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FIDIC Contracts: Law and Practice PDF

624 Pages·2009·2.45 MB·English
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FIDIC CONTRACTS: LAW AND PRACTICE RELATED TITLES Partnering and Collaborative Working edited by David Jones, David Savage and Rona Westgate (2003) Delay and Disruption in Construction Contracts 3rd edition by Keith Pickavance (2005) The Law of Insurance Contracts 6th edition by Malcolm A. Clarke (2009) Construction Law and Management edited by Keith Pickavance (2007) Compendium of Insurance Law by Robert Merkin and Johanna Hjalmarsson (2007) Insurance Law: An Introduction by Robert Merkin (2007) Construction Insurance and UK Construction Contracts by Marshall Levine and Roger ter Haar QC (2008) FIDIC CONTRACTS: LAW AND PRACTICE By ELLIS BAKER BEN MELLORS SCOTT CHALMERS ANTHONY LAVERS WHITE KCASE (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:2)(cid:8)(cid:9)(cid:4)(cid:6)(cid:4)(cid:10)(cid:11)(cid:2)(cid:12)(cid:13)(cid:14)(cid:15)(cid:4)(cid:16)(cid:7)(cid:8)(cid:9)(cid:2)(cid:17)(cid:18)(cid:18)(cid:19)(cid:2)(cid:2) (cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:2)(cid:14)(cid:20)(cid:2)(cid:21)(cid:11)(cid:5)(cid:10)(cid:22)(cid:23)(cid:24)(cid:2)(cid:25)(cid:24)(cid:26)(cid:2)(cid:5)(cid:22)(cid:10)(cid:23)(cid:2)(cid:27)(cid:10)(cid:13)(cid:6)(cid:15)(cid:8)(cid:9)(cid:28)(cid:8)(cid:2)(cid:2) (cid:17)(cid:2)(cid:29)(cid:24)(cid:22)(cid:30)(cid:2)(cid:31) (cid:13)(cid:24)(cid:22)(cid:8)!(cid:2)"(cid:4)(cid:15)(cid:6)(cid:10)(cid:11)(cid:2)(cid:29)(cid:24)(cid:22)(cid:30)!(cid:2)#(cid:14)(cid:4)(cid:11)(cid:28)(cid:9)(cid:10)(cid:11)!(cid:2)$%(cid:10)(cid:11)(cid:2)$&’((cid:2)((cid:27))(cid:2)(cid:2) Informa Law from Routledge is an imprint of the Taylor & Francis Group, an Informa business © Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers 2009 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978–1–84311–628–8 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, mechnical, photocopying, recording or otherwise, without the prior written permission of Informa Law. Whilst every effort has been made to ensure that the information contained in this publication is correct, neither the authors nor Informa Law can accept any responsibility for any errors or omissions or for any consequences arising therefrom. Typeset in 10/12 Erhardt by Interactive Sciences Ltd, Gloucester FOREWORD In 1999, three new conditions of contract were published by FIDIC, with their basic structure and wording harmonised around the previous FIDIC Design-Build and Turnkey Contract (the 1995 “Orange Book”) format. These conditions were the Conditions of Contract for Construction, for Plant and Design-Build, and for EPC/Turnkey Projects. The first one is intended for construction works where the Employer is responsible for the design, similar to the old Red Book, and with an important role for the Engineer. The two latter ones are intended for cases when the Contractor supplies the design. The Plant and Design-Build Contract has the traditional Engineer while the EPC/Turnkey Projects Contract has a two-party arrangement. The 1999 Conditions of Contract for Plant and Design/Build retained the essential elements of the earlier Orange Book. It had been noted, however, that new trends in project financing and management, especially related to PFI and BOT, required a different set of conditions, and the Conditions of Contract for EPC/Turnkey Projects were drafted to cater for this. They complement but do not replace the Conditions of Contract for Plant and Design/Build, in that they are intended to be used in a rather specific context, for example: u when greater certainty is sought that price and time will not be exceeded; u when the Contractor is required to take total responsibility for the design and construction of the infrastructure or other facility; u when the Employer is willing to pay more in return for the Contractor bearing the extra risks associated with this; and u when uncertain or difficult ground conditions or other largely unforeseeable risks are unlikely to be encountered. The EPC/Turnkey Contract should not be used for design-build work in other circum- stances. The decision about which form of contract to use should, therefore, always be taken in full consideration of the particular characteristics of the project at hand. While several guides to the 1999 editions have been published, only a few deal with the whole suite of contracts, most notably the Contracts Guide published by FIDIC. For FIDIC, this guide, with detailed guidance to the new contracts, remains the main reference work, especially since it was written by the principal drafter of the three 1999 conditions of contract. However, it aims mainly to explain the basis for interpreting the clauses. This new guide—FIDIC Contracts: Law and Practice—is sure to become a leading industry guide as it also covers the full suite of contracts but does so in a more detailed manner by providing legal commentary and detailed analysis of the clauses for each of the different forms, with relevant case law. Moreover, the guide examines the FIDIC suite of contracts in relation to other organisations, such as the World Bank and the ICC, who are closely involved in their use. This is especially important now that the Multilateral Development Banks (MDBs) and an increasing number of bilateral development agencies have