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- Herausgeber: John Wiley & Sons
- Kategorie: Wissenschaft und neue Technologien
- Sprache: Englisch
- Veröffentlichungsjahr: 2020
Provides a clear and comprehensive guide to the 2017 FIDIC contracts--written by a member of the FIDIC Updates Task Group FIDIC contracts are the most widely used engineering standard form contracts internationally but until 2017 the three main forms (the Red, Yellow and Silver Books) had not been amended or updated for nearly two decades, since the first editions were published in 1999. Written by a specialist lawyer who was member of the FIDIC Updates Task Group responsible for writing the new contracts, this book examines in detail the many substantial changes they have introduced. After providing an overview the contracts are examined clause by clause with the aim of showing how each compares and contrasts with the others and how the second editions compare and contrast with the first. The first chapter describes how the Red, Yellow and Silver Books evolved from earlier contract forms and the distinctive characteristics of each, before providing an overview of the updates, including new potential risks for both Employer and Contractor, and then examining, in the second chapter, key general provisions such as the new rules on notices and limitation of liability. Chapter 3 examines the enhanced role of the Engineer in the Red and Yellow Books/Employer's Representative's function in the Silver including the new procedure for determinations as well as the Employer's obligations and contract administration. The Contractor's obligations are considered in chapter 4 while chapter 5 examines his responsibility for design in the Yellow and Silver Books. Chapters 6 to 14 deal respectively with plant, materials and workmanship and staff and labour; time-related provisions in the three contracts including extensions of time, and the Employer's right to suspend the works; testing on and after completion and the Employer's taking over of the works; defects after taking over, acceptance of the works and unfulfilled obligations; measurement (in the Red Book), the Contract Price and payment; the new variations regime and adjustments to the Price; termination and suspension; care of the works and indemnities and Exceptional Events (previously, Force Majeure). An important feature of the new contracts is their increased emphasis on clarity in the claims process and on dispute avoidance. These topics are examined in the final two chapters, 15 and 16, which deal respectively with the new claims and dispute resolution provisions of the 2017 forms. * FIDIC contracts are the most widely used standard forms of contract for international engineering and construction projects * Provides a clear and comprehensive guide to the 2017 FIDIC Red, Yellow and Silver Books * Written by a senior specialist lawyer and member of the FIDIC 2017 Updates Task Group responsible for writing the new contracts * Accessible to those with little or no familiarity with FIDIC contracts The 2017 FIDIC Contracts is an important guide for anyone engaged in international projects, including employers, contractors, engineers, lawyers, suppliers and project financiers/sponsors.
