When in 1999, the Fe´de´ration Internationale des Inge´nieurs-Conseils (“FIDIC”) published its three new forms of contract which are know as the 1999 Rainbow Edition, the Contracts Committee decided to publish a complementary guide. The three books of which are covered by this Guide and referred to as “CONS”,
“P&DB” and “EPCT”.
This Guide was written by Peter L Booen and reviewed by the Contracts Committee which at that time comprised Michael Mortimer-Hawkins (Chairman), Christopher Wade, Axel-Volkmar Jaeger and Peter L Booen; together with John B Bowcock as Special Adviser and Christopher R Seppala as Legal Adviser. The commentary on Clause 18 was also reviewed by Mark Griffiths, Griffiths &
Armour, UK.
Remember that each of the three Books is in three parts:
l General Conditions, the part which is intended to be incorporated (by reference) into each contract, and whose Sub-Clauses are often referred to in this Guide without the use of the word “Sub-Clause” (for example: “CONS 1.1”).
l Guidance for the Preparation of the Particular Conditions, the part which is referred to in this Guide as “GPPC”, which commences by proposing suitable wording to incorporate the appropriate General Conditions into a contract, and which concludes with annexed example forms of securities.
l Forms of Letter of Tender, Contract Agreement and Dispute Adjudication Agreement, the part which is referred to in this Guide as “the Example Form(s)”.
In the FIDIC Contracts Guide, the texts in the Books are reproduced in a three- column layout. The Guide includes comments and recommendations as the case may be. It is not a comprehensive or conclusive clause by clause commentary but it gives extremely important advice and information about the books.
AB1992GeneralConditionsof1992forWorksandSuppliesintheBuildingandConstructionIndustry(AlmindeligeBetingelserfor ArbejderogLeveranceriBygge-ogAnlổgsvirksomhed1992)foruseinDenmarkinSweden ABT1993“AlmindeligeBetingelserforTotalentreprise”(ABT93)(GeneralConditionsforturnkeycontracts)foruseinDenmarkin Sweden AIAAmericanInstituteofArchitects,publishingawholesetofcontractformforuseintheUnitesStatesofAmerica ArbitraryBymereopinion;notaccordingtoreasonedjudgmentorrules;adecisionmadeatthediscretionofthejudge,notthelaw ArbitrationMethodofdisputeresolutionpresupposinganexpressagreementbywhichthepartiesofadisputederogatethegiven jurisdictionofanotherwisecompetentstatecourt.Itisquitecommontorefertoanexistingsetofprocedurerules,suchas therulesoftheInternationalChamberofCommerce(ICC)inParis ArchitectRegulatedprofession.InFrancethemissionofanarchitectliesintheinterestofpublicorder(seearticle1Act1977).InEngland theuseofthearchitecttitleisreservedbystatuteforprofessionalswhoareprofessionallyentitledtoit.InGermanytheuseof theprofessionaltitlearchitectisreservedforthosewhoareenteredinthearchitects’listoftherelatedchamberofarchitects. Somedesignservices,suchassubmissionofbuildingpermissionplanningareinprinciplereservedforarchitectsorsimilar suitableprofessionals BillofquantityAdocumentwhichitemisesthequantitiesofmaterialsandlabourinaconstructionprojectandisusuallydrawnupandspecified byacostprofessionalcalledaquantitysurveyor.Theyarepreparedinadvancetotakeintoaccounttheworksrequiredfora projectandissuedwiththeprojectspecification,forusebycontractorsinsubmittingtenders.Usuallyquantitiesare measuredfromdesigndrawings,tobeusedbythecontractorsfortenderingandforprogresspayments,forvariationsand changesandultimatelyforstatistics,taxationandvaluation BondAnundefinedterm.Itisadebtinstrumentusuallyissuedbyabankorinsurerwhichconstitutesawrittenguarantysubmittedto theEmployerbytheContractoronwinningthetenderensuringpaymentofasumofmoneyincasetheContractorfailsto performthecontract.Unlikeondemandguaranteesitisnotpayableonfirstdemandbutonlyonpresentationofevidence provingtheContractor’snon-performance.Abondusuallycovers100%oftheContractPrice.Unlikebondsunconditional ondemandguaranteessubstituteacashdepositandarepayableonfirstdemand.Whetheraspecificinstrumentiseitheranon demandguaranteeorabondmustbederivedfromtheparticularwordingoftheinstrument.UnderCivillawbondsusually havethenatureofanaccessoryguaranteeorsurety(Buărgschaft,Cautionnement)involvingatriangularrelationshipbetween thecreditor,theprincipaldebtorandthesurety.Asasuretyisaccessoryinnaturetheexistenceandextentoftheprincipal debtcreatesanddeterminestheextentofthesurety.Thesuretyisusuallyentitledtorelyonalldefencesoftheprincipal debtoragainstthecreditor Breach(ofcontract)Violationofaright,dutyorobligationarisingfromacontractbyanactoromission,e.g.failuretoperformaccordingtoa contract(delayedperformance,defectivework,etc.) CareofworksNotreallyalegalterminEnglishlawbutoftenusedinconstructioncontractsinordertoexpresstheresponsibilityfordamageto theworks,materials,plantandequipment,bymakingthecontractorgenerallyliabletotakecarefortheworksandto
