FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS

GUIDE TO THE USE OF FIDIC

CONDITIONS OF CONTRACT FOR
DESIGN-BUILD AND TURNKEY
FIRST EDITION

ISBN 2—88432—012-
FIDIC is the International Federation of Consulting Engineers comprised of National
Associations whose members comply with FIDIC's Code of Ethics

FIDIC was founded in 1913 by three national associations of independent consulting

engineers within Europe. The objectives of forming the federation were to promote in
common the professional interests of the member associations and to disseminate
information of interest to members of its component national associations. Today FIDIC
membership numbers 63 countries from all parts of the globe, representing most of the
independent consulting engineers in the world.

FIDIC arranges seminars, conferences and other events in the furtherance of its goals:
maintenance of high ethical and professional standards; exchange of views and
information; discussion of problems of mutual concern among member associations and
representatives of the international financial institutions; and development of the
engineering profession in developing countries.

FIDIC publications include the proceedings of various conferences and seminars,

information for consulting engineers, project owners and international development
agencies, standard pre-qualification forms contract documents and client/consultant
agreements. They are available from the FIDIC secretariat in Switzerland.

© Copyright FIDIC 1996

All rights reserved.

No part of this publication may be reproduced or transmitted in any
form or by any means without permission of the publisher.

Published by
Fédération Intemationale des
Ingénieurs-Conseils (FIDIC)
P.O. Box 86
1000 Lausanne 12
Switzerland
Phone +41216544415
Fax +41 21 65444 17

© FIDIC 1996
1
Page blank
in original
Foreword
Fédération Internationale des Ingénieurs-Conseils (FIDIC) has published
three forms of international conditions of contract, informally titled the
Red, Yellow and Orange Books. The Red Book is the "Conditions of
Contract for Works of Civil Engineering Construction": the fourth edition
was published in 1987 and amended in 1988 and 1992. The Yellow Book
is the "Conditions of Contract for Electrical and Mechanical Works": the
third edition was published in 1987 and amended in 1988.
The Red Book is intended for the construction of works designed by (or
on behalf of) the Employer, with evaluation by measured quantities and
contract rates. The Yellow Book is intended for the provision and erection
of plant, often for items which are to be part of a large project.
Recognising that some Employers wanted to procure the construction of
project works on a lump-sum contractor-design basis, FIDIC initiated the
preparation of an appropriate form of contract: it became known as the
Orange Book.
In 1995, FIDIC published the Orange Book, the "Conditions of Contract
for Design-Build and Turnkey". It had been prepared by a drafting
committee referred to as the Orange Book Task Group, which consisted
of: Axel-Volkmar Jaeger (Task Group Leader), Schmidt Reuter Partner,
Germany; Peter L Booen, Sir Alexander Gibb & Partners Ltd, UK; Philip
Jenkinson, W S Atkins, UK; Bob Kavanagh, Stanley Industrial
Consultants Ltd, Canada; and Charles B Molineaux, Wickwire Gavin PC,
USA. The preparation was carried out under the general direction of the
FIDIC Contracts Committee which then comprised: K B (Tony) Norris,
Consulting Engineer, UK (Chairman); Michael Mortimer-Hawkins,
SwedPower AB, Sweden; and John B Bowcock, Sir Alexander Gibb &
Partners Ltd, UK.
Drafts of the Orange Book had previously been reviewed by the following
persons or organisations: Peter Batty, TAMS Consultants Inc., USA;
Geoffrey F Hawker, Consulting Engineer, UK; Joseph A Huse,
Freshfields, France; Gordon L Jaynes, Whitman Breed Abbott & Morgan,
UK; A E J (Tony) Sanders, Mouchel Management Ltd, UK; R J (Rob)
Falconi, Delcan Corporation, Canada; Harold Fairfull, European Capital,
UK; Martyn J Nixon, Willis Corroon, UK; Per Fagerholt, COWlConsult
A/S, Denmark; Christopher Wade, VBB VIAK AB, Sweden; Dr
GroBekatthöfer, Germany; Christopher R Seppala, White & Case, France;
R Mark H Griffiths, Griffiths & Armour, UK; A J M (Tony) Blackler,
Rowe & Maw, UK; the World Bank; and the International Bar
Association. Many of these reviewers gave valuable advice on legal,

© FIDIC 1996 3
financial or insurance aspects. Immediately prior to publication, David R
Wightman and Andrew Inkester (Nabarro Nathanson, UK) carried out the
final review to ensure legal conformity of the entire document.
Subsequently, FIDIC published its "Model Terms of Appointment for a
Dispute Adjudication Board", which had been prepared by A J M (Tony)
Blackler and reviewed by Peter L Booen and the FIDIC Contracts
Committee listed above. These Model Terms are reproduced towards the
end of this Guide, after the comments on Clause 20.
This Guide was prepared by Peter L Booen and reviewed by K B (Tony)
Norris, Charles B Molineaux, R Mark H Griffiths and the FIDIC
Contracts Committee which now comprises John B Bowcock (Chairman),
Michael Mortimer-Hawkins and Axel-Volkmar Jaeger. Immediately prior
to publication, David R Wightman and Andrew Inkester carried out a final
legal review.
FIDIC wishes to record its appreciation of the time and effort devoted by
all the above.
FIDIC Secretariat receives requests from time to time to assist in the
interpretation of individual contracts which are based upon conditions of
contract incorporating the FIDIC publications. It should be evident that,
as an international federation of consulting engineers, FIDIC cannot
undertake to give legal advice. In any event, the legal interpretation of a
contract will depend upon such matters as its precise wording and the law
governing the particular contract.
This Guide does not, therefore, attempt to give legal interpretations of the
Orange Book, although it does indicate some relevant legal issues. The
Guide also indicates what the drafting committees (the Orange Book Task
Group and the Contracts Committee) intended in drafting particular
clauses. The interpretation of individual clauses in a specific contract falls
to be determined in accordance with the law applicable to the contract,
and may also be affected by other parts of the contract.
The final section of this Guide contains a photo reproduction of FIDIC's
Orange Book, the "Conditions of Contract for Design-Build and Turnkey,
First Edition 1995". Within the text of this Guide, the various sub-clauses
from the Orange Book are copied and are shown in italics. The italicised
text should be identical to the corresponding text in the Orange Book as
reproduced in the final section. If any discrepancy is found between the
corresponding texts, the reader should refer to the photo-reproduced final
section in order to determine the authentic wording.

© FIDIC 1996
 Foreword .
Contents

Introduction
Tendering Procedure
3
7
11
1 The Contract 15
2 The Employer 33
3 The Employer's Representative 36
4 The Contractor 40
5 Design 59
6 Staff and Labour 69
7 Plant, Materials and Workmanship 72
8 Commencement, Delays and Suspension 76
9 Tests on Completion 85
10 Employer's Taking Over 88
11 Tests after Completion 91
12 Defects Liability 95
13 Contract Price and Payment 100
14 Variations 114
15 Default of Contractor 120
16 Default of Employer 123
17 Risk and Responsibility 126
18 Insurance 131
19 Force Majeure 136
20 Claims, Disputes and Arbitration 140
FIDIC Model Terms of Appointment for a Dispute Adjudication Board . . . 151

Conditions of Contract for Design-Build and Turnkey:

Part I General Conditions
Part II Guidance for the preparation of
Conditions of Particular Application
Forms of Tender and Agreement

© FIDIC 1996 5
FIDIC publications on associated topics
Conditions of Contract for Design-Build and Turnkey
(The Orange Book) First Edition 1995
FIDIC Tendering Procedure. Second Edition 1994
Standard Pre-Qualification Form for Contractors.
Second Edition 1994 (pad of 5 complete forms)
Dealing with Risk — Managing Expectations (1994);
Amicable Settlement of Construction Disputes (1992).
The 1992 Report of the Alternative Dispute Resolution
(ADR) Task Committee
Client / Consultant Model Services Agreement
(The White Book) Second Edition 1991
The White Book Guide
(With other notes on documents for Consultancy Agreements) 1991
Joint Venture (Consortium) Agreement 1992
Sub-Consultancy Agreement 1992
Guide to Joint Venture and Sub-Consultancy Agreement 1994
Professional Liability Insurance — A Primer (1991)
Conditions of Contract for Works of Civil Engineering Construction
(The Red Book) Fourth Edition 1987 Reprinted 1992
Conditions of Contract for Electrical and Mechanical Works
(The Yellow Book) Third Edition 1987 Reprinted 1988
Conditions of Subcontract for Works of Civil Engineering Construction 1994
Guide to the Use of FIDIC Conditions of Contract for Works of Civil Engineering
Construction (The Red Book Guide) 1989
Guide to the Use of FIDIC Conditions of Contract for Electrical and Mechanical
Works (The Yellow Book Guide) 1988
FIDIC List of potential arbitrators (with detailed CV's) Annual update
FIDIC International Directory Bi-annual update
The above publications may be purchased from FIDIC Secretariat
P.O. Box 86, 1000 Lausanne 12, Switzerland, Phone +41 21 654 44 15
Fax +41 21 654 44 17, or from other authorised distributors

© FIDIC 1996
Introduction
Why Standard Documents?
Standardisation, both in technical and administrative matters, is desirable for the
satisfactory execution of many types of commercial projects. Major projects, whether
they are predominantly building, civil engineering, chemical engineering, electrical
engineering, mechanical engineering, or any combination, are frequently complex. With
the resulting increased complexity of contract conditions, it is becoming increasingly
important to ensure that they are based upon a standardised form of contract, with which
the contracting parties and financing institutions are familiar, and which maintains a fair
and reasonable balance between the differing objectives of these parties, allocating fairly
the risks and responsibilities.
In the majority of cases, the contracting parties will react favourably to such a
standardised form of contract, which will do much to reduce the likelihood of
unsatisfactory performance, increased costs and disputes. With the contract being based
on an acceptable standard form, tenderers will be less inclined to make financial
provision for unfamiliar contract conditions, whose consequences they may have
difficulty in assessing. The widespread use of standard conditions also provides a stable
base for training personnel in contract management, reducing the need for them having
to work with ever-changing contract conditions.
The Orange Book
The object of this Guide is to comment on the provisions contained in Part I of the first
edition of the "Conditions of Contract for Design-Build and Turnkey". Informally titled
"the Orange Book", it was published by the Fédération Internationale des Ingenieurs-
Conseils (FIDIC) in 1995. A Test Edition had been published in 1994, and the many
reactions to it were reviewed before the first edition was completed. This Guide
(informally titled "the Orange Book Guide") is intended to assist the users of the Orange
Book, namely those who write, and those who administer, contracts based on these
Conditions of Contract. This assistance is focused on particular features of the Orange
Book: the Guide is not intended to provide complete training material for the expertise
required for the preparation of tender documents. Also, the comments are not intended
to provide an authoritative legal interpretation of every aspect of each subject, which
must depend on the law applicable to the particular contract.
It is envisaged that the Orange Book can be the basis of all contracts which involve the
provision of facilities designed by the Contractor, whether such facilities comprise
building, civil engineering, chemical engineering, electrical engineering, mechanical
engineering, or any combination. Throughout the drafting, the intention was to
incorporate provisions applicable to (for example) housing, roads, refineries, generators,
turbines, treatment works, etc. However, the Orange Book is not appropriate for the
provision of facilities designed by the Employer or his consulting engineer, or for similar
arrangements where the Contractor is not to be responsible for design.

