Fidic 1992 Risk Clauses

7/27/2019 Fidic 1992 Risk Clauses

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FIDIC 4th

Edition 1987/1992 SOME OF THE IMPORTANT CONTRACT

CLAUSES, BOTH TERMS & CONDITIONS, WHICH HAVE ATTENDANT

RISKS FOR THE CONTRACTOR ARE OUTLINED HEREBELOW WITH MY

COMMENTS FOR YOUR REFERENCE.

Clause 2.1 Engineers Duties and Authority

The Contractor must ensure that the Engineer has obtained the specific

approval of the Employer before acting on any of the Engineers

requirements, say for additional works / variations, otherwise the

contractor runs the risk of not being paid for a disputed variation.

However in the event that an instruction is issued by the Engineer

which the Contractor believes to be a variation, but which is contested

by the Engineer, the contractor is duty bound to comply, but must

make his stand very clear that he considers the Engineers requirement

to be a variation involving time and cost and submit his claim inaccordance with clauses 44 or 53, otherwise he runs the risk of losing

his right to time and costs under the contract.

Clauses 2.2 Authority of the Engineers Representative

And 2.3 The Engineer may delegate to the Engineers Representative any of the

duties and authorities vested in the Engineer. The Contractor must

make sure that he receives a copy of such delegation, otherwise he runs

the risk that he will act in accordance with the Resident Engineers

instructions but without having appropriate recourse under the

contract.

Clause 2.5 Instructions in Writing

Any oral instruction issued by the Engineer must be confirmed within

7 days by the Contractor in writing to the Engineer, and such

confirmation must not be contradicted by the Engineer in writing

within 7 days, otherwise the Contractor runs the risk of not being able

to recover costs and / or time.

Clause 3.1 Assignment of Contract

The Contractor shall not, without the prior consent of the Employer,

assign the Contract or any part thereof, etc. otherwise the Contractor

runs the risk of being in breach of a main condition of the contract, andbeing terminated under clause 63.1.

Clause 4.1 Subcontracting

The Contractor shall not subcontract the whole of the Works, and in

addition shall not subcontract any part of the works without the prior

consent of the Engineer, failing which he risks termination under

clause 63.1.

Clause 6.3 Disruption of Progress

The Contractor must give Notice to the Engineer whenever planning or

execution of the Works is likely to be delayed or disrupted unless any

further drawing or instruction is issued by the Engineer within a


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reasonable time. Failure to give such notice may well place at risk the

Contractors entitlement for any requests for additional time and / or

costs.

Clause 7.3 Permanent Works Designed by Contractor

The Contractor remains liable for his design even if approved by theEngineer, and therefore runs the risk of any cost or delay arising from

any fault in the design to the extent that it is not covered by Insurance.

Clause 8.1 Contractors General Responsibilities

The Contractor shall provide all things necessary and shall execute and

complete the Works with due care and diligence, failure of which

render him liable to additional costs.

The Contractor has a duty to give prompt notice to the Engineer of any

error, fault, or other defect in the design of or Specification of the

Works which he discovers, otherwise he runs the risk of any resultant

additional costs or delays.Clause 8.2 Site Operations and Method of Construction

The Contractor shall take full responsibility (the risk) for the adequacy,

stability, and safety of all site operations and methods of construction.

Clause 10.1 Performance Security

This tends to be an on demand bond. The risk here is that an

unscrupulous Employer may well call upon the bond in circumstances

when he is not contractually entitled to do so, and the Contractor has

no remedy except to go to the Courts to try to stop the calling of the

bond, which is an extremely difficult task. This can be time consuming

and costly, with the added risk that if the Employer calls the bonds

when he is in financial difficulties, it will be too late if a year later the

Courts or Arbitrators decide that the calling of the bonds was wrongful,

at which stage, the Employer may have already gone into liquidation.

This is why it is important to contract with a reputable Employer. A

further risk here arises under clause 60.2, that in the event that the

Contractors performance security is delayed, the Engineer does not

have to certify any amount for payment whilst the performance

security is outstanding.

