FIDIC Forms Of Contract

Key Features, Choice Of FIDIC Contracts

and Qatari Law aspects

Richard Birks, Partner

Eversheds LLP
Society of Construction Lawyers, 10 May 2010
Overview

• Forms Available
• Key Features
• Qatari law issues
FIDIC Forms of Contract

Employer Design:
• The Construction Contract
- the “Red Book”

Contractor Design:
• The Plant Design and Build
Contract - the “Yellow
Book”

• The EPC/ Turnkey

Contract - the “Silver
Book”
Principles

• Risk allocated to party best able to

bear and control risk

• Recompense and time extension

when unforeseen unpriced
hindrances occur
Choice
• Who designs?
• Who bears quantity risk?
• Design parameters
• Subsoil and other investigations
• Employer’s capacity
• Employers appetite for risk
• Cost factors
• Project financing and complexity

Essentially …

RISK AND COST

Qatari law context

• Law No 22 of 2004 (“the Civil Code”)

• Arabic is the official language

• Overriding principle Article 171(1)

“the contract is the law of the contracting

parties and so cannot be revoked or modified
except with the agreement of the parties or
for such reasons as are prescribed by law”
1 Contract Price
Red Book Yellow Book Silver Book

Payment by reference to Lump sum contract price. Lump sum.

engineer’s evaluation. Advance payment. All Advance payment.
Advance payment payments conditional on Performance security.
guarantee. Retention receipt of required
monies. Adjustment for Performance security Retention.
changes in legislation Retention. Currencies for payment
and cost. Adjustments for changes in stipulated – this covers
Employer not liable to legislation and cost payment of damages
Contractor for any fluctuations under contract.
matter or thing in Adjustments for changes
connection with contract in legislation.
or execution of Works Adjustments for changes
except to extent in costs.
Contractor included
amount expressly for it
in Final Statement and
also Statement at
Completion
Contract Price – Qatari law issues

• Article 697 – obligation of employer to pay on

delivery of the work
• Article 698 – obligation to pay for work that
consists of distinct parts
• Article 699 – where contract is silent on value of
payment
• Article 700 – increase in raw material costs
• Article 708 – where price is based on estimate
• Article 709 – where price is a lump sum/total fee
2 Extensions of Time
Red Book Yellow Book Silver Book

Variations. Variations. Variations.

Exceptionally adverse Exceptionally adverse Cause of delay giving
climatic conditions. climatic conditions. entitlement under the
Unforeseeable shortages of Unforeseeable shortages. Conditions.
personnel or Goods caused Employer acts of Delay, impediment or
by epidemic or government prevention. prevention caused by or
actions cause of delay Any other cause of delay attributable to Employer.
giving entitlement under giving an entitlement under Delay caused by
the Conditions. the Conditions. authorities.
Delay, impediment or Delay, impediment or
prevention attributable to prevention caused by or
Employer, Employer attributable to Employer,
personnel or Employers his personnel or Employers
other contractors on Site. other contractors on Site.
Delay caused by
authorities.
EoT – Qatari law issues

• Qatari law is likely to allow a contractor a

reasonable amount of time to complete the
works where a delay was caused by an act of the
employer
• Similar to “time rendered at large”
• Article 256 – relief for debtor where creditor
causes delay
• Article 694(3) – opportunity for contractor to
remedy
• Article 695 – owner as cause of defect
3 Design Responsibility
Red Book Yellow Book
- Contractor generally
responsible for design.
Employers Requirements
and Contractors Proposals.
Errors in the Employers
requirements.
Contractor review period.
Fitness for purpose.
If errors, omissions,
ambiguities, inconsistency,
defects found in Contractor
documents, Contractor
documents and Works
corrected at Contractors
cost notwithstanding
consent or approval.
Silver Book
Contractor generally
responsible for design.
Contractor deemed to have
scrutinised Employers
requirements.
Contractor responsible for
design of Works and for
accuracy of Employers
Requirements.
Contractor undertakes the
design. Contractors
Documents, execution of
completed Works will be in
accordance with Laws in
Country and documents
forming Contract (as
altered/modified by
variations).
Design Responsibility – Qatari law
issues