© FIDIC 1996 7
Project Procurement — the Design-Build Option
Under the Orange Book design-build form of contract, design is the responsibility of the
construction organisation. This arrangement reduces the problems which may on
occasions arise from the division of responsibility between designer and constructor.
Design-build may also encourage economies, not only in terms of price, but at the
expense of quality. Therefore, it is considered essential that the Employer has (or
procures) expert technical services, in order to ensure that his requirements are
elaborated in the tender documents and are achieved in practice. If expertise is unavail-
able, problems may arise, particularly in respect of the need for variations.
Ideally, variations under a design-build contract should be instructed by reference to
requirements (not by a redesign by the Employer); and their costs and other
consequences should be agreed in advance, in order to minimise disputes. In practice,
these aspects can make the design-build process appear somewhat inflexible. The
design-build process is thus less amenable to variations initiated by the Employer,
compared with the alternative where the designer is separately employed by the
Employer and is independent of the Contractor.
The design-build option prevents the Employer from having a close involvement in the
design process. However, it enables him to have the benefits of lump-sum pricing, of
the Contractor's undivided liability for the works (including design), and of the potential
savings (in cost and time) due to a degree of overlap of design and construction. The
latter overlap may (or may not) lessen the total period between the commencement of
the preparation of tender documents and the completion of construction. The saving in
time due to this overlap may be offset by the effects of the lack of continuity of the design
processes during the pre-contract stages.
Project Procurement Options
At the inception stage of a project, procurement options should be reviewed and a
decision made as to the most appropriate option; FIDIC's publication of the Orange Book
does not constitute any indication of a preferred option. The Employer should first
analyze the project financing arrangements, their consequences, the risks inherent in the
type(s) of works and the other factors which affect the procurement process. After that
analysis, decisions can be made as to which procurement option is appropriate; and as
to which standard form of contract is closest to the Employer's requirements and will
thus require less text in Part II than would be the case if another form were to be used.
FIDIC publishes three forms of international conditions of contract, informally titled the
Red, Yellow and Orange Books:
The Red Book is the "Conditions of Contract for Works of Civil Engineering
Construction", the fourth edition having been published in 1987 and amended
in 1988 and 1992. It is intended for the construction of works which are
mostly designed by (or on behalf of) the Employer. Interim and final
payments for the works are evaluated by an impartial Engineer appointed by
© FIDIC 1996
 the Employer, the evaluation being based on measured quantities and contract
rates. Part I of the Red Book does not include specific arrangements for the
Tests on Completion and does not mention any tests after completion. The
defects liability period is of fixed duration.
The Yellow Book is the "Conditions of Contract for Electrical and
Mechanical Works", the third edition having been published in 1987 and
amended in 1988. The Yellow Book is intended for the provision and erection
of plant, often for items which are to be part of a large project. Interim
payments, including the cost of shipped Plant, are evaluated by an impartial
Engineer appointed by the Employer; the final payment for the works is also
evaluated by the Engineer, but the method of evaluation is not defined (if not
lump-sum, Part II text would be required). Part I of the Yellow Book
contains specific arrangements for the provision of facilities by the Employer,
for the prior agreement of variations and for Tests on Completion; it does not
mention any tests after completion. The defects liability period is extended
in certain circumstances.
The Orange Book is intended for the provision and erection of plant and for
the construction of works which are designed by (or on behalf of) the
Contractor. Except as may be defined in a schedule of payments, interim and
final payments for the works are evaluated by the Employer's Representative,
but the method of evaluation is not defined (if not lump-sum, Part II text
would be required). Part I of the Orange Book contains specific arrange-
ments for copyrights, for progress reporting, for the provision of facilities by
the Employer, for the prior agreement of variations and for Tests on
Completion and Tests after Completion. The defects liability period is
extended in certain circumstances.
If the result of the above analysis is a decision to procure the works on the basis of
design-build or turnkey, the Orange Book provides an internationally acceptable basis
for the contract. The Orange Book may be used for projects constructed under a single
contract and also for a contract (for the provision of plant or for construction) which is
part of a multi-contract project, although the latter type of project may give rise to
significant co-ordination problems. The Orange Book may be used for individual items
of plant, for individual structures and for complete facilities, including the provision of
facilities under turnkey contracts.
Turnkey contracts include most or all of the fixtures, fittings and equipment (f.f.e.)
required for the provision of a fully-equipped-facility, ready for operation (at the turn of
the "key"). The Orange Book is equally appropriate for all design-build contracts, but
the particular features of the actual project may have a major effect on the drafting of
the contract Part II and the other tender documents.

© FIDIC 1996 9
The tender documents must be drafted with care, particularly in respect of quality,
performance criteria and tests. If the tender documents are deficient, the Employer may
pay an exorbitant price for unacceptable works. He must therefore ensure that adequate
resources are allocated to the skilled tasks of drafting the technical and commercial
aspects of the tender documents, and of analysing the tenderers' proposals.
Notes for Clarification (except where the context requires otherwise)
(a) In Part I of the Orange Book and in the Tender and Appendix:
(i) references to "Part II" refer to the Part II as written for the particular
contract, and
(ii) references to Clauses and Sub-Clauses refer to Clauses and Sub-Clauses in
the Conditions of Contract for the particular contract, which will consist of
the published Part I and the contract Part II.
(b) In the comments contained in this Orange Book Guide:
(i) references to "Part I" refer to the Part I as published in the Orange Book,
(ii) references to "the published Part II" refer to the "Guidance for the
Preparation of Conditions of Particular Application" as published in the
Orange Book,
(iii) references to "the contract Part II" refer to the Part II as written for the
particular contract,
(iv) references to Clauses and Sub-Clauses refer to Clauses and Sub-Clauses in
the Part I as published in the Orange Book,
(v) the commentary relates to the Part I text, which is shown in italics.

© FIDIC 1996
Tendering Procedure
FIDIC has published a document entitled "Tendering Procedure" which presents a
systematic approach to the selection of tenderers and to the obtaining and evaluation of
tenders; the second edition was published in 1994. The document is intended to assist
the Employer to receive sound competitive tenders without deviations. Its Introduction
concludes with the comment that it can be readily adapted to any acceptable contract
form. Therefore, its advice is not repeated here; the following comments only elaborate
on the procedures applicable to the Orange Book.
Experience has shown that, for contracts which include design, prequalification of
tenderers is particularly desirable. It enables the Employer to establish the competence
of a known number of firms who are subsequently invited to tender, and it encourages
the better qualified firms to tender in the knowledge that they have a reasonable chance
of success. Unrestricted tendering does not promote appropriate competition. Although
the Employer can specify what will constitute a responsive tender, tenderers will be
reluctant to carry out their preliminary design to an adequate extent of detail if they
consider that the number of other tenderers gives them little chance of recovering their
costs through being awarded the contract (especially if they feel entitled to suspect that
others may benefit from their design efforts).
Unless tendering procedures are governed by the rules of a financing institution, the
invitation to prequalify should ideally specify how many prospective tenderers will be
invited to submit tenders. This number should be determined carefully, taking account
of the amount of work which could be required for the preparation of a compliant tender:
whereas six might be appropriate for "simple" projects, three might be reasonable for
complex or major projects.
The tender documents issued to the prequalified firms will normally include the
following, in the sequence listed:
(a) Letter of invitation to tender.
(b) Instructions to Tenderers, including submission procedures and proposal
requirements, all of which should not form part of the Contract. These proposal
requirements should define the documents to be included in each tenderer's
Proposal. Whereas the requirements which are to be applicable to the Contractor
and/or to the Works (after the Contract becomes effective) must be included in the
Employers Requirements (f), these proposal requirements are directed to the
tenderers and would instruct them regarding such requirements as:
(i) the extent of detail to be included in the preliminary designs in the Proposals,
and
(ii) filling-in the Schedules.

© FIDIC 1996 11
(c) Tender form and Appendix to Tender: these would be based on the example form
in the third part of the Orange Book, as reproduced at the end of this Guide, taking
account of the comments (in this Guide and in the published Part II) on the various
sub-clauses listed in the Appendix to Tender.
(d) Schedules, which might include questionnaires and/or tables: see the comments on
Sub-Clause 1.1.1.6 in this Guide.
(e) Conditions of Contract.
(f) Employer's Requirements, which specify the Works, and which should not instruct
tenderers: see the comments on this important document in the published Part II,
and throughout this Guide.
(g) Information and data on hydrological and sub-surface conditions at the Site, studies
on environmental impact, and reports on any other investigations initiated by the
Employer, all of which would normally not form part of the Contract.
A technical requirement may be either objective or subjective. An objective requirement
is one which is precise, the requirement being defined in such a way that it does not
require the application of opinion or judgement: for example, it may specify that an item
of Plant shall maintain a defined area within certain temperature limits. A subjective
requirement is one which is imprecise, the requirement being defined in such a way that
the application of opinion or judgement is necessary: for example, it may specify that
an item of Plant is to use "the most up-to-date technology", a very vague phrase.
The Employer's Requirements should not contain subjective requirements, which
tenderers would find difficult to interpret to the precision necessary when designing and
pricing the works. If the Employer's Requirements include a subjective requirement, a
tenderer would probably wish to avoid the problems which could arise due to possible
differing interpretations of such a requirement. It might be possible for the tenderer to
ensure that the details in the Proposal and/or Schedule are sufficiently clear, and to
ensure that these details are to be the binding interpretations of the requirement.
However, it is preferable to avoid this type of potential disagreement by ensuring that
the Contract does not contain subjective requirements, whilst ensuring that the Proposal
contains sufficient information for the Employer to verify that the tenderer is offering to
provide Works which will comply with the Employer's subjective requirements. If the
Employer wishes to specify subjective requirements, they may be included in
Instructions to Tenderers. The Employer's Requirements should contain his objective
requirements, including the location of the Site, the definition and purpose of the Works,
quality and performance criteria, and details such as those listed on page 3 of the
published Part II.
Each tenderer prepares a Proposal, as required in (b), showing how he proposes to satisfy
the Employer's Requirements (f). The Proposal is then submitted, together with (c) and
(d) duly completed, in accordance with any procedures instructed in (b). If the tenderer