Clause 11.1 Inspection of SiteThe Contractor shall be deemed to have based his Tender on the data

made available by the Employer. The risk here is that if it is

established during the construction period that the information

provided by the Employer was incorrect, the Contractor will only be

able to seek recompense for time and cost if he can demonstrate to an

arbitral tribunal that it was not practicable for him to have carried out

during the tender period, having regard to considerations of cost and

time, the type of inspection and examination required to have

established the accuracy or otherwise of the information provided.

Clause 12.1 Sufficiency of Tender


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The Contractor runs the risk that his prices may not have taken into

consideration all his obligations under the Contract.

Clause 12.2 Not Foreseeable Physical Obstructions or Conditions

The Contractor must forthwith (immediately) give Notice to the

Engineer of any unforeseeable physical obstructions or conditions heencounters, failing which he runs the risk that his claim for time and

cost may not be entertained.

Clause 14.1 Programme to be Submitted

The Contractor must pay particular attention to the preparation of the

programme. Although the FIDIC conditions do not refer to the Critical

Path, most applications for an Extension of Time under Clause 44 do

refer to the impact of a delaying event on the critical path. Therefore

care must be taken to ensure that the programme covers the full

contractual period with the minimum of float, (zero float is preferable),

otherwise the Contractor will run the risk that he may not be able torecover time and cost for any delaying event for which otherwise he

would have been entitled, as the delay may be such as to take up only

part or all of the float.

Clauses 15.1 Contractors Superintendence and Employees

And 16.1 If the Contractor does not provide the necessary superintendence,

skilled technical assistants and the necessary level of skilled workforce,

the Contractor runs the risk of delays and losses.

Clause 17.1 Setting-out

If the Contractor does not carry out the setting out properly and with

the proper survey equipment, he runs the risk of having to remedy any

errors at his own cost.

Clause 19.1 Safety, Security, and Protection of the Environment

If the Contractor does not pay attention to safety and environmental

issues, he runs the risk of being subjected to fines imposed by the

Authorities, as well as stop work orders, either by the relevant

Authorities or by the Engineer.

Clause 20.1 Care of the Works

Clause 20.2 Responsibility to Rectify Loss or Damage

The Contractor carries the risk of caring for the Works, and for thematerials and plant for incorporating therein, to the extent that such

risks are not the Employers risks under clause 20.4, are not covered by

the exclusions and exceptions under clauses 21.4 and 22.2 respectively,

or are not covered under the insurance policies stipulated in clauses 21

through to 25.

Clause 20.4 Employers Risks

The Contractor retains the risk for any riot, commotion, or disorder

solely restricted to the Employees of the Contractor or of his

sub-contractors, for any loss or damage arising from any part of the


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works that have been designed by the Contractor, and for any operation

of the forces of nature that an experienced contractor could reasonably

have been expected to take precautions.

Clause 21.1 Insurance of Works and Contractors Equipment

The Contractor carries the risk for any excesses or deductiblesstipulated in the insurance policies for the items that are not covered in

clauses 20.4, 21.4, and 22.2.

Clause 22.1 Damage to Persons and Property

The Contractor carries the risk of indemnifying the Employer against

all losses and claims which are not included in the exceptions defined

in clause 22.2 and which are not covered by the insurance policies

stipulated in the Contract.

Clause 23.1 Third Party Insurance (including Employers Property)

Clause 23.2 Minimum Amount of Insurance

The Contractor carries the risk of liability for any amount over andabove the minimum amount stipulated in the Appendix to Tender as

well as any deductible stipulated in the insurance policy.

Clause 24.1 Accident or Injury to Workmen

Clause 24.2 Insurance Against Accident to Workmen

The Contractor carries the risk for any exclusions or deductibles

stipulated in the insurance policy.

Clause 25.2 Adequacy of Insurances

The Contractor carries the risk of inadequate insurance cover and

therefore additional costs in the event that there are significant changes

to the nature, extent, or programme for the execution of the Works and

he neglects to inform the insurers.

Clause 26.1 Compliance with Statutes, Regulations

The Contractor carries the risk of penalties and liability in the event

that he fails to conform in all respects with the rules, regulations,

statutes, ordinances, or other laws of duly constituted authorities,

public bodies, etc.

