The above mentioned internationally used standard forms have some common characteristics with which draftsmen and user should be familiar before using the forms.
3.3.1 The Position of the Engineer
All the abovementioned standard forms use the concept of certification and a certifier. The latter is a person or company, usually nominated by the employer, who is authorised to certify payments, completion of the works and to determine claims. The certifier, known under different names such as Engineer, Project Manager, Employer’s Representative, Architect, etc., is a third person to the contract who is not a party to it. However the certifier derives its powers from the construction contract. The idea is that the parties to the contract agree that certain rights and obligations only exist under the condition that the certifier exercises his powers. Hence payment is only due if the certifier evaluates and certifies the relevant amount. A claim is given, if the certifier has determined it. The common understanding of such position is the following:
The building owner and the contractor make their contract on the understanding that in all such matters the Engineer will act in a fair and unbiased manner and it must therefore be implicit in the owner’s contract with the Engineer that he shall not only exercise due care and skill but also reach such decisions fairly, holding balance between his client and the contractor.5
5Sutcliffe v. Thackrah [1974] AC 727.
3.3.2 Certification
As seen above it is a common feature of construction contracts to provide for an independent third party to issue certificates signifying particular events and usually embodying administrative decisions. By means of the construction contract the parties to it agree that such kind of certificates will be issued. The effect of such a certificate is thus no more than the parties agree to it. Usually the function of the certificate is to record factual events involving the certifier to form a judgment or giving an opinion. Whilst such a certificate may be conclusive as to what it purports to certify, generally the parties confer only a power and duty to file interim binding certificates which can be challenged in further proceedings. On the other hand standard forms quite often require the existence or issuing of a certificate as a pre- condition for payments. It is usual to provide a contract provision for evaluation and payment certification by the contract administrator. If no such certificate exists the employer will be entitled to refuse payment. This leads to the question of what happens when the certifier improperly refuses to issue the certificate. It is not at all astonishing that a considerable number of court cases exist, where the alleged improper conduct of a certifier has been dealt with. In such circumstances the English courts usually held that the certifier was considered to be disqualified and that the contractor was entitled to recover payment even in the absence of a certificate (see Uff2005, p.283).
3.3.3 Time
The parties to a contract may make time of the essence. They do this when they fix time for completion or a fixed day of completion. If they have done so, they usually also agree to liquidated damages (LAD) for failure to comply with time for completion. But what happens if the employer prevents the contractor from com- plying with the time limits, either by instructions or by failure to grant possession of the site? In this event there is a risk to slip into time at large, which means that the employer looses his right to sue for liquidated damages in the event of delay by the contractor. At common law the usual approach to preserve the employer’s entitle- ment to liquidated damages is that the contractor becomes entitled to require time extension, if and when delay and disruption occurs which is attributable to the employer.
Usually the certifier has the power to determine whether the contractor is allowed to ask for time extensions. In order to make his decisions transparent and comprehensible a sophisticated system has been established. Quite often networks techniques are used showing the critical path of the works. If and when delay and disruption has any impact to the critical path time extension has to be granted. It depends on the contract wording whether time extension will be given for each impediment or not. Most often only events which directly causes a delay on time for
completion will be considered to be decisive. So called floating time will be owner owned and thus consumed in favour of the employer before any time extension can be granted.
3.3.4 Programming
Programming is the central feature to manage progress of the works. In general the contractor has to provide the programme and to update it. It depends on the contract wording whether network techniques have to be used. In such a case the critical path method as referred to in the Delay and Disruption Protocol of the English Society of Construction Law (SCL) will be applied.