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Table of Contents
Cover
Foreword
Preface
About the Author
1 Overview of the 2017 Contracts
1.1 Introduction
1.2 The Rainbow Suite: The Main Features of the 1999 Red, Yellow and Silver Books
1.3 Contractor Risk in the Silver Book: Two Examples
1.4 New Potential Risks for Contractor and Employer in the 2017 Books
1.5 FIDIC's Guidance for the Preparation of Particular Conditions
1.6 Forms
Notes
2 Key General Provisions
2.1 Definitions
2.2 Notices and Other Communications
2.3 Law and Language
2.4 Priority of Documents
2.5 Errors in the Employer's Requirements/Delayed Drawings and Instructions
2.6 Use of Documents
2.7 Compliance with Laws
2.8 Limitation of Liability
2.9 Contract Termination: Clause 1.16 Red and Yellow Books/1.15 Silver Book
Notes
3 The Employer, the Engineer and Contract Administration
3.1 The Employer
3.2 The Engineer/Employer's Administration
3.3 Agreement or Determination
3.4 Meetings
Notes
4 The Contractor and Fitness for Purpose
4.1 Contractor's General Obligations
4.2 Contractor to Provide Performance Security
4.3 Contractor's Representative
4.4 Subcontractors
4.5 Nominated Subcontractors
4.6 Contractor's Documents: The 2017 Red Book
4.7 Cooperation
4.8 Quality Management and Compliance Verification Systems
4.9 Use of Site Data
4.10 Unforeseeable Difficulties/Physical Conditions
4.11 Other Contractor's Obligations
Notes
5 Design
5.1 Contractor's General Design Obligations
5.2 Contractor's Documents: 2017 Yellow and Silver Books
5.3 Other Design‐related Provisions
Notes
6 Plant, Materials and Workmanship/Staff and Labour
6.1 Staff and Labour
6.2 Plant, Materials and Workmanship
Notes
7 Commencement, Delays and Extensions of Time, and Employer's Suspension of the Works
7.1 Commencement
7.2 Time for Completion
7.3 The Programme
7.4 Advance Warning
7.5 Extensions of Time
7.6 The Specified Causes of Delay to Completion
7.7 Concurrent Causes
7.8 Delay Damages
7.9 Employer's Suspension of the Works
Notes
8 Testing on and After Completion and Employer's Taking Over
8.1 Testing on Completion
8.2 Employer's Taking Over
8.3 Tests After Completion
Notes
9 Defects After Taking Over, Acceptance of the Works and Unfulfilled Obligations
9.1 Contractor's Basic Obligation
9.2 Who Is Responsible for the Cost?
9.3 Extending the DNP
9.4 Other Obligations
9.5 Performance Certificate
9.6 Unfulfilled Obligations
Notes
10 Measurement, the Price and Payment
10.1 Measurement and Valuation: Clause 12 of the 2017 Red Book
10.2 The Contract Price
10.3 Advance Payment
10.4 Plant and Materials Intended for the Works
10.5 The Payment Process
10.6 Cessation of Employer's Liability
Notes
11 Variations and Adjustments to the Contract Price
11.1 Variations
11.2 Value Engineering
11.3 Variation Procedure
11.4 Other Adjustments to the Contract Price
Notes
12 Termination and Suspension
12.1 Employer Termination: For Contractor Default
12.2 Employer's Termination: For Convenience
12.3 Contractor's Right to Suspend
12.4 Contractor's Termination
Notes
13 Care of the Works, Indemnities and Insurance
13.1 Care of the Works
13.2 Indemnities
13.3 Intellectual and Industrial Property Rights
13.4 Insurance
Notes
14 Exceptional Events
14.1 Examples of Exceptional Events
14.2 Notice Requirements
14.3 Duty to Minimise Delay
14.4 Consequences of an Exceptional Event
14.5 Optional Termination
14.6 Release from Performance Under the Applicable Law
Notes
15 Employers' and Contractors' Claims
15.1 The Categories of Claim: Clause 20.1
15.2 Claims for Money and/or Time
15.3 General Requirements: Clause 20.2.7
Notes
16 Dispute Resolution
16.1 The Three‐tier Process in the 1999 Contracts
16.2 The 2017 Contracts
16.3 Appointment of the DAAB
16.4 Failure to Appoint DAAB Members
16.5 Avoidance of Disputes
16.6 Amicable Settlement
16.7 Arbitration
16.8 Failure to Comply with the DAAB's Decision
Notes
Index
End User License Agreement
Guide
Cover
Table of Contents
Begin Reading
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The 2017 Fidic Contracts
The Second Editions of the Red, Yellow and Silver Books
William Godwin QC
Member of the FIDIC 2017 Updates Task Group
Copyright
This edition first published 2020
© 2020 William Godwin QC
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by law. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions.
The right of William Godwin QC to be identified as the author of this work has been asserted in accordance with law.
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Library of Congress Cataloging‐in‐Publication Data
Names: Godwin, William QC, author.
Title: The 2017 FIDIC contracts / William Godwin QC.
Other titles: FIDIC contracts
Description: First edition. | Hoboken : Wiley, 2020. | Includes index.
Identifiers: LCCN 2019035412 (print) | LCCN 2019035413 (ebook) | ISBN
9781119514633 (hardback) | ISBN 9781119514640 (adobe pdf) | ISBN
9781119514657 (epub)
Subjects: LCSH: Construction contracts. | Engineering contracts. |
Architectural contracts. | Contracts (International law) | Standardized
terms of contract.
Classification: LCC K891.B8 G635 2019 (print) | LCC K891.B8 (ebook) | DDC
343.07/8624–dc23
LC record available at https://lccn.loc.gov/2019035412
LC ebook record available at https://lccn.loc.gov/2019035413
Cover Design: Wiley
Cover Image: © ivanastar/iStock/Getty Images Plus
Foreword
Since their publication in 1999 the three FIDIC contract forms or, as also aptly named, Books, have become not just well known and respected in international infrastructure contracting in all its many guises, but a major force for international cooperation and understanding. To those who have seen the free‐for‐all that can result from the absence of accepted norms in infrastructure procurement, FIDIC is a lifeline, more successful in its quiet deliberations than other over‐politicised international bodies but exercising a major and largely unseen influence over the well‐being of international projects which can lead less developed nations towards prosperity or financial ruin. Given the now truly global reach of FIDIC it remains a matter of national pride that the body was founded and modelled on UK practices, that the official and authentic texts remain the versions in the English language and that the now multifarious committees and other bodies of FIDIC retain many of its UK representatives and experts. These include the author of this work who has been closely involved with the new task group charged with writing the second editions of these three major FIDIC publications, still known as the Red, Yellow and Silver Books.
However well regarded, there inevitably comes a time for review and updating to take account of more recent developments in contracting and to build on the substantial experience gained from use of the forms over the intervening years. While the author is a specialist construction lawyer with wide experience of legal issues generated by the forms, the drafting and review bodies also have the inestimable advantage of including many distinguished specialists in other areas covered by the forms, from engineering and management to insurance and finance, and with access to FIDIC experts and commentators from many different jurisdictions and regions. The forms therefore remain a major international and cross‐disciplinary statement of good and accepted practice in this economically vital field.
The new Books will inevitably be the subject of renewed commentary and analysis, particularly in the light of issues and disputes which will arise in as yet unpredictable circumstances. It is notable that the books are now some 50% longer and thus cover in considerably greater detail many provisions, from the extended definitions section to enhanced notice provisions. Whether they will be regarded as over prescriptive and complex remains to be seen but, as pointed out in the introduction to the book, the forms must be usable to parties and individuals whose first language in not English. Thus one of the main aims of the new editions has been to increase clarity and certainty. Another aim has been to promote improved project management and dispute avoidance, important objectives which necessarily result in greater complexity.
This book provides, with the benefit of the author's unrivalled experience, a clear overview and comprehensive guide to each of the 2017 FIDIC Books. For the detailed contract provisions the forms themselves must be read along with the commentary which shows how each Book compares and relates to the others as well as pointing out changes from earlier editions including the 2008 Gold Book, the FIDIC Design‐Build‐Operate form. The book achieves all this with remarkable concision, being somewhat shorter than the three forms themselves and well illustrated with authorities on the earlier editions. No doubt the new forms will generate fresh rounds of court decisions and commentaries but the FIDIC Books will remain at the core of the international infrastructure industry which will continue to benefit from its accumulated experience and guidance.
Professor John Uff CBE QC
Preface
In early 2016 FIDIC asked me if I would be willing to join a new task group to write the second editions of the Red, Yellow and Silver Books. Since the first editions of the three Books were published in 1999 they have become the most widely used engineering standard form contracts internationally, and among the best regarded. It was felt nevertheless that the Books needed to be reviewed and updated to take account of developments in contracting since 1999 and to build on the substantial experience gained from use of the forms over the years. Much work had already been done by the FIDIC Contracts Committee and an earlier task group, but it remained to write the new editions with a view to publication in 2017. As a specialist lawyer I welcomed the opportunity to contribute to the writing of the new contracts and felt honoured to have been asked.
I could not have been in better company. My colleagues on the task group were all highly experienced engineers and FIDIC experts: they were Simon Worley, who became our group leader, Siobhan Fahey, Contracts Committee liaison, John Greenhalgh, Leo Grutters, Aisha Nadar and, assisting throughout as secretary to the group, Shelley Adams. I would like to pay tribute to them all. I would also like to acknowledge with gratitude the close involvement throughout of William Howard, president‐elect of FIDIC and the Executive Committee's primary liaison, and Zoltan Zahonyi, chair of the Contracts Committee.
