works (or a Section, if any) when If the Employer does use any part of the Works before the Taking-
they are complete in accordance with the Contract, except for minor Over Certificate is issued:
outstanding work that does not affect the use of the Works or Section for
(a) the part which is used shall be deemed to have been taken
their intended purpose, and they have passed the Tests on Completion (if
over at the date on which it is used,
any) under Clause 9. The Contractor applies for the Taking-Over Certificate
by written notice to the Employer's Representative, which may precede (b) the Employer's Representative shall, when requested by the
the completion and/or passing of the Tests. Note that "completion" is not Contractor, issue a Taking-Over Certificate accordingly, and
qualified as "substantial", but only limited by the reference to minor (c) the Contractor shall cease to be liable for the (.are of such
outstanding work. However, substantial completion is sufficient to entitle part from such date, when responsibility shall pass to the
the Contractor to the deemed certification mentioned in the last sentence Employer.
of Sub-Clause 10.1, if he receive no response from the Employer's
Representative and the Works or Section are substantially in accordance After the Employer’s Representative has issued a Taking-Over
with the Contract. Certificate for a part of the Works, the Contractor shall be given the
earliest opportunity to take such steps as may be necessary to carry
The Employer has no right to use the Works if the Contractor has failed to out any outstanding Tests on Completion, and the Contractor shall
complete them in accordance with the Contract, except after termination. carry out such Tests on Completion as soon as practicable, before
If the Works appear to be complete (except for minor outstanding work the expiry of the Contract Period.
that does not affect the use of the Works for their intended purpose) but
fail the Tests on Completion, Sub-Clause 9.4 may be applied. Under Sub-Clause 2.2, the Employer grants the Contractor possession of
the Site. Taking over a part of the Works brings possession to an end. If
Under the final sentence of Sub-Clauses 5.6 and 5.7 respectively, the the Employer expected to take over any part of the Works, it should have
Employer's Representative is not empowered to issue a Taking-Over been defined, in the Appendix to Tender, as a Section. Sub-Clause 10.2
Certificate if certain Construction Documents have not been received. covers the possibility that the Employer may eventually decide to take over
Nevertheless, the Employer may wish to take over and operate the Works. a part of the Works (other than a Section) before completion of the other
If the Employer wishes to take over any works before they meet the parts.
completion criteria set out in Sub-Clause 10. 1, Sub-Clause 10.2 provides
him with an appropriate procedure. The Employer must first arrange for the issue of a Taking-Over Certificate
for the part, recognising that it will reduce his entitlement to liquidated
10.2 damages. In some countries, it might prejudice his entire entitlement,
Use by the Employer because the reduction is to be determined by his Representative, pro rata
The Employer shall not use any part of the Works unless the to the value of the part. The laws of some countries require liquidated
Employer's Representative has issued a Taking-Over Certificate for damages to be predetermined, and not to be subject to assessment by
such part. If a Taking-Over Certificate has been issued for any part the payee's Representative. Under Sub-Clause 10.2, he has to determine
of the Works (other than a Section), the liquidated damages for the value of the part which has been taken over, probably without a
delay in completion of the remainder Of the Works (and of the documented basis such as a bill of quantities.
Section of which it forms part) shall, for any period of delay after the 10.3
date stated in such Taking-Over Certificate, be reduced in the
Interference with Tests on Completion
proportion which the value of the part so certified bears to the value
of the Works or Section (as the case may be); such values shall be If the Contractor is prevented from carrying out the Tests on
determined by the Employer’s Representative in accordance with Completion by a cause for which the Employer (or another
contractor employed by the Employer) is responsible, the Employer days’ notice of the date after which the Tests after Completion will
shall be deemed to have taken over the Works or Section (as the be carried out. Unless otherwise agreed, such Tests shall be carried
case may be) on the date when the Tests on Completion would out within 14 days after this date, on the day or days determined by
otherwise have been completed. The Employer's Representative the Employer. If the Contractor does not attend at the time and
shall then issue a Taking-Over Certificate accordingly, and the place agreed, the Employer may proceed with the Tests after
Contractor shall carry out the Tests on Completion as soon as Completion, which shall be deemed to have been made in the
practicable, before the expiry of the Contract Period. The Contractor's presence, and the Contractor shall accept the readings
Employer's Representative shall require the Tests on Completion to as accurate.
be carried out by 14 days' notice and in accordance with the
The results of the Tests after Completion shall be compiled and
relevant provisions of the Contract. If the Contractor incurs
evaluated by the Employer and the Contractor. Any effect on the
additional Cost as a result of this delay in carrying out the Tests on
results of the Tests after Completion which can reasonably be
Completion, such Cost plus reasonable profit shall be determined
shown to be due to the prior use of the Works by the Employer shall
by the Employer's Representative in accordance with the provisions
be taken into account in assessing such results.
of Sub-Clause 3.5 and shall be added to the Contract Price.
The Tests after Completion are the tests, defined in the Employer's
Typically, the Tests on Completion are the events which immediately

Requirements and/or Contractor's Proposal, which are required to be
precede completion and taking over. It is therefore reasonable that, if they
carried out as soon as possible after taking over in order to determine
are prevented by the Employer, he nevertheless becomes responsible for
whether the Works (or a Section, if any) comply with specified performance
the relevant Works or Section (not just the part), taking over of which he is,
criteria. See comments on Sub-Clauses 1.1.4, 7.3 and 9. 1.
in effect, preventing. This deemed taking over will apply to the scope of the
prevented Tests; i.e., to the Works or Section, whichever would otherwise For some types of Works, it may be appropriate for the Tests after
have been taken over when the prevented Tests had been passed. Even if Completion to include the repetition of some of the Tests on Completion,
the prevented Tests were limited to those which should have been carried possibly with more onerous acceptance criteria. If there are to be no Tests
out on a Section, they may result in a deemed taking over of the Works, after Completion, the Employer's Requirements should include a
depending upon the relevant circumstances. statement to this effect, for avoidance of doubt.
The Clause was written assuming that, before they carry out these Tests,
the personnel of the Employer (or other operating organisation.) would
Clause 11 Tests after Completion
require a few weeks after taking over for training and/or familiarisation, and
in order to allow an initial period for commissioning and for minor teething
troubles to be resolved. This training would be specified in the Employer's
11.1
Requirements as a task for the Contractor to perform prior to and/or
Employer's Obligations
during the Tests after Completion.
If Tests after Completion are specified in the Contract, this Clause
Tests after Completion might include a combination of electrical, hydraulic
shall apply. Unless otherwise stated in Part II, the Employer shall
and mechanical tests, with the Works being operated continuously during
provide the necessary labour, materials, electricity, fuel and water,
a reliability run, the duration of which would have to be specified: 28 days
and shall carry out the Tests after Completion in accordance with
is often appropriate. Specification of these performance tests may be
the manuals provided by the Contractor under Sub-Clause 5.7 and
made more difficult by the Employer's Requirements having to be written
such guidance as the Contractor may be required to give during the
before the details of the Works are known, and possibly some years before
course of such Tests.
the Tests will be carried out. However, inadequate specification could give
The Tests after Completion shall be carried out as soon as is rise to dispute, because the Tests have a major role in determining the
reasonably practicable after the Works, or Section, have been taken acceptability of the Works. Typically, the provisions might have to take
over by the Employer. The Employer shall give to the Contractor 21 account of the quality and availability of feedstock and other materials, the
quality and production rates of the output (product) and of by-products 11.3
(including treatment and disposal of effluent), and efficiency in the use of Retesting
power, materials and other resources.
If the Works, or a Section, fail to pass the Tests after Completion,
For some types of Works, it might be necessary to carry out these Tests the Employer or the Contractor may require such failed Tests, and
during a particular season of the year. Under Part I, the Employer decides the Tests after Completion on any related work, to be repeated
the date after which the Tests after Completion are to be carried out, and under the same terms and conditions. ~f such failure and retesting
is responsible for making the necessary arrangements. result from a default of the Contractor and cause the Employer to
incur additional costs, such costs shall be recoverable from the
Evaluation of the results should be carried out Jointly by the Employer and Contractor by, the Employer, and may be deducted by the
the Contractor, in order to resolve any technical differences at an early Employer from any monies due, or to become due, to the
stage. They may find it difficult to take account of the prior use of the Contractor.
Works by the Employer, depending on the required long term performance
specified in the Employer's Requirements. Ideally, the Tests after Note that either party may require Tests after Completion to be repeated,
Completion should be specified in such a way that, provided they are including tests on "related work" which may have been affected by any
carried out before the expiry of the Contract Period, the results should not rectification work. For certain types of Plant, technological development
be influenced by the foreseeable use prior to testing. can only be maintained by utilising feedback from testing. The party
requiring repetition should do so promptly.
11.2
Delayed Tests 11.4
Failure to Pass Tests after Completion
If the Contractor incurs additional Cost as a result of any
unreasonable delay by the Employer in carrying out the Tests after If the following conditions apply, namely:
Completion, such Cost plus reasonable profit shall be determined (a) the Works, or a Section, fail to pass any or all of the Tests
by the Employer's Representative in accordance with the provisions after Completion,
of Sub-Clause 3.5 and shall be added to the Contract Price.
(b) the relevant sum payable as liquidated damages for such
If, for reasons not attributable to the Contractor, a Test after failure is stated (or its method of calculation is defined) in the
Completion of the Works or any Section cannot be completed Appendix to Tender, and
during the Contract Period (or any other period agreed upon by the
Employer and the Coil tractor), then the Works or such Section shall (c) the Contractor pays such relevant sum to the Employer
be deemed to have passed such Test after Completion. during the Contract Period,
The Employer might be reluctant to enter into a contract which required then the Works or such Section shall be deemed to have passed
him to carry out the Tests after Completion immediately after taking over, such Tests after Completion.
before training and/or familiarisation. The Contractor might be reluctant to If the Works, or a Section, fail to pass a Test after Completion and
enter into a contract which entitled the Employer to carry them out as late the Contractor in consequence proposes to make any adjustment
as possible, because of the cost of financing the delayed repayment of the or modification thereto, the Employer's Representative may
first half of the Retention Money under Sub-Clause 13.9. This Sub-Clause instruct the Contractor that the Employer does not wish such
therefore protects the Contractor from undue delay, and entitles him to adjustment or modification to be made until a time that is
recover the Cost caused by the delay, plus reasonable profit. What convenient to the Employer. In such event, the Contractor shall
constitutes "unreasonable delay" must depend on the nature of the Works remain liable to carry out the adjustment or modification, and to
and on any indications of timing specified in the Employer's Requirements, satisfy such Test within a reasonable time of being notified to do
which should include as much detail as possible. so by the Employer's Representative. If, however, the Employer's
Representative falls to give any such notice during the Contract
Period, the Contractor shall be relieved of any such obligation and
the Works or Section (as the case may be) shall be deemed to have a Taking-Over Certificate, as soon as practicable after such
passed such Test after Completion. date, and
If the Contractor incurs additional Cost as a result of any (b) execute all work of amendment, reconstruction, and
unreasonable delay by the Employer in permitting access to the remedying defects or damage, as may be instructed by the
Works or Plant by the Contractor, either to investigate the causes of Employer or the Employers Representative during the
failure to pass a Test after Completion, or to carry out any Contract Period.
adjustments or modifications, then the Contractor shall be paid the
If any such defect appears or damage occurs, the Employer or the
additional Cost, plus reasonable profit, caused by such delay.
Employers Representative shall promptly notify the Contractor in
The first part of this Sub-Clause provides a mechanism to compensate the writing.
Employer in the event of a failure to pass any of the Tests after
The operation of this Sub-Clause is wider than similar provisions in some
Completion, unless the Appendix to Tender does not include details
other forms of contract, because the Contract Period (referred to in sub-
defining how to calculate the liquidated damages for the particular failure. If
paragraph (b)) is the entire period from commencement up to the date a
the liquidated damages are not thus ascertainable, this first part may not
year after taking over. However, the Sub-Clause only applies during the
be applicable.
Contract Period: the Employer's Representative must notify the Contractor

When preparing the tender documents, the Employer should define of defects on or before the last day of the Period. The parties’
minimum acceptable criteria (the maximum permissible extent of the test representatives should therefore convene a joint inspection of the Works a
failure), and not mistakenly define it as a limit to such liquidated damages. few days before the Contract Period expires. If the period for notifying
The latter limit would only provide a limitation on the payment by the defects is to be other than 365 days, the contract Part II can amend the
Contractor and may not impose any restriction on what is acceptable. The definition in Sub-Clause 1. 1.3.5 accordingly.
importance of assessing these liquidated damages carefully cannot be
Note that Sub-Clause 12.1 applies to all the Construction Documents as
over-emphasised, because of the eventual possibility that the Employer will
well as the Works.
find that he has taken over non-compliant Works, paid the Contract Price
and only been able to deduct these liquidated damages. Subject to Sub-Clause 12.3, the Contract Period expires a year after the
whole of the Works are taken over. There is no separate provision for
The second paragraph seeks to deal with the practical difficulty which the
Sections and other parts taken over earlier, for which the defects liability
Employer may have in giving the Contractor access to overcome a failure.
period is thus longer. This might seem unfair to the Contractor, but should
The Contractor remains liable to carry out the work, unless he receives no
give him some incentive to minimise defects. When writing Sub-Clauses
notice during the Contract Period, but becomes entitled to compensation
12.1 and 1.1.3.5, it seemed anomalous to permit a situation where the
(under the final paragraph) in the event of unreasonable delay.
Contractor was still on Site but his obligation to rectify defects in a Section
had expired.
Clause 12 Defects Liability 12.2
Cost of Remedying Defects
All work referred to in Sub-Clause 12.1(b) shall be executed by the
12.1 Contractor at his own cost, if the necessity for such work is due to:
Completion of Outstanding Work and Remedying Defects
(a) the design of the Works,
In order that the Construction Documents and the Works shall be in
the condition required by the Contract (fair wear and tear excepted) (b) Plant, Materials or workmanship not being in accordance with
at, or as soon as practicable after, the expiry of the Contract Period, the Contract, or
the Contractor shall: (c) failure by the Contractor to comply with any of his other
(a) complete any work which is outstanding on the date stated in obligations.
If such necessity is due to any other cause, the Employer's 12.4
Representative shall notify, the Contractor accordingly and seek Failure to Remedy Defects
agreement to an adjustment to the Contract Price. In this event,
If the Contractor fails to remedy, any defect or damage within a
Sub-Clause 14.3 shall apply to such work.
reasonable time the Employer or the Employer's Representative
Note that the Employer's Representative is only to notify the Contractor if may fix a date on or by which to remedy the defect or damage, and
he considers that the necessity for the work is "due to any other cause", in give the Contractor reasonable notice of such date.
which case Sub-Clause 14.3 shall apply. If the cause is not set out in a
If the Contractor fails to remedy the defect or damage by such date
notice, the Contractor will not be entitled to an adjustment of the Contract
and the necessity for such work is due to a cause stated in Sub-
Price. If he considers that he is entitled to an adjustment, he should notify
Clause 12.2(a), (b) or (c), the Employer may (at his sole discretion):
the Employer's Representative accordingly, but continue to execute the
work in accordance with his obligations under Sub-Clauses 3.4 and 12. 1. (a) carry out the work himself or by others, in a reasonable
manner and at the Contractor's risk and cost, but the
12.3
Contractor shall have no responsibility for such work: the
Extension of Contract Period
costs properly incurred by the Employer in remedying the
The Contract Period shall be extended by a period equal to the sum defect or damage shall be recoverable from the Contractor
of ally periods, after the Works are taken-over, during which the by the Employer;
Works or any Section or item of Plant cannot be used, for the
(b) require the Employer's Representative to determine and
purposes for which they are intended, by reason of a defect or certify a reasonable reduction in the Contract Price; or
damage; except that the Contract Period shall not be extended by
more than two years. (c.) if the defect or damage is such that the Employer has been
deprived of substantially the whole of the benefit of the Works
When delivery of Plant and/or Materials, or erection of Plant, or
or parts of the Works, terminate the Contract in respect of
installation of Materials, has been suspended under Sub-Clause such parts of the Works as cannot be put to the intended
8.7, the Contractor's obligations under this Sub-Clause shall not
use: the Employer shall then be entitled to recover all sums
apply to any defects or damage occurring more than three years
paid for such parts of the Works together with the cost of
after the Plant and/or Materials would otherwise have been
dismantling the same, clearing the Site and returning Plant
delivered, erected and taken-over.
and Materials to the Contractor, and Sub-Clause 15.1 shall
If a defect prevents the Works, Section or Plant being operated, the not apply.
Contract Period is extended so that the Employer operates them for a total What constitutes "reasonable", for the Contractor's remedial work and for
of 365 (non-consecutive) days before the Contract is completed under the period prescribed by the notice, must depend on such factors as the
Sub-Clause 12.9. However, the Employer might not get 365 days' proximity of the Site to the Contractor's Equipment and personnel (who
operation of every part, because some defective parts might not prevent may have left the Country), the delivery periods for replacement Plant, and
any Section or item of Plant being used for their intended purpose(s). the operational status of the Works. When giving the described notice, the
Sub-Clause 12.3 applies whenever works cannot be used by reason of a Employer may (but is not bound to) indicate which of the sub-paragraphs
defect or damage, which may have occurred before or after taking over will be applied.
and which may (or may not) have been due to the Contractor's If sub-paragraph (a) applies, the Employer should take account of any
shortcomings. If the Contractor is not responsible for the defect or progress in manufacturing replacements, which the Contractor might be
damage, the Employer might prefer to waive these provisions, in order to willing to supply but might find it difficult to install. The work is carried out
avoid the Contractor's reimbursable costs. at the risk of the Contractor (who bears responsibility for accidental
damage, for example), but the Employer is responsible for the
performance of the rectification. Therefore, the Employer's best interests