compensateortomakegoodanydamageirrespectiveoffaultonhispart.BycontrastunderGermanlawcareofworksis moreorlessalegalterm,expressingthatthecontractorbearstheriskforthelossordamageoftheworkpriortoacceptance includingthoseduetoeventswhicharebeyondthecontractor’scontrolandforwhichheisnotresponsible;riskwhich becomespartiallytransferredtotheemployeraccordingtoSec.7no.1VOB/B CommonlawCommonlawjurisdictionsareinwidespreaduse,particularlyinthosenationswhichtracetheirlegalheritagetoGreatBritain.It meansthelawrefinedbyjudgesincommonlawjurisdictions.Commonlawinitsbroadersensedividesintocommonlawin itsstrictsenseandequity.Before1873,Englandhadtwoparallelcourtsystems,courtsof“law”thatcouldonlyaward moneydamagesandrecognizedonlythelegalownerofproperty,andcourtsof“equity”thatcouldissueinjunctivereliefand recognizedtrustsofproperty ConditionprecedentAcondition,thatmustbefulfilledbeforeacontractorarightorobligationunderacontractbecomeseffective,forexample subjecttoaccordingcontracttermspaymentbecomesduewhenapaymentcertificatehasbeenissued ConsiderationAnessentiallegalcomponentofanycontractgovernedbycommonlaw;abargain.Itmeanscounterperformance,somethingof legalvaluedone,givenorpromisedbythepartyseekingtoenforcethecontract.Itisnotnecessaryinadeed ConstructionpermitFormalpermissionfromthelocalbuildingauthorityrequiredinseveraljurisdictionstobeginconstruction,demolition,additionor renovationonpropertyandinsomecasesformodificationsofuses.Theownershallusuallyapplyforthegrantofa constructionpermitandobtainitbeforestartinganyworks.Subjecttolocallawtheauthoritiesmustreviewsubmittedplansto ensurethattheycomplywiththelocalbuildingcodes,localzoningby-laws,andotherapplicableregulations.Therightto submitplanningdocumentsissometimesreservedforsuitableprofessionals,suchasarchitectsandengineers(forexamplein Germanlaw) ContractAlegallybindingagreement,arisingasaresultofofferandacceptance,butsubjecttoapplicablelawanumberofother requirementsmustbesatisfiedforanagreementtobelegallybinding CopyrightCopyrightisanintangiblepropertyright;aformofprotectionprovidedbythelawtotheauthorsof“originalworksofauthorship”, includingliterary,dramatic,musical,artistic,andcertainotherintellectualworks.Subjecttoapplicablelawsitconsistsofthe exclusiverightofreproducinganyformofthoseworksdefinedinapplicablelaws,includingforexamplethedesignofa building.LicencesmaybegrantedinrespectofCopyrightbytheowner.Whetheritistransmissiblebyassignmentdependson theapplicablelaw.UnderGermanlawitisonlytransferablebyheritage DamagesCompensationawardedtoapartysufferinglossordamagecausedbyathirdparty.Undercommonlawitisusuallyamonetary obligation,whilstundercivillawspecificperformanceispossible DB(DesignandBuild)DesignandBuildcontractsareusedinordertocommitacontractorwithboththedesignandtheexecutionofworks DBO(DesignBuild Operate)DBOisaninnovativecontractingmethodthatreducesthetimeandownerrisksassociatedwithdeliveringmajorprojects DeedCommonlyreferredtoasa“contractunderseal”.InUSA:awritteninstrumenttransferringinterestsinrealproperty DesignThisisnotadefinedterm.TheextentofthedesignresponsibilityshallbespecifiedbytheContract
