Content of the pre-2017 FIDIC forms

Clause 4

Clause 4 covers the contractor's general obligations, including the requirements in respect of contractor designed works.

The reference to design changes throughout the various FIDIC forms but the obligation in respect of carrying out the works remains substantially the same (the wording in italics below is the additional wording included in the analogous clause of the Red Book):

‘The Contractor shall design (to the extent specified in the Contract) execute and complete the Works in accordance with the Contract and shall remedy any defects in the Works.’

In respect of the works which the contractor is to design, these are to be fit for the purposes for which they are intended as defined in the contract.

Subject to the nature of the works, the parties may agree to an amendment in the particular conditions to reduce the design standard to one of reasonable skill and care. It is important that any documents forming part of the contract (for example the specification or employer’s requirements) are consistent with the duty of care set out in the contract and that any design life requirements are set out in the particular conditions.

Subclause 4.2 specifies that the contractor shall provide a performance security (the FIDIC form has a number of sample forms of security) where the amount has been specified in the appendix to tender, and the subclause continues with provisions for extending the security. Some protection is afforded to the contractor as the subclause includes an indemnity by the employer in favour of the contractor against damage, loss and expense resulting from a claim under the performance security:

'... to the extent to which the employer was not entitled to make the claim.'

The sample FIDIC forms are in an on-demand guarantee form, which is payable upon the submission of identified documentation by the beneficiary. While this may be accepted in some markets, many contractors will resist providing an on-demand guarantee and instead seek to negotiate a conditional form of guarantee which can only be called in the event of default by the contractor.

Subclause 4.2 sets out when an employer may make a demand under the performance security and includes amounts an employer is entitled to if the contract is terminated for contractor default (subclause 4.2(d)).  In the English decision in National Infrastructure Development Company Limited v Banco Santander S.A [2017] EWCA Civ 27 the bank tried to argue that the claim for termination damages could only be made once the amount had been determined by agreement or an award. The Court of Appeal dismissed the argument.

Under subclause 4.12 the contractor is entitled to claim an extension of time and additional cost if it suffers delay or incurs cost due to 'unforeseeable' conditions. 'Unforeseeable' is defined as 'not reasonably foreseeable by an experienced contractor'.

In the English decision Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2015] EWCA Civ 712 the Court of Appeal upheld the first instance decision and confirmed that subclause 4.12 requires the contractor at tender stage to make its own independent assessment of the available information and draw upon its own expertise and experience of previous civil engineering projects. It must use this to make its own reasonable assessment of the physical conditions which it may encounter and cannot simply accept the interpretation of the data as included in the tender documents and say that is all that was foreseeable.

Subclause 4.21 provides details of the information required to be inserted by the contractor in the progress reports. The provision of this report is a condition of payment. Under clause 14.3, payment will only be made within 28 days of receipt of the application for payment and the supporting documents, one of which is the progress report.

Clause 5

In the Red Book, clause 5 deals with nominated subcontractors, that is subcontractors selected by the employer but for whom the contractor is still responsible. Nominated subcontractors may be named in the contract or instructed by way of a variation. 

Under clause 5.2, the contractor is not obliged to employ a nominated subcontractor to which it raises reasonable objections – which can include the nominated subcontractor lacking the necessary competence, resources or financial strength or the subcontract failing to adequately protect the contractor from the nominated subcontractor’s failure to perform its obligations.