lie in persuading the Contractor to remedy the defect or damage, in order For certain types of Plant, technological development can only be
to avoid dispute as to whether any element of under-performance of the maintained by utilising feedback from operational records. The Contractor
Works is due to a rectification by the Employer. has right of access to these records, which should allow his designers to
give their comments.
12.5
Removal of Defective Work 12.8
Contractor to Search
If the defect or damage is such that it cannot be remedied
expeditiously on the Site, the Contractor may, with the consent of The Contractor shall, if required by the Employer's Representative,
the Employers Representative or the Employer, remove from the search for the cause of any defect, under the direction of the
Site for the purposes of repair ally part of the Works which is Employer's Representative. Unless the defect is one for which the
defective or damaged. Contractor is liable, the Cost of such search, plus reasonable profit,
shall be added to the Contract Price.
This Sub-Clause covers the possibility of it being necessary (for technical
reasons) to take items off Site for rectification work. If consent is sought Although the Employer's Representative is entitled to give "direction", in
under this Sub-Clause, the Employer will be entitled to impose conditions many cases it may be preferable for him to agree the search methods with
for the consent, which must be in writing and not unreasonable delayed or the Contractor and/or the designer(s).
withheld (Sub-Clause 1.8). For example, if the value of an item is not
12.9
significantly less than that of the performance security, the Employer may
Performance Certificate
wish to consider an additional security in respect of the item, which is his
property, as well as appropriate insurance. The Contract shall not be considered to be completed until the
Performance Certificate has been signed by the Employer's
12.6
Representative and delivered to the Contractor, stating the date on
Further Tests
which the Contractor completed his obligations to the Employers
If the remedying of any defect or damage is such that it ma affect Representative’s satisfaction.
the performance of the Works, the Employer may require that Tests
The Performance Certificate shall be given by the Employer's
on Completion or Tests after Completion, or both, be repeated to
Representative by the date 28 days after the expiry of the Contract
the extent necessary. The requirement shall be made by notice
Period, or as soon after such date as the Contractor has provided
within 28 days after the defect or damage is remedied. Such Tests
all the Construction Documents and completed and tested all the
shall be carried out in accordance with Clause 9 or Clause 11 (as
Works, including remedying any defects.
the case may be).
Only the Performance Certificate shall be deemed to constitute
No provisions for payment are made in this Sub-Clause, because of the
approval of the Works.
various circumstances which could cause it to be applied. If the Contractor
disputed the need for the tests, he might notify the Employer in order to The Performance Certificate is the Contractor's evidence that the
request payment, but he would still be obliged to comply. Employer's Representative:
12.7 (a) is satisfied that the Contractor has completed his obligations under
Right of Access the Contract, and
Until the Performance Certificate has been issued, the Contractor (b) approves the Works.
shall have the right of access to all parts of the Works and to
The Employer's Representative is required to issue the Certificate within 28
records of the working and performance of' the Works, except as
days of the expiry of the Contract Period, unless the Contractor is then
may be inconsistent with any reasonable security restrictions by the
organisation responsible for operating the Works. known to have outstanding obligations. The latter could (for example)
include further Construction Documents to be supplied, tests to be
passed, searches to be completed under Sub-Clause 12.8, and/or defects (e) any quantities, prices or rates of payment pet- unit quantity
to be remedied. Typically, it may not be possible for the Contractor to have which may, be set out in a Schedule are only to be used for
remedied, within these 28 days, all the defects notified (under Sub-Clause the purposes stated in such Schedule.
12.1) during the last few days of the Contract Period.
If any part of the Works is to be paid according to quantity supplied
12.10 or work done, the provisions for measurement and valuation shall be
Unfulfilled Obligations as stated in Part II.
After the Performance Certificate has been issued ` the Contractor This Sub-Clause lists five basic elements of the Contract as regards
and the Employer shall remain liable for the fulfilment of any money.
obligation which remains unperformed at that time. For the
(a) The Contract Price is a fixed lump sum for the Works defined in the
purposes of determining the nature and extent of any such
Contract, and is not to be adjusted by reference (for example) to
obligation, the Contract shall be deemed to remain in force.
actual quantities.
Although the Works may have been approved under Sub-Clause 12.9,
(b) The Contract Price is not to be adjusted for escalation (inflationary
each party may have outstanding obligation(s), and the Contract must
changes in the cost of labour, materials, etc).
therefore remain in force. At the time when the Performance Certificate is

issued, the Employer will probably not have made all the payments which (c) The Contractor pays all duties and taxes, and is deemed to have
will be due under the Contract, nor released the performance security. included for them (and for associated administrative costs) in the
Thereafter, it may be discovered that the Works do not wholly comply with Contract Price, based on the rates of duty/tax levied at the Base
the Contract, because of latent defects for example. The Contractor may Date. If the rates of duty/tax increase after the Base Date, Sub-
remain liable, notwithstanding having received the Performance Certificate. Clause 13.16 applies.
(d) If quantities are set out in a Schedule, they might not be the precise
quantities, because they have only been estimated (either by the
Clause 13 Contract Price and Payment Employer or by the Contractor) prior to submission of the Tender.
The Contractor's obligation is to complete the Works, which may
require the execution of different quantities. If these scheduled
13.1
quantities were deemed to be correct, it could be argued that his
The Contract Price
obligation would only be to execute these scheduled quantities.
Unless otherwise stated in part II:
(e) If a Schedule includes any quantities, prices or rates of payment per
(a) payment for the Works shall be made oil a fixed lump sum unit quantity, they are only to be used for the purposes stated in the
basis; Schedule; for example, it might state that they are to be used for the
preparation of Interim Payment Certificates. If no purpose is stated
(b) the Contract Price shall not be adjusted for changes in the
in the Schedule, the quantities, prices, etc may only have the status
cost of labour, materials or other matters;
of non-binding information.
(c) the Contractor shall pay all duties and taxes in consequence
These provisions may, be appropriate for many contracts, but they should
of his obligations under the Contract, and the Contract Price
not be taken as being recommended for all contracts. They are listed
shall not be adjusted for such costs, except as stated in Sub-
together as the principles adopted in Part I, and are made subject to any
Clause 13.16;
provisions in the contract Part II. See the guidance and example wording
(d) any quantities which may be set out in a Schedule are only included on pages 14 to 22 of the published Part II.
estimated quantities and are not to be taken as the actual and
correct quantities of the Works to be executed by the Contractor In particular, payment procedures are likely to be affected by the project
in fulfilment of his obligations under the Contract; and financing arrangements, and may have to be agreed with the financing
institution/bank when the tender documents are being prepared. Some For this Sub-Clause to be applicable, the amount of the advance(s) must
guidance is included in the published Part II, but the actual requirements be stated in the Appendix to Tender. If the number and timing of
should be ascertained direct from the project financing Institution/bank. instalments is not mentioned, all the advance will be paid in one
instalment. If no amount is specified in the Appendix to Tender, this Sub-
13.2
Clause will not apply.
Advance Payments
The purpose of the advances is to minimise the Contractor's financing
The Employer will make interest-free advance payments to the
costs. These costs, which he will have included in the Contract Price, will
Contractor for his mobilization and design. The total of such
reflect the extent to which he can maintain a positive cash flow, which in
advance payments, and the number and timing of instalments (if
turn will be affected by the interim payment procedures.
more than one), shall be as stated in the Appendix to Tender,
payable in the proportions of currencies in which the Contract The Sub-Clause envisages that the advances will be used for:
Price is payable. The Employers Representative shall issue an
Interim Payment Certificate for the first instalment after the (a) "mobilization", which includes purchase of items such as
Contractor has delivered, to the Employer, the performance Contractor's Equipment, Plant and Materials. and other early
security in accordance with Sub-Clause 4.2 and a bank expenditure such as advances to Sub-contractors, and
guarantee in a form and by a bank acceptable to the Employer in (b) "design", which recognises that the interim payment procedures
amounts and currencies equal to the advance payments. Such may not adequately cover early design costs.
bank guarantee shall remain effective until the advance payments
have been repaid, but its amount shall be progressively reduced Whenever the Contractor is required to be paid prior to the Employer
by the amount repaid by the Contractor as indicated in Interim having received anything in return, the Employer will probably (as here)
Payment Certificates. require some security for his outlay. Therefore, provision is made for a
guarantee to ensure that the Employer can recover the advances, even if
The advance payments shall be repaid through percentage the Contractor falls to repay them.
deductions in Interim Payment Certificates certified by the
Employer's Representative in accordance with this Clause. Unless Payment of the first instalment is to be made after the Employer receives the
other percentages are stated in the Appendix to Tender: guarantee and performance security, at the cost of the Contractor, in
accordance with any acceptable forms included in the Contract. The wording
(a) deductions shall commence in the Interim Payment of these securities should take account of the law under which they would be
Certificate in which the total of all certified interim payments called, and of the conditions entitling the call. Example wording is included in
(excluding the advance payments and deductions and the published Part II, which is reproduced at the end of this Guide. However,
repayments of retention) exceeds tell per cent (10%) of the being legal documents, it may be appropriate for them to be drawn up by
Contract Price less Provisional Sums; and lawyers familiar with the law under which they will be called.
(b) deductions shall be made at the amortization rate of one 13.3
quarter (25%) of the amount of all Interim Payment Application for Interim Payment Certificates
Certificates (excluding the advance payments and deductions
and repayments of retention) in the types and proportionate The Contractor shall submit a statement in six copies to the
amounts of currencies of the advance payments, until such Employer's Representative after the end of each month, in a form
time as the advance payments have been repaid. approved by the Employer's Representative, showing the amounts
to which the Contractor considers himself to be entitled, together
If the advance payments have not been repaid prior to the issue of with supporting documents which shall include the detailed report
the Taking-Over Certificate for the Works or prior to termination on the progress during the month in accordance with Sub-Clause
under Clauses 15, 16 or 19 (as the case may be), the whole of the 4.15. The statement shall include the following items, as applicable,
balance then outstanding shall immediately become due and which shall be expressed in the various Currencies in which the
payable by the Contractor to the Employer. Contract Price is payable, in the sequence listed:
(a) the estimated contract value of the Construction Documents whereby the contract value is estimated each month for sub-paragraph (a).
produced and the Works executed up to the end the month Clearly, estimating cannot be left to be determined by one of the parties to
(including Variations but excluding items described in sub- the Contract. Nor can this important matter be left to the whim of the
paragraphs (b) to (g) below): Employer's Representative because, even if he is an independent engineer
(b) any amounts to be added and deducted for changes in whose impartiality is accepted by tenderers, cash flow and consequential
legislation in accordance with Sub-Clause 13.16; financing costs cannot be predicted with any degree of reliability.
(c) any amount to be deducted for retention, calculated by The tender documents should indicate how the interim payments to the
applying the percentage of retention stated in the Append to Contractor are to be assessed. It is preferable, but not essential, for the
Tender to the total of the above amounts, until the amount so tender documents to include a Schedule of Payments, specifying the
retained by the Employer reaches the limit of Retention amounts due based upon achievement; i.e., upon the actual progress
Money (if any,) stated in the Appendix to Tender; achieved in executing the Works.
(d) any amounts to be added and deducted for the advance 13.4
payments and repayments in accordance with Sub-Clause Schedule of Payments
13.2;
If the Contract includes a Schedule of Payments specifying the
(e) any amounts to be added and deducted for Plant and instalments in which the Contract Price will be paid, then, unless
Materials in accordance with Sub-Clause 13.5; otherwise stated in such Schedule:
(f) any other additions or deductions which may have become
due in accordance with the Contract (including those under
Clause 20), other than under Sub-Clause 8.6; and (a) the instalment quoted in such Schedule shall be used to
determine the contract value for the purposes of sub-
(g) the deduction of the amounts certified in all previous Interim paragraph (a) of Sub-Clause 13.3;
Payment Certificates.
(b) Sub-Clause 13.5 shall not apply; and
This Sub-Clause entitles the Contractor to a payment for the work
executed during each calendar month. He has to make application in the (c) if the payment instalments are not defined by reference to the
approved form, namely a statement accompanied (or preceded) by his actual progress achieved in executing the Works, the
monthly report. Unless and until he submits his statement, report and Employer’s Representative shall be entitled to amend such
other necessary supporting documents, he is not entitled to the interim Schedule: such amendment shall be made in accordance
payment. with the provisions of Sub-Clause 3.5 and shall only take
account of the extent to which the actual progress achived is
The "approved" form should be that which facilitates rapid checking and less than that on which the instalments in the Schedule were
certification by the Employer's Representative, and takes account of any based.
additional financial provisions in the Contract: for example, a Schedule of
This Sub-Clause only becomes applicable if interim payments are to be based
Payments. Under Sub-Clause 1.8, approval shall not be unreasonably
on a Schedule of Payments, which could be in one of the following forms:
withheld. The Employer's Representative should seek to allow the Contractor
to utilise any computerised system with which his staff are familiar, provided it (i) an amount (or percentage of the Contract Price) could be entered for
produces clear and comprehensible monthly statements. each month during the Time for Completion, which can prove
unsatisfactory because payment instalments may become unreasonable
When pricing, the tenderers will take particular account of the extent to
if the Contractor's progress differs significantly from the expectation on
which they can reduce their prices in anticipation of positive cash flow.
which the Schedule was based: therefore, sub-paragraph (c) specifies
The difficulty, which has to be addressed when preparing tender that a Schedule which prescribes payment instalments by calendar
documents for a lump sum contract, is the determination of the procedure dates can be adjusted to take account of actual progress; or
(ii) the Schedule could be based on actual progress achieved in (iv) the Contractor has submitted a statement of the Cost
executing the Works, i.e., on completion of defined milestones: this of acquiring and delivering the Plant and Materials to
method is considered preferable, but it necessitates careful definition the Site, together with such documents as may be
of the payment milestones. Otherwise, disagreements may arise required for the purpose of evidencing such Cost; and
when the work required for a payment milestone is 99.99% achieved (v) the Plant and Materials are those listed in the Appendix
but the balance cannot be completed until some months later. to Tender;
Sub-Clause 13.4(a) clarifies that the figures in the Schedule of Payments (b) the additional amount to be certified shall be the equivalent of
are to be used to determine the "contract value" under Sub-Clause eighty percent of the cost of the Plant and Materials delivered
13.3(a). This contract value is thus subject to additions and deductions to the Site, as determined by the Employers Representative
under sub-paragraphs (b) to (g) of Sub-Clause 13.3, including the after review of the documents mentioned in sub-paragraph
deduction of retention. If the Schedule is as described in sub-paragraph (1) (a) above, taking account of the contract value of such Plant
above, and if progress falls behind (but not if it is ahead of) the programme and Materials as determined and considered appropriate by
on which the Schedule was based, the Employer's Representative is the Employer's Representative;
empowered to amend the payment instalments, applying the procedure of
Sub-Clause 3.5. (c) the amount of the deduction for any Plant and Materials
incorporated in the Permanent Works shall be equivalent to
A Schedule of Payments allows both parties to plan their obligations in the the addition previously, certified by the Employer’s
knowledge of likely cash flow. Therefore, Sub-Clause 13.4(b) invalidates Representative for such Plant and Materials under sub-
Sub-Clause 13.5, which would otherwise have introduced a variable paragraph (b) above; and
aspect of cash flow.
(d) the currencies for such additions and deductions shall be
13.5 determined by the Employer's Representative as follows:
Plant and Materials for the Permanent Works
(i) in the case of each addition, the currencies shall be
If this Sub-Clause applies, Interim Payment Certificates shall include those in which the payment will eventually become due
(i) an additional amount for Plant and Materials which have been for the relevant item of Plant or Materials, upon their
brought to the Site for incorporation in the Permanent Works, and (ii) incorporation in the Permanent Works; and
a deduction when they have been incorporated in the Permanent
Works. The Employers Representative shall determine each addition (ii) in the case of a deduction, the currencies shall be
and deduction in accordance with the following provisions: those in which the addition for the respective item of
Plant or Materials had been certified.
(a) no addition shall be included in the Interim Payment Certificate
unless., in the opinion of the Employer's Representative: This Sub-Clause will not apply if:
(i) the Plant and Materials are considered to be in (a) it is rendered inapplicable by a statement to this effect in the
accordance with the Contract; Appendix to Tender, in lieu of the list referred to in sub-paragraph
(a)(v),
(ii) the Plant and Materials have been delivered to the Site
and are properly, stored on Site and protected against (b) it is deleted, by a statement to this effect in the contract Part II, or
loss, damage or deterioration; (c) the Contract includes a Schedule of Payments, unless otherwise
(iii) the Contractor's records of the requirements, orders, stated in such Schedule: see Sub-Clause 13.4(b).
receipts and use of Plant and Materials are kept in a The purpose of the provisions is to minimise the Contractor's financing
form approved by the Employer's Representative, and
costs. These costs, which he will have included in the Contract Price, will
such records are available for inspection by the
reflect the extent to which he can maintain a positive cash flow, which in
Employer's Representative;
turn will be affected by these and other interim payment procedures. The Employer's Representative may in any payment certificate
Payment is only due when the Contractor has satisfied all the requirements make any correction or modification that should properly be
listed in sub-paragraph (a) of the Sub-Clause. made to any previous certificate.
In sub-paragraph (a)(i), the Plant and Materials are only "considered" to be The Employer's Representative is required to issue the Interim Payment
in accordance with the Contract. They are not deemed approved until the Certificate within 28 days of receiving the Contractor's application for
Performance Certificate is issued under Sub-Clause 12.9. payment, namely the statement in accordance with Sub-Clause 13.3 and
the supporting documents. The latter documents are required to include
In sub-paragraph (a)(ii), the Plant and Materials are to have been delivered
the detailed report on the progress during the month in accordance with
to the Site. When preparing the tender documents, the Employer may wish
Sub-Clause 4.15. Each period of 28 days does not commence until the
to consider making payment for certain items prior to their arrival at Site:
Employer's Representative receives the application and all these
see the published Part II.
documents. Under Sub-Clause 1.8, certificates shall be in writing and not
These payments are, in effect, further advances which have to be repaid be unreasonably withheld or delayed.
when the Plant or Materials become due for payment under Sub-Clause
Under sub-paragraph (a), the cost of rectifying defects may be withheld.
13.3(a), the advances being made in the same currency proportions as
These defects may be contained in Construction Documents, Materials,
then become due.