© FIDIC 1996
also issues a covering letter, it should not contain anything relevant to an eventual
contract, unless there is a statement in the Tender that this letter is part of the Proposal.
Evaluation and comparison of tenders may be a major task, depending on the degree of
detail in the Proposals and on the degree of precision and objectivity in the requirements
contained in the tender documents, (b) and (f). The Employer will need to study,
evaluate and compare all aspects of the Proposals, especially if they are very detailed.
Unsuccessful tenderers will retain the copyright of their Proposals, unless and until they
dispose of it. The Employer must return their designs, without copies being retained and
without releasing details to the successful tenderer, the Contractor.
The Conditions of Contract
In the tender documents, the Conditions of Contract will be in two Parts, I and II. Part
I will incorporate the Orange Book, as published. There are two alternative ways to
achieve this; either the actual published pages can form part of the tender documents, or
the following text can be used:
The Conditions of Contract Part I — General Conditions — shall be those
forming Part I of the "Conditions of Contract for Design-Build and
Turnkey", First Edition 1995, prepared by the Fédération Internationale
des Ing.énieurs-Conseils (FIDIC), and shall be amended and added to in
accordance with the following Part II entitled "Conditions of Particular
Application".
The Conditions of Particular Application (the contract Part II) has to be written for the
particular contract, taking account of the Orange Book (including its Part II), any
relevant comments in this Guide, and any particular requirements of the project financing
institution/bank(s), who may have particular preferences and/or mandatory
requirements. Any amendments and additions to Part I should be contained in the
contract Part II, not in an amended and/or retyped Part I, so that tenderers can rapidly
identify any changes and assess their effects.
In the preparation of the Orange Book, it was recognised that, while there are many sub-
clauses which will be generally applicable, there are some sub-clauses which must
necessarily vary to take account of the circumstances relevant to the particular contract.
A policy was therefore adopted in writing Part I, namely:
(i) interim payments will be made as construction proceeds, but example wording for
contractor-financed contracts is included in the published Part II;
(ii) if the wording in Part I necessitates further information, the sub-clause makes
reference to that information being contained in the Appendix to Tender: it does
not specify whether the information has been prescribed by the Employer or
inserted by the tenderer, because this aspect may be affected by tendering
requirements;

© FIDIC 1996
(iii) if a sub-clause in Part I concerns a matter on which different terms could apply
on different contracts, the principles applied in writing the sub-clause were:
(a) users would find it more convenient to delete (or not invoke) provisions
which they did not want to apply, than to write additional text, for
incorporation in the contract Part II, if Part I did not cover their
requirements: therefore, as much text as possible was included in Part I;
(b) in cases where the application of (a) was thought to be inappropriate, the sub-
clause contains the provisions which were considered to apply to the option
most often used; this conclusion was often subjective, in part because of the
intention to prepare a Part I which could be adopted for a wide variety of
types of projects.
Elaborating on (a), it would be incorrect to assume that each and every provision in Part
I is recommended as being applicable for most contracts. In order to provide Conditions
of Contract for use on the wide variety of works mentioned above, it has been accepted
that the Orange Book may need to be adapted for each project. The latter process should
not be used to prejudice the fair balance of responsibilities contained in the published
Part I, but merely to address those issues which inevitably relate to such matters as the
law applicable to the contract, and the type and location of the works.
By incorporating as much text as possible in Part I, less text should be necessary in the
contract Part II. A smaller Part II should be of benefit to tenderers and other users:
there should be less to write, and tenderers should have less new text to analyze.

© FIDIC 1996
Clause 1 The Contract
1.1 Definitions
In the Contract (as defined below) the words and expressions
defined below shall have the meanings assigned to them, except
where the context requires otherwise:
Sub-Clause 1.1 consists of a number of definitions used throughout the contract
documents, set out in six groups by subject matter. The defined terms are readily
identifiable by their capital initial letters. All tender documents should be consistent in
their use of these defined words and expressions.
1.1.1 Documents
1.1.1.1 "Contract" means these Conditions of Contract (Parts land/I),
the Employer's Requirements, the Tende,; the Contractor's
Proposal, the Schedules, the Letter of Acceptance, the Contract
Agreement (if completed) and such further documents as may he
expressly incorporated in the Letter of Acceptance or Contract
Agreement (if completed).
This first definition prescribes which documents are to form the Contract, unless it is
otherwise defined in the Contract Agreement; the order of precedence is specified in
Sub-Clause 1.6. The contract documents are then defined, in terms which indicate what
they are expected to contain. However, mentioning these expected contents may have
little effect. When the Contract comes into force, the Contract consists of the actual
documents, and it is their contents which are relevant, not the contents indicated in these
definitions. Thus, for example, these definitions cannot prescribe the extent of detail
required in the Proposal, which comes into existence before this Clause comes into
effect.
1.1.1.2 "Employer's Requirements" means the description of the scope,
standard, design criteria (if any) and programme of work, as
included in the Contract, and any alterations and modifications
thereto in accordance with the Contract.
The Employer's Requirements is the document where the Employer specifies precise
requirements for the completed Works, including all matters not covered by the
Conditions of Contract. The Employer's Requirements is the base document which
includes: the definition of the location of the Site, the definition and purpose of the
Works, quality and performance criteria, details such as those listed on page 3 of the
published Part II, and the Contractor's particular obligations (training of personnel to
operate the Works, for example), in addition to any prescribed in the Conditions of
Contract. If these matters are specified elsewhere (in the Instructions to Tenderers, for
example), and are therefore not contractually binding, they would be superseded by the
Proposal.

© FIDIC 1996 15
The Employer's Requirements should define the Site and the Works, which may require
the inclusion of drawings. If the proposed Works are outlined on drawings, either
dimensioned or otherwise, the Employer's Requirements should define the extent to
which (for example) the Works to be executed by the Contractor must comply with the
outline. The incorporation of design aspects into this document should be carried out
with care, with full consideration being given to the consequences, including any
ultimate responsibility for this design by the Employer.
The Employer's Requirements should include all relevant criteria, including quality,
performance and testing, but need not specify any matters which would be imposed on
the Works by the applicable law. Quality should be specified in terms which are not so
detailed as to reduce the Contractor's design responsibilities, not so imprecise as to be
difficult to enforce, and not reliant on the future opinions of the Employer's
Representative, which tenderers may consider impossible to forecast. For example,
specifying "best quality", or other imprecise standards of quality, can give rise to dispute,
because the parties may interpret these standards differently; see the above comments
on Tendering Procedure (page 12). Further guidance relevant to the preparation of the
Employer's Requirements is included in the published Part II, and throughout this
Guide.
The Employer's Requirements may also (but need not) include a "programme of work",
if the Employer actually requires the Contractor to adhere to particular programme
requirements. For example, if the Works include work on an existing facility, the
Contractor might be required to phase the work in a particular way in order to minimise
the disruption to the continuing operation of the facility (which might be a process plant);
see also Sub-Clause 2.2. For most works on previously-unoccupied (green-field) sites,
there may be no need for this type of requirement, the time constraints being those
arising from Clause 8.
Prior to accepting the Tender, the Employer should consider whether there is any incon-
sistency between any tender documents; if so, it should be resolved. In particular, if
there are any details in the Proposal or Schedules which are inconsistent with particular
aspects of the Employer's Requirements, the inconsistency should be resolved by an
agreed amendment. Anticipating this possibility, each of definitions 1.1.1.2, 1.1.1.5 and
1.1.1.6 refers to the version of the document "as included in the Contract".
1.1.1.3 "Tender" means the Contractor's priced offer to the Employer for
the Works, as accepted by the Letter of Acceptance.
1.1.1.4 "Appendix to Tender" means the completed appendix comprised
in the Tender.
The Tender, and the Appendix to Tender, should be based on the example form in the
third part of the Orange Book, as published and as reproduced at the end of this Guide.
The Tender constitutes the tenderer's offer to enter into a legally-binding contract. It is
not a lengthy document, but is important because, as agreed by the Letter of Acceptance,

© FIDIC 1996
it is the means by which a legally-binding Contract comes into effect, unless and until
the Employer and Contractor enter into a Contract Agreement.
The main page of the Tender starts by identifying the tender documents (including any
Addenda thereto) and the fixed lump sum price, which may be a total of a breakdown
in a Schedule. In many countries, the written price will prevail over the amount
expressed in figures.
The second paragraph refers to the appointment of the Dispute Adjudication Board: see
Sub-Clause 20.3.
The third paragraph states the date up to which the Tender is valid for acceptance. This
validity date should be assessed by the Employer, taking account of his procedures and
the time necessary for adjudication of tenders, including studying tenderers' design
proposals. In some countries, the validity undertaking may be unenforceable, other than
through the calling of the tender security.
The Appendix to Tender is referred to in the many Sub-Clauses which require specific
data in order for them to become effective: this data includes the parties' names and
various amounts and percentages. There is no indication whether data is to be provided
by the Employer, prior to issuing the tender documents, or by the tenderer. When
preparing the Appendix to Tender, the Employer has to decide what items to complete.
Generally, he would include data for Sub-Clauses 1.1.2.1, 1.1.2.3, 1.4, 1.8, 2.2, 4.2, 8.6,
11.4, 18.1 and 18.3 as a minimum, and would probably include (in the Instructions to
Tenderers) any criteria relevant to the completion of some of the other items. However,
he might prefer to complete all items other than 1 .1.2.2 and the tables.
1.1.1.5 "Contractor's Proposal" means the preliminary design submitted
with the Tendei; as included in the Contract.
The Contractor's Proposal is the document containing the tenderer's preliminary design,
which he prepared and submitted with his Tender. There is no indication whether the
preliminary design is only a small-scale outline, or includes fully detailed working
drawings. The Employer cannot insist on either, because a contract has not become
effective, but he may define (in the Instructions to Tenderers) what will constitute a
responsive tender. Either party might, on the one hand, prefer an outline, in order to
minimise the costs of tendering and/or of the adjudication of tenders; on the other hand,
either party might prefer detailed drawings, in order to reach agreement on the details.
Although the Employer can specify what will constitute a responsive tender, tenderers
will be reluctant to carry out a costly, detailed preliminary design if they consider that
they have little chance of recovering their costs through being awarded the contract.
The tenderer should identify any aspects where he proposes not to comply with any
particular aspect of the Employer's Requirements, so that these deviations can be
resolved before the Tender is accepted. If deviations are not identified, and thus are not
clarified in the Contract, the Employer's Requirements take precedence: see Sub-Clause
1.6. However, if the Contractor's Proposal includes clarification of any matter (for
© FIDIC 1996
example, quality assurance details) which is incorporated into the Contract and is
consistent with the other Contract documents, the matter becomes an obligation and
either party can enforce it.
Prior to accepting the Tender, the Employer should consider whether there is any incon-
sistency between any tender documents; if so, it should be resolved. In particular, if
there are any details in the Proposal or Schedules which are inconsistent with particular
aspects of the Employers Requirements, the inconsistency should be resolved by an
agreed amendment. Anticipating this possibility, this (and the next) definition refers to
the version of this document "as included in the Contract".
1.1.1.6 "Schedules" means the information and data submitted with the
Tender, as included in the Contract.
1.1.1.7 "Schedule of Payments" means the Schedule designated as such
(if any), referred to in Sub-Clause 13.4.
The Schedules may include a questionnaire, tables and/or lists prepared by the Employer,
issued with the tender documents and completed by the tenderer. The form of the
Schedules will depend on the type of Works and the information and data which the
Employer requires, both for the adjudication of tenders and for inclusion in the Contract.
Typically, the Schedules might include some of the following:
Schedules of Technical Particulars
Schedule of Designers
Schedule of Subcontractors
Schedules of Supply-Only Materials/Plant/Spares/Tools/etc
Schedule of Payments
Schedule of Provisional Sums
Schedule of Insurances (General Terms)
Schedule of Dispute Adjudication Board membership
If the Schedules, as incorporated into the Contract, define any matter consistent with the
other Contract documents, the matter becomes an obligation and either party can enforce

