subcontractor to be a "nominated Subcontractor" as clause 59.

1 (Definition of
"nominated Subcontractors") does not include the word "named". Thus,
exception (c) may apply equally to the nominated Subcontractors and other
subcontractors named in the contract. Contractors are often required to list in
their tender their proposed subcontractors. If the Contractor receives no adverse
comment and his tender is accepted, it is obviously sensible that the Contractor
should have to seek no further consent. The definition of nominated
Subcontractor is itself very wide: see the commentary under clause 59.1.

In general, the Contractor will be well advised to obtain consent for his every
action in connection with sub-contracting.

4.2: This sub-clause is intended to secure the transfer to the Employer of

guarantees given to the Contractor by subcontractors. Thus, if there is a need to
claim on the guarantee, the Employer can deal directly and is not dependent
upon the survival or willing co-operation of the Contractor. The difficulty with this
sub-clause is that virtually every subcontractor has, by entering into his sub-
contract "undertaken ... [a] continuing obligation extending for a period exceeding
that of the Defects Liability Period". Whilst the subcontractor's right or obligation
to remedy defects in his works expires with the Defects Liability Period, he has a
continuing obligation to pay damages for breach of contract for defects in his
works until the expiry of the limitation period. Thus, if the clause was taken
literally, the Employer would be entitled to the assignment of all sub-contracts.
Accordingly, a Contractor would be well advised to seek to amend this clause to
limit the obligations to be assigned to guarantees and obligations other than the
basic contractual obligations and/or to prohibit the Employer from pursuing the
Contractor in relation to any defects emerging from the subcontractors' works.

It may be important to appreciate the distinction, in English law at least, between

assignment and other transfers of rights such as novations. An assignment will
not give the Employer the same rights as if the contract was directly between the
Employer and the subcontractor. The Employer will only have the same rights
against the subcontractor as the Contractor would have had. Thus, if for any
reason the Contractor has suffered no loss as a result of some breach by the
subcontractor, the Employer would be unable to recover against the
subcontractor regardless of the loss which he had incurred. Assignments are
also subject to any rights the Contractor may have against the subcontractor, for
example, a defence of set-off. By contrast, under a novation, the original contract
comes to an end and a new contract is formed between Employer and
subcontractor. Novations can be implied but normally are agreed expressly
between Employer, Contractor and subcontractor. This is necessary as, under a
true novation, the Contractor is released by the subcontractor from any liability.
Assignments can only transfer the benefit of the contract and not the burden.
Novation can transfer the burden but this requires careful drafting.

This clause should be read with clause 54.5 (Conditions of hire of Contractor's
Equipment), clause 54.7 (Incorporation of clause in subcontracts) and clause
63.4 (Assignment of benefit of agreement) which seek to secure for the Employer

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the benefit of subcontractor, hire and supply agreements in the event of the
termination of the Contractor's employment under clause 63.1 (Default of
Contractor). Terms for inclusion in nominated sub-contracts are specified by
clause 59.2 (Nominated subcontractors; objection to nomination).

In English law, the potential liability of subcontractors to the Employer in the

absence of a contractual link is in a state of some uncertainty. The minimum
requirement seems to be that the subcontractor must either have caused
physical damage to some property of the Employer other than that upon which
the subcontractor was working or have been in a special relationship with the
Employer. This effectively means that the subcontractor should be a specialist
subcontractor upon whom the Employer is relying for particular expertise or
design. See the House of Lords in Junior Books v Veitchi (1983) 1 AC 520; 21
BLR 66 and the Court of Appeal's decision in Simaan General Contracting v
Pilkington Glass (1988) 40 BLR 28. For an Australian view, in a case brought by
a subcontractor against an Employer, see the Supreme Court of ACT decision in
S.W. Neilsen (Canterbury) v PTC Constructions (1987) B&CL 387.

CLAUSE 5 : Language of the Contract

This clause requires the language or languages of the contract to be stated and,
in the case of more than one language, it requires the Ruling Language to be
agreed. The law of the contract is also to be set down.