Plant or other parts of the Works, but not in the application for payment (if
13.6 defective, it would presumably not comply with Sub-Clause 13.3). In some
Issue of Interim Payment Certificates circumstances, the "cost of rectification or replacement" may be the same
as the estimated contract value of the defective item. Note that no account
No amount will be certified or paid until the Employer has received,
is taken of any retention money withheld; all the estimated cost of
and approved, the performance security in accordance with Sub-
rectifying known defects may be withheld, as well as deducting the
Clause 4.2. Thereafter the Employers Representative shall, within 28
appropriate retention.
days of receiving a statement and supporting documents, deliver to
the Employer with a copy to the Contractor an Interim Payment If the Employer's Representative considers that the amount requested by
Certificate showing the amount which the Employer’s the Contractor is in excess of what is due under the Contract, he must
Representative considers to be due; if no payment is considered to certify the amount due, and not seek to delay payment by asking the
be due, the Employer’s Representative shall promptly notify the Contractor to prepare a revised application. Under Sub-Clause 13.7,
Contractor accordingly. Except that the Employers Representative payment is due within 56 days from receipt of the original application and
shall not be bound to certify any, payment under this Sub-Clause, if supporting documents.
the net amount to be certified (after retention and other deductions)
would be less than the minimum amount of Interim Payment 13.7
Certificates (if any) stated in the Appendix to Tender. Payment
An Interim Payment Certificate shall not be withheld on account of: Unless otherwise stated in Part II,
(a) defects: if any thing supplied or work done by the (a) the Employer shall pay the amount certified in each Interim
Contractor is not in accordance with the Contract, the Payment Certificate within 56 days from the date on which
cost of rectification or replacement shall be deducted by the Employer's Representative received the Contractor's
the Employer's Representative from any amount otherwise statement and supporting documents; and
due; (b) the Employer shall pay the amount certified in the Final
(b) part (only) of the payment applied for being disputed: in such Payment Certificate within 56 days from the date of' issue of
case, a payment certificate shall be issued for the undisputed the Certificate.
amount. Payments shall be made into a bank account, nominated by the
Contractor, in the payment country named as such in the Contract. If
payments are to be made in more than one currency, separate bank payment without formal notice and without prejudice to any other
accounts may be nominated by the Contractor for each currency, and right or remedy.
payments shall be made by the Employer accordingly.
Although these payments (in some countries called "Interest") may be
Interim payments are to be made within 56 days of the application for included in Interim Payment Certificates for accounting purposes, they are
payment, provided it includes the statement and all the necessary due irrespective of certification. Note that the Contractor is entitled to
supporting documents. By not timing payment to the date of issue of the these payments without being required to give notice, and that they do not
Interim Payment Certificate, the Employer has more time to pay in the prejudice his rights and remedies under Clause 16.
event that the Certificate is issued promptly, but the Contractor has some
13.9
degree of protection under Sub-Clauses 13.8 and 16.1 in the event that
Payment of Retention Money
the Employer's Representative takes longer to certify than the period
specified in Sub-Clause 13.6. When the Employers Representative has issued the Taking-Over
Certificate for the Works, and the Works have passed all specified
For example, if the Certificate is a week late, the Contractor will be entitled
tests (including the Tests after Completion, if any), the first half of the
to financing charges under Sub-Clause 13.8 unless the Employer
Retention Money shall be certified by the Employer's Representative
manages to accelerate his procedures and comply with this Sub-Clause
for payment to the Contractor of the Works are taken over in

13.7. If the Employer's Representative takes even longer to certify, having Sections, the percentage of the first half of the Retention Money
not notified the Contractor (under 13.6) that no payment is considered to released following the issue of a Taking-Over Certificate for a Section.,
be due, circumstances could entitle the Contractor to suspend under Sub- and it passing all tests, shall be the percentage value of the Section
Clause 16.1. Precise guidance cannot be given on the latter entitlement, as stated in the Appendix to Tender.
because it will depend on circumstances and on the applicable law.
Upon the expiry of the Contract Period, the second half of the
The Employer is required. to make payment into the Contractor's bank Retention Money shall be certified by the Employer's Representative
account(s), with provision being made for the Contractor's Proposal (or for payment to the Contractor, Except that, if at such time any work
another Contract document) to have specified the country or countries of shall remain to be executed under Clause 11 or Clause 12, the
the Contractor's bank(s). Thus, a “payment country" may have been Employer's Representative shall be entitled to withhold certification,
specified for each of the currencies of payment, and might be the country until completion of such work, of so much of the balance of the
of the currency of payment; or all payments may have been specified as Retention Money as shall represent the cost of the work remaining
being made into the Contractor's bank in the Country. to be executed.
When pricing, their tenders, tenderers will take account of the option to The first half of the Retention Money is released when the Works are
specify a payment country, and of the periods for payment, particularly complete and tested satisfactorily. If Tests after Completion are specified
that specified in sub-paragraph (a). Longer periods for payment increase in the Contract, these Tests must also be completed before the first half of
the Contractor's financing costs, so tenderers would wish to increase their the Retention Money is released. In the event of any unreasonable delay
prices accordingly. by the Employer in carrying out the Tests after Completion, the Contractor
13.8 will probably incur financing cost in respect of the delay to this release of
Delayed Payment retention. This financing cost may be recoverable from the Employer under
Sub-Clause 11.2.
If payment (if any slim payable under Sub-Clause 13.7 is delayed,
the Contractor shall be entitled to receive financing charges The other half of the Retention Money is released at the expiry of the
compounded monthly on the amount unpaid during the period of Contract Period, except that the cost of outstanding rectification work may
delay. Unless otherwise stated in Part II, these financing charges be withheld. This cost might exceed the Cost which the Contractor
shall be calculated at the annual rate three percentage points expects to incur when carrying out the rectification work. In order to
above the discount rate of the central bank in the country of the protect the Employer's interests, the amount withheld should be sufficient
currency of payment. The Contractor shall be entitled to such to cover the cost of another contractor completing the work.
13.10 require and shall make such changes in the draft as may be agreed
Statement at Completion between them. The Contractor shall then prepare and submit to the
Employer’s Representative the final statement as agreed (for the
Not later than 84 days after the issue of the Taking-Over Certificate
purposes of these Conditions referred to as the "Final Statement")
for the Works, the Contractor shall submit, to the Employer's
Representative, six copies of a statement at completion with If, following discussions between the Employer’s Representative and
supporting documents showing in detail, in the form approved by the Contractor and any changes to the draft final statement which
the Employer's Representative under Sub-Clause 13.3: may be agreed between them, it becomes evident that a dispute
exists, the Employer's Representative shall deliver to the Employer
(a) the final value of all work done in accordance with the
(with a copy to the Contractor) an Interim Payment Certificate for
Contract up to the date stated in such Taking-Over
those Parts of the draft final statement which are not in dispute. The
Certificate,
dispute may then be resolved under Clause 20, in which case the
(b) any further sums which the Contractor considers to be due, Contractor shall then prepare and submit to the Employer (with a
and copy, to the Employer’s Representative) a Final Statement in
accordance with the outcome of the dispute.
(c) an estimate of amounts which the Contractor considers will
become due to him under the Contract. This Sub-Clause sets out the procedure for settling the financial aspects of
the Contract. The Contractor must initiate the procedure by the date eight
The estimated amounts shall be shown separately in such
weeks after the issue of the Performance Certificate under Sub-Clause
statement at completion. The Employer’s Representative shall certify
12.9. He may feel able to initiate it as soon as the Contract Period expires.
payment under Sub-Clause 13.6.
If the Contractor and the Employer's Representative cannot agree, the
The statement at completion has to comply with the requirements in Sub-
latter issues an Interim Payment Certificate. After further attempts to agree,
Clause 13.3 for an interim statement. Thus the statement has to have
the dispute proceeds to the resolution procedures of Clause 20. The final
supporting documents which shall include the detailed report on the
sentence of Sub-Clause 13.11 specifies the preparation of a Final
progress during the month in accordance with Sub-Clause 4.15, unless all
Statement in accordance with the outcome of the dispute, so that the
the reports required have been submitted. The statement at completion is
following Sub-Clauses can then be applicable.
the basis of the constraint contained in Sub-Clause 13.14, and
encourages the early settlement of financial aspects. 13.12
Discharge
13.11
Application for Final Payment Certificate When submitting, the Final Statement, the Contractor shall submit a
written discharge which confirms that the total of the Final
Not later than 56 days after the issue of the Performance Certificate,
Statement represents full and final settlement of all monies due to
the Contractor shall submit to the Employer's Representative six
the Contractor under the Contract. Such discharge may state that it
copies of a draft final statement with supporting documents
shall become effective only after payment due under the Final
showing in detail, in a form approved by the Employer's
Payment Certificate has been made and the performance security
Representative:
referred to in Sub-Clause 4.2 has been returned to the Contractor.
(a) the value of all work done in accordance with the Contract,
The Contractor submits the “Final Statement" (defined in Sub-Clause
and
13.11), as agreed with the Employer's Representative or when
(b) any further sums which the Contractor considers to be due disagreements have been determined by arbitration. The Contractor's
to him under the Contract or otherwise. agreement is confirmed in this written discharge; the agreement of the
Employer's Representative is confirmed in the Final Payment Certificate.
If the Employers Representative disagrees with or cannot verify ally
part of the draft final statement, the Contractor shall submit such
further information as the Employers Representative may reasonably
13.13 13.15
Issue of Final Payment Certificate Calculation of Payments in Foreign Currency
The Employer’s Representative shall issue to the Employer, with a If the Contract Price is expressed in Local Currency only, but some
copy to the Contractor, the Final Payment Certificate within 28 days payments are to be made in another currency, the proportions or
after receiving the Final Statement and written discharge in amounts of the Local and Foreign Currencies, mid the fixed rates of
accordance with Sub-Clauses 13.11 and 13.12, stating: exchange to be used for calculating the payments, shall be as stated
in the Appendix to Tender. If no rates of exchange are stated therein,
(a) the amount which is finally dive, and
they shall, unless otherwise stated in Part II, be those prevailing the
(b) after giving credit to the Employer for all amounts previously Base Date, as determined by the central bank of the Country.
paid by the Employer and for all sums to which the Employer
For a lump sum contract, it is usually preferable to define each of the
is entitled, other than under Sub-Clause 8.6, the balance, if
amounts due in each of the currencies in which payment is to be made; in
any, due from the Employer to the Contractor or from the
which case, this Sub-Clause will not apply. However, it may sometimes he
Contractor to the Employer as the case may be.
appropriate to adopt the procedure often used on contracts which include
If the Contractor has not applied for a Final Payment Certificate in large numbers of rates or prices, namely a currency of account and
accordance with Sub-Clauses 13.11 and 13.12, the Employer's defined proportions and rates of exchange.
Representative shall request the Contractor to do so. If the
Contractor fails to make such an application within a period of 28 Unless redefined in the contract Part II, the Local Currency is the currency
days, the Employer’s Representative shall issue the Final Payment of the Country. It is preferable, in order to determine the matter from the
Certificate for such amount as he considers to be due. outset, for the rates of exchange to be set out in the Appendix to Tender. If
no rates of exchange are stated therein, the rates are to be those
Usually, the Contractor will submit the Final Statement and discharge in determined by the central bank.
accordance with the first sentence, in order to receive payment.
13.16
If (as envisaged in the last paragraph) he fails to apply for a Final Payment Changes in Legislation
Certificate, the Employer's Representative must request the Contractor to
The Contract Price shall be adjusted to take account of any increase
submit his application within 28 days. In the event that the Employer's
or decrease in Cost resulting from changes in legislation of the
Representative does not receive it within 28 days, he is required to issue
Country, made after the Base Date. Such legislation means any law,
the Final Payment Certificate without further delay. Under Sub-Clause 1.8,
order, regulation or by-law having the force of law, including
certificates shall be in writing and not be unreasonably withheld or delayed.
currency restrictions, which affects the Contractor in the
13.14 performance of his obligations.
Cessation of Employer's Liability
If the Contractor suffers (or will suffer) delay and/or incurs (or will
The Employer shall not be liable to the Contractor for any matter or incur) additional Cost resulting from such changes in legislation,
thing arising out of (or in connection with) the Contract or execution made after the Base Date, the Contractor shall give notice to the
of the Works, unless the Contractor shall have included a claim for it Employer's Representative. After receipt of such notice the
in his Final Statement and (except for matters or things arising after Employer's Representative shall proceed in accordance with Sub-
the issue of the Taking-Over Certificate for the Works) in the Clause 3.5 to agree or determine:
statement at completion described in Sub-Clause 13.10.
This Sub-Clause provides a constraint on the Contractor's entitlements to under Sub-Clause 8.3, and
submit claims at a late stage in the Contract Period, or thereafter.
(b) the amount of such Cost, which shall be added to the
Contract Price,
and shall notify the Contractor accordingly.
This Sub-Clause protects the Contractor from the consequences of changes design, unless the Employer has been unduly prescriptive in specifying the
in legislation in the Country, made after the Base Date. Under Sub-Clause 1.8, Variation. For this reason, the definition of a "Variation" indicates that it is a
his notice must be in writing and not unreasonably delayed. change to the Employer's Requirements (with which the Contractor's design
must comply), and not a change to the Works (which, would indicate a
No protection is provided in respect of changes in other countries,
transfer of responsibility). However, notwithstanding this indication from the
because the Employer will not be able to influence those changes; he may
wording of the definition, the actual content of a Variation is more significant
(or may not) have some influence in his own Country. Even if he has little
and would take precedence over the indications from the definition. Clearly,
influence, it is reasonable, in international contracts, for the Employer to
the Employer must be responsible for any design solution which he
accept the risk as allocated by Sub-Clause 13.16.
imposes: he cannot vary the width of a road (for example) and then assert
It may be necessary to obtain legal advice as to whether a particular event that the road is too narrow and thus not fit for purpose.
constitutes a change in legislation under this Sub-Clause. For example, does
In order that the Employer receives proposals and competitive prices in
the judicial decision of a high court constitute such a change? This is a matter
respect of his requirements, he should have ensured that the Employer's
on which no general advice can be given, but it is suggested that judicial
Requirements provide as much detail as possible of his requirements,
decisions are usually a representation of the law as it stands not a change.
minimising the need for Variations. Nevertheless, with the passing of time
and the production of Construction Documents, his requirements may

develop, necessitating Variations. The latter should not be too basic, such
Clause 14 Variations as changing the productive capacity or other basic statistic of the Works
(unless the Contractor agrees to do so), but could be in the form of
refinements. For example, the varied requirement may have the effect of
14.1 improving the quality of the Works (by reducing the cost of maintenance or
Right to Vary operation, or improving productivity or efficiency) and may involve
Variations may be initiated by, the Employer's Representative at any additional access arrangements, or extra offices, parking or feedstock
time during the Contract Period, either by instruction or by a request facilities.
for the Contractor to submit a proposal. If the Employer's
Although a Variation may arise under Sub-Clause 1.6, 4.1, 5.4, 5.5, 8.10
Representative requests the Contractor to submit a proposal and
or 12.2, procedures are specified in this Clause 14. Variations can be
subsequently elects not to proceed with the changes, the
initiated by any of three ways:
Contractor shall be reimbursed for the Cost incurred, including
design services. (a) the Employer's Representative may, if he considers it necessary,
instruct the Variation under Sub-Clause 14.1, without prior
The Contractor shall not make any alteration and/or modification of
agreement as to feasibility, price or extension of time;
the Works, unless and until the Employer's Representative instructs
or approves a Variation. If the Construction Documents or Works (b) the Contractor may initiate his own proposals under Sub-Clause
are not in accordance with the Contract, the rectification shall not 14.2; the Employer's Representative may then approve the
constitute a Variation. proposals as a Variation, or reject them and/or proceed as
described in (c) below;
Although variations can cause problems on a design-build contract, the
Employer will want to be able to amend his requirements so that the (c) the Employer's Representative may, under Sub-Clause 14.1,
completed Works can meet his needs. The Employer's Requirements may request the Contractor to submit a proposal under Sub-Clause
have been written without a clear and complete concept of the 14.3; the Employer's Representative may then:
opportunities or technicalities relevant to the product. However, problems
may arise if the effects of a Variation are not anticipated and agreed before (i) reject the proposal, but the Contractor will be paid for
it becomes a contractual requirement. preparing it,
In particular, it is important that the Contractor remains responsible for (ii) accept the proposal, approving it as a Variation,
(iii) if the proposal is not wholly acceptable, proceed under document, but Sub-Clauses 4.1 and 5.3 impose compliance with all
option (a) above, or Contract documents.
(iv) attempt to reach prior agreement with the Contractor on any Thus, the Contractor cannot (for example) economise by failing to provide
adjustments to the Contract Price, Time for Completion and what he promised in his Proposal, whilst still complying with the
Schedule of Payments, and then proceed under (i), (ii) or (iii) Employer's Requirements. The reason for this principle is to allow for the
based on the outcome, which could include an amended situation where the Employer's Requirements are not very precise and the
proposal. Employer enters into the Contract following his acceptance of a detailed
Proposal. The latter would probably have been studied in detail by the
For the Employer, option (c) is usually preferable to option (a) if time allows,
Employer before accepting the Tender, and he may have considered the
because he can ascertain the full effects of the prospective variation before
Proposal superior to those of other tenderers. In this situation, the
it is instructed. It may be difficult for the Employer's Representative to
Employer would want the Contractor to comply with the Proposal upon
anticipate the disruptive effects, extent of abortive work, or design
which the Employer had based the award of the Contract.
feasibility, of some types of variations, and prior agreement on price should
minimise dispute. If the Employer considers that the Contractor is seeking Under Sub-Clause 14.2, the Contractor may propose variations in (for
an unreasonably high price, he must decide whether to abandon his desire example) the following situations:
for the variation, or instruct it under option (a) and accept the risk that the
(a) the proposal may appear to be of benefit to the Contractor, in which
Contractor's previous proposal is later found to have been reasonable.
case he may offer a reduction in the Contract Price in order to
In accordance with Sub-Clause 3.4, the Contractor is required to comply encourage the Employer's acceptance;
with the Variation, unless it is legally or physically impossible for him to do
(b) the proposal may appear to be of benefit to the Employer, by
so. Such impossibility should have been ascertained in advance. If the
improving the quality of the Works (reducing the cost of
Variation was instructed under option (a) without prior discussions, the
maintenance or operation, or improving productivity or efficiency);
Contractor should notify the Employer's Representative as soon as he
for example, additional access arrangements, or extra offices,
becomes aware of any impossibility. After notifying, the Contractor should
parking or feedstock facilities.
await further instructions from the Employer's Representative.
In some cases, the Contractor might submit his proposal in stages, the
14.2
first stage being conceptual, with details of how he proposed to carry out
Value Engineering
(and be paid for) the expensive design of the prospective variation.
The Contractor may, at any time, submit to the Employer's
Although the new proposal is required to include the items listed in Sub-
Representative a written proposal which the Contractor’s opinion
will reduce the cost of constructing, maintaining or operating the Clause 14.3, the Contractor may initiate his own proposal but not include all
Works, or improve the efficiency or value to the Employer of the such items, and the Employer's Representative has no effective way of
completed Works, or otherwise be of benefit to the Employer. Any insisting on their inclusion. However, if they are not included, the proposal may
such proposal shall be prepared at the cost of the Contractor and be less likely to be accepted, and the Employer's Representative's obligation
shall include the items listed in Sub-Clause 14.3. under Sub-Clause 14.3 will not apply: its penultimate paragraph requires him
to respond as soon as practicable after receipt of compliant proposals.
The Contract requirement is that the Works shall include any work which is
necessary to satisfy the Employer's Requirements, Contractor's Proposal Sub-Clause 14.2 makes no mention of:
and Schedules, and be in accordance with these documents in the order (i) the Contractor being reimbursed for the cost of an acceptable
of priority specified in Sub-Clause 1.6. Under Sub-Clause 14.1, the proposal: it is to be expected that his proposed price would include
Contractor is not allowed to make any alteration and/or modification of this these costs and other elements in recognition of his endeavours, as
requirement, unless and until the Employer's Representative instructs or envisaged in the last sentence of Sub-Clause 14.3;
approves a Variation under Clause 14. Sub-Clause 5.2(c) recognises that
the Contractor may find it necessary to modify any design or construction (ii) the subsequent actions of the Employer's Representative: if the
proposals include the items listed in Sub-Clause 14.3, it requires The Contractor is not empowered to impose time constraints on the
him to respond as soon as practicable.. response to his proposals, but may need to define the validity of any
offered adjustments to the Contract Price and Time for Completion.
iii) any saving being shared between the parties, because of (b) above
Typically, these adjustments would be affected by the timing of a variation
and because of the practical difficulties in any determination of a
order.
Cost saving, if any.
The penultimate paragraph of Sub-Clause 14.3 requires the Employer's
Under the Orange Book, the Contractor's value engineering proposals
Representative to respond as soon as practicable after receipt of the
could include improvements to what he is required to provide under the
Contractor's proposals. This requirement applies to proposals requested
Contract, which might involve more, not less, Cost. He should be
by the Employer's Representative, and also to proposals in accordance
confident, because of the last sentence of Sub-Clause 14.3, that he will
with Sub-Clause 14.2, namely those which include the items described in
get some benefit from having originally proposed a variation, unless his
sub-paragraphs (a) to (c) of Sub-Clause 14.3. No period is specified: what
proposal does not comply, with Sub-Clause 14.2.
constitutes " as soon as practicable" could be affected by the amount of
14.3 documentation which constitutes the proposal and the possibility of
Variation Procedure substantial submissions at particular stages of the design-build process.
If the Employer's Representative requests a proposal, prior to The last sentence of the Sub-Clause specifies that adjustments shall take
instructing a Variation, the Contractor shall submit as soon as account of submissions under Sub-Clause 14.2, if the Variation arose from
practicable: a Contractor's proposal thereunder. No specific mention is made of him
(a) a description of the proposed design and/or work to be receiving any special benefit from having thought up the proposed
performed and a programme of its execution, variation, because of the difficulty of preventing such entitlement arising in
situations where he did little to develop his initial ideas. Therefore, the
(b) the Contractors proposal for any necessary modifications to sentence only requires account to be taken of his submissions, including
the programme according to Sub-Clause 4.14, and recognition of his endeavours in seeking improvements beneficial to the
(c) the Contractor's proposal for adjustment to the Contract Price, Employer.
Time for Completion and/or modifications to the Contract. Under Sub-Clause 14. 1. if the Employer's Representative requests the
The Employer's Representative shall, as soon as practicable after receipt Contractor to submit a proposal and subsequently elects not to proceed
of such proposals, respond with approval, rejection or comments. with the change, the Contractor shall be reimbursed for the Cost incurred,
including design services. If he does elect to proceed with the change, the
If the Employer's Representative instructs or approves a Variation, adjustment to the Contract Price (in respect of the Variation) should
he shall proceed in accordance with Sub-Clause 3.5 to agree or include payment for the design, which might have been most of the Cost
determine adjustments to the Contract Price, Time for Completion of preparing the proposal.
and Schedule of Payments. Adjustment of the Contract Price shall
include reasonable profit, and shall take account of the Contractor's Note the following aspects from other Sub-Clauses. Under Sub-Clause
submissions under Sub-Clause 14.2 if applicable. 1.8: instructions, consents, approvals, etc shall be in writing and not be
unreasonably withheld or delayed. Under Sub-Clause 3.1: any proposal,
The Employer's Representative should usually initiate Variations under this consent or approval shall not relieve the Contractor from any responsibility.
Sub-Clause by requesting a proposal, clearly stating the scope of the
proposed Variation and stating that the proposal is to comply with this 14.4
Sub-Clause. He may also set out time constraints on the Contractor's Payment in Applicable Currencies
submission. If these constraints are in the form of instructions under Sub- If the Contract provide for payment of the Contract Price in more
Clause 3.4, it might not be possible for the Contractor to comply with this than one currency and an adjustment is agreed or fixed as stated
Sub-Clause. above, the amount payable in each of the applicable currencies
shall be specified when the adjustment is agreed or fixed. In
specifying the amount in each currency, the Contractor and the for parts of the Works which are not required to be priced at the risk of the
Employer’s Representative (or, failing agreement, the Employer's Contractor: for example, to cover goods which the Employer wants to
Representative) shall take account of the actual or expected select, or to deal with a major uncertainty regarding sub-surface
Currency proportions of the Cost of the varied work, without being conditions. Alternatively, a tenderer may include a Provisional Sum in his
bound by the proportions of various currencies specified for Proposal (unless disallowed by the Instructions to Tenderers) to give the
payment of the Contract Price. Employer the option of various alternatives. A Provisional Sum for daywork
This Sub-Clause applies whenever an adjustment is agreed or fixed might be considered appropriate, with the method of evaluation prescribed
(determined), irrespective of the arrangements by which payment of the in a Schedule.
Contract Price is made in more than one currency. The usual arrangement The Contract should include a precise definition of the scope of each
is to define each of the amounts due in each of the currencies. Provisional Sum (in a Schedule, probably), which may affect the operation
Alternatively, the Contract Price may have been expressed in a currency of of Sub-Clause 14.5. Precise definition is required because the scope will
account with defined proportions and rates of exchange, in accordance be excluded from the other elements of the Contract Price. It might be
with Sub-Clause 13.15. necessary to clarify the timing of any relevant instructions related to the
14.5 work covered in a Provisional Sum.
Provisional Sums Because Provisional Sums are generally inappropriate for Contractor-
Each Provisional Sum shall only be used, in whole or in part, in designed Works, Sub-Clause 14.5 only contains outline provisions. If the
accordance with the Employer's Representative's instructions. The Employer intends to nominate a subcontractor for a part of the Works,
total sun] paid to the Contractor shall include only such amounts for further provisions may have to be included in the contract Part II.
the work, supplies or services to which such Provisional Sums relate
as the Employer's Representative shall have instructed. For each
Provisional Sum, the Employer's Representative may, order: Clause 15 Default of Contractor
(a) a work to he executed (including Plant, Materials or services
to be supplied) by, the Contractor and valued under Sub- 15.1
Clause 143; Notice to Correct
(b) Plant, Materials or services to be purchased by, the If the Contractor fails to carry, out any of his obligations, or if the
Contractor, for which payment will be made as follows: Contractor is not executing the Works in accordance with the
(i) the actual price paid (or due to be paid) by the Contract, the Employer's Representative may give notice to the
Contractor, and Contractor requiring him to make good such failure and remedy the
same within a specified reasonable time.
(ii) a percentage of the actual price paid (or due to be
paid), as stated in the Appendix to Tender, to cover all The Employer's Representative is under no obligation to give notice, so the
other Costs, charges and profit. Contractor cannot rely on the absence of a notice as indicating that the
Contractor and his personnel are carrying out his obligations or that the
The Contractor shall, when required by the Employer's Works are in accordance with the Contract.
Representative, produce quotations, invoices, vouchers and
accounts or receipts in substantiation. If the Contractor's failure is sufficiently serious for the Employer to consider
termination under Sub-Clause 15.2, the Employer should, before the
Sub-Clause 1. 1.5.5 defines "Provisional Sum" as a sum specified in the notice is issued, consider whether termination appears to be the most
Contract and designated as such, for the execution of any part of the appropriate course of action. If so, the Employer should consider taking
Works or for the supply of Plant, Materials or services. Although generally legal advice, with a view to minimising the possibility of a termination being
inappropriate for this type of contract, a Provisional Sum may be required considered unjustified.
If the Employer intends to rely on a notice as having been issued under this liabilities under the Contract. The rights and authorities conferred on
Sub-Clause, the notice should specify: the Employer and the Employer’s Representative by the Contract
shall not be affected.
(a) the nature of the Contractor's failure,
The Employer may upon such termination complete the Works
(b) the reasonable time within which the Contractor is to remedy the himself and/or by any other contractor. The Employer or such other
failure, and contractor may use for such completion so much of the
(c) that the notice is given under this Sub-Clause. Construction Documents, other design documents made by or on
behalf of the Contractor, Contractor's Equipment, Temporary,
15.2 Works, Plant and Materials as he or they may think proper. Upon
Termination completion of the Works, or at such earlier date as the Employer's
If the Contractor: Representative thinks appropriate, the Employers Representative
shall give notice that the Contractors Equipment and Temporary
(a) fails to comply, with a notice under Sub-Clause 15.1, Works will be released to the Contractor at or near the Site. The
(b) abandons or repudiates the Contract, Contractor shall remove or arrange removal of the same from such
place without delay and at his cost.