DecennialliabilityStrictliabilityforstructuraldefectsruledbylaw,FrenchoriginandadoptedbyFrenchlawinspiredjurisdictionsalloverthe world DischargeRelease,dismiss,free,orrelievefromobligationsunderacontract DisputeadjudicationAninnovativeformofdisputeresolutionnotaimedtoreplacecourtproceedingsorarbitrationbuttoprovideacomplementary featureofdisputeresolution.Usuallythedecisionsgivenbyanadjudicatorordisputeadjudicationboardbecome temporarilybindinguntilrevisedbyanarbitralaward Doctrineofsubstantial performanceDoctrineofequitywherebysubstantialperformanceshouldbecompensated,notonlycompleteperformance,meaningthat minordefectsareunremarkable EJCDCEngineersJointContractDocumentsCommittee,publishingawholesetofcontractformsforuseintheUnitedStatesofAmerica EngineerInsomestandardcontractforms(forexampleFIDICformsofcontract)thistermisusedinlegalsenseexplainedinSutcliffe v.Thackrah.TheEngineeristhirdparttoaconstructioncontractwhoowesdutiesundertheconstructioncontract,including tasksofdeterminationofclaims,certificationofpayments,etc.Thewordingmayvaryandsomecontractsrefertoanarchitect, supervisor,contractmanagerbuttheroleandfunctionofthisthirdpartytoaconstructioncontractisalwaysnearlythesame EquitableremediesAlegalremedybasedonequityinsteadofcommonlaw,whichisaspecificcommonlawdistinction EquityPrinciplesofjusticeorfairnessappliedtoovercomeanyunjustresultorconsequenceresultingfromtheapplicationofcommon lawinitsstrictsense FIDICFe´de
´ration
InternationaledesInge
´nieurs-Conseils,
sittinginGeneva,representstheinterestsofEngineersworldwide.FIDIChas publishedarangeofinternationallyrecognisedconstructioncontractformswhicharealsorecommendedforusebytheWorld Bank.AmongthosecontractformstheFIDICRedBook,YellowBookandSilverBookarethemostimportantones Float(floatingtime)Contingencytimeallowancebetweenthedateonwhichtheworkshavetobecompletedandthedatewhenthecontractoractually planstocomplete.Inmajorprojectsusuallynetworkstechniquesareusedinordertofindthecriticalpathofeachactivity whichisrequiredforcompletion.IffloatingtimecanbeshownontheCPNthequestionarisesofwhoistheownerofthisfloat. AccordingtotheSCLDelayandDisruptionProtocolfloatisownedbytheemployer ForcemajeureLegaltermusedtodescribeasituationunderwhichnonperformanceofacontractisexcused,oftenreferredtoasactofgodor actwhichisbeyondthecontrolofbothpartiesofthecontractbutsubjecttolocallegislationincludingelementsoffrustration orimpossibilitytoperform.Bewarethatinsomejurisdictionsforcemajeureisruledbylaw,thushavingaprecisemeaning. Boilerplatewhichisoftenusedininternationalcontracts ForumCourt ForumshoppingPracticeadoptedbyalitiganttogethislegalcaseheardinthecourtthoughtmostlikelytoprovideafavourablejudgment GoldBookAFIDICcontractformforworks,wherethedesign,theexecutionoftheworksandtheoperationserviceisdonebythe contractor(seeDBO)
GuaranteeAnundertakingtoperformsomeact,etc.Aguaranteecanbeconditionalorondemand.Dependingonitsnatureitisonly enforceable,ifaconditionisfulfilled,e.g.undertakingto“paymoneyback”ifthemaindebtorfailstodoso.Incivillaw jurisdictionsconditionalguaranteesareruledbylawandreferredtoasBu¨rgschaft(German)orCautionnement(French), bothbeing“accessory” ICEInstitutionofCivilEngineerspublishingawholesetofcontractformsofuseintheUK InjunctionAnequitableremedyundercommonlawinwhichthecourtordersapartytoperformortodesistfromaparticularact.An “interim”or“interlocutory”isaninjunctionissuedpriortotrialtopreventirreparableinjurytotheplaintiffwhilethecourt considerswhethertograntpermanentrelief JCTJointContractsTribunalpublishingawholesetofcontractformsforuseintheUK Jointandseveral obligationAnobligationenteredintobytwoormorepersons,sothateachisliableseverally,andallliablejointly,andacreditororobligee maysueoneormoreseverally,oralljointly,athisoption.Insomejurisdictionsjointandseveralliabilityisprovidedbylaw, forexampleinFrance,whereusuallycontractorsandconsultantsassumejointandseveralliabilityunderthedecennial liabilityrule JurisdictionPowerorauthorityofacourtoveraperson(inpesonam)orproperty(inrem);areaoflegalauthority,oftenusedasasynonym forlegalsystem,especiallywhereanindividualstateisdividedindifferentjurisdictions,suchastheUnitedKingdom, CanadaorAustralia Koran(Qur’an)FirstsourceofLawinIslamiccountries.IslamiclawisknownasShar’iahLaw.Shari’ahmeansthepathtofollowGod’sLaw, whichmeansamuchwiderconceptthanforexampleCivillawbecauseitincludesthewholeprescriptivesideofreligion.The secondelementofShar’iahisreferredtoastheSunna,includingtheteachingsoftheProphetMohammadnotexplicitlyfound intheQur’an.Sunna’srulesareacompositeoftheteachingsoftheProphetandhisworks.Fiqh,Islamicjurisprudence,isan expansionofIslamiclaw,complementedbytherulingsofIslamicjurists.Fiqhconsistsofdetailedrulesandisthereforecloser totheconceptoflawthanShari’ah Letterofintent(LOI)Awritten,preliminaryunderstandingbetweenpartiesofhowtheyintendtoproceedinaparticularmatter.AnLOIwasnot