• Article 711 – decennial liability

• Article 712 – liability for different aspects of the

works

• Article 713 – liability for defects

4 Site Conditions
Red Book Yellow Book Silver Book

Employers to make Employer to provide Employers to make

available to Contractor site data. available to Contractor
all relevant data re Contractor responsible all relevant data re
subsurface and for interpretation. subsurface and
hydrological conditions Deemed awareness (to hydrological conditions.
Contractor responsible the extent practicable). Contractor responsible
for interpretation. for verifying and
Sufficiency of Accepted interpreting all data.
Deemed to have Contract Amount.
obtained all necessary Employer has no
information and responsibility for
deemed inspection of accuracy, sufficiency or
site. completeness of data.
Sufficiency of Accepted Sufficiency of contract
Contract Amount. price.
5A Contractors Indemnities
Red Book Yellow Book Silver Book
Injury, sickness, Injury, sickness, Injury, disease, death,
disease, death, disease or death. loss property real or
damage or loss of Damage to or loss of personal (other than
property, real or any property (other Works) to extent
personal (other than than the Works). damage or loss arises
Works) arising out of Contractors care of the out of or in the course
Contractors design (if Works. of or by reason of
any) the execution and design, execution and
completion of Works completion of Works
and remedying defects. and remedying of
Is attributable to defects or not
negligence, wilful act or attributable to any
breach of Contract by negligence, wilful act or
Contractor. breach of Contract by
Employer.
5B Employers Indemnities
Red Book Yellow Book Silver Book
Injury, sickness, Injury, sickness, Injury, sickness,
disease, death disease, death disease, death
attributable to attributable to any attributable to any
negligence, wilful act or negligence, wilful act or negligence, wilful act or
breach of Contract by breach of Contract by breach of Contract by
Employer, Employers Employer, his personnel Employer, his personnel
personnel or agents and or agents and for or agents and for
any matters for which matters for which matters for which
liability cover is liability is excluded from liability is excluded
excluded from insurance cover form insurance cover
insurance cover. (insurances under (insurances under
Contractor has total cap contract). contract).
on liability with
exclusions including
fraud, deliberate default
and reckless
misconduct.
5C Other Indemnities
Red Book Yellow Book Silver Book
Liability for indirect and Contractor has total cap Contractor has total cap
Consequential losses on liability. Level of in liability (excluding
are excluded. Total Cap to be fraud, deliberate default
negotiated by parties. and reckless
Level of Total Cap to be misconduct).
negotiated by parties. Liability for indirect and
Consequential losses Level of Total Cap to be
are excluded. negotiated by parties.
Both parties liability for
indirect and
Consequential losses
are excluded.
Indemnities – Qatari law issues

• Article 259
“An agreement may be reached on the
exemption of a debtor from any liability
arising out of the non-fulfilment of his
contractual obligation or delay in fulfilling it,
unless it is a result of deception or gross
mistake on his part.”
• Article 263 – measure of damages and “loss of
such gain” as has been foregone (consequential
loss?)
• Article 199 – indemnity for unlawful act (tort)
6 Employer Risk
Red Book Yellow Book Silver Book
War, hostilities, War, hostilities, War, rebellion, riot,
rebellion, riot, rebellion, riot, munitions of war,
munitions of war, munitions of war, pressure waves.
pressure waves, use or pressure waves, use or
occupation by occupation by Employer Consequences:
Employer, design of any of any part of the Contractor will give
part of Works by Works except as prompt notice and
Employers personnel, specified; Employers receive time and money
operation of forces of design; unforeseeable
nature that is operation of the forces
Unforeseeable. of nature.
Consequences: Time
and money to
contractor.
7 Defects
Red Book
Contractor obliged to complete
any outstanding work and
remedy defects or damage on
or prior to expiry of Defects
Notification Period which
Employer can extend by up to 2
years
If fails, Employer may carry out
work or procure; Engineer
determines reasonable
reduction in price; terminate
contract if substantial
Yellow Book
Contractor obliged to remedy
defects or damage notified on
or prior to the expiry date of
the Defects Notification Period
Extension of Defects
Notification Period by up to 2
years
Failure to rectify defects:
Employer may carry out work
at Contractor’s cost; or
Employer may require Engineer
to agree or determine reduction
in Contract Price; or Terminate
if defect deprives Employer of
substantially the whole benefit
of the Works etc.
Silver Book
Contractor completes any
outstanding work and remedy
defects or damage on or prior
to expiry of Defects Notification
period.
At Contractors cost to extent
work is attributable to: design,
Plant Materials or
Workmanship, improper
operation or maintenance,
failure to comply with any other
obligation.
Employer can extend by up to 2
years
Date may be fixed by Employer
to remedy defects. If missed
Employer may carry out work
Contractor’s cost,
agree/determine a reasonable
decrease in Contract price,
terminate if substantial
Defects – Qatari law issues