Our task group reported to the Contracts Committee and we carried out our work under its general direction. At the London Users' Conference in December 2016 a pre‐release version of the Yellow Book was circulated and received extensive comment. This was carefully considered in preparing the eventual second editions of the three Books, along with comments and suggestions received as part of a wider consultation or friendly review by a long list of interested persons and organisations. Each of the Books was subject to a legal review before approval by the Executive Committee prior to eventual publication in December 2017.
The reaction to the new Books has been broadly positive, although they have been said to be too prescriptive and complex. To some extent this criticism was inevitable. One of the main aims of the new editions was to increase clarity and certainty so that the parties and the Engineer or Employer's Representative know exactly what is expected of them and when; another was improved project management and dispute avoidance. Fulfilling these aims was always likely to result in more prescription and complexity, but whether the right balance has been struck will be for users of the contracts to decide.
An important development since publication of the new forms has been the adoption by the World Bank of the 2017 contracts, with complementary special provisions. At the London Users' Conference in December 2018, one year after the new Books were rolled out, the World Bank revealed its intention to move away from using the Multilateral Development Banks version of the Red Book (the ‘Pink Book’) in favour of the 2017 Red Book with special provisions to cover areas of particular concern, such as the environment and social and anti‐corruption matters; the Bank indicated it would do likewise with the 2017 Yellow Book. Subsequently in early 2019 the Bank entered into a licence agreement with FIDIC permitting it to use the 2017 suite with its own conditions of particular application. FIDIC expects to enter into similar agreements with other development banks.
The aim of this book is to provide a clear and comprehensive guide to each of the 2017 FIDIC Books. After providing an overview the contracts will be examined clause by clause with the aim of showing how each Book compares and contrasts with the others and how the second editions compare and contrast with the first editions. Understanding the new contracts depends on seeing how they have developed from the first editions as well as how they relate to each other. There are also important points of intersection with the 2008 Gold Book, the FIDIC Design‐Build‐Operate form.
The first chapter seeks to put the three Books in context by indicating the extent to which they evolved from earlier forms and the distinctive characteristics of each, before providing an overview of the updates, including new potential risks for both Employer and Contractor, and then going on to consider, in the second chapter, key general provisions such as the new rules on notices and limitation of liability. Chapter 3 examines the enhanced role of the Engineer in the Red and Yellow Books/Employer's Representative's function in the Silver including the new procedure for determinations as well as the Employer's obligations and contract administration. The Contractor's obligations are considered in Chapter 4 while Chapter 5 examines his responsibility for design in the Yellow and Silver Books. Chapters 6 to 14 deal respectively with plant, materials and workmanship and staff and labour; time‐related provisions in the three contracts including extensions of time, and the Employer's right to suspend the works; testing on and after completion and the Employer's taking over of the works; defects after taking over, acceptance of the works and unfulfilled obligations; measurement (in the Red Book), the Contract Price and payment; the new variations regime and adjustments to the Price; termination and suspension; care of the works and indemnities and Exceptional Events (previously, Force Majeure). An important feature of the new contracts is their increased emphasis on clarity in the claims process and on dispute avoidance. These topics are examined in the final two chapters, 15 and 16, which deal respectively with the new claims and dispute resolution provisions of the 2017 forms.
I would like finally to express my thanks and appreciation to Dr Paul Sayer at Wiley Blackwell for his encouragement and support, and to Dr Peter Boswell, who so encouraged my involvement with FIDIC and interest in the contracts.
About the Author
William Godwin QC was legal member of the FIDIC Updates Task Group responsible for drafting the 2017 (second) editions of the Red, Yellow and Silver Books. A specialist barrister whose work often involves cross‐border projects, he has extensive experience of acting as counsel in international arbitrations and sits as an arbitrator and adjudicator. He writes and speaks regularly on FIDIC contracts, construction law and arbitration and is the author of International Construction Contracts: A Handbook (Wiley Blackwell 2013).
1Overview of the 2017 Contracts
1.1 Introduction
The second editions of the three main FIDIC construction contracts were formally introduced at the London users' conference in December 2017. The new Red, Yellow and Silver Books had long been anticipated and represented the first update to the three main forms since 1999.
A key aim of the new contracts was to increase clarity and certainty. Users will find several new definitions, which are now in alphabetical order (clause 1.1). ‘Claim’, ‘Dispute’, ‘Notice’ and ‘Programme’, for example, are now defined terms; ‘may’, ‘shall’ and ‘consent’ are also defined, with the particular aim of assisting those whose first language is not English. ‘Particular Conditions’ is now defined to comprise Part A – Contract Data and Part B – Special provisions. ‘Plus reasonable profit’, as used in the 1999 Contracts, often caused difficulty. A new definition, ‘Cost Plus Profit’, now applies, and refers to a percentage for Contractor's profit to be stated in the Contract Data, or in default 5%.
One important procedural change concerns notices in the 2017 contracts. By a new clause 1.3 a notice must be in writing and identify itself as such, among other requirements. Notices are now required in many more situations than previously and, when given, trigger time limits. For example, under a new clause 3.5 in the Yellow and Red Books, or clause 3.4 in the Silver Book, if the Contractor considers that an instruction not stated to be a variation does in fact amount to one he must immediately, and before commencing any related work, give a notice to that effect with reasons. If the Engineer (Red and Yellow Books) or Employer (Silver Book) does not respond to this notice within a defined period by giving another notice confirming, reversing or varying the instruction he will be deemed to have revoked it.
The contract administrator's role in agreeing or determining any claim or other matter under the Contract is also set out in more detail than in the 1999 Books, and in a step‐by‐step fashion with time limits. Clause 3.7 of the 2017 Yellow and Red Books, for example, requires the Engineer first to consult the parties to try to reach agreement; if no agreement is reached within 42 days, or the parties give ‘early notice’ of no agreement, the Engineer must give a notice accordingly and within 42 days (or other agreed time limit) must make a determination. If the Engineer is late then, in the case of a claim, he is deemed to have rejected the claim and for any other matter a dispute is deemed to have arisen which may be referred to the renamed Dispute Avoidance/Adjudication Board (DAAB) for its decision. Similar provisions apply in clause 3.5 of the 2017 Silver Book.