If, when all the contract documents are read together, there is any ambiguity or
discrepancy, the Engineer is to issue an instruction explaining it and adjusting the
documents as necessary. In reaching such decision, he is to treat the contract
documents as having priority in the order set out in the clause.

Sub-clause 5.1 is essentially the same as the 3rd Edition but clause 5.2 has been
substantially amended to provide a full priority listing for the contract documents.

5.1: With the exception of references in Part II to required language ability in

clause 15.1 (Contractor's superintendence) and clause 16.1 (Contractor's
employees), there are no references to language or the Ruling Language in any
other part of these conditions. Thus, a Ruling Language is established by the
completion of Part II but no use is made of it. There is no requirement that
communication between the parties or at least notices, certificates etc should be
in a particular language nor, significantly, is there any statement of the language
in which any arbitration is to be conducted. Although there is room for argument
that the mere existence of a Ruling Language carries with it an implication that
communications should be in that language, it is very difficult to identify the limits
of the application of such a term. The silence of this clause could lead to
considerable confusion and, in a dispute, could be an important factor in
complicating the appointment of arbitrators and greatly increasing the costs of

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the proceedings. Parties would therefore be well advised to spell out their
intentions. For example, they could agree that all communications between the
parties and with the Engineer should be in the specified language as should
certain categories of records which are likely to be scrutinised for purposes such
as for valuation or in a dispute.

Similarly, although the law of the contract is to be nominated in Part II, the law of
the procedure of an arbitration is not specified. Thus, if an ICC arbitration takes
place in Paris, it will be French procedural law that will apply and would be
enforced, if necessary, by the French courts. The parties may wish to make a
conscious decision and agree where arbitrations should take place and/or the
procedural law to apply with an amendment either to this sub-clause or to clause
67 (Settlement of disputes).

The nominated law of the contract does not exclude the local or other countries'
laws entirely. The following lists are not exhaustive:-

(a) Local laws may impinge in the following areas:-

Working days and hours
Employment rules
Import and export of plant, materials etc
Taxes and duties
Planning
Clause 26 (Compliance with statutes, regulations)

(b) The laws of other countries may impinge in these areas:-

Insurance, for example, decennial liability
Performance security
Arbitration procedural law
Off-site manufacture
Goods in transit

In addition, rules adopted such as a Standard Method of Measurement or the

ICC rules of arbitration will govern areas of the contract. In clause 63.1 (Default
of Contractor), the expression "deemed by law" appears. The above
demonstrates that such an expression is imprecise.

Difficulties may be encountered if the specified law is not recognised by a country

whose courts are being asked to enforce a contractual remedy or an arbitrator's
award. In DST v Raknoc (1988) 2 AllER 833, the English Court of Appeal refused
to recognise the existence of lex mercatoria. A party had sought to persuade the
court that there existed a transnational body of commercial law but the court
remained sceptical. Nevertheless, the English courts will normally enforce such
an award.

"...the law of which shall apply to the Contract...". The boundary between the law
of the contract and other laws is made no easier to draw by these words. It

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appears to be intended that the influence of the named law should reach beyond
the construction and interpretation of the contract.

In countries with civil law systems such as France and a number of Middle
Eastern countries which have modelled their systems on France, the civil code, a
part of private law, will apply to many projects undertaken in those countries. If
the project is a public works project, however, the contract will be an
administrative contract and certain specific public law rules apply in the public
interest, in many cases regardless of the terms of the contract. If the contract is a
private law contract certain terms are also imposed or implied.