1.1.1.8 "Letter of Acceptance" means the formal acceptance by the

Employer of the Tender.
1.1.1.9 "Contract Agreement" means the contract agreement (if any)
referred to in Sub-Clause 1.5.
The Letter of Acceptance is the document whereby the Employer accepts the Tender. In
some countries, if it only says "For and on behalf of we accept your Tender
reference the Contract may become effective immediately, unless the tenderer

© FIDIC 1996
had included more than one option, with the result that the quoted words would not make
it clear what was being accepted.
The Contract Price is defined (in 1.1.5.1) as the sum stated in the Letter of Acceptance.
The Letter must therefore specify the Contract Price, identify which of any options are
to apply, and list the documents which are to constitute the Contract. This wording may
actually constitute a "counter-offer", because it incorporates changes which have only
been agreed tentatively: it is not accepting the original Tender as submitted. Following
a counter-offer Letter of Acceptance, the Contract only becomes effective when it has
been unreservedly accepted by the tenderer.
In the event of protracted negotiations, it may be necessary for a memorandum of under-
standing to be jointly agreed, for inclusion in the Letter of Acceptance. The memo-
randum would record the outcome of any post-tender discussions and correspondence,
including clarification of any inconsistency between tender documents.
When the Contract becomes effective, the tenderer becomes the "Contractor", and his
Proposal becomes the "Contractor's Proposal", subject to any accepted changes thereto
which are incorporated in the Letter of Acceptance.
Even if the applicable law does not necessitate a Contract Agreement, the latter is often
considered advisable, in order to record what constitutes the Contract. A hasty award
may give rise to problems (in the event of a future dispute) over the meaning and inter-
relationship of post-tender pre-award communications. Although neither party can insist
on a change in the Contract, they should be able to agree how these communications
may be consolidated into coherent documentation.
1.1.2 Persons
1.1.2.1 "Employer" means the person named as such in the Appendix to
Tender and the legal successors in title to such person, but not
(except with the consent of the Contractor) any assignee of such
person.
1.1.2.2 "Contractor" means the person whose Tender has been accepted
by the Employer and the legal successors in title to such person,
hut not (except with the consent of the Employer) any assignee of
such person.
1.1.2.3 "Employer's Representative" means the person appointed by the
Employer to act as Employer's Representative for the purposes of
the Contract and named as such in the Appendix to Tender, or
other person appointed from time to time by the Employer and
notified as such to the Contractor.
1.1.2.4 "Contractor's Representative" means the person (if any) named
as such in the Contract or other person appointed from time to
time by the Contractor under Sub-Clause 4.3.
© FIDIC 1996 19
The parties to the Contract are the Employer and the Contractor, and not any assignee
to which the other party has not given prior consent. Under Sub-Clause 1.8, consent
shall be in writing and not be unreasonably withheld or delayed. It is advisable to take
legal advice before seeking or giving consent to an assignment.
Each party will have its Representative, who may be named in the tender documents and
thus in the Contract. The Employer should name his Representative in the Appendix to
Tender; the tenderer may propose his Representative in his Proposal or Schedule. Each
party can appoint a replacement Representative, but the appointment of the Contractor's
Representative is subject to the prior consent of the Employer's Representative under
Sub-Clause 4.3.
Each party could be a firm, corporation or other "legal person", under Sub-Clause 1.3.
Similarly, the Employer's Representative may be an individual or a firm or corporation:
for example, a firm of independent consulting engineers.
1.1.2.5 "Subcontractor" means any person named in the Contract as a
subcontractor, manufacturer or supplier for a part of the Works
or any person to whom a part of the Works has been sub-
contracted in accordance with Sub-Clause 4.5, and the legal
successors in title to such person, hut not any assignee of such
person.
It is not envisaged that the Contract will necessarily identify every subcontractor,
manufacturer and supplier, but some may need to be recorded at this stage, when the
parties enter into the Contract. Part I contains no provisions for the procedures under
which the Employer nominates a Subcontractor, because of the problems associated with
design responsibility and the perceived inconsistency between this nomination procedure
and contractor-designed works.
1.1.2.6 "Dispute Adjudication Board" means the person or persons
named as such in the Contract, or other person or persons
appointed from time to time under Sub-Clause 20.3.
See the comments on Clause 20 and the Model Terms of Appointment reproduced
thereafter.
1.1.3 Dates, Times and Periods
1.1.3.1 "Base Date" means the date 28 days prior to the latest date frr
submission of the Tender for acceptance by the Employer.
1.1.3.2 "Effective Date" means the date on which the Contract entered
into legal force and effect.
1.1.3.3 "Commencement Date" means the date on which the Contractor
receives the notice to commence issued by the Employer's Repres-
entative under Sub-Clause 8.1.

20 © FIDIC 1996
Three dates are defined, on which all time-related matters are to be based.
Administration of the Contract may be facilitated by redefining these dates, in the
Contract Agreement, as particular calendar dates. Part I generally refers to the Base
Date as the reference date of the information available at time of tender.
In many countries, the Effective Date will be when the Letter of Acceptance is issued.
However, Part I does not incorporate this definition in case it is inconsistent with the
laws of other countries; under any law, the Effective Date will be definable precisely.
FIDIC acknowledges that some provisions in Part I may have different consequences in
different legal jurisdictions.
1.1.3.4 'Time for Completion" means the time frr completing the Works
or a Section (as the case may be), and passing the Tests on
Completion, as stated in the Appendix to Tender (or as extended
under Sub-Clause 8.3), calculated from the Commencement
Date.
1.1.3.5 "Contract Period" means the period from the Commencement
Date to the date 365 days after the date on which the whole of the
Works shall have been completed as certified by the Employer's
Representative under Clause 10 (or as extended under Sub-
Clause 12.3).
In some previous forms of contract, the period after completion was given a name which
gave an incorrect implication of the Contractor's responsibilities; the definition of
"Contract Period" avoids any implication. The Contract Period is the actual period up
to completion (not the Time for Completion) of the whole of the Works, plus a defects
liability period of 365 days. If the latter period is to be other than 365 days, the contract
Part II can amend this definition accordingly.
The effect of this definition is that the defects liability period for completed Sections
will be more than 365 days, because the Contractor's liability to rectify a defective
Section extends to the same date as applies to defects in the other parts of the Works.
This extra liability period may seem onerous, but it removes some potential anomalies.
If the Employer finds a tenderer keen to amend this provision, he may be suspicious that
the tenderer expects to provide a Section which contains defects which will not become
apparent during the first 365 days after completion and taking over.
If the Employer requires to take over the Works in stages, he should define each Section
in the Appendix to Tender. It is usually preferable for the definitions of the Sections to
be such that they do not together constitute the whole of the Works; the Appendix to
Tender would define (i) a Time for Completion for each Section, and (ii) the Time for
Completion of the whole of the Works. If the Works are divided totally into Sections,
with every part of the Works being part of one or other Section, it is possible (but bad
practice) for there to be no Taking-Over Certificate for the Works. In this (avoidable)
event, if a Taking-Over Certificate has been issued for each Section, "the date on which

© FIDIC 1996 21
the whole of the Works shall have been completed as certified by the Employer's
Representative under Clause 10" can be derived from the effect of all Taking-Over
Certificates, thus defining the Contract Period. However, it is advisable to avoid this
method of derivation, by the issue of a Taking-Over Certificate for the Works.
1.1.3.6 "day" means a calendar day and "year" means 365 days.
Since "day" means any (working or non-working) day from midnight to midnight, time
periods specified in days commence on the beginning of the day following the date of
the act which constitutes the starting-point. However, "year" is any 365 days, not the
calendar year from 1 January to 31 December: time periods specified in years commence
on the beginning of the day following the date of the act which constitutes the starting-
point, and not from the beginning of the next calendar year.
1.1.4 Tests and Completion
1.1.4.1 "Tests on Completion" means the tests specified in the Contract
and designated as such, and any other such tests as may he agreed
by the Employer's Representative and the Contractor or
instructed as a Variation, which are to he carried out before the
Works or any Section are taken over by the Employer.
1.1.4.2 "Taking-Over Certificate" means a certificate issued under
Clause 10.
1.1.4.3 "Tests after Completion" means the tests specified in the Contract
and designated as such, which are to be carried out after the
Works or any Section are taken over by the Employer.
1.1.4.4 "Performance Certificate" means the certificate issued by the
Employer's Representative under Sub-Clause 12.9.
The Employer's Requirements should describe the Tests on Completion and the Tests
after Completion which he considers necessary to demonstrate that the Plant and other
Works satisfy the prescribed criteria: see Clauses 9 and 11. The Tests on Completion
are the ones which will demonstrate whether the Plant and other Works can be taken
over by the Employer; both types of tests would demonstrate whether their operation
complies with prescribed performance criteria, so they may all be called "performance
tests". The latter phrase is not used in Part I, which merely assumes the following
sequence of events:
(i) the Contractor completes the Section or Works;
(ii) the Contractor carries out the tests defined as the Tests on Completion;
(iii) the Employer takes over the Section or Works; and
(iv) the Employer carries out the tests defined as the Tests after Completion.
Put another way, it is necessary to decide on the details and timing of each test, before