Another key aim in preparing the second editions was to improve project management and reflect international best practice. New procedures designed to promote this aim include requiring the Contractor to prepare and implement a Quality Management System to show compliance with the Contract requirements (clause 4.9.1) and a Compliance Verification System to show that the design, materials, workmanship and certain other matters all comply (clause 4.9.2). There is in general much greater emphasis on dispute avoidance, including an enhanced role for the DAAB in this respect, and promoting cooperation between the parties during the project.
1.2 The Rainbow Suite: The Main Features of the 1999 Red, Yellow and Silver Books
1.2.1 The 1999 Red Book
The origins of the 1999 Red Book go back to 1957, when a first edition based on the English civil engineering ‘ACE’ (Association of Consulting Engineers) form was introduced. The ACE form was in turn an international version of the UK Institution of Civil Engineers (ICE) form, fourth edition, the main UK domestic engineering contract of the time.
The Red Book's UK origins are not just of historical interest since important features of the form, and indeed of all three 1999 Books, are attributable to them. Expressions such as ‘fitness for purpose’ and ‘consequential loss’, for example, are common law expressions used in the three Books. More generally, the 1999 contracts are drafted in English. In the notes to the 1999 and 2017 editions the English language versions are stated to be the official and authentic texts.
The Red Book underwent several changes since its introduction in 1957, culminating in the very widely used 1987 fourth edition. It was this edition to which the FIDIC task group mainly had regard when preparing the 1999 edition of the Red Book, which we know as the ‘first edition’; 1999 was a watershed year for FIDIC, when the three main forms constituting the ‘rainbow suite’ were simultaneously issued. Each of the 1999 contracts had the same simplified 20‐clause format, with many of the same topics dealt with by clauses with the same numbering. These features, which all had in common, led to their designation as ‘first editions’: they were the first editions of a new, fundamentally overhauled and restructured suite of contracts.
Employer design
The main distinguishing feature of the 1999 Red Book is that the Employer is responsible for all or most of the design of the works. The title of the 1999 edition (and the 2017) is Conditions of Contract for Construction, for Building and Engineering Works designed by the Employer. That is not to say the Contractor is never responsible for any design, but the form is intended for use where the Employer or those acting on his behalf are responsible for all or most of the design. The Contractor's basic responsibility under the Red Book forms is to execute the works in accordance with designs prepared by or on behalf of the Employer.
Re‐measurement
The second main distinguishing feature of the 1999 Red Book is that it is a re‐measurement contract. The Contractor's entitlement is to be paid in accordance with the quantity of work he executes under the Contract applying the relevant rates, typically stated in the bills of quantities. This is by contrast with the other two members of the rainbow suite, the Yellow and Silver Books, where the Contractor's basic entitlement is to be paid a fixed price lump sum subject to adjustments or additions for such things as variations.
The Engineer
The third feature of the Red Book, which it shares with the Yellow Book, is that an important role is assigned to the Engineer. Under both Books in both the 1999 and 2017 editions the Employer is obliged to appoint an Engineer to administer the Contract. The Engineer is not a party to the Contract, but he exercises a range of important functions which control the project and affect the rights of the two parties, the Employer and Contractor. Broadly speaking, those functions involve administering the Contract, by for example certifying interim payments due to the Contractor, and determining certain matters affecting the parties' entitlements under the Contract, such as the Contractor's entitlement to an extension of time or an additional payment.
This latter adjudicative function in particular highlights the dual role Engineers perform of being at once the agents of the Employer for various purposes and determiners of the parties' entitlements. Engineers' decisions about such matters as extensions of time or additional payments are not in general final under the FIDIC forms, although, as we shall see, if time limits are breached an Engineer's determination might become final; but the importance of ensuring that as far as possible the Engineer, in making his determinations, should do so in a disinterested and fair way as between the parties has led to express provision in both the 1999 and 2017 editions of the Red and Yellow forms for the Engineer to act fairly, in accordance with the Contract and taking into account all relevant circumstances (clause 3.5/1999 and 3.7/2017) with, in the 2017 editions of the two Books, the express additional requirement that the Engineer should act neutrally between the parties and not be deemed to act for the Employer (clause 3.7 of the 2017 editions). The 2017 editions also provide (clause 3.2) that there should be no requirement for the Engineer to obtain the Employer's consent before exercising his authority under clause 3.7.
The role of the Engineer in the 2017 editions of the Red and Yellow Books is another legacy of the UK origins of the FIDIC forms. The UK domestic engineering forms historically assigned an important role to the Engineer, broadly in line with the role adopted by the Engineer in the FIDIC Books; and historically the Engineer was treated as a professional person to be accorded great respect, and who was expected by both parties to act neutrally and fairly in carrying out all his functions. This traditional status of the Engineer has for some time been eroded, and in many cases in projects internationally he has come to be regarded as no more than the mouthpiece of the Employer. For that reason the 2017 editions have sought to reinforce the expected neutrality of the Engineer by the new provisions in clauses 3.2 and 3.7.
Risk allocation
The fourth feature of the 1999 Red Book, which it also shares with the 1999 Yellow Book, is that the allocation of risk between Contractor and Employer is intended to be an even handed or fair one, having regard to each party's ability to manage and control risk. Thus, for example, under clause 4.12 of both Books the Contractor may claim both additional time and money if he encounters physical conditions which were unforeseeable in the sense that they were not reasonably foreseeable by an experienced contractor at the date of tender, or the Base Date1 in the 2017 editions.2The Contract allocates risk by striking a balance between the need to protect the Employer from the time and cost consequences of physical conditions which an experienced Contractor ought to have foreseen, and the need to protect responsible contractors from the time and cost consequences of conditions which they cannot reasonably have been expected to foresee at tender stage.