(c) without reasonable excuse fails:
If the Contractor's action or inaction is sufficiently serious to justify
(i) to commence the Works in accordance with Sub- termination under this Sub-Clause, the Employer should consider taking
Clause 8.1, legal advice, with a view to minimising the possibility of the termination
(ii) to proceed with the Works in accordance with Clause being considered unjustified. It may be advisable for the notice to
8, or mention the Contractor's actions and inactions, although it may not be
essential to classify them under the listed items (a) to (f). The
(iii) to demonstrate that sufficient design capability is Employer's Representative may then consider it necessary to issue
employed in the design of the Works to achieve instructions under Sub-Clause 3A for example, in order to make the
completion within the Time for Completion, Works safe and secure.
(d) becomes bankrupt or insolvent, goes into liquidation, has a The Sub-Clause does not mention assignment of subcontracts to the
receiving or administration order made against him,
Employer, who may want to continue construction of the Works using the
compounds with his creditors, or carries on business under a
same subcontractors. The Employer should start considering, before
receiver, trustee or manager for the benefit of his creditors, or
notifying termination, whether in the event of termination he would wish to
if any act is done or event occurs which (under any applicable
seek agreement to assignments, or to renegotiate direct contracts with
law) has a similar effect to any of these acts or events,
any previous subcontractors. In either case, it may be preferable to
(e) fails to comply with a notice issued under Sub-Clause 7.5 achieve each arrangement with the agreement of the subcontractor, rather
within 28 days after having received it., or than relying on a term of the Contract to impose assignment on an
unwilling subcontractor.
(f) assigns the Contract or subcontracts the Works without the
required consent, Under Sub-Clause 1.10, the Employer can use Construction Documents
for the purposes of completing and altering the Works.
then the Employer may, after having given 14 days' notice to the
Contractor, terminate the Contractor's employment under the 15.3
Contract and expel him .from the Site. The Contractor shall then Valuation at Date of Termination
deliver all Construction Documents, and other design documents
made by or for him, to the Employer' Representative. The The Employer's Representative shall, as soon as possible after
termination under Sub-Clause 15.2, determine and advise the
Contractor shall not be released from any of his obligations or
Contractor of the value of the Construction Documents, Plant,
Materials, Contractor's Equipment and Works and all sums then with the Employer, then the Employer may, after having given
due to the Contractor as at the date of termination. 14 days' notice to the Contractor, terminate the Contractor’s
employment under the Contract and expel him from the Site,
Following the Employer's termination of the Contractor's employment
and the provisions of this Clause shall apply as if such
because of his shortcomings, the Employer's Representative is required to
termination and expulsion had been made under Sub-Clause
determine the value of the Contractor's work. This determination does not
15.2.
constitute certification under Clause 13, and the Employer is not obliged to
make immediate payment: see Sub-Clause 15.4. Note that Sub-Clause Unless the applicable law requires otherwise, the Employer's entitlement to
13.2 requires the advance payment to be repaid immediately upon terminate does not require the Contractor to be aware that any of his
termination, thereby reducing to zero the value of the advance payment Subcontractors, agents or servants have given or offered to give to any
guarantee, which should then be promptly returned to the Contractor. person any bribe, gift, gratuity or commission.
15.4
Payment after Termination
Clause 16 Default of Employer
After termination under Sub-Clause 15.2, the Employer shall not be
liable to make any further payments to the Contractor until the costs
of design, execution, completion and remedying of any defects, 16.1
damages for delay in completion (if any), and all other costs incurred Contractor's Entitlement to Suspend Work
by the Employer, have been established.
If the Employer fails to pay the Contractor the amount due under
The Employer shall be entitled to entitled to recover the Contractor any certificate of the Employer's Representative, and fails to explain
the extra costs, if any, of completing the Works after allowing for any why the Contractor is not entitled to such amount, within 21 days
slim due to the Contractor under Sub-Clause 15.3. If there are no after the expiry of the time stated in Sub-Clause 13.7 within which
such extra costs, the Employer shall pay any balance to the payment is to be made, except Mr any deduction that the Employer
Contractor. is entitled to make under the Contract, the Contractor may,
suspend work or reduce the rate of work after giving not less than 7
After termination, the Employer would probably have had to make other
days' prior notice to the Employer (with a copy to the Employer's
arrangements for the completion of the Works, including the rectification of
Representative). Such action shall not prejudice the Contractor's
any defects. If these arrangements include the appointment of a new
entitlements to payment under Sub-Clause 13.8 and to terminate
contractor, it would probably not be until the latter's Contract Period had
expired that the costs of design, execution, completion and remedying of
any defects, damages for delay in completion (if any), and all other costs If the Contractor suspends work or reduces the rate of work, and
incurred by the Employer, could be established. the Employer subsequently pays the amount due (including
payment in accordance with Sub-Clause 13.8), the Contractor's
15.5
entitlement under Sub-Clause 16.2 shall lapse in respect of such
Bribes
delayed payment, unless notice of termination has already been
If the Contractor, or any of his Subcontractors agents or servants given, and the Contractor shall resume normal working as soon as
gives or offers to give to any person any bribe, gift, gratuity, or is reasonably possible.
commission as an inducement or reward:
If the Contractor suffers delay and/or incurs Cost as a result of
(a) for doing or forbearing to do any action in relation to the suspending work or reducing the rate of work in accordance with
Contract or any other contract with the Employer, or this Sub-Clause, the Contractor shall give notice to the Employer's
Representative. After receipt of such notice, the Employer's
(b) for showing or forbearing to show favour or disfavour to any
Representative shall proceed in accordance with Sub-Clause 3.5 to
person in relation to the Contract or to any other contract,
agree or determine:
(a) any extension of time to which the Contractor is entitled under 16.1, the Employer may prefer to pay the certified amount but notify his
Sub-Clause 8.3, and disagreement. If not resolved, the dispute would be dealt with under
Clause 20.
(b) the amount of such Cost plus reasonable profit, which shall be
added to the Contract Price, Note that Sub-Clause 16.1 states that it applies if the Employer falls to pay
and shall notify the Contractor accordingly. the amount due under any certificate of the Employer's Representative. If
the latter falls to certify, having not notified the Contractor (under 13.6) that
The Contractor's first entitlement, if the Employer falls to pay the no payment is considered to be due, circumstances could entitle the
Contractor the certified amount due, is to payment of financing charges Contractor to suspend under Sub-Clause 16. 1. Although Sub-Clause
under Sub-Clause 13.8. 13.8 cannot be applied because it requires definition of an amount, Sub-
Clause 16.1 only requires definition of a date, which can be ascertained
Secondly, if after 21 days (plus 7 days' notice) the Employer has neither
from the date defined in Sub-Clause 13.7(a). Precise guidance cannot be
paid the amount due nor explained why the Contractor "is not entitled" to
given on this entitlement, because it will depend on circumstances and on
the amount due. the Contractor is entitled to slow down or stop work.
the applicable law.
From the description of the Employer's failure, it might appear that the
Employer can fail to pay, provided he gives an explanation. However, the The third (and final) stage is termination, which the Contractor can initiate
Contractor's entitlement to suspend arises when "the Employer falls to pay by giving a notice of termination after becoming entitled under Sub-Clause
the amount due under any certificate except for any deduction that the 16.2(a), if he has not received payment. If payment is received after the
Employer is entitled to make under the Contract". Although the Employer notice has been given, the notice of termination still takes effect 14 days
may be entitled to effect a deduction, he is obliged to pay the balance after it was given, unless the parties agree otherwise.
amount (i.e., the amount certified less the entitled deduction) and will
16.2
usually have difficulty explaining why the Contractor is actually not entitled
Termination
to this balance amount.
If the Employer:
In other words, whilst the Employer may be able to explain why he is of the
opinion that the Contractor is not so entitled, the Sub-Clause requires the (a) fails to pay, the Contractor the amount due under any
Employer to provide a factual explanation, not an opinion. Although the certificate of the Employer's Representative within 42 days
requirement for an explanation may therefore seem superfluous, it should after the expiry of the time stated in Sub-Clause 13.7 within
encourage the Employer to provide an explanation whenever he does not which payment is to be made (except for any deduction that
intend to pay the amount certified. He should thus explain the "deduction the Employer is entitled to make under the Contract),
that the Employer is entitled to make under the Contract".
(b) becomes bankrupt or insolvent, goes into liquidation, has a
If the Employer neither pays the amount certified nor provides an receiving or administration order made against him,
explanation, the Contractor should first assess whether the non-payment compounds with his creditors, or carries on business under a
arose from any deduction that the Employer is entitled to make. If so, the receiver, trustee or manager for the benefit of his creditors,
Contractor loses the entitlement to suspend, notwithstanding the or, if any act is done or event occurs which (under any
Employer's unwise failure to provide an explanation. In the light of this two- applicable law) has a similar effect to any of these acts or
fold failure, it is considered that a court or arbitrator should be lenient in events,
reviewing the Contractor's assessment of his entitlement. (c) consistently fails to meet the Employer's obligations under
In many countries, the applicable law may constrain the Employer's rights the Contract, or
of "set-off", which might otherwise permit him to deduct amounts which (d) assigns the Contract without the Contractor’s consent,
he considered recoverable from the amounts due to the Contractor. If the
Employer is unsure of each party's entitlement and does not want to give or if a prolonged suspension affects the whole of the Works as
the Contractor the opportunity to proceed as described in Sub-Clause described in Sub-Clause 8.10,
then the Contractor may terminate his employment under the calculated and certified in accordance with Sub-Clause 19.6 plus
Contract by giving notice to the Employer, with a copy, to the the amount of any loss or damage, including loss of profit, which the
Employer's Representative. Such notice shall take effect 14 days Contractor may have suffered in consequence of termination.
after the giving of the notice.
The Contractor is entitled to payment of an amount to be calculated and
If the Employer's action or inaction is sufficiently serious to justify certified as described in Sub-Clause 19.6, and to the amount of loss or
termination under this Sub-Clause, the Contractor should consider taking damage. The latter amount is not subject to certification by the Employer's
legal advice, with a view to minimising the possibility of the termination Representative, who may find it difficult to certify under Sub-Clause 19.6,
being considered unjustified. The Contractor's entitlement to terminate his bearing in mind that he was appointed by the Employer.
employment mirrors, to some extent, the Employer's entitlement following
Note that Sub-Clause 13.2 requires the advance payment to be repaid
the Contractor's shortcomings.
immediately upon termination, thereby reducing to zero the value of the
16.3 advance payment guarantee, which should then be promptly returned to
Cessation of Work and Removal of Contractor's Equipment the Contractor.
After termination under Sub-Clause 2.4 or Sub-Clause 16.2, the
Contractor shall:
Clause 17 Risk and Responsibility
(a) cease all further work, except for such work. as may be
necessary and instructed by, the Employer's Representative
for the purpose of making safe or protecting those parts of 17.1
the Works already, executed, and any work required to leave Indemnity
the Site in a clean and safe condition,
The Contractor shall indemnify and hold harmless the Employer, the
(b) hand over all Construction Documents, Plant and Materials Employer's Representative, their contractors, agents and employees
for which the Contractor has received payment., from and against all claims, damages, losses and expenses arising
(c) hand over those other parts of the Works executed by the out of or resulting from the Works, including professional services
Contractor up to the date of' termination, and provided by the Contractor.
(d) remove all Contractor's Equipment which is on the Site and These indemnification obligations shall be limited to claims, damages,
repatriate all his staff and labour from the Site. losses and expenses which are attributable to bodily injury sickness,
disease or death, or to injury to or destruction physical property (other
Any such termination shall be without prejudice to any other right of than the Works), including consequential loss of use. Such obligations
the Contractor under the Contract. shall also be limited to the extent that such claims, damages, losses
After termination, for the Employer's convenience or because of default, or expenses are caused in whole or in part by a breach of a duty of
the Contractor is required to hand over the things for which the Employer care, imposed by law on the Contractor or anyone directly or
has paid, and the parts of the Works executed on the Site. Whilst it may indirectly employed by the Contractor.
seem unrealistic to expect the Contractor to be willing to carry out much of The Contractor is required to protect the Employer and others from claims,
the work described in sub-paragraph (a), it may be essential for safety including those from third parties, arising out of the Contractor's execution
and/or for compliance with the law. of the Works. The indemnity applies widely, but its scope is subject to the
16.4 limitations set out in the second paragraph. The claims must relate to
Payment on Termination injury, sickness, etc, and not (for example) to a dislike of the very existence
of the Works. Also, the claims must arise from a legal duty of care, breach
After termination under Sub-Clause 16.2, the Employer shall return of which is often called negligence.
the performance security, and shall pay the Contractor an amount
17.2 of the Contractor's notice under Sub-Clause 10.1, that the Works or a
Contractor's Care of the Works Section were nearly ready for taking over and transfer of liability.
The Contractor shall take full responsibility for the care of the Works Difficulties may arise in respect of a Taking-Over Certificate for a Section or
from the Commencement Date until the date of issue of the Taking- part of the Works, if the physical extent of the Section or part is not
Over Certificate, when responsibility shall pass to the Employer. If adequately defined. When preparing the tender documents, the Employer
the Employer's Representative issues a Taking-Over Certificate, for should define each Section (if any) clearly; defining it as a construction
any Section or part of the Works, the Contractor shall cease to be milestone may not be sufficiently precise for the purposes of defining what
responsible for the care of that Section or part from the date of liability is transferred upon the issue of the Certificate. For example, a
issue of such Taking-Over Certificate, when responsibility shall pass construction milestone might consist of the closure of diversion
to the Employer. arrangements in a dam, allowing impounding to commence, although dam
The Contractor shall take responsibility for the care of any construction has not reached crest level. If this type of construction
outstanding work which is required to be completed prior to the stage/milestone had been defined as a Section, it might be impossible to
expiry of the Contract Period, until the Employers Representative determine the extent of the structure which the Contract requires the
confirms in writing that such outstanding work has been completed. Employer to take over.
If any loss or damage happens to the Works, arising from any The Contractor is also required to take responsibility for the care of any
cause other than the Employers risks listed in Sub-Clause 17.3, outstanding work which is required to be completed prior to the expiry of
during the period for which the Contractor is responsible, the the Contract Period, until the Employer's Representative confirms in writing
Contractor shall rectify such loss or damage, at his cost, so that that this outstanding work has been completed. There is no formal
the Works conform with the Contract. The Contractor shall also procedure specified in Part I covering the request for, and issue of, this
be liable for any loss or damage to the Works caused by any confirmation by the Employer's Representative. However, it is in both
operations carried out by the Contractor after the date of issue of parties' interests to manage the remedying of defects, possibly by monthly
the Taking-Over Certificate. confirmation of what outstanding work has been completed and what
defects have yet to be rectified.
The Contractor is responsible for the care of the Works, and is required to
rectify any loss or damage which is not due to any of the Employer's risks. 17.3
The Employer does not need to demonstrate what caused the loss or Employer's Risks
damage; in many cases, the cause may be uncertain. The Contractor must The Employer’s risks are:
rectify loss or damage at his own cost (or that of his insurers), except to
the extent that he can demonstrate that the loss or damage was due to (a) war, hostilities (whether war be declared or not), invasion, act
any of the Employer's risks listed in Sub-Clause 17.3. of foreign enemies,
Under Sub-Clause 1.9, the Contractor is responsible for the care of each (b) rebellion, revolution, insurrection, or military or usurped
of the Construction Documents until it is supplied to the Employer or his power, or civil war,
Representative. This responsibility is unaffected by the transfer of (c) ionising radiations, or contamination by radio-activity from
responsibility under Sub-Clause 17.2. any nuclear fuel, or from any nuclear waste from the
The liability transfers to the Employer on the date when the Employer's combustion of nuclear fuel, radio-active toxic explosive, or
Representative issues the Taking-Over Certificate, although the Certificate other hazardous properties of any explosive nuclear assembly
may record that the Works (or a Section) were taken over on a date a few or nuclear component of such assembly,
days previously. Therefore, if the Employer wishes to effect insurance, it (d) pressure waves caused by aircraft or other aerial devices
should have become effective by the date of issue of the Taking-Over travelling at sonic or supersonic speeds,
Certificate. Even if the Employer's Representative was unable to forecast
completion, he would have been able to advise the Employer, upon receipt (e) riot, commotion or disorder, unless solely restricted to
employees of the Contractor or of his Subcontractors and substantiate that it has been "foreseen" by, or become "known" to. the
arising from the conduct of the Works, Contractor.
(f) loss or damage due to the use or occupation by the The Employer's Representative will want to monitor its effect and may
Employer of any Section or part of the Works, except as may require the Contractor to rectify any loss or damage. If he does not actively
be provided for in the Contract, and require (i.e., instruct or agree) rectification, the Contractor is not obliged by
(g) any operation of the forces of nature against which an this Sub-Clause to carry out rectification. However, depending on the nature
experienced contractor could not reasonably have been and extent of the loss or damage, the Contractor may be entitled and/or
expected to take precautions. obliged to do so, under the applicable law and/or other provisions of the
Contract. Note that, under Sub-Clause 1.8, notices and determinations shall
International construction projects can be subject to various risks, many be in writing and not be unreasonably withheld or delayed.
unforeseen. A contract should provide mechanisms to deal with the
possible occurrence of the various types of risk. Sub-Clause 17.3 defines 17.5
the risks which are to be borne by the Employer. Some of these risks may Contractor's Risks
constitute force majeure events under Clause 19, depending on their The Contractor's risks are all risks other than the Employer's risks
consequences. Conversely, certain actions of the Country's government listed in Sub-Clause 17.3.
might constitute events of force majeure, but are not listed as Employer's
Although Sub-Clause 17.4 entitles the Contractor to payment in respect of
risks: see Sub-Clause 13.16. Only "risks" are listed: no mention is made of
Employer's risks, there is no equivalent entitlement for the Employer to receive
matters covered by other Clauses, such as the Employer's own
payment in respect of any of the Contractor's risks. Generally, "risk" is that
shortcomings.
related to the "Cost" (which is incurred by the Contractor) of designing,
17.4 executing and completing the Works, and remedying of any defects.
Consequences of Employer's Risks
17.6
The Contractor shall give notice, to the Employer's Representative, Limitation of Liability
of an Employer's risk upon it being foreseen by, or becoming known
to, the Contractor If an Employer's risk results in loss or damage, The Contractor shall in no event be liable to the Employer, by way
the Contractor shall rectify, such loss or damage to the extent of' indemnity or by reason of any breach of the Contract or in tort or
required by the Employers Representative. If the Contractor suffers otherwise, for loss of use of any part (or all) of the Works or for loss
delay and/or incurs Cost as a result of an Employer's risk, the of production, loss of Profit or loss of any contract or for any indirect
Contractor shall give further notice to the Employer's special or consequential loss or damage which may be suffered by
the Employer in connection with the Contract. The total liability, of
Representative. After receipt of such further notice the Employer's
Representative shall proceed in accordance with Sub-Clause 3.5 to the Contractor to the Employer under the Contract shall not exceed
the Contract Price. Except that this Sub-Clause shall not limit the
agree or determine:
liability of the Contractor:
under Sub-Clause 8.3, and (a) under Sub-Clauses 4.19, 4.20, 5.9, 8.6 and 11.4,
(b) the amount of such Cost, which shall be added to the (b) under any other provisions of the Contract which expressly
Contract Price, impose a greater liability,
and shall notify the Contractor accordingly. (c) in cases of fraud, wilful misconduct or illegal or unlawful acts, or
(d) in cases of acts or omissions of the Contractor which are
In order to seek protection under this Sub-Clause, the Contractor must
contrary to the most elementary rules of diligence which a
first notify the Employer's Representative of the nature of the Employer's
conscientious contractor would have followed in similar
risk. A notice asserting an unidentified risk will be insufficient to
circumstances.
When preparing their tenders, tenderers will wish to assess their potential The contractor is required to effect professional indemnity insurance in an
liability to the Employer and include in their prices some allowance for their amount not less than the amount specified in the Appendix to Tender.
risks. The basis of this Sub-Clause is to maintain a reasonable balance When preparing the tender documents, the Employer should consider
between the differing objectives of the parties. The Employer will wish to whether he requires this insurance, taking account of the status of the
receive full compensation in respect of any shortfall from his expectations; prequaliflied tenderers and their apparent ability to self-insure. If no
the Contractor will wish to restrict his liability to the particular defaults amount is specified in the Appendix to Tender, this Sub-Clause will not
which he feels most able to prevent and/or insure against. apply.
As an alternative, the Sub-Clause may be amended (in the contract Part II) The insurance must be maintained for the full period of the Contractor's
by, the insertion of an agreed multiplier after the word "exceed" in the liability. No period is stated in Part I, because it may depend on the law
second sentence. applicable to the Contract and/or to the Contractor.
Sub-paragraph (a) removes the following Sub-Clauses from the limitation Sub-Clause 18.5 requires each insurance policy to be consistent with the
of liability: general terms agreed prior to the Effective Date, including in respect of
excesses and exclusions. There are many possible exclusions: in
(a) Sub-Clauses 4.19 and 4.20, for payments for the services actually
particular, the Contractor may be unable to obtain professional indemnity
used by the Contractor,