3.3.5 Substantial Completion and Taking Over
All the abovementioned standard forms mirror the common law concept of sub- stantial completion. Taking over will be certified by the certifier, but normally the certificate will not release the contractor from any contractual obligations. Only by issuing the so called Performance Certificate the contractual obligations will be deemed to be performed. However, any legal liability will remain binding. Thus, if such a contract form becomes combined with civil law the exact date of reception must be carefully ascertained in order to determine the beginning of any legal defects liability, especially for those countries where the so called decennial liability (French: responsabilite´ de´cennale6) has been introduced by the legislator. If a FIDIC form of contract has been used by the parties the commencement date of the decennial liability will therefore be the date of the issuing of the Performance Certificate only.
3.3.6 Liquidated Damages
The common law approach as to compensation for delay is that of delay or liquidated damages. By contrast in civil law jurisdictions the doctrine of penalty prevails. Care has to be taken that in an international contract a penalty clause may be considered invalid, when common law is the proper law of the contract.
Common law courts permanently hold that penalty clauses are not equitable and therefore void. Thus it is strongly recommended not to use penalty clauses in international contracts. Liquidated damages are where a specific, usually pre- agreed, sum is requested, which must correspond to a genuine pre-estimated
6See Art. 1792 et seq. French Civil Code.
amount for compensation of a probable delay. Thus, under common law, any general wording in standard forms providing for a specific amount or percentage of the contract amount being due for delay will be void, because it cannot be pre- estimated. LAD cover comprehensively all damages resulting from delay.
3.3.7 Claims
In common law based contract forms it is usual to provide a set of claim-management rules. Compliance with such kind of management rules is critical because in general non compliance with claim management rules will lead to the foreclosure of the concerned claim or may influence the assessment of the claim. It is therefore crucial to establish a well organised contract management which requires experienced staff.
A good example for such kind of clauses is contained within the FIDIC Red Book.
Two major claim management requirements are ruled there, one of which is the respect of the notification delay and the other is the requirement to keep contemporary records (see sub-clause 20.1). Failure to comply with the claim management requirements leads to the foreclosure of the concerned claim. Skill and care should be taken in order to establish a claim management which covers all contractual management requirements. Civil law practitioners must understand that the timely notification of claims is a necessary part of daily work.
3.3.8 Dispute Resolution
In most of the common law standard forms alternative dispute resolution mechan- isms have been introduced. For a long time, only arbitration has been used as an alternative to national courts. But today it is quite common to refer to mediation, dispute reviewing or dispute adjudication at a first step. Parties to an international contract should familiarise themselves with such modern forms of dispute resolu- tion. This trend in “preventive law” has been taking hold all over the world, saving time, project costs, and legal fees.
Mediation is a procedure normally presided by a mediator who tries to moderate negotiations and to support any endeavour to find an amicable settlement. The mediator never decides a dispute but he may be asked for his opinion.
Dispute review boards, panels of three experienced, reputable, and impartial reviewers, take in all the facts and circumstances of a dispute and make recom- mendations on the basis of those facts and circumstances and the board’s own expertise and experience.
Dispute adjudication leads to a decision of the adjudicator or Dispute Adjudica- tion Board, if any. The idea of dispute adjudication is to come to a quick result, which should be binding on the parties until revision by arbitration or court proceedings. However dispute adjudication should not be confused with arbitration.
Thus the decision of an adjudicator is enforceable but subject to a following court or arbitration proceedings.
For large, complex projects, most often dispute adjudication is the preferred dis- pute resolution method. It can save enormous amounts of money and time compared with traditional court proceedings or even arbitration. Disputes are settled contem- poraneously with the construction project, which allows the parties to free up time and resources and allows personnel to work on more productive things.
All bespoken contract forms provide Dispute Adjudication except the MF/1 form. There disputes shall be referred directly to arbitration whilst FIDIC and NEC have adopted dispute adjudication clauses. Any dispute arising form or in connection with the contract must first be referred to the Adjudicator or the Dispute Adjudication Board. Under the MF/1 form however, the parties are not allowed to go directly to arbitration when they dispute or question any decision, instruction or order of the Engineer before having given the opportunity to the Engineer to produce relief (compare Cl. 2.6 MF/1).