22 ©FIDIC 1996
deciding whether it is to be one of the Tests on Completion or one of the Tests after
Completion. For example, if the Employer requires all performance tests to be passed
before his Taking-Over, they may all be classified as Tests on Completion; and either
there might be no Tests after Completion, or they might be repetitions of (some or all
of) the Tests on Completion. For some types of Works, it may be appropriate for the
Employers Requirements to specify the extent of the Employers participation in
performing the Tests on Completion, and/or the Contractor's participation in performing
the Tests after Completion.
When specifying these Tests, it may be necessary to consider the likely effect of any
relevant factors at the time of testing. For example, a Section may need to be tested
when adjacent parts of the Works are incomplete, or testing may be required to be carried
out at a time when conditions (such as river flows) are below the design criteria.
1.1.5 Money and Payments
1.1.5.1 "Contract Price" means the sum stated in the Letter of
Acceptance as payable to the Contractor for the design, execution
and completion of the Works and the remedying of any defects in
accordance with the provisions of the Contract.
Since the "Contract Price" is defined as the amount agreed by the Letter of Acceptance,
it will probably not be the final amount due under the Contract (for example, because
of Variations). Adjustments are described as being added to, or deducted from, the
Contract Price.
For this type of contract, the Contract Price is usually a lump sum and is not subject to
remeasurement: see Sub-Clause 13.1. It is sometimes considered appropriate for the
lump sum to be two or more separate sums, one in each of the currencies of payment.
In this case, the Contract Price may actually be expressed as the total of these sums,
without converting them to a single currency amount using defined rate(s) of exchange:
for example, six million francs plus two million dollars.
1.1.5.2 "Local Currency" means the currency of the Country.
1.1.5.3 "Foreign Currency" means a freely convertible currency, named
in the Appendix to Tender as a currency in which part of the
Contract Price is payable, but not the Local Currency.
Currencies of payment, including Foreign Currency (or Currencies), are to be specified
in the Appendix to Tender, either by the Employer or (subject to the Instructions to
Tenderers) by each tenderer.
1.1.5.4 "Retention Money" means the accumulated retention monies
retained by the Employer under Sub-Clause 13.3.
1.1.5.5 "Provisional Sum" means a sum (if any) specified in the Contract
and designated as such,fiur the execution of anypart of the Works
or.for the supply of Plant, Materials or services.
© FIDIC 1996 23
Provisional Sums are the subject of Sub-Clause 14.5, which will only apply if
Provisional Sums are specified in the Contract: in the Employers Requirements, the
Contractors Proposal or a Schedule.
1.1.5.6 "Cost" means all expenditure properly incurred (or to be
incurred) by the Contractot; whether on or off the Site, including
overhead and similar charges, hut does not include profit.
"Cost" is defined as including overhead charges, but profit is excluded. Overhead
charges may include reasonable financing costs incurred by reason of payment being
received after expenditure. In some countries, financing costs might be due even though
the Contractor had sufficient funds at his disposal, and therefore had no need to borrow.
1.1.5.7 "Interim Payment Certificate" means any payment certificate
issued by the Employer's Representative under Clause 13, other
than the Final Payment Certificate.
1.1.5.8 "Final Payment Certificate" means the payment certificate issued
by the Employer's Representative under Sub-Clause 13.13.
1.1.5.9 "Final Statement" means the agreed statement defined in Sub-
Clause 13.11.
Note that the "Final Statement" is defined as the agreed statement, not the Contractor's
draft final statement.
1.1.6 Other Definitions
1.1.6.1 "Construction Documents" means all drawings, calculations,
computer software (programs), samples, patterns, models,
operation and maintenance manuals, and other manuals and
information of a similar nature, to he submitted by the Contractor.
The Construction Documents are defined as all drawings, etc, which are "to be submitted
by the Contractor"; they may include documents on paper and electronic media. The
Employer's use of these documents is constrained by Sub-Clause 1.10. If the
submission requirements of Sub-Clauses 5.2, 5.5, 5.6 and 5.7 are to be fully effective,
a more detailed definition of the documents to be submitted must be included in the
Contract: either in the Employer's Requirements or in the Contractor's Proposal.
The Employer's Requirements should describe the extent of detail required for the
submissions to the Employer's Representative, who may not want to review every minor
detail. For example, the Employer's Representative may only want to receive the general
arrangement drawings; he may also want to review drawings of the reinforcement for
concrete; and he might even want to receive the bending schedules detailing this rein-
forcement, although he would then have to ensure that sufficient staff were available to
review them. See Sub-Clause 5.2.

24 © FIDIC 1996
 1.1.6.2 "Variation" means any alteration and/or modification to the
Employer's Requirements, which is instructed by the Employer's
Representative or approved as a variation by the Employer's
Representative, in accordance with Clause 14.
Variations are defined as any change to the Employer's Requirements, the change having
been instructed or approved under Clause 14. Therefore, Part I does not need to contain
provisions empowering the Employer's Representative to change specific requirements
(e.g., tests) which are to be specified in Employer's Requirements. Clause 14 provides
the procedures for amending anything specified in the Employer's Requirements, and the
consequences in respect of time and payment. It is advisable to seek prior agreement of
the consequences of each Variation, especially if it affects the scope or purpose of the
Works, but it may not be possible to do so. See comments on Clause 14.
1.1.6.3 "Works" means the Permanent Works and the Temporary Works
or either of them as appropriate.
1.1.6.4 "Permanent Works" means the permanent works to he designed
and executed in accordance with the Contract.
1.1.6.5 "Temporary Works" means all temporary works of every kind
(other than Contractor's Equipment) required for the execution
and completion of the Works and the remedying of any defects.
1.1.6.6 "Plant" means machinery and apparatus intended to form or
forming part of the Permanent Works, including the supply-only
items (if any) which are to he supplied by the Contractor as
specified in the Contract.
1.1.6.7 "Materials" means things of all kinds (other than Plant) to he
provided and incorporated in the Permanent Works by the
Contractor, including the supply-only items (if any) which are to
he supplied by the Contractor as specified in the Contract.
1.1.6.8 "Contractor's Equipment" means all machinery, apparatus and
other things (other than Temporary Works) required for the
execution and completion of the Works and the remedying of any
defects, hut does not include Plant, Materials, or other things
intended to form or forming part of the Permanent Works.
1.1.6.9 "Section" means a part of the Works specifically defined in the
Appendix to Tender as a Section (if any).
1.1 .6.10 "Site" means the places provided by the Employer where the
Works are to he executed and to which Plant and Materials are
to he delivered, and any other places as may be specifically
designated in the Contract as forming part of the Site.

© FIDIC 1996 25
 1.1.6.11 "Country" means the country in which the Works are to he
executed and to which Plant and Materials are to be delivered.
When preparing the tender documents, the Employer may wish to consider whether he
will be taking over the Works in stages. If so, he should define each Section in the
Appendix to Tender, and include the table shown at the end of the example Appendix,
as published and as reproduced at the end of this Guide. Precise geographical definitions
of Sections are advisable, so that the extent of the parties' responsibilities after taking
over are clear.
It is usually preferable for the definitions of the Sections to be such that they do not
together constitute the whole of the Works. The Appendix to Tender would define (i) a
Time for Completion for each Section, and (ii) the Time for Completion of the whole
of the Works. See the comments after Sub-Clause 1.1.3.5, above.
If no Sections are defined in the Appendix to Tender, the Part I provisions relating to
Sections will not apply.
1.2 Headings and Marginal Notes
The headings and marginal notes are not part of these Conditions, and shall
not be taken into consideration in their interpretation.
The headings and marginal sub-headings are inserted for the convenience of the reader,
and do not influence the meaning of the text.
1.3 Interpretation
Words importing persons or parties shall include firms and corporations and
any organization having legal capacity. Words importing the singular also
include the plural and vice versa where the context requires. Words
importing one gender also include other genders.
Unless inconsistent with the context, the word "person", and other words normally taken
as indicating a person or persons, may refer to an individual or to a firm, corporation or
other organization having legal capacity. This principle applies throughout the Contract.
Where reference is intended to relate to an individual only, and where a reference is
intended to relate to either singular or plural (but not both), the references have to be
expressed clearly. The final sentence, which refers to the genders (masculine, feminine,
neuter), takes account of grammatical variations between some of the various languages
which may be used as contract languages.
1.4 Law and Language
The law of the Contract is named in the Appendix to Tender.
Where versions of the Contract are prepared in different languages, the
version which is in the ruling language named in the Appendix to Tender shall
prevail. The language for day to day communications shall be as stated in
the Appendix to Tender.
26 © FIDIC 1996
These details must be included in the Appendix to Tender. The law of the Contract may
affect the interpretation of Part I, but should not cause ambiguity for any particular
contract. It should be noted that, under some jurisdictions, certain provisions may be
implied into the Contract. FIDIC acknowledges that some provisions in Part I may have
different consequences in different legal jurisdictions.
1.5 Contract Agreement
Either party shall, if requested by the other party, execute a Contract
Agreement, in the form annexed with such modifications as may be necessary
to record the Contract. The costs of stamp duties and similar charges
imposed by law shall be borne by the Employec
A hasty award may give rise to problems (in the event of a future dispute) over the
meaning and inter-relationship of communications exchanged between the respective
submission dates of the Tender and Letter of Acceptance. Therefore, it is generally
advisable to execute a Contract Agreement, in order to record what constitutes the
Contract. In some countries, a Contract Agreement is an essential part of an enforceable
contract. However, it was not thought appropriate to include an obligation in Part I.
Unless disallowed by law, the costs imposed by law on the execution of the Contract
Agreement are borne by the Employer. The law may require each party to bear his own
costs, with the possible exception of any expensive procedures which one party seeks to
impose on the other. For example, it might be unreasonable for one party to require all
the signatories to attend a joint signing ceremony.
The form for the Contract Agreement should be appended, in the tender document, to
the contract Part II. An example form is included at the end of the Orange Book, and
is reproduced at the end of this Guide. As mentioned in the published Part II, the parties
may agree to include particular definitions: for example, the Contract Price and/or the
dates defined in Sub-Clause 1.1.3.
In some countries, the method of execution of the Contract Agreement affects the
duration of the parties' liabilities.
Under Sub-Clause 1.6, the Contract Agreement takes precedence over the terms of the
Contract which became effective through the Letter of Acceptance.
1.6 Priority of Documents
The documents forming the Contract are to be taken as mutually explanatory
of one another. If there is an ambiguity or discrepancy in the documents, the
Employer's Representative shall issue any necessary clarification or
instruction to the Contractor, and the priority of the documents shall be as
follows:

© FIDIC 1996 27
 (a) The Contract Agreement;
(b) The Letter of Acceptance;
(c) The Employer's Requirements;
(d) The Tender;
(e) The Conditions of Contract, Part II;
(f,) The Conditions of Contract, Part 1;
(g) The Schedules; and
(h) The Contractor's Proposal.
The order of precedence of the documents contained in the Contract can have a
significant effect on a party's obligations in respect of any matter where he was not aware
of an inconsistency when he entered into the Contract. This Sub-Clause provides for
the possibility that discrepancies may be discovered between contract documents, with
the result that some provisions may be invalidated by other provisions. Legal systems
differ in the extent to which the Courts will seek to interpret a contract so as to avoid
totally invalidating particular provisions.
Under the Orange Book, the Contractor is responsible for design and takes the financial
risk arising from the lump-sum pricing; he may therefore have included many details in
his tender Proposal. However, there is a possibility that (perhaps inadvertently) some
parts of the Contractor's Proposal are inconsistent with some parts of the Employer's
Requirements. In this event, this Sub-Clause resolves the problem in favour of the
Employer, by making the Employer's Requirements take precedence over all documents
other than those issued after receipt of the Tender.
If the Employer's Requirements contain an imprecise requirement, a tenderer may wish
to avoid the problems which could arise due to possible differing interpretations of such
a requirement. For example, the Employer's Requirements may specify that an item of
Plant is to use "the most up-to-date technology", a very vague phrase. In this case, if
the details in the Proposal and/or Schedule are sufficiently clear, there might be neither
an ambiguity nor a discrepancy for resolution under this Sub-Clause, by reason of these
details being knowingly agreed (by the Letter of Acceptance) as being the most up-to-
date technology.
However, it is preferable to avoid this type of potential disagreement, by ensuring that
the Contract does not contain imprecise requirements, and by ensuring that the Proposal
contains sufficient information for the Employer to verify that the tenderer is offering to
provide Works which will comply with the Employer's actual (if imprecise) requ-
irements. See the above comments on Tendering Procedure (page 12).
If a problem arises from a discrepancy between two documents, there will usually be no
change in the Contract Price, because Sub-Clause 1.6 prescribes how the discrepancy