adopted the MDB Harmonised Edition of the Construction Contract for their projects. v FOREWORD The authors have considerable experience in project procurement and international dispute resolution, so they are able to explain and interpret the significance of the contract clauses in the light of extensive use by a large user community that takes in engineers, project managers, quantity surveyors, architects, contractors, and professional staff from public authorities and procurement agencies. The new guide will certainly receive much positive attention from all interested parties. Philip Jenkinson, Chairman of the FIDIC Contracts Committee vi PREFACE For a practising lawyer, a book is a daunting undertaking. In the course of producing this one, I came to understand better why there was so little published assistance in use of the FIDIC contracts. This is not to denigrate the work of other authors on FIDIC subjects: grateful reference to their contributions has been made and recorded in many places within this one. But it was not hard to see the incentive to limit the scope of coverage, for example, to one form of contract. And this was the gap which I, and colleagues, and indeed clients and others in the industry, remarked over many years; the absence of a comprehensive legal text on the entire FIDIC suite, reflecting the full range of options offered by the respective forms. It is, of course, not possible to practise in construction law internationally without being fully aware of the massive presence of the FIDIC contracts in the global construction and engineering industries. Apart from the numerous projects where one or other of the FIDIC contracts is selected for use, there are indirect, often ‘unofficial’ influences, as in the adaptation of older FIDIC editions for use as standard forms (e.g., in Eastern Europe or by State entities in the Middle East) or in reference of terms of bespoke contracts to the FIDIC equivalent for comparison with an international benchmark. For me, at White & Case, this awareness was greatly enhanced by Christopher Seppälä, in the Paris office. His work as Legal Adviser to the FIDIC Contracts Committee and as author and presenter of papers was a constant reminder of the paramountcy of the FIDIC contracts in international construction procurement and disputes practice and was one of the inspirations for this book. Reference should also be made to FIDIC itself. This is in no sense an ‘official’ publication. Indeed, individual aspects of the FIDIC contracts are criticised where that is felt to be justified, but this does not reduce the gratitude felt for encouragement received from Peter Boswell, as General Manager, and Philip Jenkinson, as Chairman of the Contracts Committee. I have always taken the view that FIDIC is ‘big’ enough in attitude to accept differences of opinion and valid criticism and do not regard these as being inconsistent with sincere respect for FIDIC’s many achievements. That the opportunity ever arose to try to fill the perceived gap was due to the enterprise of Informa in making the initial approach to us and the tenacity of Jessica Westwood and her colleagues in seeing the project through. It is even more of a pleasure to record how much is owed to them now that the debt no longer includes an undelivered manuscript. While I have taken responsibility for all editorial judgements, including any errors in the text, final delivery would never have been achieved without the sustained efforts of my co-authors, all White & Case lawyers in the London Construction & Engineering Practice Group. Ben Mellors has, in less than a year, project-managed the team effort from a part- finished draft to an end product. Scott Chalmers combined preparation of draft chapters with lengthy overseas business trips and a young family. Anthony Lavers brought experi- ence of authorship as well as his substantive contribution to the collective effort. vii PREFACE Formal acknowledgement is made throughout to the sources referred to, but more general gratitude is also appropriate to the colleagues, senior and junior, in the Firm and in the wider legal profession, clients and other FIDIC users. Their insights and comments have often enriched my understanding of the forms in practice. As I have indicated, the intention behind this book is to respond to a need which was obvious to me and to many others. How completely it meets that need is for readers to say; the team intends to listen to all constructive comment to factor into the preparation of any future editions, which the publishers have been kind enough to anticipate. What can be stated with certainty is that FIDIC Contracts: Law and Practice is offered to FIDIC users and their advisers in the same spirit of sharing of knowledge and experience from which I and my co-authors have benefited over the years. We hope it will make a difference. Ellis Baker White & Case, London viii OUTLINE CONTENTS Foreword v Preface vii Author Biographies xxvii Introductory Notes for Readers xxix Table of Cases xxxiii Table of Legislation xxxvii List of Tables xxxix CHAPTER 1. FIDIC 1 CHAPTER 2. THE FIDIC CONTRACT 17 CHAPTER 3. PRODUCT 57 CHAPTER 4. PRICE 157 CHAPTER 5. TIME 217 CHAPTER 6. CONTRACT ADMINISTRATION AND CLAIMS 267 CHAPTER 7. RISK, INSURANCE AND SECURITIES 343 CHAPTER 8. REMEDIES 401 CHAPTER 9. DISPUTE RESOLUTION 505 Index 555 ix

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