FIDIC and Qatar law - SCL CPD event

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 engineer’s evaluation. Advance payment guarantee. Retention monies. Adjustment for changes in legislation and cost.

Employer not liable to Contractor for any matter or thing in connection with contract or execution of Works except to extent Contractor included amount expressly for it in Final Statement and also Statement at Completion

Lump sum contract price. Advance payment. All payments conditional on receipt of required Performance security Retention.

Adjustments for changes in legislation and cost fluctuations

Lump sum.

Advance payment.

Performance security.

Retention.

Currencies for payment stipulated – this covers payment of damages under contract.

Adjustments for changes in legislation.

Adjustments for changes in costs.

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 TimeRed Book Yellow Book Silver Book

Variations.

Exceptionally adverse climatic conditions.

Unforeseeable shortages of personnel or Goods caused by epidemic or government actions cause of delay giving entitlement under the Conditions.

Delay, impediment or prevention attributable to Employer, Employer personnel or Employers other contractors on Site.

Delay caused by authorities.

Variations.

Exceptionally adverse climatic conditions.

Unforeseeable shortages.

Employer acts of prevention.

Any other cause of delay giving an entitlement under the Conditions.

Delay, impediment or prevention caused by or attributable to Employer, his personnel or Employers other contractors on Site.

Variations.

Cause of delay giving entitlement under the Conditions.

Delay, impediment or prevention caused by or attributable to Employer.

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


- 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.

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


Employers to make available to Contractor all relevant data re subsurface and hydrological conditions Contractor responsible for interpretation.

Deemed to have obtained all necessary information and deemed inspection of site.

Sufficiency of Accepted Contract Amount.

Employer to provide site data.

Contractor responsible for interpretation.

Deemed awareness (to the extent practicable).

Sufficiency of Accepted Contract Amount.

Employers to make available to Contractor all relevant data re subsurface and hydrological conditions. Contractor responsible for verifying and interpreting all data.

Employer has no responsibility for accuracy, sufficiency or completeness of data.

Sufficiency of contract price.

5A Contractors Indemnities


Injury, sickness, disease, death, damage or loss of property, real or personal (other than Works) arising out of Contractors design (if any) the execution and completion of Works and remedying defects. Is attributable to negligence, wilful act or breach of Contract by Contractor.

Injury, sickness, disease or death.

Damage to or loss of any property (other than the Works).

Contractors care of the Works.

Injury, disease, death, loss property real or personal (other than Works) to extent damage or loss arises out of or in the course of or by reason of design, execution and completion of Works and remedying of defects or not attributable to any negligence, wilful act or breach of Contract by Employer.

5B Employers IndemnitiesRed Book Yellow Book Silver Book

Injury, sickness, disease, death attributable to negligence, wilful act or breach of Contract by Employer, Employers personnel or agents and any matters for which liability cover is excluded from insurance cover. Contractor has total cap on liability with exclusions including fraud, deliberate default and reckless misconduct.

Injury, sickness, disease, death attributable to any negligence, wilful act or breach of Contract by Employer, his personnel or agents and for matters for which liability is excluded from insurance cover (insurances under contract).

Injury, sickness, disease, death attributable to any negligence, wilful act or breach of Contract by Employer, his personnel or agents and for matters for which liability is excluded form insurance cover (insurances under contract).

5C Other Indemnities


Liability for indirect and Consequential losses are excluded.

Level of Total Cap to be negotiated by parties.

Contractor has total cap on liability. Level of Total Cap to be negotiated by parties.

Liability for indirect and Consequential losses are excluded.

Contractor has total cap in liability (excluding fraud, deliberate default and reckless misconduct).

Level of Total Cap to be 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


War, hostilities, rebellion, riot, munitions of war, pressure waves, use or occupation by Employer, design of any part of Works by Employers personnel, operation of forces of nature that is Unforeseeable.

Consequences: Time and money to contractor.

War, hostilities, rebellion, riot, munitions of war, pressure waves, use or occupation by Employer of any part of the Works except as specified; Employers design; unforeseeable operation of the forces of nature.

War, rebellion, riot, munitions of war, pressure waves.

Consequences: Contractor will give prompt notice and receive time and money

7 DefectsRed Book Yellow Book Silver 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

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.

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


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

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

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


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

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

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



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.

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


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: [email protected]