In such a civil law country, a choice of the law of the contract other than the law
of the country would be impracticable, even if legal. In many cases an arbitration
award based on a foreign law might not be enforceable in the civil law country for
reasons of public policy. In any event considerable difficulties would result from
the application of two relevant laws to the whole of a single contract. All countries
require that the local law or lex situs governs rights of property and many
countries have extended this to matters such as employment law. Some civil
code countries have extended this to personal obligations relating to property so
that there would be virtually no scope for a different nominated law of the
contract. Points of similarity and dissimilarity with civil code principles common to
many countries are noted in the comments under the following clauses:

- clause 12.2 (Adverse physical obstructions or conditions) - Theorie des

sujetions imprevues;
- clause 20.4 (Employer's risks) - Theorie de l'imprevision;
- clause 47.1 (Liquidated damages for delay) - civil and administrative law
treatment of penalties;
- clause 51.1 (Variations) - Power of Administration to vary contract or
Fait du Prince;
- clause 52.1 (Valuation of variations) - Power of Administration to vary
contract or Fait du Prince;
- clause 65 (Special risks) - Theorie de l'imprevision;
- clause 70.1 (Increase or decrease of cost) - Theorie de l'imprevision;
- clause 70.2 (Subsequent legislation) - Fait du Prince;
- clause 71.1 (Currency restrictions) - Fait du Prince;
- clause 72.1 (Rates of Exchange) - Theorie de l'imprevision.

Briefly, Theorie des sujetions imprevues (literally the theory of unforeseen

constraints) permits compensation of a Contractor who encounters an
exceptional physical constraint which is not due to any act of the administration
and was not foreseen at the time of the contract. Theorie de l'imprevision
(literally, theory of want of foresight) compensates the Contractor in the event of
unforeseeable financial, economic and political circumstances. Fait du Prince,
meaning act of state, provides an opportunity for the Contractor to obtain full
reimbursement where the administration has somehow intervened by changing
the law or acting in a way that alters the economic balance of the contract. In this
context, it is worthy of note that normally for the purposes of Fait du Prince, the

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government is regarded as one and indivisible so that an action of one ministry
which affected a Contractor in contract with another ministry would be a ground
upon which the Contractor would be entitled to rely to obtain compensation. See
the comment under clause 26.1 (Compliance with statutes, regulations). An
extreme expression of Fait du Prince is the power of the administration to
terminate the contract unilaterally.

This clause should be read with clause 26 (Compliance with statutes,

regulations) and clause 70.2 (Subsequent legislation). The difficulty of
distinguishing the roles of arbitration and the administrative courts is mentioned
under clause 67.3 (Arbitration).

5.2: Under the 3rd Edition, the conditions Part I and II were given priority over
the remainder of the contract documents which were to be taken as mutually
explanatory. Reasonably unforeseen costs flowing from the Engineer's
instructions were recoverable but no time. In this edition, all the documents are
initially to be taken as mutually explanatory but the Engineer is given a full order
of priority to assist him in the resolution of discrepancies. Parts I and II are
substantially demoted in the order. There is no provision for time or costs and
the Contractor would have to endeavour to bring any consequences of the
Engineer's instruction within clause 44.1 (Extension of time for completion)
and/or clause 51.1 (Variations). The ICE, in their 5th and 6th Editions, decline to
give a list of priority of the documents, requiring all the contract documents to be
read as mutually explanatory.

Although the prescribed order is consistent with the principle of giving particular
clauses precedence over general Standard Form clauses, there is a danger for
the parties that the familiar and desired terms of these conditions could be
overridden by one or other of the four preceding documents. Thus, the parties
must check the preceding documents very carefully for anything which could be
inconsistent with the conditions that they require. In particular, there is a danger
that documents intended to be subordinate to the conditions will be incorporated
by reference into the documents having priority. For example, clause 2 of the
Contract Agreement incorporates all of the particular documents listed in this
sub-clause as well as the Specification, the Drawings and the bill of quantities.
That incorporation is a necessary part of the Agreement which may be the only
document signed by the parties and must therefore be comprehensive.
Nevertheless, if it is used, it does not assist in the interpretation of clause 5.2. It
is submitted that the correct approach is to disregard that particular incorporation
as it brings in all contract documents and does not advance the priority issue. If
however, the Letter of Acceptance, for example, was to incorporate by reference
the Specification, then the Specification would have to be studied with extreme
care to ensure that the conditions were not accidentally overruled.