Clause 29.1 Interference with Traffic and Adjoining Properties

The Contractor carries the risk of liability arising from interfering

unnecessarily or improperly with the convenience of the public, oraccess to, use and occupation of roads / properties.

Clause 30.1 Avoidance of Damage to Roads

Clause 30.2 Transport of Contractors Equipment or Temporary Works

The Contractor is deemed to have priced the risk of damaging any

roads or bridges, or the cost of strengthening the same to avoid

damage.

Clause 32.1 Contractor to Keep Site Clear


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Failing which, the contractor runs the risk of being fined or having a

stop work order imposed on the site, in the event that the state of the

site constitutes a safety hazard.

Clause 36.4 Cost of Tests not Provided for

Clause 37.4 RejectionThe Contractor runs the risk of paying for additional tests required by

the Engineer in the event that the test results show that the materials,

plant, or workmanship are not in accordance with the provisions of the

Contract. Breach of Clause 37.4 further carries the risk of termination

under clause 63.1(c).

Clause 38.2 Uncovering and Making Openings

In the event that the Contractor covers up work in breach of clause

38.1, he runs the risk of having to pay for all costs arising from his

having to carry out any of the Engineers instructions in this regard,

such as uncovering the work, making openings, etc.Clause 39.1 Removal of Improper Work, Materials or Plant

Breach of this clause by the Contractor exposes him to a two fold risk.

The first is that the Contractor may have to pay for the costs of another

contractor brought in by the Employer to do this work (clause 39.2),

and the second, a much more serious risk, is termination under clause

63.1(c).

Clause 41.1 Commencement of Works

If the Contractor fails to commence the works without reasonable

excuse, he runs the risk of termination in accordance with clause

63.1(b)(i).

Clause 42.2 Failure to Give Possession

This would entitle the Contractor to Claim an Extension of Time for

completion under clause 44. However, the Contractor runs the risk that

the Engineer may not make a determination (he is not bound to) in

relation to the Contractors claim, in the event that the Contractor does

not give adequate notice under the provisions of clause 44.2.

Clause 44.2 Contractor to Provide Notification and Detailed Particulars

In the event that the Contractor fails to provide notification and

detailed particulars, the Contractor runs the risk that the Engineer maynot make a determination (the clause says the Engineer is not bound

to) in relation to the Contractors claim for an Extension of Time.

Clause 45.1 Restriction on Working Hours

The Contractor is to note that working nights or on public holidays,

runs the risk of disapproval by the Engineer, or of the local authorities

for noise pollution / disturbance.

Clause 46.1 Rate of Progress

If the Contractors rate of progress is slow, for issues that do not entitle

him to an extension of time, he runs the risk of either termination under


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Clause 63.1(b)(ii), or being asked to expedite the Works to comply

with the Time for Completion at his own cost.

Clause 47.1 Liquidated Damages for DelayIf the Contractor fails to comply with the Time for Completion, he runs

the risk of having liquidated damages levied against him, which

depending on the period of delay, can amount to as much as 10% of

the contract sum.

Clause 49.4 Contractors Failure to Carry Out Instructions

During the Defects Liability Period, the Contractor shall, within a

reasonable time, carry out any instructions of the Engineer to execute

any remedial works required as a result of faulty materials, plant or

workmanship, failing which he runs the risk of being liable to the

Employer of the costs of instructing another contractor to carry out thework.

Clause 51.1 Variations

The Contractor shall carry out any variations validly issued to him by

the Engineer under the Contract, which shall be valued at the rates and

prices set out in the Contract. The Contractor here runs the risk that if

his overhead and profit is not uniformly distributed throughout his

rates, the Employer / Engineer may decide to omit or vary a highly

priced item, or increase the quantities of a low priced item, resulting in

reduced profitability or loss for the Contractor.

Clause 52.2 Notice required for Variations

No varied work instructed to be done by the Engineer shall be valued

under sub-clauses 52.1 & 52.2 unless, within 14 days of the date of

such instruction and, other than in the case of omitted work, before the

commencement of the varied work, notice shall have been given of the

intention to claim extra payment or a varied price or rate. The

Contractor here runs the risk that if he does not give his notice as

required under the clause, he will not be able to claim for the varied

work.