traditionallyacontract,butratheratentativeexpressionofintentions.However,todaysomepartsofanLOImayinclude contractualduties(e.g.confidentiality)andifwordedinbindingtermsthecourtmayholdanLOItobecontractuallybinding inpartorwhole LexcausaeThelaworlawschosenbytheforumcourtfromamongtherelevantlegalsystemstoarriveatitsjudgmentofaninternationalcase LexforiThelawoftheforumorcourtbeforewhichacaseispending.Moreparticularlythelawrelatingtoprocedureortheformalitiesin force(adjectivelaw)inagivenplace LexreisitusorsitaeThelawofthesituationofthething Liquidateddamages (delaydamages)Apre-estimatedamountofmoneyspecifiedinacontracttocompensateapartyfordamagessufferedbecauseofabreachof contractbytheotherpartytotheagreement.Itisalsoalimitationonliabilityfordamages.Bewarethatliquidateddamages shouldnotbeconfusedwithsocalledpenalties
MayVerbinEnglishusedtoexpressapossibility,alsousedinlegaltextsasasynonymforshallleavingopentotheaddresseesome discretion.Dependingonthecontext“may”canmean“shall” Mechanic’slienAmechanic’slien(USA)isa“hold”againstpropertythat,ifunpaid,allowsaforeclosureaction,forcingthesaleoftheproperty. Suchkindofinstrumentsarequitecommonwithinjurisdictionsallovertheworldbuttheirnatureandwayinwhichit becomesenforceddifferquitealot.InGermanyforexamplethecontractorisentitledtosueforregistrationofasocalled workman’smortgage(orbetterhypothec),ifheremainsunpaid.InEnglandhoweversuchkindofinstrumentisunknown Memorandumof understandingAdocumentoutliningareasof“agreement”orunderstanding.Notusuallyintendedtobeabindingcontract,although,aswithan LOI,ifitiswordedpreciselyintermsofrightsandduties,etc.,itmaybebinding Misrepresentation (commonlaw)Afalseandmisleadingstatementastoamaterialfact,whichmaybegroundsforrescindingacontractorfortherecoveryof damagesincontractortort.Thecivillawapproachisabitdifferent.Germanlawhasadoptedtheculpaincontrahendo doctrineaccordingtowhichtheinnocentpartymaycalimfordamagesasaresultofapre-contractualnegligentfalse statement(ofwhichthepartyshouldorcouldhaveknownthattheinformationwasmisleading) MortgageChargeagainstland,oftenruledindetailbylaw.AccordingtoGermanlawtheContractorisentitledtoamortgageagainstthe landoftheownerinordertosecureitsentitlementtopayment NEC3TheNewEngineeringContractEngineeringandConstructionContract NegligenceAsatort,negligenceisthebreachbythedefendantofalegaldutytotakecareanddiligence,whichresultsindamagetothe claimant NominatecontractsAcontractthatisgivenaspecialdesignationastoitspurpose.Somejurisdictions,especiallycivillawjurisdictionsandislamic jurisdictionsmakeadifferencebetweennominateandinnominatecontracts.Eachnominatecontractisgovernedby particularrules(whosecontentandformisregulatedbystatute,thusbeingacontractwithagivenspecialdesignation), whereasallinnominatecontractsarecreatedaspeopleexercisetheirfreedomtocontractinnewsituations.Thusinnominate contractsevolveasanon-regulatedvariantofaregulatedornominatecontract,suchasacontractofsaleoraloancontract. Aninnominatecontractdoescreaterightsandobligationsoftheparties,whichrightsandobligationsmaybeenforceable anddemandable PenaltyApunishment,usuallyreferredtoasapenaltyclausebywhichonepartyofacontractpromisestopayapredeterminedamount ofmoneyforbreachofcontractinordertoensurestrictcompliancewiththecontract;avoidcontracttermaccordingto “equity”rulesundercommonlaw,butusuallybindingundercivillaw PerformanceFulfilmentofone’sobligationsaccordingtoacontract PrivilegeTermdescribinganumberofrulesexcludingevidencethatwouldbeadversetoafundamentalprincipleorrelationshipifitwere disclosed;underFrenchlawapaymentsecurity,forexamplethecontractor’sorarchitect’sprivilegerelatedtoanypayment claimagainsttheemployer