insurance to the level of duty prescribed in Sub-Clause 4.1, namely fitness
(b) Sub-Clause 5.9, for his infringement of patents and other intellectual for purpose, at commercially reasonable rates. At present, most insurers
property rights, and limit indemnity cover to the professional designers' duty to exercise skill,
care and diligence.
(c) Sub-Clauses 8.6 and 11.4, for liquidated damages: the Contract will
have defined the rate(s) and limit(s) of such damages, which may Tenderers will usually find it necessary to include details of exclusions,
include elements in respect of loss of production, loss of profit, loss of excesses and other general terms in their Proposals.
any contract, and/or indirect special or consequential loss or damage.
18.2
The operation of Sub-Clause 17.6 may be affected by the applicable law. Insurance for Works and Contractor's Equipment
The Contractor shall insure the Construction Documents, Plant,
Materials and Works in the joint names of the Employer, the
Clause 18 Insurance Contractor and Sub-contractors, against all loss or damage. This
insurance shall cover loss or damage from any cause other than the
Employer's risks listed in Sub-Clause 17.3 sub-paragraphs (a), (b),
18.1 (c) and (d) in so far as such insurance is readily obtainable. Such
Insurance for Design insurance shall be for a limit of not less than the full replacement
The Contractor shall effect professional indemnity insurance, which cost (including profit) and shall also cover the costs of demolition
shall insure the Contractor's liability by reason of professional and removal of debris. Such insurance shall be in such a manner
negligence in the design of the Works. Such insurance shall be for a that the Employer and the Contractor are covered from the date by
limit of not less than the amount specified in the Appendix to which the evidence is to be submitted under Sub-Clause 18.5(a),
Tender. until the date of issue of the Taking-Over Certificate for the Works.
The Contractor shall extend such insurance to provide cover until
The Contractor shall use his best endeavours to maintain such the date of issue of the Performance Certificate, for loss or damage
professional indemnity insurance in full force and effect throughout for which the Contractor is liable arising from a cause occurring prior
the periods of his liability, under the Contract and under the law, of to the issue of the Taking-Over Certificate, and for loss or damage
the Country. The Contractor undertakes to give the Employer occasioned by the Contractor or Subcontractors in the course of
reasonable notice in the event of difficulty (if any) in extending, any other operations (including those under Clauses 11 and 12).
renewing or reinstating such insurance.
The Contractor shall insure the Contractors Equipment in the joint Employer's risks for which insurance may be available although the
names of the Employer, the Contractor and Subcontractors, against Contractor does not have an insurable interest in them. This should avoid
all loss or damage. This insurance shall cover loss or damage from the need for the Employer to effect insurances for any works until he takes
any cause other than the Employer's risks listed in Sub-Clause 17.3 them over.
sub-paragraphs (a), (b), (c) and (d) in so far as such insurance is
readily obtainable. Such insurance shall be for a limit of not less than For these reasons. the insurance of the Contractor's Equipment is also required
the full replacement value (including delivery to Site). Such insurance to be effected, by the Contractor, in the joint names of the parties and including
shall be in such a manner that each item of equipment is insured those Employer's risks which are insurable as part of the general terms to be
while it is being transported to the Site and throughout the period it agreed in accordance with the first sentence of Sub-Clause 18.5.
is on or near the Site. When preparing the tender documents, the Employer should review the
This Sub-Clause specifies that insurance of the Works is to be effected by insurable Employer's risks, taking advice from insurance experts, and
the Contractor, who will probably wish to consult insurance experts. consider whether to amend them and/or add further insurance
Insurances are virtually an essential part of major construction projects. requirements. The detailed requirements should only call for insurances
When preparing the tender documents, the Employer may wish to which are likely, to be available for the particular project.
consider whether these insurances should be effected by the Contractor 18.3

(who may have long-term arrangements), or by the Employer (who may Insurance against Injury to Persons and Damage to Property
effect one policy to cover many contracts). Proposals in respect of
Employer-provided insurance are included in the published Part II. The Contractor shall insure against liability to third parties, in the
joint names of the Employer, the Contractor and Subcontractors, for
The Contractor is required to effect insurance of the Works and other any loss, damage , or death or bodily injury which may occur to any
things, including Construction Documents. The latter include drawings, Physical property (except things insured under Sub-Clause 18.2) or
calculations, computer software (programs), samples, patterns, models, to any person (except persons insured under Sub-Clause 18.4),
and operation and maintenance manuals: the consequences of loss or which may arise out of the performance of the Contract and
damage to these items usually justifies insurance. Note that the insurance occurring before the issue of the Performance Certificate. Such
imposed by this Sub-Clause covers loss or damage, and does not cover insurance shall be for a limit of not less than the amount specified in
the cost of rectifying defects. the Appendix to Tender.
The date from which the insurance is to be effective must be not later than The Contractor is required to effect insurance, in the joint names of the
the date defined in Sub-Clause 18.5(a), which is to be stated in the Appendix Employer and Contractor, against liability to other parties. This Sub-Clause
to Tender. Some forms of contract require the insurance to be effective from does not require the insurance to cover any, liability of the Contractor to
the Commencement Date. However, this latter requirement is frequently the Employer. However, it would usually be advisable for this insurance to
impractical (it could delay the Commencement Date) and/or may be be extended to include cover in respect of the Contractor's liability to the
unnecessary because no insurable activities may be initiated for some time. Employer for loss or damage to any physical property (except the Works).
This additional cover might be available from the insurers without much
The insurance is required to be in the "Joint names" of the Employer and
increase in the premiums. When preparing the tender documents, the
Contractor, so that each is covered and can claim under the policy.
Employer should consider whether to require this or other additional
Typically, the Contractor may submit the claim under the policy, because it
insurance cover, as appropriate for the particular project.
is his Costs (in overcoming the risk which occurred) which are being
claimed. However, the claim may relate to parts of the Works for which the 18.4
Employer has paid. The policy should therefore entitle the Employer to Insurance for Workers
make a claim, in case the Contractor goes into liquidation or the risk is one
The Contractor shall effect and maintain insurance against losses
of the Employer's risks which is covered under the policy: Sub-Clause
and claims arising from the death or injury to any person employed
17.3(e), (f) or (g). The intention of the Sub-Clause is thus to require the by the Contractor or any Subcontractor, in such a manner that the
Contractor to effect insurance to cover all insurable risks, including those
Employer and the Employer’s Representative are indemnified under satisfactory evidence, policies in accordance with this Sub-Clause,
the policy of insurance. For a Sub-contractor's employees, such the Employer may, without prejudice to any other right or remedy,
insurance may be effected by the Subcontractor, but the Contractor effect insurance for the coverage relevant to such default, and pay
shall be responsible for compliance with this Clause. the premiums due. Such payments shall be recoverable from
Contractor by the Employer, and may be deducted by the Employer
In many countries, this type of insurance is required by law. If the law
from any monies due, or to become due, to the Contractor.
requires each employer to effect this insurance in respect of his
employees, the provisions of the last sentence would be equally applicable Nothing in this Clause limits the obligations, liabilities or
to sub-subcontractors. responsibilities of the Contractor or the Employer, under the other
terms of the Contract or otherwise. Any amounts not insured or not
18.5
recovered from the insurers shall be borne by the Contractor and/or
General Requirements for Insurances
the Employer accordingly.
Each insurance policy shall be consistent with the general terms
At any given time, it is difficult for any published form of construction
agreed in writing prior to the Effective Date, and such agreement
contract to define the precise insurance requirements which the parties
shall take precedence over the provisions of this Clause.
will be able to (and should) procure for any particular Works. Therefore,
The Contractor shall, within the respective periods stated in the Clause 18 sets out the requirements in general terms, allowing the
Appendix to Tender (calculated from the Contractor and the Employer to elaborate on the detailed terms, as
agreed prior to the Effective Date, and as envisaged in the first sentence
Commencement Date), submit to the Employer:
of Sub-Clause 1-8.5.
(a) evidence that the insurances described in this Clause have
Tenderers may be invited to include, in their Proposals, details of their
been effected, and
insurer(s) and of the insurances to be provided under Clause 18, including
(b) copies of the policies for the insurances described in Sub- conditions, limits, exclusions/exceptions, deductibles/excesses and
Clauses 18.2 and 18.3. (possibly) operative clauses. In order to minimise dispute on this matter, it
is suggested that the Instructions to Tenderers should invite tenderers to
When each premium has been paid, the Contractor shall submit
copy receipts to the Employer. The Contractor shall also, when provide details of their insurances, and should also indicate the Employer's
providing such evidence, policies and receipts to the Employer, preferences (if any): for example, permitted exclusions and levels of
notify the Employer's Representative of so doing. deductibles/excesses. Any particular requirements of the Employer may be
made compulsory by including them in the Employer's Requirements.
The Contractor shall effect all insurances for which he is responsible Even if tenderers are not invited to provide details of their proposed
with insurers and in terms approved by the Employer. Each policy insurances, they may consider it advisable to do so.
insuring against loss or damage shall provide for payments to be
made in the currencies required to rectify such loss or damage. If no general terms of insurance are agreed prior to the Effective Date, the
Payments received from insurers shall be used for the rectification of policies must comply with Clause 18. However, Sub-Clause 18.1 is
such loss or damage. worded in very general terms, and the cover specified in Sub-Clause 18.2
is subject to the limitation defined by the phrase “in so far as such
The Contractor (and, if appropriate, the Employer) shall comply with insurance is readily obtainable".
the conditions stipulated in each of the insurance policies. The
Contractor shall make no material alteration to the terms of any The insurers and the terms are subject to the approval of the Employer.
insurance without the prior approval of the Employer, If an insurer Under Sub-Clause 1.8, approvals shall be in writing and not be
makes (or purports to make) any such alteration, the Contractor unreasonably withheld or delayed.
shall notify, the Employer immediately. The Contractor is required, within the prescribed periods, to submit to the
If the Contractor fails to effect and keep in force any of the Employer:
insurances required under the Contract, or fails to provide
(a) evidence, which could be in the form of appropriate certificates from Clause 19 Force Majeure
the insurers, that all the insurances described in this Clause have
been effected;
19.1
(b) copies of the policies for the insurances described in Sub-Clauses
Definition of Force Majeure
18.2 and 18.3, insurers might also be prepared to release copies of
operative clauses of the policies for the insurances prescribed in the In this Clause, "force majeure" means an event beyond the control
other Sub-Clauses of Clause 18 of the Employer and the Contractor, which makes it impossible or
illegal for a party to perform, including but not limited to:
If a party falls to comply with a condition of an insurance policy, he will be
in breach of the fifth paragraph of Sub-Clause 18.5. No mention is made (a) act of God;
of the consequences, the most serious being the possibility of the insurer
(b) war, hostilities (whether war be declared or not), invasion, act
becoming entitled to withhold cover under the policy. The party in breach
of foreign enemies, mobilization, requisition, or embargo;
might have to bear responsibility for the consequences of the breach,
unless he was unaware of the relevant condition. (c) rebellion, revolution, insurrection, or military or usurped
power, or civil war;
The penultimate paragraph entitles the Employer to effect insurance if he