In the event of an ambiguity or discrepancy in the contract documents, the

Engineer is obliged to issue an instruction. The clause does not specify who may
trigger this action nor, unusually for this edition, is there any notice provision. It is
submitted that either the Contractor or the Employer must have pointed out an

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alleged ambiguity or discrepancy and that the Engineer should not issue
instructions under this clause uninvited. The existence or otherwise of ambiguity
or discrepancy will be of considerable significance as, in the absence of such a
problem, the documents are to be taken as mutually explanatory. For example,
the Contractor may consider that wording included in his tender is more
advantageous to him than a condition in Part I: if he can demonstrate an
ambiguity or discrepancy between the clauses, his tender would take priority.

It seems clear that the Engineer is to instruct on matters of interpretation as well

as discrepancies in relation to the physical work. This is plainly sensible as a
contract could otherwise run into difficulties in the absence of a decision on a
point of interpretation. This is reinforced by the fact that the Engineer is obliged
by clause 67.1 (Engineer's decision) to settle matters of interpretation which are
the subject of dispute between the parties.

It is submitted that the Engineer is to instruct on ambiguities and discrepancies

not only between the various contract documents but also within documents.
Thus, it would be possible to ask the Engineer to instruct, for example, to resolve
the discrepancy between the time limits for claims set out in clause 52.2 (Power
of Engineer to fix rates) and clause 53.1 (Notice of claims). To achieve maximum
clarity, any of the ambiguities referred to in this commentary which are not
resolved by amendment to the contract, should be resolved by instruction of the
Engineer at the outset. Often, however, the parties may decide it to be in their
respective interests to maintain an element of ambiguity in the hope that it will
give them either flexibility during the work or room for negotiation at the
conclusion of the works.

The Engineer's instruction would not normally entitle the Contractor to additional
payment directly as it is merely interpreting the existing contractual obligations
between the parties and thus cannot itself amount to a variation. The instruction
may however mean that work executed or to be executed by the Contractor was
not part of the original contract works and thus must be paid for as a variation.

Part II provides alternative clauses, either prescribing an alternative order of

priority or stating that the various documents are to be taken as mutually
explanatory.

CLAUSE 6 : Drawings to the Contractor

The Engineer is to provide two free copies of the drawings to the Contractor.
The Contractor will have to make any further copies himself. The Contractor
must keep the drawings and specification confidential and use them or show
them to a third party only when strictly necessary for the project. When the
project is complete, the Contractor must return all such documents to the
Engineer. The Contractor should provide the Engineer with four copies of all
drawings, specifications etc prepared by him and approved by the Engineer.

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Further copies should be supplied at the request of the Engineer at the
Employer's cost.

The Contractor should keep one copy of the drawings on site and available for
inspection and for use at any reasonable time by the Engineer or anyone with the
Engineer's written authorisation.

If the Works are likely to be delayed or disrupted unless a drawing or instruction

is issued by the Engineer within a reasonable time, the Contractor must give a
notice to the Engineer and a copy to the Employer, giving the details.

If, despite the notice, the drawing or instruction is late and the Contractor suffers
delay or incurs costs, the Engineer must consult the parties and grant time and
costs.

In considering a grant of time and costs to the Contractor, the Engineer must
take into account any contributory delay by the Contractor in his production of
drawings.

The principles and much of the wording of the 3rd Edition have been retained for
the 4th Edition but sub-clause 6.1 has been considerably expanded and sub-
clause 6.5 is entirely new.

6.1: When reading this clause it is to be borne in mind that the definition of
Drawings at 1.1(b)(iii) is very broad and includes not only the Engineer's
drawings, calculations and technical information but also "all drawings,
calculations, samples, patterns, models, operation and maintenance manuals
and other technical information" submitted by the Contractor and approved by the
Engineer. The definition covers not only the documents in existence at the time
of the contract but also documents brought into being during the course of the
contract. In addition, it covers items other than documents such as samples,
patterns and models which are obviously not capable of being readily
reproduced.