ProformainvoiceAtermcomingfromLatinwhichmeans“asamatterofform”.Inforeigntradetransactions,aproforma(orproformaorpro- forma)invoiceisaninvoiceprovidedbyasupplierinadvanceofprovidingthegoodsorservice.Itstatesacommitmentfrom thesuppliertoprovidegoodsorservicestothepurchaser(orclient)atspecifiedpricesandtermsanditiscommonlyusedto declarethevalueofthetransaction.Someoftheadvantagesofaproformainvoicetothepurchaserincludetoshowtohis governmentforforeigncurrencyallocationandmostimportantly,tohaveadetailedinformationonthetransactionthatcan helphimplan.Theproformainvoiceisalsooftenusedbythepurchasertoapplyforaletterofcredit(L/C).Anaccurateand professionallysubmittedproformainvoicecanhelppurchaserstomakeadecisionandagreetothequotation.Infactitisnot atrueinvoice,becauseitisnotusedtorecordaccountsreceivableforthesupplierandaccountspayableforthepurchaser Punitivedamages (commonlaw)Awardofdamagesintendedtopunishthedefendantanddeterfuturewrongdoing.Usuallyawardedwhenanactionis aggravatedbyevilmotives,grossnegligence,ordeliberateviolenceoroppression.Alsocalled“exemplarydamages” Availableundertortsbutgenerallynotundercontractlaw QuantitysurveyorConstructionprofessionals,whoareemployedpredominantlyonmajorbuildingandconstructionprojectsasconsultantstothe owner,inboththepublicandprivatesectors.Theyworkcloselywitharchitects,financiers,engineers,contractors,suppliers, projectowners,accountants,insuranceunderwriters,solicitorsandCourtsandwithalllevelsofgovernmentauthorities. TheygettheirnamefromtheBillofQuantities.Theprofessionofquantitysurveyorsiswellknownincommonlaw countriesbutrarelyknownincivillawcountries QuantummeruitSupposingapersonemploysanothertodosomeworkforhim,withoutanybindingcontractastohiscompensation,thelawmay implyapromisefromtheemployertotheworkmanthathewillpayhimforhiswork,asmuchashemaydeserve,basedon merit RealpropertyLandandbuildings(orotherpermanentattachmentstotheland)aswellastherightsarisingoutofland.Realpropertyis differentfrom“personalproperty”,whichisanymovableproperty ReasonableUsedinlegaltextsinordertoexpressastandardofdutyorthewayinwhichapowerorauthorisationcanormaybeused. Areasonablemanispresumedtobeacarefulman,amanofordinaryprudence.Thereasonablemanisahypothetical individualwhoisintendedtorepresentasortofaveragecitizenorprofessional.Withinreasonabletimemeanswithin appropriateandpertinenttime,withinthetimewhichisneeded.Reasonabletimemeansatanytimewhichisacceptable. Reasonablypracticablemeansalevelofprecautiontakinginaccountofthebalancebetweentheriskinvolvedinaparticular hazardandthecostinvolvedinremedyingit.Reasonableskillandcarehasbeenjudgedasthestandardofanordinaryman exercisingandprofessingtohavethatskillwhichisappropriateforthetaskcommittedtohim ReceptionNounformofreceiving;undercivillawalegaltermmeaningtheacceptanceofworksunderaconstructioncontractfollowedby acoupleoflegalconsequences,suchasthetransferofcarefortheworkstotheownerandthecommencementdateof(legal) defectsliabilitylimitation RedBookAFIDICcontractformforworks,wherethedesignisdonebytheemployeroronbehalfoftheemployer
RescissionTheendingofacontractandtherestoringofthepartiestotheirrespectivepositionsbeforethecontractstarted RevocationThecancellationofpowerorauthoritygrantedtoanother;thewithdrawingofanoffertocontract SealAmethodofexpressingconsenttoawritteninstrumentbyattachingtoitwaximpressedwithadevice,ornow,morecommonly, apaperseal Set-offWhereaclaimbyadefendanttoasumofmoney(whetherofanascertainedamountornot)isreliedonasadefencetothewholeor partofaclaimmadebytheclaimant,itmaybeincludedinthedefenceorcounterclaimandset-offagainsttheclaimant’s claim.Undersomelawsset-offpresupposesanexpressedorimplieddeclaration,undersomeset-offrequiresonlyasituation wheretwocounterclaimsexist ShallModalverbinEnglishusedtoexpressthefuture;alsousedinlegaltextstoexpressadutyorobligation(butseealso“may”) SilverBookAFIDICcontractformforturnkeyprojects SpecificperformanceUndercommonlawanequitableremedygrantedbyacourtwherebythecourtrequiresthebreachingpartytofulfilits obligationsunderacontract.Incivillawjurisdictionsspecificperformanceistherulewhereasundercommonlawitisan exceptionalremedywhichcanbegrantedbycourt StandardcontracttermsTermsofcontractwhichhavebeendraftedformultipleuse.Insomecountriesstandardcontracttermsaresubjecttolegal control.InGermanyevencommercialcontractsfallundertheparticularrulesofcourtcontrol(Sect.305etseq.German CivilCode),whichsometimesisreferredtoasthe“mainrouge”principle StatuteoflimitationsStatutesorlawswhichsetoutthemaximumtimeperiodswithinwhichvarioustypesoflegalproceedingscanbestartedorrights enforced,timebarofaclaim. SubjecttoConnotationusedtoexpressthatanyobligationprovidedinalegaltextwillbebecomeeffectiveonlywhenacontracthasbeen executed.Example:“SubjecttocontractthecontractorshalldesignandexecutetheworksspecifiedintheBillofQuantity” SubstantialcompletionAmatteroffactwhichisrequiredtodischargecontractualobligations.Theword“substantial”isnotintendedtoconveythe