does not receive “Satisfactory evidence, policies and receipts in accordance (d) contamination by radio-activity from any nuclear fuel, or from
with this Sub-Clause". He does not have to ascertain whether insurance any nuclear waste from the combustion of nuclear fuel, radio-
cover is actually in force: his entitlement to effect insurance only depends on active toxic explosive, or other hazardous properties of any
the lack of evidence from the Contractor. Although not a requirement of explosive nuclear assembly or nuclear component of such
Sub-Clause 18.5, the Employer should issue a formal notice to the assembly;
Contractor, specifying the evidence required (which the Contractor has failed (e) riot, commotion or disorder, unless solely restricted to
to submit) and the reasonable date by which the Employer must receive it, employees of the Contractor or of his Subcontractors.
and stating that, if the evidence is not received by that date, the Employer
may effect the insurance at the cost of the Contractor. In most countries, the In many countries, particularly those codifying civil law, "force majeure" is a
Employer would be obliged to act reasonably in issuing this notice and concept defined by law. In the Contract, the term is defined to include
subsequently procuring economical insurance. certain events beyond the control of the Employer and the Contractor,
namely those which make it impossible or illegal for either (or both) of them
Clause 18 is not intended to impose, on either party, an obligation to to perform. The Clause is intended to cover major (and thus unusual)
insure all his risks under the Contract. Under the last paragraph of Sub- prevention of performance, similar to the doctrine of frustration in many
Clause 18.5, the insurance requirements of Clause 18 do not reduce the common law countries, but is not intended to cover every event which
obligations or liabilities of either party. The Clause only requires certain impedes or disrupts either party's performance.
insurances to be effected, each of which will apply in accordance with the
actual terms of the policy. Actual terms will probably include conditions, In order for an event to be classified as force majeure, the event has to
limits, exclusions (exceptions) and deductibles (excesses). make it impossible or illegal for the Employer and/or the Contractor to
carry out their obligations under the Contract. The event does not have to
The liabilities of the parties (other than to effect insurance) are not to be be one of those listed, which are only examples. Conversely, if one of the
interpreted from this Clause 18. It is these liabilities, in accordance with the listed events occurs but it is still possible and legal for the Employer and
other terms of the Contract, which will be relevant whenever an element of the Contractor to perform, the event will not constitute force majeure.
loss or damage is not covered by insurance. For example, an insurer may Examples of events which could constitute force majeure include the
bear the amount of a claim except for the deductible. The latter would be operation of uncontrollable natural forces such as an earthquake,
borne by the Employer if the claim arose from an Employer's risk, or by the governmental confiscation, mass labour action (strikes, unless restricted to
Contractor if it arose from a Contractor's risk; these risks are defined in the Contractor's employees or affected by his breach of Sub-Clause 6.2)
Clause 17. and port congestion due to obstruction.
19.2 Contractor of any proposals, with the objectives of completing the
Effect of Force Majeure Event Works and mitigating any increased costs to the Employer and the
Contractor.
Neither the Employer nor the Contractor shall be considered in
default or 117 contractual breach to the extent that performance of The Employer is required to notify the Contractor and the Employer's
obligations is prevented by a force majeure event which arises after Representative, so that the parties can reach agreement on whether the
the Effective Date. event does actually constitute force majeure. Note that one of the
consequences of the force majeure event might be prevention of
Note that the excused performance has to have been "prevented" by the
payment.
force majeure event, which has to have arisen after the date on which the
Contract entered into legal force and effect. In order for it to be a force 19.5
majeure event, the event must have made it impossible or illegal for a party Payment to Contractor
to perform some obligation. This Sub-Clause might also relate to the effect
If, in consequence of force majeure, the Works shall suffer loss or
of that force majeure event upon the performance of any other prevented
damage, the Contractor shall be entitled to have included, in an
obligation.
Interim Payment Certificate, the Cost of work executed in
This Sub-Clause provides important protection for the party prevented accordance with the Contract, prior to the event of force majeure. If
from performing, by excusing the unperformed obligation to the extent the Contractor incurs additional Cost in complying with Sub-Clause
prevented by the force majeure event. As regards time, Sub-Clause 8.3(b) 19.3, such Cost shall be determined by the Employer’s
also provides protection. Representative in accordance with the provisions of Sub-Clause 3.5
and shall be added to the Contract Price.
19.3
Contractor's Responsibility This Sub-Clause deals with the immediate effects of the force majeure
event, which may subsequently dissipate, allowing the parties to resume
Upon occurrence of an event considered by the Contractor to
performance. The Contractor is entitled to be paid for the work executed,
constitute force majeure and which may affect performance of his
even if damaged due to the force majeure event, unless it was not
obligations, he shall promptly notify the Employer's Representative, and
originally executed in accordance with the Contract.
shall endeavour to continue to perform his obligations as far as
reasonably practicable. The Contractor shall also notify, the Employer’s Even if the Works are not damaged, the Contractor is entitled to be paid
Representative of any proposals, including any reasonable alternative for endeavouring to continue performing his obligations, and for preparing
means for performance, but shall not effect such proposals without the and executing any proposals, including any reasonable alternative means
consent of the Employer's Representative. for performance. Sub-Clauses 13.3 to 13.9 and 16.1 will still apply.
providing some measure of protection for the Contractor.
The Contractor is required to notify the Employer's Representative, who
must notify the Employer (see last sentence of Sub-Clause 3. 1) so that the 19.6
parties can reach agreement on whether the event does actually constitute Optional Termination, Payment and Release
force majeure.
Irrespective of any extension of time, if a force majeure event occurs
19.4 and its effect continues for a period of 182 days, either the
Employer's Responsibility Employer or the Contractor may give to the other a notice of
termination, which shall take effect 28 days after the giving of the
Upon occurrence of an event considered by the Employer to
notice. If, at the end of the 28-day period, the effect of the force
constitute force majeure and which may, affect performance of his
majeure continues, the Contract shall terminate. If the Contract is
obligations, he shall promptly notify the Contractor and the
terminated under this Sub-Clause, Sub-Clause 2.4 or Sub-Clause
Employers Representative, and shall endeavour to continue to
16.21, the Employer's Representative shall determine the value of
perform his obligations as far as reasonably practicable. The
the work done and:
Employer shall also notify, the Employer's Representative and the
(a) the amounts payable for any work carried out for which a 19.7
price is stated in the Contract; Release from Performance under the Law
(b) the Cost of Plant and Materials ordered for the Works which If under the law of the Contract the Employer and the Contractor are
have been delivered to the Contractor, or of which the released from further performance, the sum payable by the
Contractor is liable to accept delivery: such Plant and Employer to the Contractor shall be the same as would have been
Materials shall become the property of (and be at the risk of) payable under Sub-Clause 19.6 if the Contract had been terminated
the Employer when paid for by the Employer, and the under that Sub-Clause.
Contractor shall place the same at the Employers disposal;
This Sub-Clause only takes effect if the applicable law prescribes that the
(c) any other Cost or liability which in the circumstances was parties are released from performance: in many countries, the Contract is
reasonably, incurred by, the Contractor in the expectation of said to have been frustrated. Sub-Clause 19.6 specifies the
completing the Works; consequences, unless the law prescribes otherwise. Legal advice may be
required to verify the validity of the assumptions, namely frustration and the
(d) the reasonable Cost of removal of Temporary Works and
Contractor's Equipment from the Site and the return of such applicability of Sub-Clause 19.6. Note that the Sub-Clause relies on the
law, not on the question of whether a force majeure event occurred under
items to the Contractor's works in his country (or to any other

destination at no greater cost); and the definition in Sub-Clause 19. 1.
(e) the reasonable Cost of repatriation of the Contractor's staff

and labour employed wholly in connection with the Works at Clause 20 Claims, Disputes and Arbitration
the date of such termination;
and issue an Interim Payment Certificate in accordance with Clause 13.
20.1
When preparing the tender documents, the Employer may wish to Procedure for Claims
consider amending the period of 182 days, after which either party is
entitled to initiate termination, particularly for contracts having a Time for If the Contractor intends to claim any additional payment under any
Completion of less than a year. Clause of these Conditions or, otherwise, the Contractor shall give
notice to the Employer's Representative as soon as possible and in
For some events of force majeure, it may be immediately apparent that its any event within 28 days of the start of the event giving rise to the
effect will continue for the relevant period. In this case, the parties might claim.
wish to agree an amendment to the Contract by reducing the period and
initiating termination immediately. Note that Sub-Clause 13.2 requires the The Contractor shall keep such c records as may be necessary to
advance payment to be repaid immediately upon termination, thereby substantiate any claim, either on the Site or at another location
reducing to zero the value of the advance payment guarantee, which acceptable to the Employer's Representative. Without admitting the
should then be promptly returned to the Contractor. Employer's liability, the Employer's Representative shall, on receipt
of such notice, inspect such records and may instruct the
Under sub-paragraph (a), the Contractor is entitled to payment for any Contractor to keep further contemporary records. The Contractor
work carried out "for which a price is stated in the Contract". In many shall permit the Employer's Representative to inspect all such
cases, the completed work may not have been priced in the Contract, records, and shall (if instructed) submit copies to the Employer’s
because there was no breakdown of the Contract Price. Therefore, sub- Representative.
paragraphs (b) and (c) provide a method for determining a reasonable
Within 28 days of such notice, or such other time as may be agreed
payment in respect of work carried out which was not separately priced.
by the Employer's Representative, the Contractor shall send to the
Employers Representative an account, giving detailed particulars of
the amount and basis of the claim. Where the event giving rise to
the claim has a continuing effect, such account shall be considered 20.3
as interim. The Contractor shall then, at such intervals as the Dispute Adjudication Board
Employer’s Representative may reasonably require, send further
Unless the member or members of the Dispute Adjudication Board
interim accounts the accumulated amount of the claim and any
have been previously mutually agreed upon by the parties and
further particulars. Where interim accounts are sent to the
named in the Contract, the parties shall, within 28 days of the
Employer's Representative, the Contractor shall send a final account
Effective Date, jointly ensure the appointment of a Dispute
within 28 days of the end of the effects resulting from the event. If
Adjudication Board. Such Dispute Adjudication Board shall
the Contractor fails to comply with this Sub-Clause, he shall not be
comprise suitably qualified persons as members, the number of
entitled to additional payment.
members being either one or three, as stated in the Appendix to
This is a procedural Sub-Clause: it does not of itself entitle the Contractor Tender. If the Dispute Adjudication Board is to comprise three
to additional payment for any particular type of event, but can disqualify members. each party shall nominate one member for the approval
him from an entitlement if he fails to comply with these procedural of the other party, and the parties shall mutually agree upon and
requirements. Although not specifically mentioned, in most countries the appoint the third member (who shall act as chairman).
Contractor will have a duty to take any wholly reasonable measures in The terms of appointment of the Dispute Adjudication Board shall:
endeavours to mitigate the losses to the Employer which a claim

represents. (a) incorporate the model terms published by the Fédération
Internationale des Ingénieurs-Conseils (FIDIC),
The Contractor is required to notify the Employer's Representative
promptly, so that he can carry out any investigations and so that both (b) require each member of the Dispute Adjudication Board to
parties can keep adequate records, preferably on an agreed basis. The be, and to remain throughout the appointment, independent
Employer's Representative can monitor these records without admitting of the parties,
the claim, although early agreement on the principles usually simplifies (c) require the Dispute Adjudication Board to act impartially and
resolution and minimises dispute. in accordance with the Contract, and
If the Employer does not receive the requisite notice and/or access to the (d) include undertakings by the pat-ties (to each other and to the
records, the last sentence resolves the resulting dispute in his favour. Dispute Adjudication Board) that the members of the
20.2 Dispute Adjudication Board shall in no circumstances be
Payment of Claims liable for breach of duty or of contract arising out of their
appointment; the parties shall indemnify the members
The Contractor shall be entitled to have included in any Interim against such claims.
Payment Certificate such amount for any claim as the Employers
Representative considers due. If the particulars supplied are The terms of the remuneration of the Dispute Adjudication Board,,
insufficient to substantiate the whole of the claim, the Contractor including the remuneration of each member and of any specialist
shall be entitled to payment for such part of the claim as has been from whom the Dispute Adjudication Board may require to seek
substantiated. advice, shall be mutually agreed upon by the Employer, the
Contractor and each member o the Dispute Adjudication Board
This Sub-Clause confirms a basic principle of Sub-Clause 13.6, namely when agreeing such terms of appointment. In the event (~f
that the Employer's Representative must certify amounts which he disagreement, the remuneration of each member shall include
considers are due, and not await every element of substantiation before reimbursement for reasonable expenses, a daily fee in accordance
certifying any part of a particular claim. Since the basis of the claim is with the daily fee established from time to time for arbitrators under
unlikely to be of the Contractor's own making, it is clearly unfair for him not the administrative and financial regulations of the International
to be paid promptly. However, he cannot expect to receive a payment until Centre for Settlement of Investment Disputes, and a retainer fee pet.
it has been substantiated under the Contract. calendar month equivalent to three times such daily fee.

The Employer and the Contractor shall each pay one-half of the In the current editions of the other FIDIC forms of contract, which are
Dispute Adjudication Board's remuneration in accordance with its informally titled the Red and Yellow Books, there is an "Engineer" who is
terms of remuneration. If, at any time, either party shall fail to pay its required to issue a decision on disputes referred to him, and who is
due proportion of such remuneration, the other party, shall be required to act impartially in this (and other) actions. Under the Orange
entitled to make payment oil his behalf and recover it from the party Book, there is no impartial "Engineer" available to make these pre-arbitral
in default. decisions. These decisions can form a vital ingredient in preventing minor
The Dispute Adjudication Board's appointment may be terminated problems escalating into major disputes, and in encouraging economic
only by mutual agreement of the Employer and the Contractor. The resolution of all disputes. This Sub-Clause sets out the procedure for
Dispute Adjudication Board's appointment shall expire when the appointing a Dispute Adjudication Board ("DAB"), ready to make pre-
discharge referred to in Sub-Clause 13.12 shall have become arbitral decisions on disputes, if they arise.
effective, or at such other time as the parties may mutually agree. The DAB can consist of either one or three members, the number being
If, at any time, the parties so agree, they may appoint a suitably prescribed in the Appendix to Tender; as with any other element of the
qualified person to replace (or to be available to replace) any or all Contract, the parties can, of course, agree to change this number. The
members of the Dispute Adjudication Board. The appointment will main factors to be taken into account in prescribing the number of
come into effect if a member of the Dispute Adjudication Board members are:
declines to act or is unable to act as a result of death, disability, (a) the respective nationalities of the parties;
resignation or termination of appointment. If a member so declines
or is unable to act, and no such replacement is available to act, the (b) the types of activities to be carried out; and
member shall be replaced in the same manner as such member (c) the estimated Contract Price: it is suggested that three members would
was to have been nominated probably be appropriate if the estimated Contract Price exceeds 10
If any of the following conditions apply, namely: 000 multiplied by the daily fee for each of the members of the DAB.
(a) the parties fail to agree upon the appointment of the sole If the parties cannot agree, the daily fee is required to be in accordance
member of a one-person Dispute Adjudication Board within with the daily fee established from time to time for arbitrators under the
28 days of the Effective Date, administrative and financial regulations of the International Centre for
Settlement of Investment Disputes (at the World Bank). At the beginning of
(b) either party fails to nominate an acceptable member, for the 1996, their established daily fee was approximately US$ 900.
Dispute Adjudication Board of three members, within 28 days
of the Effective Date, Although some disputes may have to be decided by arbitration, the DAB
provides the second procedure for early resolution: the first procedure is
(c) the parties fail to agree upon the appointment of the third the previous direct discussion between the Representatives of the parties.
member (to act as chairman) within 28 days of the Effective In order to maximise the DAB's chances of success in avoiding arbitration,
Date, or its member(s) must be suitably qualified, impartial, and accepted and
(d) the parties fail to agree upon the appointment of a replacement trusted by both parties. Therefore, although the Employer usually prepares
member of the Dispute Adjudication Board within 28 days of the the tender documents and will therefore prescribe the number of
(late on which a member of the Dispute Adjudication Board members, it is essential that the constitution of the DAB (including its
declines to act or is unable to act as a result of death, disability, members, Terms and Rules) are mutually agreed upon by the parties, and
resignation or termination of appointment, not imposed by either party. Although it is desirable to agree the DAB
before the Contract becomes effective, circumstances may sometimes
then the person or administration named in the Appendix to the
prevent this, with pre-contract discussions concentrating on the Works.
Tender shall after due consultation with the parties, nominate such
member of the Dispute Adjudication Board, and such nomination The Sub-Clause anticipates that the one-person DAB, or the third member
shall be final and conclusive. (to act as chairman) of a three-person DAB, is mutually agreed, and that
the first two members of a three-person DAB are each nominated by one 20.4
party and approved by the other. For the chairman/third-member, this Procedure for Obtaining Dispute Adjudication Board's Decision
method is considered preferable to the procedure by which the two
If a dispute arises between the Employer- and the Contractor in
persons choose their chairman, but the Sub-Clause does not prevent the
connection with, or arising out of the Contract or the execution of
parties adopting the latter procedure. the Works, including any dispute as to any opinion, instruction,
For the one-person DAB or chairman to be mutually agreed, the Employer determination, certification or valuation of the Employer's
(or the tenderer) could provide the names and curriculum vitae of suitable Representative, the dispute shall initially be referred in writing to the
persons in a Schedule, for the tenderer (or Employer) to select. Alternates Dispute Adjudication Board for its decision, with a copy to the other
may be required in case some subsequently decline the appointment, party. Such re reference shall state that it is made under this Sub-
assuming that they have not previously indicated a willingness to accept; Clause. The parties shall promptly make available to the Dispute
there may be a reluctance to choose names from a list of people who have Adjudication Board all such information, access to the Site, and
already been contacted by the other party. appropriate facilities, as the Dispute Adjudication Board may require
for the purposes of rendering its decision. No later than the fifty-
For the first two members of a three-person DAB, each party is entitled to sixth day, after the day on which it received such reference, the
nominate a person for the approval of the other party. These members
Dispute Adjudication Board, acting as a panel of expert(s) and not