28 © FIDIC 1996
is to be resolved. If there is an ambiguity or discrepancy within one of the contract
documents, the Employer's Representative may wish to consult with the Contractor in
an endeavour to reach agreement. If agreement is not achieved, the Employer's
Representative is required to issue a clarification or instruction, with which the
Contractor must comply: see Sub-Clause 3.4.
1.7 Documents on Site
The Contractor shall keep on the Site one complete set of the documents
forming the Contract, the Construction Documents, Variations, other
communications given or issued under Sub-Clause 1.8 and the documents
mentioned in Sub-Clause 5.4. The Employei; the Employer's Representative
and assistants (as referred to in Sub-Clause 3.3) shall have the right to use
such documents at all reasonable times.
This administrative provision may be most applicable if the Employer's Representative
does not have his own facilities on the Site.
1.8 Communications
Wherever provision is made for the giving or issue of any notice, instruction,
consent, approval, certificate or determination by any person, unless
otherwise specified such communication shall he in writing and shall not be
unreasonably withheld or delayed.
Wherever provision is made for a communication to he written" or 'in
writing", this means any hand-written, type-written or printed commun-
ication, including the agreed systems of electronic transmission stated in the
Appendix to Tender
All certificates, notices or written orders to he given to the Contractor by the
Employer or the Employer's Representative, and all notices to be given to the
Employer or to the Employer's Representative by the Contractot; shall either
he delivered by hand against written acknowledgement of receipt, or he sent
by airmail or one of the agreed systems of electronic transmission. The
addresses for the receipt of such communications shall be as stated in the
Appendix to Tender
The first sentence requires formal communications to be in writing, and imposes the
general obligation for promptness. Therefore, this obligation does not need to be
repeated in the many relevant Sub-Clauses. In view of recent developments in electronic
communications, and the possibility that one of the parties might not be equipped to
receive certain types of such communications, the systems agreed by both parties are to
be stated in the Appendix to Tender. A possible procedure would be for the Employer
to name the systems which he is prepared to accept, and each tenderer could then delete
the systems which he cannot utilise. The parties might need to consider how some of
the available forms of communications can be authenticated, or their source verified.

© FIDIC 1996 29
1.9 Provision of Construction Documents
The Construction Documents shall be in the custody and care of the
Contractor. Unless otherwise stated in the Employer's Requirements, the
Contractor shall provide six copies for the use of the Employer's Repres-
entative and assistants (as referred to in Sub-Clause 3.3).
As producer of Construction Documents, the Contractor bears ultimate responsibility for
their care, and should therefore ensure that back-up copies are safely stored. Sub-Clause
18.2 requires Construction Documents to be insured.
1.10 Employer's Use of Contractor's Documents
Copyright in the Construction Documents and other design documents made
by or on behalf of the Contractor shall (as between the parties) remain the
property of the Contractor. The Employer may, at his cost, copy, use and
communicate any such documents (including making and using
modifications) for the purposes of completing, operating, maintaining,
altering, adjusting and repairing the Works. They shall not, without the
Contractor's consent, he used, copied or communicated to a third party by
the Employer or the Employer's Representative for other purposes.
Copyright is the intellectual property right of an originator to control the copying and
use of his work. Generally, contracts which include the production of original designs
should clarify the intellectual property rights (copyright) of the parties, including the
extent of one party's entitlement to use the design produced by the other party as part of
the contract.
Sub-Clauses 1.10 and 1.11 set out the FIDIC policy: designers should be able to retain
the copyrights of their designs, and their clients should be able to use their designs for
the original project and its expansion. The qualification "(as between the parties)" does
not prejudice the intellectual property rights, in respect of their designs, of third parties
such as Subcontractors.
Under Sub-Clause 1.1.6.1, Construction Documents include drawings, calculations,
computer software (programs), samples, patterns, models, operation and maintenance
manuals, and other manuals and information of a similar nature. When preparing the
tender documents, the Employer may wish to consider the future uses of these
documents. For example, certain projects may involve writing computer software which
cannot be guaranteed free of errors; specific warranties and/or access to source code may
be appropriate.
Under Sub-Clause 1.8, the Contractor gives consent in writing, which shall not be
unreasonably withheld or delayed. It may be reasonable for the Contractor to withhold
consent if the Employer declines to accept reasonable conditions in respect of secrecy
and restrictions on use.

© FIDIC 1996
The Employer is entitled to use the Contractors documents for the Works, but not for
other purposes. Unless the Contractor consents, the Employer is not entitled to use the
Contractor's documents for the provision of similar works, on the Site or elsewhere. In
particular, if a further stage or expansion of the Works is executed, the Contractors
documents may be used as records of construction in order to determine the details of
the existing facilities, but should not be used as working drawings for construction of
identical facilities.
Modification of this wording, taking account of the Country's law, may be necessary if:
(a) the Employer will require more use of the Construction Documents than as
permitted in this Sub-Clause: he should then indemnify the Contractor from
liability which might arise from inappropriate use (the design might be used for a
purpose not envisaged by the designer);
(b) the Construction Documents will include computer software (programs) which the
Employer will use other than as permitted in this Sub-Clause; or
(c) the Works will include process plant requiring some form of licence. See comments
after Sub-Clause 5.9.
1.11 Contractor's Use of Employer's Documents
Copyright in the Employer's Requirements and other documents issued by
the Employer or the Employer's Representative to the Contractor shall (as
between the parties) remain the property of the Employer. The Contractor
may, at his cost, copy, use and communicate any such documents for the
purposes of the Contract. They shall not, without the Employer's consent, he
used, copied or communicated to a third party by the Contractoi; except as
necessary for the purposes of the Contract.
Sub-Clause 1.11 mirrors 1.10: the Employer is given rights, in respect of the documents
he provides to the Contractor, which are similar to those which the Contractor receives
in respect of the documents he provides. The qualification "(as between the parties)"
does not prejudice the intellectual property rights, in respect of their designs, of third
parties such as the Employer's Representative. Under Sub-Clause 1.8, the Employer
gives consent in writing, which shall not be unreasonably withheld or delayed.
1.12 Confidential Details
The Contractor shall not he required to disclose, to the Employer or the
Employer's Representative, the confidential details listed in the Appendix to
Tender.

Although the Employer might like to have all details of the Works/Plant which are going
to be supplied to him, the Contractor and Subcontractors will wish to keep confidential
certain processes which they regard as trade secrets. In order to reduce the likelihood
of disagreement as to what is to be kept confidential, confidentiality is limited to the
extent described (usually by the tenderer) in the Appendix to Tender.
©FIDIC 1996 31
1.13 Compliance with Statutes, Regulations and Laws
The Contractor shall, in all matters arising in the performance of the
Contract, comply with, give all notices under, and pay all fees required by,
the provisions of any national or state statute, ordinance or other law, or any
regulation of any legally constituted public authority having jurisdiction over
the Works. The Contractor shall obtain all permits, licences or approvals
required for any part of the Works, in reasonable time taking account of the
times for delivery of the Plant and Materials and for completion of the Works.
The Employer and the Contractor shall comply with the laws of each country
where activities are performed.
In order to facilitate the various administrative procedures imposed by the Country's law,
the Employer may wish to complete any procedures which can be completed prior to the
Contract becoming effective, and advise tenderers of the outcome. In particular, the
Employer should apply for any essential licences which can be procured prior to inviting
tenders: for example, planning consents and building permits. Tenderers may be
reluctant to incur expense in the preparation of their tenders if they are uncertain whether
statutory requirements can be satisfied, and there may also be time-related constraints.
Part I makes no reference to these pre-contract procedures because they are pre-contract
and because of the difficulty of referring precisely to Country-specific requirements.
Thereafter, this Sub-Clause makes the Contractor responsible for complying with the
administrative procedures, many of which may require information which originates
from the Contractor. He becomes responsible for ensuring that the Works conform with
any statutory requirements (under Sub-Clauses 5.3 and 5.4), and that any statutory
inspection requirements are satisfied. Sub-Clause 8.4 entitles the Contractor to
extensions of time for unforeseeable delays caused by public authorities; their refusal of
an essential licence could constitute force majeure under Clause 19.
If certain laws specifically relate to the Works, the Employer might wish to consider
drawing them to the attention of tenderers, and/or dealing with their effects in the
Contract. For example, major works may require legislation before they can legally be
initiated, and/or may require various agreements with other affected parties. It is not
envisaged that the Employer needs to list out all relevant legislation for the convenience
of tenderers or the Contractor. If the Employer only lists some of the relevant legislation,
the limited extent of the list should be stated, for avoidance of doubt.
When preparing the tender documents, the Employer may also need to consider what
procedures are relevant to the continuing operation of the Works, since they may not be
covered by this Sub-Clause. For example, the wording may need to be amended if the
Works include process plant requiring some form of operational licence (see comments
under Sub-Clause 5.9). However, provision of a process licence may be a requirement
of any national or state statute, ordinance or other law, or any regulation of any legally
constituted public authority having jurisdiction over the Works; if so, this Sub-Clause
might be sufficient to impose an obligation on the Contractor to procure it, although
possibly only for the Contract Period.
32 ©F1D1C1996
Although the law applicable to the Contract would require the parties to comply with it,
the last sentence of Sub-Clause 1.13 also makes breach of a relevant foreign law a
breach of Contract. The party in breach would then be unlikely to be able to be protected
from any effects of the breach of the law, and might have to compensate the other party
for these effects.
1.14 Joint and Several Liability
If the Contractor is a joint venture (or consortium) of two or more persons,
all such persons shall he jointly and severally liable to the Employer fr the
fulfilment of the terms of the Contract. Such persons shall designate one ot
them to act as leader with authority to hind the joint venture (or consortium)
and each of its members. The composition or the constitution of the joint
venture (or consortium) shall not he altered without the prior consent ot the
Employer
This Sub-Clause will only be effective if the Contractor is a joint venture or consortium,
the precise definition of these terms being subject to the applicable law. When preparing
the tender documents, the Employer may wish to assess his requirements, taking account
of any information on the status of the prospective tenderers. They may prefer some
other arrangement, namely the appointment of a delegated representative (an individual)
to act as leader, rather than one of the members.
Sub-Clause 1.14 provides the minimum appropriate provisions, requiring each of the
members to be fully liable and to appoint and empower a leader, and giving the Employer
some protection from changes in the status of the joint venture or consortium. Under
Sub-Clause 1.8, the Employer gives consent in writing, which shall not be unreasonably
withheld or delayed.