The first sentence seems to apply only to drawings supplied by the Engineer:
where drawings are to be provided by the Contractor, it is the Contractor that
provides copies. The obligation to keep the Drawings confidential is especially
limited to those provided by the Employer or Engineer. As to the documents to
be returned, it is submitted that this obligation is also limited to those provided by
the Engineer as this clause uses the term "provided" for documents supplied by
the Engineer to the Contractor and "supplied" for those from the Contractor to the
Engineer. Contractors should have in mind that the confidentiality duty seems to
include subcontractors by the reference to "a third party". Although the Employer
would normally have difficulty demonstrating loss from a breach of the clause,
subcontractors should not be given more than they need without the Engineer's
approval.

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"... four copies of all Drawings, Specification and other documents". It is
submitted that a reasonable reading of this obligation will be that the words "other
documents" limit the obligation to provide four copies to those items within the
definition of Drawings which are themselves documents. Thus, it is not
necessary to produce four copies of the models, samples etc.

6.2: In view of the broad definition of the term "Drawings" at clause 1.1(b)(iii),
this obligation is apparently not limited to documents but includes samples,
patterns and models.

6.3 The failure by the Engineer to give drawings or instructions on and time
is generally regarded as being a breach of contract by the

6.4 Employer who has an implied duty to ensure that the Engineer provides
such documents without causing delay. It is further generally accepted that in
the absence of provision for such delays in the extension of time clause, late
drawings would set time at large. These sub-clauses provide for extension of
time and costs to be given where a drawing or instruction is late despite the
Contractor having given notice of the potential delay. In the event that no such
notice was given, it would, it is submitted, be possible for the Contractor to
comply with the notice provision under clause 44.2 (Contractor to provide
notification and detailed particulars) and claim an extension of time under clause
44.1(d) for "any delay, impediment or prevention by the Employer", at least
where the need for the drawing or instruction by a particular time was obvious.

It is submitted that the Contractor's notice need not have specified the delay that
in fact occurs. Sub-clause 6.4 does not refer the "delay and/or...costs" back to
the "delay or disruption" in sub-clause 6.3, so the Engineer would be wrong to
refuse an extension on the ground that the forecast consequence had not
materialised.

There is scope for debate as to whether the requirements of clause 6.3 would be
satisfied by a programme marked up with the critical dates for information and
annotated to provide the details required by the sub-clause. The programme
under clause 14.1 (Programme to be submitted) is not normally sent to the
Employer, but to comply with this sub-clause it must be copied to the Employer in
compliance with clause 68 (Notices). Whilst it is reasonably clear that this was
not the intention of the draftsman, it is submitted that such a programme could be
capable of complying with the sub-clause's requirements. See L B Merton v
Leach (1985) 32 BLR 51 for the position on an English standard form of contract.

"... within a time reasonable in all the circumstances". The draftsman has not
created a direct tie between the reasonable time specified by the Contractor in
sub-clause 6.3 and the definition of a failure in sub-clause 6.4. The function of
"within a reasonable time" in sub-clause 6.3 is presumably to ensure that the
Contractor's notice is given a reasonable time in advance of the critical date.
However, the Engineer or arbitrator is entitled to take into account all
circumstances in deciding whether or not a failure has occurred. The mere fact

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that the Engineer has not complied with the Contractor's notice is not enough to
give the Contractor an entitlement to time and costs.

These sub-clauses refer only to "any further drawing or instruction". Thus, this
does not refer to all the other items contained in the definition of Drawings but
does refer to instructions which are not contained within that definition.

6.5: This sub-clause has been included to forestall an argument by a

Contractor that clause 6.4 gives the Contractor an entitlement to time and costs
as a consequence of the late issue of drawings or instructions regardless of the
cause of that late issue. The delay, the Contractor would argue, would otherwise
be caused by the "failure or inability" of the Engineer to issue the drawing and the
clause does not enquire into the reasons for that failure or inability. Faced with
such an argument, the Engineer would otherwise have to fall back on clause 44.1
(Extension of time for completion) and the requirement to grant only such
extensions as the Contractor is "fairly" entitled to. As to the costs, the Engineer
would be in more difficulty. It is in the interests of avoiding such arguments that
clause 6.5 puts the matter beyond doubt.