must not be regarded, and must not regard themselves, as as arbitrator(s), shall give notice of its decision to the parties. Such
representatives or advocates of their nominating party, although they may notice shall include reasons and shall state that it is given under this
be of similar nationality as that party and/or involved in similar business Sub-Clause.
activities. The Employer (or the tenderer) could provide the name and
curriculum vitae of their proposal for this member, in a Schedule, for the Unless the Contract has already been repudiated or terminated, the
tenderer (or Employer) to approve. Contractor shall, in every case, continue to proceed with the Works
with all due diligence, and the Contractor and the Employer shall
In respect of any members of the DAB who are not agreed and named in give effect forthwith to every decision of the Dispute Adjudication
the Contract, the above procedures can continue in an endeavour to reach Board, unless and until the same shall be revised, as hereinafter
agreement. However, these discussions cannot continue indefinitely, so provided, in an amicable settlement or an arbitral award.
the Sub-Clause concludes by empowering a nominating authority (a
person or administration) to complete the nomination of the DAB. The If either party, is dissatisfied with the Dispute Adjudication Board's
nominating authority must be named in the Appendix to Tender, after decision, then either party, on or before the twenty-eighth day
ascertaining that it will be willing and able to perform the role at the after the day on which it received notice of such decision, may
appropriate time. notify, the other party of its dissatisfaction. If the Dispute
Adjudication Board fails to give notice of its decision on or before
In the example Appendix, reproduced at the end of this Guide, the the fifty-sixth day after the day on which it received the reference,
President of FIDIC is suggested for this nominating authority, with power to then either party, on or before the twenty-eighth day after the
delegate. FIDIC does not have the facilities to administer or support the day on which the said period of fifty-six days has expired, may
DAB's procedures in any other way. notify the other party of its dissatisfaction. In either event, such
notice of dissatisfaction shall state that it is given under this Sub-
The terms of appointment of the DAB should be agreed and signed as
Clause, such notice shall set out the matters in dispute and the
soon as possible after the member(s) have agreed to be appointed. The
reason(s) for dissatisfaction and, subject to Sub-Clauses 20.7
second paragraph of this Sub-Clause 20.3 requires the DAB's terms:
and 20.8, no arbitration in respect of such dispute may be
(a) to incorporate the Model Terms published by FIDIC, which are commenced unless such notice is given.
printed in this Guide after the comments on Clause 20, and
If the Dispute Adjudication Board has given notice of its decision as
(b) to include certain essential requirements and undertakings, all of to a matter in dispute to the Employer and the Contractor and no
which are contained in FIDIC's Model Terms. notice of dissatisfaction has been given by either party on or before
the twenty-eighth day after the day on which the pat-ties received In this type of situation, the Employer may prevent the DAB deciding what
the Dispute Adjudication Board's decision, then the Dispute the Contractor is to provide, by insisting on the Contractor's compliance
Adjudication Board's decision shall become final and binding upon with the instruction (under Sub-Clause 3.4) and thus insisting on the
the Employer and the Contractor. completed Works complying with the Employer's actual achievable
requirements. The matters in dispute would then be the interpretation of
This Sub-Clause sets out the procedure for obtaining the decision of the
the ambiguous or imprecise provision in the Employer's Requirements,
Dispute Adjudication Board ("DAB") on any matter in dispute. However,
and whether the clarification instruction was a Variation: the parties would
the parties should not have disregarded the possibility of jointly seeking an
be seeking the DAB's decision as to time and money only. In most cases,
opinion from the DAB on any matter relevant to the avoidance of a
it is to be expected that neither party would want the DAB to make a
potential dispute. The Model Terms referred to in Sub-Clause 20.3(a)
decision requiring the Contractor to execute Works unacceptable to the
prevent either party consulting the DAB privately, but do not prevent a joint
Employer.
approach, which may settle the matter and avoid a reference under Sub-
Clause 20.4. For example, the validity of a claim under Sub-Clause 4.11 If the matter in dispute is of a technical nature, such as deciding upon the
may depend upon the interpretation of the record of a particular borehole design and the details of the Employer's Works,' the DAB may need
or sample: the parties may find it useful to seek the DAB's interpretation expert advice in order to make their decision. FIDIC's Model Terms do not
prior to the preparation and evaluation of a fully detailed claim. empower the DAB to procure advice from experts. The Model Terms are
an agreement between the two contracting parties and one individual DAB
No matter can be referred to the DAB unless it is in dispute, except (as
member, who may be unwilling to be responsible for paying expert(s). It is
stated above) with the agreement of both parties. No formal notice of
probably preferable for the parties jointly to appoint each expert, on an
dispute is required by Sub-Clause 20.4, but the written reference by the
individual basis similar to the appointment of each DAB member.
claimant to the DAB should describe the situation and set out the
principles, including what the claimant wishes the decision to be. A copy of In the event of expert(s) being appointed, their role would be to advise the
this written reference must be passed by the claimant to the other party DAB, and not to join the DAB in making its decision.
(the respondent), so that the latter can respond by making its written
FIDIC's Model Terms, referred to in Sub-Clause 20.3(a), encourage the
submission to the DAB.
inclusion, in the terms for the DAB, of procedural arrangements for the
Sometimes, it may be difficult to ascertain whether a dispute has in fact DAB's deliberations. Sub-Clause 20.4 provides no requirements, but
arisen, usually because discussions are continuing and one party has not natural justice would necessitate each party being given similar
yet reached a definite position in disagreement with that of the other party. opportunities to present its case and respond to the other party's
However, even in these situations, there must come a time when the assertions.
claimant can fairly conclude that agreement cannot be reached.
The DAB is then required to give notice of its decision, including reasons.
The first sentence of Sub-Clause 20.4 provides little constraint on the type As with those of an arbitrator, the DAB's reasons should set out the matter
of dispute which can be referred to the DAB. Notwithstanding Sub-Clause in dispute, the DAB's opinions on the principles and the basis for the
3.4, the Contractor can dispute an instruction of the Employer's decision. Reasons are an essential part of the decision: properly written,
Representative, whilst complying with it. For example, an instruction may they may persuade both parties that the DAB has fully studied all relevant
have been issued under Sub-Clause 1.6, and/or in clarification of an matters and reached a similar conclusion as that which might be expected
ambiguous or imprecise provision in the Employer's Requirements; the of arbitrator(s).
Contractor may be reluctant to comply, if he knows that the Employer
The better the reasons, the greater is the likelihood of acceptance by the
seems reluctant to acknowledge the financial consequences of his
parties. In the event that a party eventually decides to reject the DAB's
Representative's instruction. It is therefore possible to envisage a situation
decision, a formal "notice of dissatisfaction" is to be given within four
where the reference to the DAB gives it the power to decide upon the
weeks of receiving the decision. The notice establishes the notifying
design and the details of the Works which the Contract requires the
party’s right to commence arbitration at any time after a further eight
Contractor to provide.
weeks. There is no specified period within which arbitration must be
commenced, because it was felt that the claimant may prefer to defer the admissions will not prejudice the case which may eventually have to be
pursuing the claim whilst attempting to resolve the final account. However, presented in arbitration.
if the claimant seems to have discontinued procedures in support of its
20.6
claim, the applicable law may invalidate the claim due to non-pursuance
Arbitration
(sometimes referred to as want of prosecution).
Any dispute in respect of which:
20.5
Amicable Settlement (a) the decision, if any, of the Dispute Adjudication Board has not
become final and binding pursuant to Sub-Clause 20.4, and
Where notice of dissatisfaction has been given under Sub-Clause
20.4, the parties shall attempt to settle such dispute amicably (b) amicable settlement has not been reached,
before the commencement of arbitration. Provided that unless the
shall be finally decided by international arbitration. The arbitration
parties agree otherwise, arbitration may be commenced on or after
rules under which the arbitration is conducted, the institution to
the fifty-sixth day after the day on which notice of dissatisfaction
nominate the arbitrator(s) or to administer such rules (unless named
was given, even of no attempt at amicable settlement has been
therein), the number of arbitrators, and the language and place of
made.
such arbitration shall be as set out in the Appendix- to Tender. The

During the first eight weeks after the notice of dissatisfaction, and by arbitrator(s) shall have full power to open lip, review and revise any
agreement thereafter, the parties should attempt amicable settlement. No decision of the Dispute Adjudication Board.
method is prescribed in the Sub-Clause, in order that the parties have the
Neither party shall be limited, in the proceedings before such
greatest flexibility in the choice of procedure. Alternatives include direct arbitrator(s), to the evidence or arguments previously put before the
negotiation, mediation, conciliation and other forms of Alternative Dispute Dispute Adjudication Board to obtain its decision.
Resolution: except that a formal review board is probably inappropriate,
being too similar to the Dispute Adjudication Board. The latter may have Arbitration may be commenced prior to or after completion of the
suggestions for the approach which the parties might wish to consider for Works. The obligations of the parties and the Dispute Adjudication
amicable settlement, but should not themselves be involved in amicable Board shall not be altered b reason of' the arbitration being
settlement procedures until their appointment as a Dispute Adjudication conducted during the progress of the Works.
Board has expired. Compared to litigation, arbitration is a private procedure in which a sole
FIDIC maintains a list of qualified persons from which the parties can seek arbitrator, or panel of three arbitrators, receives written and/or oral
to agree the appointment of mediator(s), but is not prepared to nominate submissions from the parties, usually with a private hearing, and delivers
mediator(s) in the event of disagreement. FIDIC does not have the facilities an award which is intended to be enforceable by due legal process. The
to administer or support amicable settlement in any way. parties will wish to be able to choose appropriately qualified arbitrators,
convenient dates and places for the hearings, and other matters. The 1958
Although the first sentence of the Sub-Clause imposes an obligation to New York "Convention on the Recognition and Enforcement of Foreign
attempt amicable settlement, the second sentence specifies that, if a party Arbitral Awards" may make the award easier to enforce in some countries,
falls to make any attempt, the other party cannot insist on it. The apparent particularly if the award has been certified by a recognised arbitral
contradiction is unavoidable, because of the impossibility of providing any institution: for example, the International Chamber of Commerce ("ICC").
meaningful method of imposing a requirement for the parties to reach a
consensual agreement of their differences. The arbitration may be administered by an arbitral institution, many of
which (including ICC) have their own rules, but administration is not
It is in the best interests of both parties that they attempt amicable essential. As an alternative to the rules published by arbitral institutions,
settlement, and that these procedures are not made more difficult by arbitration may be conducted under the arbitration rules issued by
imposed conditions or by lack of confidentiality. In many countries, the law UNCITRAL, the United Nations Commission on International Trade Law.
would recognise that the parties might be prepared to make admissions Arbitrations under UNCITRAL rules may be administered by ICC or another
during these procedures, in an endeavour to reach a settlement, provided
arbitral institution, or they may be ad hoc, not administered except by the 20.7
arbitrators; in either case, the arbitration may be subject to the degree of Failure to Comply with Dispute Adjudication Board's Decision
court supervision prescribed by law. If ad hoc non-administered arbitration
Where neither party, has given notice of dissatisfaction within the
is intended, the Contract should provide a workable mechanism for
period stated in Sub-Clause 20.4 and the Dispute Adjudication
nominating the arbitrator(s) in the event that the parties cannot agree on Board's related decision, of any, has become final and binding,
the appointment, unless the applicable law provides a satisfactory either party may, if the other party fails to comply with such
mechanism. decision, and without prejudice to any other rights may, have, refer
It is important that the arbitration rules should be specified in the Appendix the failure itself to arbitration under Sub-Clause 20.6. The provisions
to Tender. If these rules define the institution which will administer them, or of Sub-Clauses 20.4 and 20.5 shall not apply, to any, such
which will nominate the arbitrator(s) but take no other part in the If the DAB makes a decision and it has become binding, both parties must
proceedings, it is not essential for an institution to be named in the give effect to it. If a party falls to do so, the other party may refer this failure
Appendix to Tender. However, if the institution (to administer or only to to arbitration, without having to request a DAB decision or to attempt
nominate) is not defined in the rules, it must be named in the Appendix to amicable settlement. Alternatively, that other party may prefer to seek
Tender, after ascertaining that the institution will be willing and able to do enforcement through due legal process. Unless allowed by law, neither
so at the appropriate time. The applicable law might not enforce this Sub- party can challenge the DAB's decision after it has become binding under
Clause's requirement for arbitration in the event that it becomes the Contract.
unworkable by reason of the named institution being unable or unwilling to
carry out the performance stipulated in the Contract. 20.8
Expiry of Dispute Adjudication Board's Appointment
FIDIC maintains a list of qualified persons from which the parties can seek
to agree the appointment of the arbitrator(s), but is not prepared to When the appointment of the Dispute Adjudication Board and of
nominate arbitrator(s) in the event of disagreement. FIDIC does not have any replacement has expired, any such dispute referred to in Sub-
the facilities to administer or support the arbitration in any way, and should Clause 20.4 shall be finally settled by, arbitration pursuant to Sub-
not be mentioned in the Appendix to Tender (except as shown in the Clause 20.6. The provisions of Sub-Clauses 20.4 and 20.5 shall not
example Appendix, in respect of Sub-Clause 20.3). apply, to any such reference.
If the arbitration is conducted during the progress of the Works, the parties The appointment of the Dispute Adjudication Board may have expired
and the Dispute Adjudication Board are required to continue their other when the discharge referred to in Sub-Clause 13.12 became effective.
activities: their obligations are not affected. Alternatively, the parties may have mutually agreed the expiry of the DAB's
appointment. If a dispute arises thereafter, either party can initiate
Sub-Clause 20.6 does not provide for multi-party arbitration, to deal with arbitration immediately, without having to reconvene a DAB for a decision,
the possibility of similar disputes between Employer-Contractor and and without having to attempt amicable settlement. However, the
Contractor- Subcontractor. If multi-party arbitration is to be anticipated in advantages of amicable settlement may encourage the parties to attempt
the Contract, it is advisable for the Contract to specify suitable rules, which it, by mutual agreement.
are acceptable to the Employer, Contractor and Subcontractor. In order to
achieve the Subcontractor's acceptance of these rules before the parties
enter into the Contract, it would have been necessary for him to have
previously been selected and been given the opportunity to participate in
the choice of rules: this procedure might only be possible for major
subcontracts or where the Subcontractor is a member firm of a joint
venture Contractor. If this procedure was impossible, arbitration rules for
the particular subcontract might have to be imposed, under the terms of
the subcontract, upon the (possibly reluctant) Subcontractor.

CONDITIONS OF CONTRACT FOR DESIGN-BUILD AND TURNKEY of the Parties and shall be under a continuing duty to disclose in
writing to each of them and to the other members of the Board any
FIDIC Model Terms of Appointment for a Dispute Adjudication Board fact or circumstance which might be such as to call into question
TERMS OF APPOINTMENT FOR A BOARD OF THREE MEMBERS(1) his impartiality or independence.
THESE TERMS OF APPOINTMENT OF A BOARD MEMBER ARE MADE BETWEEN: Without prejudice to the generality of the foregoing the Board Member
(1) [name of Employer] of [address of Employer] (hereinafter called "the (a) shall have no interest financial or otherwise in either of the Parties or
Employer") the Employer's Representative as described in the Contract, or
(2) [name of Contractor] of [address of Contractor] (hereinafter called financial interest in the Contract except for payment for services on
"the Contractor”) the Board.,
(3) [name of Board Member] of [address of Board Member] (hereinafter (b) shall not previously have been employed as a consultant or
called "the Board Member") otherwise by either of the Parties or the Employer's Representative
except in those circumstances which have been disclosed in writing
WHEREAS to the Parties prior to this appointment;
A. The Employer and the Contractor (hereinafter jointly referred to as (c) shall have disclosed in writing to the Parties and to the other
“the Parties") have on the [ ]day of 199[ ] entered into a Contract members of the Board prior to this appointment any professional or
(hereinafter called "the Contract") for the execution of (hereinafter personal relationships with any director, officer or employee of the
called "the Project"). Parties or the Employer's Representative, and any prior involvement
B. By Sub-Clause 20.3 of the Conditions of Contract (hereinafter called in the Project;
“the Conditions") provision is made for the constitution of a Dispute (d) shall not while a Board Member be employed as a consultant or
Adjudication Board (hereinafter called "the Board") which shall otherwise by either of the Parties or the Employer's Representative
comprise three suitably qualified persons as stated in the Appendix without the prior written consent of the Parties and the other
to Tender. members of the Board;
C. The Board Member has agreed to serve as [one of the members of] (e) shall not give advice to either of the Parties or to the Employer's
[chairman of] the Board on the terms set out herein. Representative concerning the conduct of the Project other than in
accordance with the Procedural Rules annexed hereto as Appendix
NOW IT IS HEREBY AGREED as follows: A ("the Rules");
1. The Board Member (f) shall not while a Board Member [unless the Parties shall otherwise
(1) hereby accepts this appointment to the Board which is a agree in writing] enter into discussions or make any agreement with
personal appointment and agrees to be bound by these either of the Parties or the Employer's Representative regarding
Terms of Appointment and Sub-Clauses 20.3 and 20.4 of the employment by any of them whether as a consultant or otherwise
Conditions as if they were set out herein; after ceasing to be a Board Member.
(2) shall be entitled notwithstanding such acceptance to resign this 4. The Board Member shall
appointment on giving reasonable notice to the Parties. (a) be experienced in the type of work involved in the Project and
2. These Terms of Appointment when executed by the Parties and the the interpretation of the contract documents and shall be
fluent in the language of the Contract;
Board Member shall take effect when the Parties and the last of the
three members of the Board have executed terms of appointment. (b) ensure his availability for all site visits and hearings as are
3. The Board Member shall be and remain impartial and independent necessary and shall observe the provisions of the Rules;

(c) become conversant with the Contract and the progress of expiry of the Contract Period as defined in the Conditions the
the Project by studying all documents received which shall be Board Member shall no longer receive a monthly retainer fee];
maintained in a current working file;
(b) a daily fee of [ 1 which shall be considered as payment in full for:
(d) treat the details of the Contract and all activities and hearings
i. each day or part of a day up to a maximum of two
of the Board as private and confidential and shall not publish
days travel time in each direction for the journey
or disclose the same without the prior written consent of the
between the Board Member's home and the site or
Parties;
other location of a Board meeting;
(e) not assign delegate or subcontract any of the tasks under
ii. each working day on site visits, hearings or Board
these Terms of Appointment or the Rules~':.
meetings.,
(f) be available to give evidence and opinions in conjunction with
iii. each day spent reading the Parties' submissions in
other members of the Board on any matter relevant to the
preparation for a hearing.
Project not being a dispute when requested so to do by the
Parties. (c) cost of telephone calls, courier charges, faxes and telexes
incurred in connection with his duties; all reasonable and