• Article 711
“(1) The contractor and the engineer will be jointly liable
for any destruction or defect, total or partial, in such
buildings as they have constructed or fixed installations as
they have erected, even if such destruction or defect is the
result of a fault in the actual land or the employer has
approved defective buildings or installations. Such
liability will cover any defects appearing in the buildings or
installations that threaten their stability and safety.
(2) If the parties intend that such buildings or installations
remain for a period shorter than 10 years, such liability will
stand during the shorter period and, in all instances, the
period will run from the date delivery of the work is taken
• Article 715 – prohibition on contracting out of Article 711.
8 Force Majeure
Red Book
Exceptional event or
circumstance.
Notice must be given within
14 days of becoming aware
of relevant event or
circumstance constituting
force majeure. Contractor
entitled to EOT and Cost in
specified circumstances.
Option to terminate:
continuous period for 84
days or multiple periods
totalling more than 140
days due to the same
notified force majeur
Yellow Book
Exceptional events or
circumstances.
Notice to be given within 14
days of becoming aware –
objective test.
Contractor entitlement to
EOT and cost in specified
circumstances.
Option to terminate:
continuous period of 84
days; multiple periods
totalling more than 140
days
Silver Book
Exceptional events or
circumstance. Notice to be
given within 14 days of
becoming aware (or should
be aware).
Duty to minimise delay. If
contractor suffers delay
and/or incurs Cost entitled
to EOT and Cost in specified
circumstances. Option to
terminate: Continuous force
majeure period of 84 days
or multiple periods (or
same event/circumstance)
totalling more than 140
days.
Force Majeure – Qatari law issues

• Article 690
“If the thing is destroyed or damaged due to
unforeseen even or force majeure before its
delivery to the employer, the contractor may not
demand the agreed fee nor the value of the
materials her has provided, unless the employer, at
the time of the destruction or damage, is in
breach of his obligation to take delivery of the
work.”

• Article 171(2) – general, exceptional event leading to

contractual obligation becoming onerous, such that he
debtor has a risk of a substantial loss
9A Termination by Employer
Red Book
Specified default on 14 days
notice. Immediately for
insolvency or corrupt gifts.
Employer may complete
works/arrange to do so and
use any materials and
documents. Employer can
terminate for convenience.
Engineer will agree or
determine value of sums due
to Contractor for work
executed
After termination: Employer
may proceed with claims
procedure and withhold further
payments until costs of
execution, completion and
remedying defects, damages,
and all other costs established
and/or any losses and
damages incurred and any
extra costs of completing
Yellow Book
Specified default on 14 days
notice.
Immediately for insolvency or
corruption No obligation to pay
further amounts until cost
position of completing the
Works is established
Employer also entitled to
terminate for convenience -
Contractor entitled to value of
work done plus reasonable
costs etc; no entitlement to
loss of profit; Employer not
entitled to complete the Works
Silver Book
Specified default on 14 days
notice. Immediately for
insolvency and corrupt gifts.
Employer can terminate for
convenience.
Employer can complete Works
and use any materials or
documents and any other
sums due to Contractor.
Employer can proceed with
Employers Claims process,
withhold payment until costs of
completion and remedying
defects established.
9B Termination by Contractor
Red Book
Specified default on 14
days notice.
Immediately for: prolonged
suspension or insolvency.
Employer promptly return
performance security, pay
value of work (as
determined by Engineer),
cost of plant and Materials
ordered and delivered to
Contractor or which
Contractor liable to accept,
any other reasonable Cost
or liability, removal
temporary Works and
Equipment and repatriation
staff and labour and loss of
profit.
Yellow Book
Specified default on 14
days notice. Immediately
for insolvency or prolonged
suspension Employer
required to pay for value of
Works performed,
reasonable costs etc and
loss of profit
Silver Book
Specified default on 14
days notice.
Immediately for prolonged
suspension or bankruptcy,
insolvency, liquidation of
Employer.
Employer to return
performance security, pay
for work carried out, cost of
Plant and Materials ordered
or Contractor liable to
accept, reasonably incurred
Cost or liability, cost of
removal, repatriation of
staff.
Termination – Qatari law issues

• Articles 703 to 707 set out different reasons for

termination in different circumstances
– on completion
– in the event of impossibility
• Article 688
– rectification period
– then termination
– potentially automatic
• Article 184 – contrast ability to terminate
automatically
Any other business?

• Liquidated damages under Qatari law

• Fitness for purpose
• The new FIDIC Construction Subcontract
• Q&A
Thank you for listening

Richard Birks, Partner

Eversheds LLP
Tel: 496 7385
Mob: 325 4387
Email: RichardBirks@eversheds.com