meaningofabsoluteexactnessbuttoconveytheconceptofalmostbeingcomplete,andthatthestateofcompletionis materiallysototheextentthatthebuildingcanservetheintendeduse.Usuallyconstructioncontractsdefinewhatismeantand provideatthisstagethateithertheengineerothearchitectshallissueacompletioncertificate.Butinprinciplecompletion doesnotmeanautomaticallyacceptanceoftheworksorreleasefromliability.Completionmeansinfacttopermitthe employertotakepossessionoftheworksandtoallowthecontractortoleavethesite Taking-Over(seealso reception)Theterm“taking-over”shouldbeusedwithcare.Civillawpractitionerswillsometimeshastilyassumethattaking-overmeans dischargeoracceptanceoftheWorksinaccordancewithdomesticlegislation.FIDICusestheterminaslightlydifferent sense TerminationTheendingorfinishingofacontractforconvenienceandforbreachasaresultofanunilateraldeclaration,whichmustbe distinguishedfromrescission,repudiation,avoidance,withdrawal TimeisoftheessenceStipulationinacontractwhichdenotesthedutyofonepartytoperformwithinaspecifiedperiodoftime,orelsetheotherparty mayterminatethecontract
TimeextensionConstructioncontractformswhichoriginatefromcommonlawjurisdictionsusuallyprovideclaimsforextensionoftimein ordertoensurethattheemployermaysueforliquidateddamagesifthecontractorfailstocomplywiththeagreedtimefor completion.Ifandwhentheemployerpreventsthecontractortoprogresswiththeworksthecontractorisentitledtoclaim fortimeextension TortWrongfulbehaviourrecognizedbylawsufferedbysomebodyresultinginaninjuryorharmconstitutingthebasisforaclaimby thevictimagainsttheresponsibleperson TorescindToannul,avoid,orcancelacontract,andrestorethepartiestothepositiontheywereinbeforethecontractwasenteredinto VOB (Verdingungsordnung fu¨rBauleistungen= Vergabeund Vertragsordnungfu¨r Bauleistungen)
SetofRulesdevelopedandpublishedbytheGermanAwardandContractCommitteeforConstructionWork.Primarilyaimed torulepublicworksonlytodaytheyarepartiallyusedbythewholeindustryandevenforcontractswithconsumers.Theso calledProvisionsontheawardingofconstructionworksaredividedinthreeparts,suchastheGeneralProvisionsonthe awardingofcontractsforconstructionwork(partA),Generalcontractualconditionsfortheperformanceofconstruction work(partB)andtheGeneraltechnicalcontractualconditionsforconstructionwork(partC).WhereaspartAcontains regulationonprocurementlawfortheawardofpublicworkcontracts,partBandpartCareinuseinbothsectors,privateand public.TheprovisionsofpartB,nothavingalegalstatus,canbeusedasgeneralTermsandConditions,whichdonot underliethe“mainrouge”principlewhichisruledbylaw(Sect.305etseq.GermanCivilCode)totheextentthatno contractualamendmentstotheprovisionsoftheVOB/Bhavebeenmade.VOB/Bdiffersinvariouspointsfromtherulesof theGermanCivilCode VoidOfnolegalforceorbindingeffect WarrantyApromiseorassurance.Anagreement,forexample,withreferencetogoodswhicharethesubjectofacontractofsale,but collateraltothemainpurposeofsuchcontract,thebreachofwhichgivesrisetoaclaimfordamages,butnottoarighttoreject thegoodsandtreatthecontractasvoid.Acommonusageofthetermistorefertoamanufacturer’swrittenpromiseor guaranteeastotheextenttowhichhewillrepair,replaceorotherwisecompensatefordefectivegoods WhiteBookFIDICcontractformforconsultants’services,4thEdition2006 WorkmanshipSkillinanoccupationortrade YellowBookAFIDICcontractformfordesignandbuildprojects YSEFinnishstandardtermsofcontractsforworks,alsousedfromtotimetotimeinBalticstates ZoningKeytoolforcarryingoutplanningpolicy,usedinurbanplanningforasystemofland-useregulationinvariouspartsoftheworld. Theexpressionisderivedfromthepracticeofdeterminingthesizeanduseofbuildings,wheretheyarelocatedand,inlarge measure,thedensitiesofthecity’sdiverseneighbourhoods.Zoningisusuallybasedonmappedzoneswhichseparateoneset ofdevelopmentsfromanother.Zoningregulationsfallunderpublicpolicyrightsgovernmentsandmunicipalitiesmay exerciseoverrealproperty
Also each of the books includes a Guidance for the Preparation of Particular Conditions which gives additional help. The reader will find therein commentaries as well as pre-formulated additional Sub-Clauses for particular use as it may be appropriate depending on the specific requirements of a project or any by virtue of the governing law.