Clause 2 The Employer

2.1 General Obligations
The Employer shall provide the Site and shall pay the Contractor in
accordance with Clause 13.
This wording emphasises the two main obligations, although they are subsequently
repeated. Obligations also arise under other Clauses of the Conditions of Contract.
2.2 Access to and Possession of the Site
The Employer shall grant the Contractor right of access to, and possession
of, the Site within the time stated in the Appendix to Tender Such right and
possession may not he exclusive to the Contractor

© FIDIC 1996 33
 If the Contractor suffers delay and/or incurs Cost from failure on the part of
the Employer to grant right of access to or possession of the Site, the
Contractor shall give notice to the Employers Representative. After receipt
of such notice the Employer's Representative shall proceed in accordance
with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost plus reasonable profit, which shall be added
to the Contract Price,
and shall notify the Contractor accordingly.
The Employers first obligation is to make the Site available to the Contractor within a
prescribed time, which is to be stated in the Appendix to Tender. If the Contract does
not specify otherwise, the Contractor will be entitled to possession of all of the Site from
the end of the prescribed period of time. If possession is not to be exclusive to the
Contractor, the situation should be clarified in the Employers Requirements.
Although the Contractor may not require access for his (Contractor's) Equipment for
some time, during the design period, he may require early access to the Site for the
purposes of carrying out surveys and other investigations.
In the event of failure to provide access, the Employer is held liable for the Contractor's
Cost plus reasonable profit. The latter Cost could be considerable, because of the
consequential effects of the disruption. This Cost is to be determined under Sub-Clause
3.5, and the extension of time is to be determined under Sub-Clause 8.3. Both entitle-
ments are conditional upon the Contractor having given, under this Sub-Clause, notice
which must be in writing: see Sub-Clause 1.8.
Under Sub-Clause 2.2, the Employer is required to grant the Contractor the right of
access to the Site. The word "right" indicates entitlement, not ability: the Contractor is
entitled to go on to the Site, it being assumed that there is a route by which such access
is physically practicable or can be constructed. For example, if the Site is totally
surrounded by land owned by third parties, the Contract should clarify how the
Contractor is to be granted right of access along their lands.
The practical difficulties in getting to and from the Site are to be solved by the
Contractor, who is held responsible for determining and maintaining his chosen access
routes: see Sub-Clauses 4.12 and 4.13.
2.3 Permits, Licences or Approvals
The Employer shall, at the request and cost of the Contractor, assist him in
applying for permits, licences or approvals, which are required for any part
of the Works, for delivery (including clearance through customs) of Plant,
Materials and Contractor's Equipment, and Jr the completion of the Works.

34 ©FIDIC 1996
 Such requests may also include requests for the Employer's assistance in
applying for any necessary government consent to the export of Contractor's
Equipment when it is removed from the Site.
Under the law of the Country, permits, licences or approvals may be required for the
design and execution of the Works (see Sub-Clause 1.13), and/or for imports and
exports. For some of these matters, the Contractor may need assistance from the
Employer in the preparation and submission of his applications.
The Employer has no obligation under Sub-Clause 2.3 unless and until he receives the
Contractor's request for assistance. The Employer does not then become liable in any
way for the success or otherwise of the applications. The Sub-Clause does not relieve
the Contractor from his responsibilities.
2.4 Employer's Entitlement to Terminate
The Employer shall he entitled to terminate the Contract, at the Employer's
convenience, at any time after giving 56 days' prior notice to the Contractor,
with a copy to the Employer's Representative, and returning the performance
security. In the event of such termination, the Contractor:
(a) shall proceed in accordance with Sub-Clause 16.3, and
(h) shall he paid by the Employer in accordance with Sub-Clause 19.6.
After such termination, execution of the Works shall not he recommenced
within a period of six years without the Contractor's consent.
Before entering into the Contract, the Employer should ensure that, to the best of his
knowledge, there are no matters which seem likely to prevent him complying with his
contractual obligations. However, he may wish to have the entitlement under this Sub-
Clause to bring the Contract to an end. For example, he may not wish to rely on any of
the other termination procedures in the event of unexpected financial difficulties or (in
respect of the product created by the Works) in the event of reduced market demand or
a change in technology.
It is extremely rare for the Employer to have to operate this Sub-Clause; prior to invoking
it, legal advice may be appropriate. The Sub-Clause provides that the Employer shall
not recommence the Works, without the Contractor's written consent, within six years.
If the Works are recommenced within this period, the Contractor's entitlements may be
affected by the applicable law.

© FIDIC 1996 35
Clause 3 The Employer's Representative
3.1 Employer's Representative's Duties and Authority
The Employer's Representative shall carry out the duties specified in the
Contract. The Employer's Representative shall have no authority to amend
the Contract.
The Employer's Representative may exercise the authority specified in or
necessarily to he implied from the Contract. If the Employer's Representative
is required, under the terms of his appointment by the Employer, to obtain
the specific approval of the Employer before exercising such authority, such
requirements shall be as stated in Part II. Any requisite approval shall he
deemed to have been given by the Employer for any such authority exercised
by the Employer's Representative.
Except as expressly stated in the Conditions of Contract, the Employer's
Representative shall have no authority to relieve the Contractor of any of his
duties, obligations or responsibilities under the Contract. Any proposal,
inspection, examination, testing, consent, approval or similar act by the
Employer's Representative (including absence of disapproval) shall not
relieve the Contra ctor from any responsibility, including responsibility for his
errors, omissions, discrepancies, and non-compliance with Sub-Clauses 5.3
and 5.4.
The Employer's Representative shall copy to the Employer all commun-
ications given or received by him in accordance with the Contract.
The Employer's Representative may be an in-house professional employee of the
Employer, supported by the necessary resources. Alternatively, he may be an
independent firm of consulting engineers, appointed by the Employer. The terms of his
appointment could be the Client / Consultant Model Services Agreement; the second
edition was published by FIDIC in 1991.
The Employer's Representative is not required to act impartially in the role commonly
understood as that of "the Engineer", although fairness is stipulated in Sub-Clause 3.5.
His role is to represent the Employer, which in many countries would be regarded as the
role of an agent.
The Employer's Representative does not act as Employer: he cannot amend the Contract,
and in some cases he may be constrained by having to obtain the specific approval of
the Employer before exercising authority under the Contract, as set out in the contract
Part II. However, when the Employer's Representative exercises his authority, the
Contractor is entitled to assume that the requisite approval has been obtained. This
reduces the likelihood of delay whilst evidence of authority is procured, and makes the
Employer's Representative responsible for ensuring that he has the requisite approval.

36 © FIDIC 1996
Approvals and similar acts by the Employer's Representative (including absence of
disapproval) shall not relieve the Contractor from any responsibility. The Contractor
thus retains responsibility for providing Works which comply with the performance and
other requirements of the Contract. However, if the Employer's Representative seeks to
direct the Contractor to execute the Works in a particular way, either by instruction or
by unreasonably withholding consent or approval, the Employer may become
responsible for the outcome. Note that the Employer's Representative can only "with-
hold" a consent or approval which is required under the Contract.
Under Sub-Clause 1.8, any notice, instruction, consent, approval, certificate or
determination by the Employer's Representative shall be in writing and not be unreason-
ably withheld or delayed.
3.2 Requirements for Employer's Representative
The Employer's Representative shall he a suitably qualified engineer or other
appropriate professional, having the experience and capability necessary for
compliance with this Clause, or shall employ such suitably qualified
engineers and other proftssionals and make them available jir the Contract.
The Employer's Representative has various duties to perform under the Contract, some
of which will involve the application of expertise in the technical aspects of the Works:
for example, reviewing Construction Documents. The Employer should therefore ensure
that the Employer's Representative has competence in all the relevant aspects. Under
Sub-Clause 3.2, the Contractor is entitled to expect the Employer's Representative to be
an appropriately-qualified person.
The wording of this Sub-Clause seeks to achieve a reasonable balance between the
differing objectives of the parties. The Employer usually needs to retain the power to
replace his Representative, without having to seek the Contractor's consent. The
Contractor needs to have confidence in the competence of the Employer's Representative
and in his ability to respond rapidly to queries of a technical or operational nature.
3.3 Employer's Representative's Authority to Delegate
The Employer's Representative may from time to time delegate any of his
duties to assistants, and may at any time revoke any such delegation. Any
such delegation or revocation shall he in writing and shall not take effect
until a copy has been delivered to the Employer and the Contractor
Any determination, instruction, inspection, examination, testing, consent,
approval or similar act by any such assistant of the Employer's Repres-
entative, in accordance with the delegation, shall have the same effect as
though it had been an act of the Employer's Representative. However:
(a) any ft,ilure to disapprove any Plant, Materials, design or workmanship
shall not prejudice the right of the Employer's Representative to reject
such Plant, Materials, design or workmanship,
© FIDIC 1996 37
 (b) if the Contractor questions any determination or instruction of an
assistant of the Employer's Representative, the Contractor may refer
the matter to the Employer's Representative, who shall confirm, reverse
or vary such determination or instruction.
The Employer's Representative may wish to appoint various "assistants", including other
professional staff on the Site and inspectors to visit manufacturers' works. Some of these
persons may need to have authority delegated to them by the Employer's Representative
in order for them to operate effectively. The Employer's Representative should ensure
that any necessary assistants have been appointed, and appropriate authority delegated,
sufficiently in advance to avoid delay.
The word "assistants" does not indicate a minor supporting role: the word is only used
for flexibility. Generally, these persons have a major role in the achievement of a
successful project, and should therefore be selected with some care.
Delegation and revocation cannot be retrospective: they do not take effect until copies
have been passed to the parties.
When an assistant acts in accordance with a delegated power, the act has the same effect
as though it had been performed by the Employer's Representative. Under Sub-Clause
3.1, any proposal, inspection, examination, testing, consent, approval or similar act by
the Employer's Representative (including absence of disapproval) shall not relieve the
Contractor from any responsibility. Under Sub-Clause 3.3, a consent or approval under
the Contract (which must be in writing: see Sub-Clause 1.8), given by a duly authorised
assistant in accordance with the latter's delegated powers, has the same effect as an
approval of the Employer's Representative.
The Employer's Representative may reject any Plant, Materials, design or workmanship
in respect of which:
(i) the assistant gave oral approval, which is not in accordance with Sub-Clause 1.8;
(ii) the assistant gave an approval which was outside the scope of the assistant's
authority;
(iii) the assistant has neither approved nor disapproved.
The Employer's Representative may reverse or vary any determination or instruction of
an assistant, if the Contractor refers the matter to him. This Sub-Clause does not specify
the consequences of the reversal or variation. The consequences would depend on the
nature of the determination or instruction, and on the actual events, particularly those
during the period between the respective actions of the assistant and the Employer's
Representative.