The reputation which FIDIC has traditionally enjoyed of fairly allocating risk between the parties largely derives from this approach, reflected not merely in the 1999 edition of the Red Book but in its predecessors and in the Yellow Book (to which we turn below) and its forebears; and the same can be said of the 2017 editions of the two Books.
The scope for claims under the Red and Yellow Books in both editions is considerable by comparison with the third member of the 1999 rainbow suite, the Silver Book, considered in Section 1.2.3 below.
1.2.2 The 1999 Yellow Book
The Yellow Book is the second oldest member of the 1999 FIDIC suite of contracts. Its origins go back to an electrical and mechanical form of contract, the Electrical and Mechanical Yellow Book, first published in 1963. In contracts for electrical and mechanical works much of the design is carried out off‐site and installation carried out by specialist contractors. In this type of contract it makes more sense for the contractor rather than the employer to be primarily responsible for design. The 1963 Yellow Book was therefore a contractor‐design form of contract under which the Contractor and not the Employer was responsible for all or most of the design.
The Yellow Book underwent various editions, culminating in the third edition in 1987, the same year as the fourth edition of the FIDIC Red Book. When preparing the 1999 Yellow Book the task group mainly had regard to the 1987 version of the Yellow Book, and also to another form, first published in 1995, called Conditions of Contract for Design‐Build and Turnkey; this was known as the Orange Book.
The Orange Book was introduced to accommodate the growing trend for projects to be procured on a design‐build or ‘turnkey’ basis. Its scope was wider than the 1987 Yellow Book because it was not a specifically electrical and mechanical form of contract. Among the distinctive features of the Orange Book was a departure from the use of the Engineer. In the Orange Book there was no Engineer but the Employer administered the Contract. He was not intended to be neutral although when making determinations had still to act fairly, reasonably and in accordance with the Contract. A second significant feature of the Orange Book was that it introduced an independent dispute adjudication board, called the DAB, considered below in Chapter 16.
The 1999 Yellow Book replaced both the Yellow Book 1987 and the 1995 Orange Book. Whereas the 1987 Yellow Book dealt only with electrical and mechanical works, the 1999 Yellow Book covered any building and engineering works designed by the Contractor, reflecting the wider scope of the Orange Book.
Contractor design
The first feature to note about the 1999 Yellow Book, distinguishing it from the Red, is, therefore, that it is a contractor‐design form of contract; under the form, the Contractor is responsible for all or most of the design.
This is also the case with the 2017 edition, the title of both editions being the same: Conditions of Contract for Plant and Design‐Build, for Mechanical and Electrical Plant and for Building and Engineering works designed by the Contractor.
Fixed price lump sum
The second important feature of both editions of the Yellow Book, which also distinguishes it from the Red Book forms, is that it is a fixed price lump sum rather than a re‐measurement contract. The Contractor's basic entitlement is to be paid a fixed price, stated in the Contract at the outset and expressed as a lump sum, subject only to adjustments or additions made pursuant to the terms of the Contract for such matters as variations or unforeseeable physical conditions.
The Engineer
The third main feature of the Yellow Book in both editions is that, like the Red Book forms, an important role is assigned to the Engineer, who performs the same functions under both Books and in the 2017 edition must also act neutrally.
Risk allocation
The fourth feature of the Yellow Book in both editions is that, also like the Red Book forms, it seeks to strike a fair balance of risk between Contractor and Employer. Many of the circumstances in which the Contractor can claim in the Red Book (for example, where unforeseeable physical difficulties are encountered) are also circumstances in which he can claim in the Yellow Book.
1.2.3 The 1999 Silver Book
Unlike the other two Books in the rainbow suite, the Silver Book 1999 was a completely new form of contract. It was introduced to meet a perceived market need for a form of contract which would give project sponsors maximum certainty as to time and budget. This need was particularly evident in Build‐Operate‐Transfer and other concession‐type projects, in which the project financing placed huge constraints on sponsors to ensure that the project was completed on time and within budget. The fair or even‐handed allocation of risk characteristic of the Yellow and Red Books was wholly unsuited to such projects. What the sponsors required was a contract form under which the contractor carried virtually all the risk and had very limited opportunities to claim.
FIDIC noted a trend for sponsors to cause the general conditions of typically a Yellow Book form to be amended to try to place as much risk as possible on the Contractor, quite often with disastrous results. To avoid this tendency, and to meet head on the demand for a new form, FIDIC introduced the Silver Book in 1999. It can be used not merely in concession‐type projects but in any case where the project sponsors require maximum certainty about time and budget.
The title of the Silver Book in both editions is Conditions of Contract for EPC/Turnkey Projects. ‘EPC’ stands for Engineer‐Procure‐Construct, and indicates the range of the Contractor's responsibilities under the Contract; the Contractor is responsible for engineering design, the full range of procurement and for construction. The Contractor designs to Employer's Requirements, which in some cases amount to little more than a performance specification although they may contain considerable engineering design.
The word ‘Turnkey’ is used synonymously with ‘EPC’ in the title of the Silver Book forms to signify that the Contractor is to provide the Employer with a complete package, so that he has the plant or other facility ‘at the turn of a key’. The Employer thus has a single point of responsibility for design, procurement and construction.
The project sponsors are provided with much greater certainty about time and cost than would be available under a Yellow Book Contract; under the form, the Contractor agrees a lump sum fixed price and has very limited scope for claiming additional time or money. The Contractor is forced correspondingly to price for risk, and therefore a Silver Book Contract can result in considerably higher project costs for the sponsors. Silver Book contracting has sometimes been called a Rolls Royce method of procurement for that reason.
FIDIC itself counsels caution when contractors are invited to tender on the basis of a Silver Book form. The guidance is to the effect that contractors ought not to contemplate contracting on such a basis unless they have had an opportunity to assess all relevant risks; something which it is difficult in practice to achieve when the tender period and available resources are limited. What often happens in practice, although this will depend on the individual contractor's bargaining power, is that the parties will negotiate exceptions to the contractor's otherwise comprehensive responsibility and, for example, identify particular items of design or information for which the contractor will not be responsible or carry the risk. Even when such exceptions might be carved out, a responsible contractor will need to exercise extreme care before deciding to contract on a Silver Book basis and will almost always have to build into the price a significant cushion against remaining risk.