5. Neither the Employer, the Contractor or their respective
necessary travel expenses including [less than] first class air
Representatives shall seek advice from or consultation with the
fare, subsistence and other direct travel expenses. These
Board Member regarding the Project otherwise than in the
costs shall be reimbursed in the same currency as that in
normal course of the Board's activities under the Contract and
which fees are payable. Receipts shall be required for all
the Rules. The only exception to this prohibition shall be where
expenses in excess of percent of the daily fee referred to in
the Parties jointly agree to do so and the other Board Members
Sub-Clause (b) above;
also agree.
(d) any taxes properly levied in the country of the site on
6. The Board Member will be paid as follows (3):
payments made to the Board Member (unless a national or
(a) a retainer fee of [ ] per calendar month, which shall be permanent resident of the country of the site) pursuant to this
considered as payment in full for: Clause 6. Such reimbursement will be in the same currency
as that in which the fees are payable.
i. being available on 28 days' notice for all site visits,
hearings and Board meetings; The retainer and fees shall remain fixed for the [initial] period of
tenure of the Board Member [of twelve months]. [Thereafter they
ii. becoming conversant with all Project developments
shall be adjusted by agreement between the Parties and the Board
and maintaining relevant files;
Member at each anniversary of the execution of these Terms of
iii. all office and overhead expenses such as secretarial Appointment].
services, photocopying and office supplies incurred in
Payments to the Board Member shall be shared equally by the
connection with his duties;
Employer and the Contractor. The Board Member shall submit
iv. all services performed hereunder except those referred invoices for payment of the monthly retainer quarterly in advance.
to in Sub-Clause (c) below. Invoices for daily fees and expenses shall be submitted following the
conclusion of a site visit or hearing. All invoices shall be
Beginning with the month following that in which the Taking
accompanied by a brief description of activities performed during
Over Certificate referred to in Clause 10 of the Conditions (or
the relevant period and addressed as to 50 percent thereof to the
if there is more than one, the one last issued) has been
Contractor and 50 percent thereof to the Employer. The Parties will
issued, the Board Member shall receive [only one third of the
discharge invoices addressed to them within [28] calendar days
monthly retainer fee]. [Beginning with the next month after
after receipt.
7. The Parties may jointly terminate the Board Member's appointment Witness: ..................................................................................................
hereunder by reasonable notice in writing. Such termination shall be
Name:.....................................................................................................
without prejudice to any accrued rights of either of the Parties or the
Board Member. Address: .................................................................................................
8. The Parties undertake to each other and to the Board Member that Date:.......................................................................................................
the Board Member shall in no circumstances:
SIGNED by
(a) be called as a witness to give evidence concerning any
the Board Member in the presence of:
dispute before an arbitrator appointed under the Conditions;
Witness: ..................................................................................................
(b) be liable for any claims for breach of duty. breach of contract
or professional negligence arising out of this appointment Name: ....................................................................................................
other than for the consequences of fraud or dishonesty.
Address: .................................................................................................
The Parties hereby jointly and severally indemnify the Board Member
Date: ......................................................................................................
against all or any such claims.
9. If the Board Member shall breach any of the provisions of Clause 3

he shall not be entitled to any fees or expenses hereunder and shall APPENDIX A PROCEDURAL RULES OF THE DISPUTE ADJUDICATION BOARD
reimburse each of the Employer and the Contractor for any fees and (OF THREE MEMBERS)
expenses properly paid to him and to any other Board Member if as 1. The Board shall visit the site at regular intervals [and/or at times of
a consequence of such breach any proceedings or decisions of the critical construction events] at the request of either the Employer or
Board are rendered void or ineffective. the Contractor, and in any event not less than [three] times in any
10. The law of these Terms of Appointment shall be the law of Member [ ] twelve month period.
11. Any dispute or claim arising out of or in connection with these 2. The timing of and agendas for site visits shall be as agreed jointly by
Terms of Appointment or the breach, termination or invalidity the Board the Employer and the Contractor or in the absence of
thereof, shall be settled by arbitration in accordance with the Rules agreement shall be decided by the Board.
of the International Chamber of Commerce in force at the date 3. Site visits are to enable the Board to become acquainted with the
hereof. The Parties and the Board Member agree to comply with the progress of the Project and of any actual or potential problems or
awards resulting from arbitration and waive their rights to any form claims.
of appeal insofar as such waiver can validly be made.
Site visits shall be attended by the Employer, the Contractor and the
SIGNED by. .................................................................................. for and Employer's Representative and shall be coordinated by the
on behalf of the Employer in the presence of Employer in cooperation with the Contractor. The Employer shall
ensure the provision of appropriate conference facilities and
Witness: .................................................................................................. secretarial and copying services.
Name: ..................................................................................................... At the conclusion of each site visit and before leaving the site the
Address:.................................................................................................. Board shall prepare a report on its activities during the visit and shall
send copies to those parties who attended.
Date:.......................................................................................................
4. The Employer and the Contractor shall promptly provide the Board
SIGNED by. .................................................................................. for and with sufficient copies of any documentation and information relevant
on behalf of the Contractor in the presence of to the Project that it may request.
5. If any dispute is referred to the Board in accordance with Sub- TERMS OF APPOINTMENT FOR A BOARD OF ONE MEMBER(1)
Clause 20.4 of the Conditions the Board shall proceed as described
THESE TERMS OF APPOINTMENT OF THE BOARD MEMBER ARE MADE BETWEEN:
therein. The Board may in its discretion decide to conduct a hearing
on the dispute in which event it will decide on the date and place for (1) [name of Employer] of [address of Employer] (hereinafter called "the
the hearing and may request that written documentation and Employer")
arguments from the Employer and the Contractor be presented to it (2) [name of Contractor] of [address of Contractor] (hereinafter called
prior to or at the hearing. "the Contractor")
The Board shall act as a Board of impartial experts, not arbitrators, (3) [name of Board Member] of [address of Board Member] (hereinafter
and shall have full authority to conduct any hearing as it thinks fit, called "the Board Member")
not being bound by any rules or procedures other than those set
out herein. [Without limiting the foregoing it shall have power to WHEREAS
adopt an inquisitorial procedure, to refuse admission to hearings or A. The Employer and the Contractor (hereinafter jointly referred to as
audience at hearings to any persons other than the Employer the "the Parties") have on the [ ] day of 199[] entered into a Contract
Contractor and their respective Representatives and to proceed in (hereinafter called "the Contract") for the execution of [ ] (hereinafter
the absence of any party who the Board is satisfied received notice called "the Project").
of the hearing].
B. By Sub-Clause 20.3 of the Conditions of Contract (hereinafter called
The Board shall not express any opinions during any hearing "the Conditions") provision is made for the constitution of a Dispute
concerning the merits of any arguments advanced by the parties. Adjudication Board (hereinafter called "the Board") which shall
After a hearing is concluded the Board shall convene in private to comprise one suitably qualified person as stated in the Appendix to
formulate its decision. Tender.
[If a member falls to attend a meeting or hearing, or to fulfil any C. The Board Member has agreed to serve as the sole member of the
required function, the other two members may nevertheless Board on the terms set out herein.
proceed and make decisions unless the absent member is the
chairman and instructs the other two members not to proceed, or NOW IT IS HEREBY AGREED as follows:
the Parties otherwise agree].
1 The Board Member
6. The Board shall submit its decision in writing to the Employer and
(1) hereby accepts this appointment to the Board which is a
the Contractor in accordance with Sub-Clause 20.4 of the
personal appointment and agrees to be bound by these
Conditions or as otherwise agreed by the Employer and the
Terms of Appointment and Sub-Clauses 20.3 and 20.4 of the
Contractor in writing.
Conditions as if they were set out herein;
The Board shall endeavour to reach decisions unanimously, but if
(2) shall be entitled notwithstanding such acceptance to resign
this is impossible decisions shall be by a majority and the minority this appointment on giving reasonable notice to the Parties.
member shall prepare a written report for submission to the
Employer, the Employer's Representative and the Contractor. 2. These Terms of Appointment when executed by the Parties and the
Board Member shall take effect when the Parties and the Board
7. All communications between either of the Parties and a Board
Member shall have executed terms of appointment.
Member and all hearings shall be in the [ ] language. All such
communications shall be copied to the other Party and to other 3. The Board Member shall be and remain impartial and independent
members of the Board and shall comply with the provisions of Sub- of the Parties and shall be under a continuing duty to disclose in
Clause 1.8 of the Conditions. writing to each of them any fact or circumstance which might be
such as to call into question his impartiality or independence.

Without prejudice to the generality of the foregoing the Board Member or disclose the same without the prior written consent of the
Parties;
(a) shall have no interest financial or otherwise in either of the
Parties or the Employer's Representative as described in the (e) not assign delegate or subcontract any of the tasks under
Contract, or financial interest in the Contract except for these Terms of Appointment or the Rules (2);
payment for services on the Board;
(f) be available to give evidence and opinions on any matter
(b) shall not previously have been employed as a consultant or relevant to the Project not being a dispute when requested so
otherwise by either of the Parties or the Employer's to do by the Parties.
Representative except in those circumstances which have been
5. Neither the Employer, the Contractor or their respective
disclosed in writing to the Parties prior to this appointment;
Representatives shall seek advice from or consultation with the
(c) shall have disclosed in writing to the Parties prior to this Board Member regarding the Project otherwise than in the normal
appointment any professional or personal relationships with any course of the Board's activities under the Contract and the Rules.
director, officer or employee of the Parties or the Employer's The only exception to this prohibition shall be where the Parties
Representative, and any prior involvement in the Project; jointly agree to do so and the other Board Members also agree.
(d) shall not while a Board Member be employed as a consultant or 6. The Board Member will be paid as follows (3):
otherwise by either of the Parties or the Employer's
(a) a retainer fee of [ ] per calendar month, which shall be
Representative without the prior written consent of the Parties;
considered as payment in full for:
(e) shall not give advice to either of the Parties or to the
i. being available on 28 days' notice for all site visits and
Employer's Representative concerning the conduct of the
hearings;
Project other than in accordance with the Procedural Rules
annexed hereto as Appendix A ("the Rules"); ii. becoming conversant with all Project developments
and maintaining relevant files;
(f) shall not while a Board Member [unless the Parties shall
otherwise agree in writing] enter into discussions or make any iii. all office and overhead expenses such as secretarial
agreement with either of the Parties or the Employer's services, photocopying and office supplies incurred in
Representative regarding employment by any of them connection with his duties;
whether as a consultant or otherwise after ceasing to be a
iv. all services performed hereunder except those referred
Board Member.
to in Sub-Clause (c) below.
4. The Board Member shall
Beginning with the month following that in which the
(a) be experienced in the type of work involved in the Project and Taking-Over Certificate referred to in Clause 10 of the
the interpretation of the contract documents and shall be Conditions (or if there is more than one, the one last
fluent in the language of the Contract; issued) has been issued, the Board Member shall
receive [only one third of the monthly retainer fee].
(b) ensure his availability for all site visits and hearings and shall
[Beginning with the next month after expiry of the
observe the provisions of the Rules;
Contract Period as defined in the Conditions the Board
(c) become conversant with the Contract and the progress of Member shall no longer receive a monthly retainer fee];
the Project by studying all documents received which shall be
(b) daily fee of [ ] which shall be considered as payment in full for:
maintained in a current working file;
(d) treat the details of the Contract and all activities and hearings
of the Board as private and confidential and shall not publish i. each day or part of a day up to a maximum of two
days travel time in each direction for the journey the Board Member shall in no circumstances:
between the Board Member's home and the site or
(a) be called as a witness to give evidence concerning any
other location of Board meeting;
dispute before an arbitrator appointed under the Conditions;
ii. each working day on site visits or hearings or Board
(b) be liable for any claims for breach of duty, breach of contract
meetings;
or professional negligence arising out of this appointment
iii. each day spent reading the Parties' submissions in other than for the consequences of fraud or dishonesty.
preparation for a hearing;
The Parties hereby jointly and severally indemnify the Board Member
(c) cost of telephone calls, courier charges, faxes and telexes against all or any such claims.
incurred in connection with his duties; all reasonable and
9. If the Board Member shall breach any of the provisions of Clause 3
necessary travel expenses including [less than] first class air
he shall not be entitled to any fees or expenses hereunder and shall
fare, subsistence and other direct travel expenses. These
reimburse each of the Employer and the Contractor for any fees and
costs shall be reimbursed in the same currency as that in
expenses previously paid to him if as a consequence of such
which fees are payable. Receipts shall be required for all
breach any proceedings or decisions of the Board are rendered void
expenses in excess of [ 1 percent of the daily fee referred to

or ineffective.
in Sub-Clause (b) above;
10. The law of these Terms of Appointment shall be the law of [ ].
(d) any taxes properly levied in the country of the site on
payments made to the Board Member (unless a national or 11. Any dispute or claim arising out of or in connection with these
permanent resident of the country of the site) pursuant to this Terms of Appointment or the breach, termination or invalidity
Clause 6. Such reimbursement will be in the same currency thereof, shall be settled by arbitration in accordance with the
as that in which the fees are payable. Rules of the International Chamber of Commerce in force at the
date hereof. The Parties and the Board Member agree to comply
The retainer and fees shall remain fixed for the [initial] period of
with the awards resulting from arbitration and waive their rights to
tenure of the Board Member [of twelve months]. [Thereafter they
any form of appeal insofar as such waiver can validly be made.
shall be adjusted by agreement between the Parties and the Board
Member at each anniversary of the execution of these Terms of
Appointment].
SIGNED by .................................................................................. for and
Payments to the Board Member shall be shared equally by the
on behalf of the Employer in the presence of
Employer and the Contractor. The Board Member shall submit invoices
for payment of the monthly retainer quarterly in advance. Invoices for Witness: ..................................................................................................
daily fees and expenses shall be submitted following the conclusion of
Name:.....................................................................................................
a site visit or hearing. All invoices shall be accompanied by a brief
description of activities performed during the relevant period and Address: .................................................................................................
addressed as to 50 percent thereof to the Contractor and 50 percent
Date:.......................................................................................................
thereof to the Employer. The Parties will discharge invoices addressed
to them within 1-28] calendar days after receipt. SIGNED by .................................................................................. for and
7. The Parties may jointly terminate the Board Member's on behalf of the Contractor in the presence of
appointment hereunder by reasonable notice in writing. Such
termination shall be without prejudice to any accrued rights of
either of the Parties or the Board Member. Witness: ..................................................................................................
8. The Parties undertake to each other and to the Board Member that Name: ....................................................................................................
Address:.................................................................................................. on the dispute in which event it will decide on the date and place for
the hearing and may request that written documentation and
Date:.......................................................................................................
arguments from the Employer and the Contractor be presented to it
SIGNED by prior to or at the hearing.
the Board Member in the presence of: The Board shall act as an impartial expert, not as an arbitrator, and
shall have full authority to conduct any hearing as it thinks fit, not
Witness: ..................................................................................................
being bound by any rules or procedures other than those set out
Name: ..................................................................................................... herein. [Without limiting the foregoing it shall have power to adopt
an inquisitorial procedure, to refuse admission to hearings or
Address:..................................................................................................
audience at hearings to any persons other than the Employer the
Date:....................................................................................................... Contractor and their respective Representatives and to proceed in
the absence of any party who the Board is satisfied received notice
of the hearing].
APPENDIX A PROCEDURAL RULES OF THE DISPUTE
The Board shall not express any opinions during any hearing
ADJUDICATION BOARD (OF ONE MEMBER)

concerning the merits of any arguments advanced by the parties.
1. The Board shall visit the site at regular intervals [and/or at times of After a hearing is concluded the Board shall formulate its decision.
critical construction events] at the request of either the Employer or
6. The Board shall submit its decision in writing to the Employer and
the Contractor, and in any event not less than [three] times in any
the Contractor in accordance with Sub-Clause 20.4 of the
twelve month period.
Conditions or as otherwise agreed by the Employer and the
2. The timing of and agendas for site visits shall be as agreed jointly by Contractor in writing.
the Board the Employer and the Contractor or in the absence of
7. All communications between either of the Parties and the Board
agreement shall be decided by the Board.
Member and all hearings shall be in the [ ] language. All such
3. Site visits are to enable the Board to become acquainted with the communications shall be copied to the other Party and shall comply
progress of the Project and of any actual or potential problems or with the provisions of Sub-Clause 1.8 of the Conditions.
claims.
NOTES
Site visits shall be attended by the Employer, the Contractor and the (1) Various clauses of these Terms and Rules contain words in brackets. The
Employer's Representative and shall be coordinated by the signatories should consider whether or not these are appropriate in the
Employer in cooperation with the Contractor. The Employer shall circumstances of their Project or require amendment.
ensure the provision of appropriate conference facilities and
(2) Circumstances may arise when the Board considers it needs specialist advice in
secretarial and copying services.
order to fulfil its duties to the Parties. These Terms do not empower the Board to
At the conclusion of each site visit and before leaving the site the take such advice at the Parties' expense. It is recommended that in such a
Board shall prepare a report on its activities during the visit and shall situation the Board invite the Parties to agree to secure such advice at their own
send copies to those parties who attended. expense if they accept it is necessary or desirable.
(3) It is preferable to agree identical fees for the three Board Members, with the
4. The Employer and the Contractor shall promptly provide the Board
possible exception of the chairman.
with sufficient copies of any documentation and information relevant
to the Project that it may request.
5. If any dispute is referred to the Board in accordance with Sub-
Clause 20.4 of the Conditions the Board shall proceed as described
therein. The Board may in its discretion decide to conduct a hearing

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FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS

GUIDE TO THE USE OF FIDIC

CONDITIONS OF CONTRACT FOR

© Copyright FIDIC 1996

Fédération Internationale des Ingénieurs-Conseils (FIDIC) has published

Recognising that some Employers wanted to procure the construction of

This Guide was prepared by Peter L Booen and reviewed by K B (Tony)

legal review. 4 The Contractor 47

With other notes on documents for Consultancy Agreements) 1991

The Red Book is the "Conditions of Contract for Works of Civil

including the provision of facilities under turnkey contracts.

Schedule of Dispute Adjudication Board membership 1.1.2 Persons

Completion or one of the Tests after Completion. For example, if the

including the supply-only items (if any) which are to be

(f) The Conditions of Contract, Part I;

Contractor receives in respect of the documents he provides. The qualification

The Employer's Representative does not act as Employer: he cannot

Representative. Under Sub-Clause 3.1, any proposal, inspection, examination,

consequences of compliance and awaiting confirmation of the instruction,

(c) the workmen of any legally constituted public authorities

wish to consider whether it would be advisable to take any responsibility in

criteria might, for example, be necessary for structures where the

recoverable from the Contractor by the Employer, and may be

entitlement to extension, although early agreement on the principles 8.5

complete the Works, or from any other of his duties, obligations or

Representative shall be at the risk and cost of the Contractor. These

Typically, the Tests on Completion are the events which immediately

Contract Period: the Employer's Representative must notify the Contractor

© FIDIC 111 © FIDIC 112

therefore remain in force. At the time when the Performance Certificate is

then become due.

for payment to the Contractor of the Works are taken over in

and the production of Construction Documents, his requirements may

place without delay and at his cost.

used by the Contractor,

consider whether these insurances should be effected by the Contractor 18.3

The penultimate paragraph entitles the Employer to effect insurance if he

items to the Contractor's works in his country (or to any other

(e) the reasonable Cost of repatriation of the Contractor's staff

endeavours to mitigate the losses to the Employer which a claim

© FIDIC 163 © FIDIC 164

Dispute Adjudication Board, acting as a panel of expert(s) and not

such arbitration shall be as set out in the Appendix- to Tender. The

© FIDIC 173 © FIDIC 174

© FIDIC 175 © FIDIC 176

incurred in connection with his duties; all reasonable and

9. If the Board Member shall breach any of the provisions of Clause 3

© FIDIC 181 © FIDIC 182

expenses in excess of [ 1 percent of the daily fee referred to

ADJUDICATION BOARD (OF ONE MEMBER)

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