Clause 53.4 Failure to ComplyTo successfully lodge a claim under the Contract, the Contractor must

give the required notices and detailed information required under

clauses 53.1, 53.2, and 53.3. Failing which, the Contractor runs the risk

of being paid an amount that will not exceed such amount as can be

verified by contemporary records.

Clause 54 Contractors Equipment, Temporary Works, and Materials

Although the Employer has an obligation to assist the Contractor in

importing his equipment and materials into the country, this remains at

the Contractors risk.

Clause 57.2 Breakdown of Lump Sum Items


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The Contractor runs the risk of any mistakes during his quantity take

off to arrive at any lump sum price items in the Contract.

Clause 59 Nominated Subcontractors

The concept of the Nominated Subcontractor arises from the

Employers desire to secure preferential rates from specialistsubcontractors. The latter are keener to offer more competitive prices

directly to the Employer either due to repeat business with or

guaranteed payments from the Employer.

The Contractors mark up onto the nominated subcontractors price for

co-ordination and attendance tends to be minimal varying from 2.5%

to 12.5%. This is normally not enough to cover his risk, for once he

has given his acceptance to the nomination, the Contractor becomes

fully liable for the performance of the nominated subcontractor to the

same extent that he is liable for his own domestic subcontractors

performance.The only advantage to the Contractor of such an arrangement is the

reduction in the payment risk as he does not have to pay the nominated

subcontractor until after the corresponding payment is received by the

Employer. However, this is becoming more and more a thing of the

past, as many jurisdictions have now outlawed pay when paid clauses

such as the United Kingdom, Australia, and Singapore, to name but a

few.

Clause 60.5 Statement at Completion

In his statement at completion, the Contractor must include all claims

on any matter arising out of or in connection with the Contract or

execution of the Works, otherwise he runs the risk of being barred

from raising these claims at any time in the future, unless such issues

arise after the date of the Statement of Completion.

Clause 60.10 Time for Payment

The General Conditions of Contract allow the Contractor two remedies

for delayed payments. Interest at the rate stated in the Appendix to

Tender, and the Contractors entitlement to slow down or suspend the

Works under clause 69. These rights are sometimes deleted in the

Conditions of Particular Application, with the Contractor running therisk of potentially damaging delays and costs as a result of payments

that are excessively and unduly delayed.

Clause 63.1 Default of Contractor

Many of the risks related to this clause have already been highlighted

earlier. Suffice it to say here that the Contractor must remain vigilant

and be aware of any notice issued to him under the Contract which

could lead to the invoking of this clause by the Engineer.

Clause 65.2 Special Risks

This refers to clause 20.4(b) and excludes rebellion, revolution,

insurrection, or military or usurped power, or civil war, unless they


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relate to the country in which the Works are to be executed. This

transfers the risk back on to the Contractor in a situation where he has

ordered materials from abroad and which are unavoidably delayed as a

result of any one of these risks taking place in the country of origin of

these materials.Clause 66.1 Release from Performance

If any circumstance outside the control of both parties arises after the

issue of the Letter of Acceptance which renders it impossible or

unlawful for either or both parties to fulfill his or their contractual

obligations, or under the law governing the Contract the parties are

released from further performance, then the Parties shall be discharged

from the Contract.

Clause 67.1 Engineers Decision

If the Contractor is not satisfied with the Engineers decision under thisclause he must give notice of his intention to commence arbitration

within 70 days of receiving such decision, otherwise the Engineers

decision becomes final and binding.

Clause 70 Changes in Cost and Legislation

The Contractors risk related to changes in costs either as a result of

price fluctuation or changes in legislation is transferred to the

Employer to the extent stated in the Conditions of Particular

Application.

Clause 71 Currency Restrictions

Clause 72 Rates of Exchange

The Contractors risk related to currency restrictions and changes in

the rates of exchange of a foreign currency where the Contract

provides that part or whole payment is made in that currency is

transferred to the Employer.

Fidic 1992 Risk Clauses

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