Finally each of the books includes timelines. It is strongly recommended to have a view on it before entering into any contract. The timelines give a clear and comprehensive overview about all major events, such as the Commencement Date, the date on which the Taking-Over Certificate will be issued, the date on which the Performance Certificate will be issued or the date on which the Perfor- mance Security will be restored. The parties to the Contract will also be informed about the typical sequence of Payment Events and the typical sequence of Dispute Events. In the Gold Book this concept has been maintained and amplified. A further Guide to the Gold Book is in preparation.
In summary, FIDIC books should be read in their common law context having regard to the governing law. The meaning of any contract term which is not yet defined in Clause 1 should not be determined by mere translation. Using diction- aries without having in mind that the wording has a common law background may, and quite often will, lead to misunderstandings. FIDIC has obviously adopted a considerable number of common law concepts, such as the concepts of substantial completion and time at large. The rationale of some FIDIC features lies in the fact that common law lacks to provide appropriate remedies. This is for example the case concerning the obligation to remedy any defects. Whilst Common law pro- vides only for damages as the normal and exclusive legal remedy for breach of contract, Civil law is much more sophisticated. However, the Defects Notification Period as referred to in Clause 11 of the 1999 FIDIC Rainbow Edition is a complementary relief and not exclusive at all.
Thus the following way of working is appropriate:
l Identify the relevant term
l Check definitions in Clause 1
l Check the common law legal background of the term or of the Sub-Clause which includes the term
l Take in account any relevant provisions of the governing law dealing with interpretation of contracts
l Identify the true meaning of the term in its contractual and legal context
l Try not to denature the original meaning of the term even though used in a Civil law context
How does this work in reality? The following examples will enlighten the recom- mended approach:
(1) Supposed a Contractor is to construct a waste water treatment plant in Poland.
According to the Contract he shall pay delay damages to the Employer if he fails to comply with Time for Completion. The Contract is governed by Polish law.
The question may arise whether according to the contractual wording delay damages should be understood as a “genuine estimate of damages” in the event of
failure to comply with the requirement of Time for Completion or whether addi- tional damages may be claimed. The true meaning of delay damages in Common law is clear. It should be a genuine estimate of damages. No further damages will be due, because otherwise the clause will have the nature of a penalty clause which is null and void under Common law. However, in Poland penalty clauses are allowed.
Following the aforementioned test the result will be that the Parties have made their contract with the understanding that delay damages are different from penalties.
However, if the Parties have made their contract in Polish and the translator was not aware of the particular meaning of delay damages he might have used the term penalty instead of delay damages.3It will then be quite difficult to argue that the contractor did not intend to assume liability for penalties.
(2) Supposed the Contractor was to design, supply, construct and install 36 Wind Turbine Generators (WTGs) including all civil and building works, electrical works connecting the WTGs to the switch room and other connection works. Subject to Sub-Clause 1.4 Romanian law is the governing law. Due to defects in the ground which were unforeseeable the foundation works are defective. This was obvious when the Performance Certificate was issued, but no reservation was made. How- ever, although the Performance Certificate has been issued the Employer instructs the Contractor to remedy the defect. The Contractor who is not really unwilling to do so however argues that he should be paid for this. He relies on the fact that the Performance Certificate was issued without any reservation.