There is no Engineer in the Silver Book forms, the Employer in the 1999 edition being able to administer the Contract himself, although typically he will appoint an Employer's Representative to do so on his behalf. Whether or not such a representative is appointed, any determinations made must in the 1999 Silver Book be fair, in accordance with the Contract and take account of all relevant circumstances.
In the 2017 edition of the Silver Book the Employer is obliged to appoint an Employer's Representative and so cannot administer the Contract himself. As with the 1999 edition, determinations must be fair, in accordance of the Contract and take account of all relevant circumstances (clause 3.5). In the 2017 edition there is an added requirement (also in clause 3.5) that in carrying out his determining functions the Employer's Representative shall not be deemed to act for the Employer; unlike the 2017 Yellow and Red Books, however, he is not expected to act neutrally, although whether in practice this will make much difference is not entirely clear since in all three Books in both editions determinations have to be fair, in accordance with the Contract and take account of all relevant circumstances.
A significant difference exists between the 1999 Silver Book on the one hand, and its 2017 version and both editions of the Yellow and Red Books on the other, as to the effect of a determination. In the 1999 Silver Book, each party must give effect to a determination unless the Contractor gives notice of his dissatisfaction with the determination within 14 days; he may then refer the matter to a DAB under clause 20.4. In both editions of the Yellow and Red Books, on the other hand, the parties are to give effect to the determination unless and until it is revised by a DAB/DAAB or, ultimately, arbitral tribunal. That difference could favour the Contractor in some situations where, for example, the Employer is entitled to a payment, as the Contractor can hold off paying by notifying his dissatisfaction with the determination within the 14 days. In the 2017 Silver Book, where the Employer is no longer permitted to administer the Contract himself, the position has been changed to bring it into line with the other forms, so that both parties have to give effect to a determination unless and until it is revised by a DAAB (or ultimately an arbitral tribunal).
1.3 Contractor Risk in the Silver Book: Two Examples
The following two examples may serve to illustrate how the Silver Book stands out from the other two FIDIC forms.
1.3.1 Unforeseeable Difficulties
Clause 4.12 of the Silver Book in both editions provides that, unless the Contract (or, in the 2017 edition, the Particular Conditions) states otherwise, the Contractor (a) is to be deemed to have obtained all necessary information as to risks, contingencies and other circumstances which may influence or affect the works; (b) by signing the Contract he accepts ‘total responsibility’ for having foreseen all difficulties and costs of successfully completing the works; and (c) the Contract Price is not to be adjusted to take account of any unforeseen difficulties or costs.
This comprehensive allocation of risk contrasts with clause 4.12.4 of the Yellow and Red Books in both editions, where the Contractor may, subject to complying with the relevant notice and other requirements in clauses 4.12.1 to 4.12.3, claim both additional time and money if he encounters physical conditions which were unforeseeable in the sense that they were not reasonably foreseeable by an experienced contractor at the date of tender (1999) or the Base Date (2017).
1.3.2 Errors in Employer's Requirements
The 1999 Yellow and Silver Books impose on the Contractor the obligation to design, execute and complete the works in accordance with the Contract so that when complete the works will be fit for the purposes for which they are intended ‘as defined in the Contract’ (clause 4.1). This is similar in the 2017 editions, except that the works when completed are to be fit for the purpose or purposes for which they are intended ‘as defined or described in the Employer's Requirements’ or, where no such purposes are defined or described, fit for their ‘ordinary purposes’.
Thus the fitness for purpose obligation in the 2017 editions is anchored, not in the Contract generally, but in the Employer's Requirements or, in default, in the ‘ordinary purposes’ of the relevant works. These important distinctions are examined in Section 4.1 below.3
The extent to which the Contractor has to accept responsibility for errors in the Employer's Requirements, including any design criteria and calculations, is markedly different between the two forms.
In both editions of the Silver Book the Contractor is responsible for errors in the Employer's Requirements even if the Contractor could not reasonably have been expected to detect them, with certain limited exceptions. Clause 5.1 in both editions provides that the Contractor is assumed to have scrutinised, prior to the Base Date, the Employer's Requirements (including design criteria and calculations, if any) and the Employer is not to be responsible for any error, inaccuracy or omission of any kind in the Employer's Requirements as originally included in the Contract, unless one of the exceptions set out in sub‐paragraphs (a)–(d) of clause 5.1 applies. These exceptions are examined in Section 5.1.1 below.
The Yellow Book deals with errors in the Employer's Requirements quite differently. The Contractor is entitled to claim additional time and/or cost plus profit if a hypothetical experienced and careful contractor would not have discovered the error by a certain date.
Thus clause 1.9 of the 1999 edition entitles the Contractor to claim if delay and extra cost result from an error in the Employer's Requirements which an experienced contractor exercising due care would not have discovered when scrutinising the Requirements under clause 5.1. Although more detailed and differently structured, clause 1.9 in the 2017 edition applies a substantially similar test to determine the Contractor's right to claim more time or money in respect of errors contained in the Employer's Requirements.4
1.4 New Potential Risks for Contractor and Employer in the 2017 Books
The 2017 Books contain new potential risks for both Contractor and Employer, some of which are highlighted below. They are considered in more detail in the chapters indicated.
1.4.1 Contractor Risks
New fitness for purpose indemnity
In the 2017 Yellow and Silver Books clause 17.4 creates a new indemnity by the Contractor in respect of any acts, errors or omissions by him in carrying out his design obligations which result in the works, when complete, not being fit for their purpose under clause 4.1.5In the 2017 Red Book this applies to the extent that the Contractor has the relevant design obligations.