CLAUSE 7 : Drawings and Instructions

The Engineer may issue further drawings and instructions necessary for the
project. The Contractor is to comply with them.

Where any part of the Works is to be designed by the Contractor, he shall submit
his proposed design and back-up information for the Engineer's approval and
after the Works have been constructed, all necessary operation and maintenance
manuals, drawings etc. Substantial completion will not be achieved until such
manuals and drawings have been submitted and approved by the Engineer.

The Engineer's approval does not relieve the Contractor of his design or other
responsibilities.

Sub-clause 7.1 is taken from the 3rd Edition with amendments mainly of
vocabulary but sub-clauses 7.2 and 7.3 are entirely new and have been adopted
in principle by ICE 6th as sub-clauses 7(6) and 7(7).

7.1 This clause is, with clause 13.1 (Work to be in accordance with the
contract) and clause 51.1 (Variations), one of the most important clauses
authorising the Engineer to issue instructions. There are some 19 clauses
overall giving the Engineer power to instruct but the remainder are specific, such
as the power to instruct in regard to ambiguities at clause 5.2 (Priority of contract
documents). The power under this clause is limited to such instructions "as shall
be necessary for the purpose of the proper and adequate execution and
completion of the Works". Thus, there is no power to order variations unless they
are necessary. Clause 51.1 (Variations) provides the power to instruct changes

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that are only "appropriate". For a discussion of the Engineer's power to instruct
variations, see under clause 51.1.

"The Contractor shall carry out and be bound by the same." This is subject to
review by the Engineer under clause 67.1 (Engineer's decision) and an arbitrator
under clause 67.3 (Arbitration).

If instructions are issued late, the provisions of clause 6.4 (Delays and cost of
delay of drawings) may apply. For discussion on whether the Engineer may issue
variation instructions after substantial completion, see the commentary under
clause 13.1 (Work to be in accordance with the contract).

The broad definition of Drawings in clause 1.1(b)(iii) should be noted as this

includes matters other than drawings and indeed other than documents.
Patterns, samples and models are included.

7.2: This is not a design and build form of contract and, indeed, FIDIC do not
publish such a form for general civil engineering, (although the "Yellow Book",
FIDIC's Conditions of Contract for Electrical and Mechanical Works assumes that
the contractor will usually accept design responsibility) . Nevertheless it is
recognised that a part of the Works may be designed by the Contractor or a
subcontractor on his behalf in which case provision must be made for the
submission of the design for the Engineer's approval.

A Contractor will be well advised to scrutinise all the contract documents carefully
to identify the exact extent of any design obligation imposed upon him. Whilst
there is a general statement in clause 8.2 (Site operations and methods of
construction) that "the Contractor shall not be responsible...for the design or
specification of Permanent Works", a note on a drawing or a paragraph in an
obscure corner of the specification could nevertheless "expressly provide" a
design obligation.

A Contractor wishing to protect the copyright or confidentiality in his drawings

must make special provision. In this connection, see clause 28.1 (Patent rights)
which places responsibility for any infringement of patent rights, design
trademarks etc upon the Contractor regardless of whether infringement occurred
by reason of the Contractor's design or that of the Engineer.

The obligation to provide operation and maintenance manuals appears to be

limited to circumstances in which the Contractor has a design responsibility. It
will often be necessary, wherever the contract includes plant and machinery, for
the Contractor to be obliged to provide the operation and maintenance manuals
for that plant and machinery regardless of who designed it. Whilst it is recognised
that the obtaining of operation and maintenance manuals and as-built drawings is
often difficult at the end of a project, the practicality of making the submission of
such manuals and drawings a condition precedent to the grant of substantial
completion is to be doubted. The Employer will be keen to take over the works
and the Contractor will be facing the possibility of liquidated damages. One

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