The question is whether this is a good defence. According to English law a certificate may be conclusive as to what it purports to certify. However this is a question of contract interpretation. According to Sub-Clause 11.9 the Performance Certificate is deemed to constitute acceptance of the Works, but Sub-Clause 11.10 already states that although the Performance Certificate has been issued, each party remains liable for the fulfilment of any obligation which remains unperformed at that time. According to Romanian law approval or acceptance of the Works constitutes a waiver. On the other hand Romanian law provides for a so called decennial liability. Subject to Romanian law the issuing of the Taking-Over and the Performance Certificate by the Engineer is without prejudice to the Contractor’s liability for latent defects of the Works during the periods of liability imposed by the applicable laws. According to art. 29 Law no. 10/1995 the designer, certified specialised project checker, manufactures and suppliers of construction materials und products, the contractor, the certified technical responsible, the specialised site engineer shall be responsible for any latent defect of the works which become apparent within a period of ten years as well during the whole life cycle of the construction, resulting from a failure in observing the design and performance regulations in force at the date of the execution of the works. Furthermore according to art. 1483 Romanian Civil Code, in the course of ten years any builder of a work is liable as of right, towards the building owner or purchaser, for damages, even
3Beware that in many bilingual dictionaries the connotation “liquidated damages” will be trans- lated by using terms meaning in fact “penalty”.
resulting from a defect of the ground, which imperil the strength of the building or which, affecting it in one of its constituent parts or one of its elements of equipment, render it unsuitable for its purposes.
Furthermore the delivery of the Taking-Over Certificate and the Performance Certificate may involve an adjustment of the General Conditions as such:
The Engineer shall request the Employer to nominate a Taking-Over Commission that acting in accordance with the Applicable Laws shall issue and sign the Taking-Over Minutes upon Completion of Works.
Thus if in course of ten years a latent defect becomes apparent, even though no reservation has been made, the Contractor is liable to make good the defect. His claim for additional payment should therefore be dismissed.
Finally it is worthwhile to emphasise that using English or other languages is always dangerous if the text must be translated at a later date. Needless to say, translators often do an excellent job. However, at times translations are found to be incomplete, misleading or even wrong. In a recent case a German Court of Appeal4encountered such misleading translation. The parties to the dispute were bound to a sales contract according to which the seller was to deliver a machine for the production of refreshing tissues. A dispute arose and the purchaser started legal proceedings before the High Court of Stuttgart. The contract provided for an arbitration clause, which – in its English version which obviously was not written in perfect English – read as follows:
8. Arbitration
The seller and the Buyer, hereinafter referred to a Parties, will take measures to settle amicably all disputes and differences which may arise under the present Contract or in connection with it. If Parties cannot agree upon an amicable settlement then all disputes and differences are to be submitted without recourse to the ordinary court to Stockholm, Sweden.
The Award of the arbitration Commission will be final and bindin(g) upon both Parties.
The seller objected the jurisdiction of the court by relying on the arbitration clause.
The contract was executed in English and Russian. The purchaser submitted a translation of the aforementioned clause which had been drawn from the Russian version. The translation (literally retranslated into English) read as follows:
In case that the Parties cannot achieve an amicable settlement all disputed questions and differences, except the judicial competences of the ordinary courts, shall be submitted in Stockholm, Sweden.
During the proceedings before the Court of Appeal a second version of the arbitra- tion clause, which was drawn from the English version, was produced, which read (in a re-translated English version) as follows:
4OLG Stuttgart, decision from 15 May 2006; file no. 5 U 21/06; [2006] IBR 1407.
In the event of failure to reach amicable settlement, without recourse, legal action shall be taken before the ordinary court at Stockholm.
The High Court of Stuttgart granted the relief sought by the purchaser by relying on the translation of the arbitration clause of the Russian translator arguing that is was not sufficiently clear. It accordingly held that the seller was liable to refund the advance payment which had received. Upon appeal of the seller the Court of Appeal revised the decision and dismissed the claim. It held:
The interpretation of contractual wording is a proper task of the court. This [rule] applies not only to not completely unambiguous and literally screwed up German texts but also to such in a foreign language. Hence, the intention of the Parties covered by the literal wording has to be ascertained also by means of teleological interpretation.
The court then studied dictionaries, took in consideration further relevant circumstances (such as the fact that the Stockholm arbitration is one of the internationally well known arbitration forums and that written communication implied a common understanding of the relevant clause in favour of valid arbitra- tion clause) and finally interpreted the aforementioned clause as it was: a valid arbitration clause.