In the pre‐release Yellow Book this indemnity was not within the exclusion of indirect or consequential loss or the overall liability cap under clause 17.6. However, following strong objections from contractors during the friendly review, this position has been reversed in the published 2017 Books. By a new clause 1.15 (Red and Yellow Books)/1.14 (Silver) the indemnity is now within both the exclusion and the cap.6
Exceptions to liability limitation
The new clause 1.15/1.14 in the three 2017 Books does not include within the exclusion of indirect or consequential loss intellectual and industrial property rights under clause 17.3, or delay damages under clause 8.8, and the former is excluded from the total liability cap under the second paragraph of that clause.7Further, whereas in the 1999 editions clause 17.6 did not limit liability in any case of fraud, deliberate default or reckless misconduct, the new clause 1.15/1.14 adds gross negligence to this list.8
Delay damages and termination
The 1999 editions provide, by clause 8.7, for a maximum amount of delay damages. This is also the case in the 2017 editions, but the 2017 Books give the Employer a new right to terminate the Contract under clause 15.2.1(c) if the Contractor exceeds this limit.9
Adverse climatic conditions
Clause 8.4(c) in the 1999 Red and Yellow Books gives the Contractor a right to claim an extension of time in respect of exceptionally adverse climatic conditions, but the meaning of this expression often gave rise to dispute. Clause 8.5(c) in the 2017 editions of the two Books goes some way to providing clarity, but at the expense of limiting the scope of this ground to adverse climatic conditions at the site which are unforeseeable having regard to climatic data made available by the Employer and/or which are published in the relevant country for the geographical location of the site.10By thus limiting the conditions to those affecting the site only, the Contracts now exclude claims based on adverse conditions elsewhere which affect the Contractor's ability to maintain progress (by, for example, interfering with supply chains).
Cost of remedying defects/training
Red Book contractors should note that clause 11.2 in the 2017 edition has expanded the scope of the Contractor's responsibility for executing outstanding or remedial works under clause 11.2 and a new clause 4.5 introduces a requirement to train the Employer's employees and/or other specified personnel if stated in the Specification.
Although responsible, by clause 4.1(d), for submitting the as‐built documents and operation and maintenance manuals prior to commencement of the tests on completion, the 1999 Red Book Contractor has no training obligation and no specific liability in the terms of clause 11.2(c) of the other two Books. (In the 1999 Yellow and Silver Books clause 11.2(c) requires the Contractor to execute at his own risk and cost any works resulting from improper operation or maintenance attributable to matters for which he is responsible under clauses 5.5–5.7 – that is, training (to the extent specified in the Employer's Requirements), provision of as‐built documents and operation and maintenance manuals – or otherwise.)
These differences have now been removed in the 2017 Red Book. The Red Book Contractor now has an obligation to provide training for the Employer's employees and/or other specified personnel under clause 4.5 if this is stated in the Specification, and has the same responsibility (under clause 11.2(c)) in respect of improper operation or maintenance attributable to any failure to provide such training, operation and maintenance manuals or as‐built records as the Yellow and Silver Book Contractor.11
1.4.2 Employer Risks
Liability for care of the works and indemnities
Clause 17.3 in the 1999 editions of the three Books defines a number of Employer's risks which, if they eventuate, entitle the Contractor to claim an extension of time and/or cost for rectifying any resulting loss or damage. Clause 17.2 of the 2017 Books adds significantly to the risks borne by the Employer12 and includes in particular a general sweeping‐up provision covering any act or default of the Employer's personnel or the Employer's other contractors.
The Employer's indemnities in favour of the Contractor under clause 17.5 have also been expanded to include, as well as death or personal injury, loss of or damage to any property other than the works which is attributable to any negligence, wilful act or breach of contract by the Employer, Employer's personnel or any of their respective agents. The Employer must also indemnify the Contractor in respect of all loss or damage to property, other than the works, to the extent that it arises out of any of the events for which the Employer bears the risk under clause 17.2.13
Extensions of time
In all three of the 2017 Books the Contractor's entitlement to claim an extension of time has been increased.
(a) Access routes
The 1999 Books all provide for the Contractor to bear the costs of any non‐suitability or non‐availability of access routes for the use required by the Contractor without apparent qualification. If an access route were, for example, altered by the Employer or those for whom he was responsible, including his other contractors on site, the Contractor might be able to rely on clause 8.4(e) to claim an extension of time if he suffered delay as a result, on the basis that the alteration of the route was a delay, impediment or prevention caused by or attributable to the Employer, his personnel or his other contractors on site; but if the route were altered by a third party the Contractor would not be able to come within this ground and clause 4.15 would not appear to give him any basis for claiming an extension either.
The Contractor's position has been improved by clause 4.15 of the 2017 Books, which provides (in the last paragraph of clause 4.15) that to the extent that non‐suitability or non‐availability of an access route arises as a result of changes to the access route by a third party, as well as the Employer, after the Base Date and they result in delay and/or cost the Contractor may claim an extension of time and/or payment of that cost. This fills an important gap in the 1999 forms.
(b) Private utilities
The Contractor under the 2017 Books is now able to claim an extension of time in respect of delays caused not only by public authorities but also private utilities in the country of the project under a new clause 8.6. In the 1999 contracts clause 8.5 permitted a claim only in respect of delays caused by public authorities. This updates the earlier forms to reflect the fact that many utilities are now provided by private entities and represents a significant addition to the Contractor's right to claim.
(c) Shortages in Employer‐supplied materials
The Contractor may in all three 2017 Books claim an extension of time in respect of unforeseeable shortages in the availability of Employer‐supplied materials, as well as personnel or goods, caused by epidemic or government actions (clauses 8.5(d) 2017 Red and Yellow Books and 8.5(c) Silver). In the 1999 editions of the Red and Yellow Books the Contractor (by clause 8.4(d)) is only able to claim for unforeseeable shortages in personnel or goods caused by epidemic or government actions and in the 1999 Silver Book this ground is not available at all. The 2017 editions have therefore created an entirely new basis of claim for the Silver Book Contractor and increased the scope of the existing sub‐paragraph (d) of clause 8.4 in the other two Books by including Employer‐supplied materials.
Latent defects in plant
The 1999 contracts provide for defects which become apparent after the Employer's acceptance of the works (by issue of the Performance Certificate) by treating each party as remaining liable for the fulfilment of any unperformed obligations at that time, the Contract to be deemed to remain in force for the purpose of determining the nature and extent of such unperformed obligations (clause 11.10). There is no time limit placed on the extent of this liability; that question depends on the governing law.
The 2017 contracts contain the same provision for latent defects in clause 11.10, but introduce a time limit with respect to plant. In relation to plant, the Contractor is not to be liable for any defects or damage occurring more than two years after expiry of the Defects Notification Period for the plant, unless this is prohibited by law or in any case of fraud, gross negligence, deliberate default or reckless misconduct. Thus, subject to those exceptions, and unless clause 11.10 is amended in the special provisions, the Employer now faces a two‐year cut‐off for bringing any claims in respect of latent defects in plant, that is, any apparatus, equipment, machinery or vehicles whether on the site or otherwise allocated to the Contract and intended to form or forming part of the permanent works (clause 1.1.65 2017 Red Book/1.1.66 Yellow Book/1.1.56 Silver Book).
Termination for convenience and omitted work
One of the complaints contractors make about the 1999 Books is that, in the event of the Employer's terminating the Contract for his own convenience, that is, in the absence of any fault on the part of the Contractor, the Contractor is not entitled to any loss of profit suffered as a result. Instead, clause 15.5 gives the Contractor no more than he would be entitled to where there has been a termination by reason of force majeure.
This was thought to be anomalous and the position has been corrected in the 2017 Books. The Employer now faces the prospect of having to compensate the Contractor for loss of profit or other loss or damage suffered as a result of a termination for convenience under a new clause 15.6.14
There is also an important provision entitling the Contractor to loss of profit where work has been omitted from the Contract scope in order to be carried out by the Employer or others. In the 1999 contracts there was a blanket prohibition against the Employer's instructing the Contractor to omit work in order for it to be carried out by others (clause 13.1). This has been modified in the 2017 editions by permitting work to be omitted which is to be carried out by the Employer or others but (unless there has been a failure to remedy defects and clause 11.4 applies)15 only where the Contractor agrees to this (clause 13.1). In that case, however, the Contractor can include in his proposal for an adjustment to the Contract Price under clause 13.3.1 any loss of profit and other loss or damage suffered or to be suffered by him as a result of such an omission (clause 13.3.1(c)).16
Change in laws
Another important new risk for the Employer in the 2017 forms is that the scope for claiming additional time and/or money as a result of changes in the laws and regulations affecting the project has been significantly increased in a new clause 13.6.17 In the 1999 editions the Contractor can claim time and/or money where the laws of the country where the project is situated or the judicial or official interpretation of them, after the Base Date, gives rise to delay and/or additional cost (clause 13.7). The new clause 13.6 adds to this by providing for changes made or published after the Base Date in:
(a)any permit, permission, licence or approval obtained by the Employer or Contractor according to their respective obligations under clause 1.13 (Red and Yellow Books)/1.12 (Silver Book); or
(b)the requirements for any permit, permission, licence and/or approval to be obtained by the Contractor under clause 1.13(b)/1.12(b)
to entitle the Contractor to claim an extension of time and/or additional payment for any delay caused and/or cost incurred as a result.
This additional risk to the Employer is counterbalanced, however, by a new provision in clause 13.6 that provides for the Employer to be entitled to claim a reduction in the Contract Price should a change in the laws, including the above changes in or requirements for permits, permissions, licences and/or approvals, result in a decrease rather than an increase in cost.
1.5 FIDIC's Guidance for the Preparation of Particular Conditions
As mentioned in Section 1.1 above, the Particular Conditions in the 2017 contracts comprise (a) the Contract Data and (b) the Special Provisions. The 1999 contracts also provide for Particular Conditions but do not divide them up into these two categories; instead, the relevant details are included more generally. The division of the Particular Conditions into Contract Data and Special Provisions was introduced in the 2008 Gold Book for greater clarity, and has been adopted accordingly in the 2017 editions. Together with the general conditions, the Contract Data and Special Provisions comprise the conditions of contract for each of the 2017 Books.
1.5.1 The Contract Data
An example of the Contract Data is given at the back of each of the 2017 forms in the section headed ‘Guidance for the Preparation of Particular Conditions’. As the brief notes accompanying the example explain, the Contract Data identify the specific information needed to be provided before the documents forming the Contract are complete and in order to avoid the default provisions to be found in some of the clauses of the general conditions taking effect. Thus the Contract Data, which are to be completed by the Employer in preparing the tender documents, set out each of the sub‐clauses of the general conditions which require such specific further information. So, for example, clause 1.1.20 defines ‘Cost Plus Profit’ to mean Cost plus the applicable percentage for profit stated in the Contract Data or, if not so stated, 5%; the first item in the Contract Data example sheet then refers to clause 1.1.20 and leaves a space to be completed by the Employer for identifying the specific percentage profit to be added to Cost. The Employer will ensure that this item is completed if he wishes to avoid the default 5% applying. Similarly, the second item in the Contract Data refers to clause 1.1.27, which requires the Defects Notification Period which is to apply to the Contract to be stated, failing which the default one‐year period will apply. Other Contract Data items include the time for completion, the governing law, the ruling language and a host of other important specific details which need to be addressed.
1.5.2 The Special Provisions
The Special Provisions enable the parties to amend the general conditions. Amendments of one kind or another are inevitable in any contract in order to meet the specific needs of the project. As FIDIC points out in its Guidance, local legal requirements may necessitate modifications to the general conditions, particularly if they are to be used on domestic contracts. Where any amendments are made to the general conditions great care needs to be taken to ensure both that the amendments are internally consistent and that they are consistent with the unamended general conditions; confusion and disputes are otherwise likely to arise.
As FIDIC points out in the Guidance, the Special Provisions have priority over the general conditions, with the Contract Data having priority over the Special Provisions. This is consistent with clause 1.5 of the general conditions, which sets out the priority of documents forming the contract in the event of any conflict, ambiguity or discrepancy between them.