38 ©FIDIC 1996
3.4 Employer's Representative's Instructions
Unless it is legally or physically impossible, the Contractor shall comply with
instructions given by the Employer's Representative in accordance with the
Contract.
The Contractor is required to act in accordance with instructions given by the Employer's
Representative. Under Sub-Clause 1.8, these instructions must be in writing: Part I
does not include provisions for oral instructions. The consequences will depend on the
type of instruction. As stated above, the Contractor does not have to verify that the
Employer's Representative has obtained any requisite approval from the Employer.
Although the Contractor does not (under the Contract) have any obligation to respond
by advising the Employer's Representative of the consequences of compliance and
awaiting confirmation of the instruction, an obligation may be implied by the applicable
law. Therefore, if the consequences of compliance appear to be disproportionately
onerous, it might be advisable for the Contractor to notify the Employer's Representative
accordingly. However, the Contractor should not delay his compliance with the
instruction.
Sub-Clause 3.4 is not usually included in the list of Sub-Clauses delegated to an
assistant, so that the Contractor will not be required, or entitled, to comply with an
instruction of an assistant to the Employer's Representative which was outside the scope
of the assistant's authority.
3.5 Employer's Representative to Attempt Agreement
When the Employer's Representative is required to determine value, Cost or
extension of time, he shall consult with the Contractor in an endeavour to
reach agreement. If agreement is not achieved, the Employer's Repres-
entative shall determine the matter fairly, reasonably and in accordance with
the Contract.
Although the Employer's Representative acts as the representative (or agent) of the
Employer, he is required under the Orange Book to determine extensions of time and
certain financial aspects. Generally, these determinations will originally have been
initiated by the Contractor, by giving notice of a claim: see Sub-Clause 20.1. Sub-
Clause 3.5 assumes that the Employer's Representative will consult his principal (the
Employer), and introduces the procedure of consultation and negotiation with the
Contractor. The Employer's Representative is required to initiate consultation and
negotiation, but the Sub-Clause does not define the appropriate arrangements or their
duration.
If agreement cannot be reached within a reasonable time, the Employer's Representative
is required to determine the matter "fairly, reasonably and in accordance with the
Contract". These words require the Employer's Representative to apply the provisions
of the Contract when making his determination, and to make it within the time which is

© FIDIC 1996 39
required (or implied) in the Contract. There is no specific requirement for him to act
"impartially", but consistently failing to "determine the matter fairly, reasonably, and in
accordance with the Contract" could lead to disputes under Clause 20.
Sub-Clause 3.5 is referred to in many Sub-Clauses, mostly in respect of determinations
of extensions of time (see Clause 8) and of Cost. The procedures to determine Cost are
not defined, other than in Sub-Clauses 3.5 and 20.1.
In some Sub-Clauses, the Contractor is also entitled to profit, although there are no
provisions specifying what constitutes reasonable profit. Profit (where appropriate) is
included within the meaning of the word "value", which the Employers Representative
agrees or determines under Sub-Clause 3.5.
In Part I, profit is generally stated as being due where the cause was initiated by, or the
fault of, the Employer. Profit is generally not stated as being due in circumstances where
a risk eventuates without being initiated by either party (Sub-Clauses 4.11 and 4.24, for
example).

Clause 4 The Contractor

4.1 General Obligations
The Works as completed by the Contractor shall he wholly in accordance with
the Contract and fit for the purposes for which they are intended, as defined
in the Contract. The Works shall include any work which is necessary to
satisfy the Employer's Requirements, Contractor's Proposal and Schedules,
or is implied by the Contract, or arises from any obligation of the Contracto,;
and all works not mentioned in the Contract hut which may he inferred to he
necessary for stability or completion or the safe, reliable and efficient
operation of the Works.
The Contractor shall design, execute and complete the Works, including
providing Construction Documents, within the Time for Completion, and
shall remedy any defects within the Contract Period. The Contractor shall
provide all superintendence, lahou,; Plant, Materials, Contractor's
Equipment, Temporary Works and all other things, whether of a temporary
or permanent nature, required in and for such design, execution, completion
and remedying of defects.
Before commencing design, the Contractor shall satisfy himself regarding the
Employer's Requirements (including design criteria and calculations, if any)
and the items of refrrence mentioned in Sub-Clause 4.7. The Contractor
shall give notice to the Employer's Representative of any errol; fault or other
defect in the Employer's Requirements or such items of reference. After
receipt of such notice, the Employer's Representative shall determine whether
Clause 14 shall he applied, and shall notify the Contractor accordingly.
40 ©FIDIC 1996
 The Contractor shall take full responsibility for the adequacy, stability and
safety of all Site operations, of all methods of construction and of all the
Works, irrespective of any approval or consent by the Employer's Repres-
entative.
The first paragraph specifies that the Works shall be fit for purpose, and that the purpose
is ascertainable from the Contract. In many countries, the obligation of fitness for
purpose would be implied under the law. Generally, the initial purpose should be
obvious from the scope defined in the Employer's Requirements, but matters such as
ease of maintenance and expected life may need to be specified, unless implied by law.
The basic presumption is that the Contractor has to provide fully operable Works,
including everything necessary except as may be stated elsewhere in the Contract. Sub-
Clause 1.6 defines which document takes precedence in the event of the Contract
containing conflicting requirements.
Fitness for purpose is thus the basic criterion with which the Works must comply. It is
therefore not essential, for example, for a contract document to specify that roofs must
be resistant to local weather conditions (sun, rain, snow, etc): obvious requirements are
imposed on the Works by this Sub-Clause, and are probably also implied by law. The
basic criterion of fitness for purpose relates to the Works irrespective of the level of skill,
care and diligence expected of the Contractor's designers. Throughout the preparation
of the Orange Book, it was recognised that there would be differences of view on this
important aspect: Employers would want their Works to be fit for purpose, but
professional designers are unable to insure except to the usual professional level of skill,
care and diligence (see comments on Sub-Clause 18.1). Nevertheless, fitness for
purpose is considered to be the most appropriate duty for the Orange Book types of
contract.
The Contractor is required, before commencing design, to review any design criteria and
calculations in the Employer's Requirements, and to check the accuracy of the items of
reference from which the Works are to be set out: tenderers may have started some of
these activities during the tender period. The detailed effects of these provisions could
depend on such matters as the nature of the Works, the detailed criteria, the Country's
law, and previous assertions by the parties (including any statements in the Tender). The
Contractor is thus given the opportunity to verify that the Works can be provided in
accordance with the Contract, and notify the Employer's Representative, who is
empowered to resolve any defects in the Employer's Requirements at the commencement
of the design stage. However, it is obviously preferable to resolve these defects before
or during the tender stage. Design is covered in Clause 5; setting-out is covered in Sub-
Clause 4.7.

© FIDIC 1996 41
Note the following aspects from other Sub-Clauses. Under Sub-Clause 1.8: the
Contractor's notice shall be in writing and shall not be delayed. Under Sub-Clause
14.1: the Employer's Representative may vary the Employer's Requirements; it is
advisable to seek prior agreement of the consequences of each Variation, especially if it
affects the scope or purpose of the Works, but it may not be possible to do so.
4.2 Performance Security
The Contractor shall obtain, at his cost, a performance security from a third
party, in the amount and currencies specified in the Appendix to Tender, and
deliver it to the Employer by the date 28 days after the Effective Date. The
performance security shall be provided by an entity approved by the
Employer and shall be in the form annexed, or in another form approved by
the Employer.
The performance security shall be valid until the Contractor has executed
and completed the Works and remedied any defects. It shall be returned to
the Contractor within 14 days of the issue of the Performance Certificate.
Prior to making a claim under the performance security, the Employer shall,
in every case, notify the Contractor stating the nature of the default for which
the claim is to be made.
In international contracts, where the Employer may wish to anticipate the potential
problems of default by the Contractor, a security is a common requirement for the
protection of the Employer and/or the project financing institution/bank. If a security is
required, proposed form(s) should be included in the tender documents and the amount
of the security must be specified in the Appendix to Tender: see the published Part II
and example Appendix, both of which are reproduced at the end of this Guide. Usually,
the amount is specified as a percentage of the Contract Price, payable in the same
proportions as those in which the Contract Price is payable. If no amount is specified
in the Appendix to Tender, this Sub-Clause will not apply.
The security may be in one of two types: "on-demand", which can be called (cashed) by
the Employer without proof of Contractor's default; and "conditional" securities, which
require certain evidence, such as an arbitral award. Although "on-demand" conditions
have their proponents and advantages, FIDIC recommends "conditional" securities as
being fairer (as between the parties) and thus more conducive to keen tendering.
Securities must be drafted with care and appropriate advice, especially if the Employer
wishes to enforce them without having to resort to extensive legal procedures. The
wording of the security should take account of the law under which it would be called,
and of the conditions entitling the call. Example wording is included in the published
Part II, which is reproduced at the end of this Guide. However, being legal documents,
it may be appropriate for them to be drawn up by lawyers familiar with the law under
which they will be called. Under Sub-Clause 1.8, the Employer's approval shall be in
writing and not be unreasonably withheld or delayed.

42 © FIDIC 1996
The security is required to be valid until the Works are complete and defects have been
remedied. Whilst it is desirable for the security not to state its expiry date, the issuing
institution may seek to insist on a stated expiry date. Any expiry date must be sufficiently
in the future to take account of the possibility of:
(a) extensions to the Time for Completion,
(b) the Contractor failing to complete within the Time for Completion, and
(c) defects being identified on the last day of the Contract Period, and the Contractor
failing to remedy them within a reasonable period thereafter.
Before calling the security, the Employer is required to notify the Contractor of the
nature of the default. The notice must be in writing, describing the default in sufficient
detail for the Contractor to know what is being alleged.
4.3 Contractor's Representative
Unless the Contractor's Representative is named in the Contract, the
Contractor shall, within 14 days of the Effective Date, submit to the
Employer's Representative for consent the name and particulars of the
person the Contractor proposes to appoint. The Contractor shall not revoke
the appointment of the Contractor's Representative without the prior consent
of the Employer's Representative.
The Contractor's Representative shall give his whole time to directing the
preparation of the Construction Documents and the execution of the Works.
Except as otherwise stated in the Contract, the Contractor's Representative
shall receive (on behalf of the Contractor) all notices, instructions, consents,
approvals, certificates, determinations and other communications under the
Contract. Whenever the Contractor's Representative is to be absent from the
Site, a suitable replacement person shall he appointed, and the Employer's
Representative shall he notified accordingly.
The Contractor's Representative may delegate any of his powers, functions
and authorities to any competent person, and may at any time revoke any
such delegation. Any such delegation or revocation shall he in writing and
shall not take effect until the Employer's Representative has received prior
notice signed by the Contractor's Representative, specifying the powers,
functions and authorities being delegated or revoked. The Contractor's
Representative and such persons shall he fluent in the language for day to
day communications defined in Sub-Clause 1.4.
The role of Contractor's Representative is of much more importance than might be
inferred from the few mentions, in Part I, of this person. The Contractor's
Representative is the individual responsible for the performance of the Contractor's
obligations under the Contract, including directing the personnel, Subcontractors, etc.
Therefore, the Employer's Representative will wish to be assured, before giving his
© FIDIC 1996 43
consent, that the proposed individual appears competent for the task. Under Sub-Clause
1.8, the Employer's Representative's consent shall be given in writing and shall not be
unreasonably withheld or delayed.
For major works, it may be appropriate for the Contractor's Representative to be named
in the Contractor's Proposal or a Schedule, as envisaged in the first few words of the
Sub-Clause. In the event of the named Contractor's Representative being unavailable by
the time the Contract has commenced (or subsequently), the Contractor would have to
seek consents, to a revocation and to a reappointment, in accordance with the first
paragraph of Sub-Clause 4.3.
4.4 Co-ordination of the Works
The Contractor shall he responsible for the co-ordination and proper
execution of the Works, including co-ordination of other contractors to the
extent specified in the Employer Requirements. The Contractor shall, as
specified in the Employer's Requirements, afford all reasonable opportunities
for carrying out their work to:
(a) any other contractors employed by the Employer and their workmen,
(h) the workmen of the Employei; and
(c) the workmen of any legally constituted public authorities who may be
employed in the execution on or near the Site of any work not included
in the Contract, which the Employer may require.
The Contractor shall obtain, co-ordinate and submit to the Employer's
Representative for his information all details (including details of work to he
carried out off the Site) from Subcontractors. The Contractor shall he
responsible for the locations of their work or materials, in order to ensure
that there is no conflict with the work of other Subcontractors, the Contractor
or other contractors.
This Sub-Clause confirms the Contractor's responsibility for co-ordinating his own
personnel and those of his Subcontractors, who may include (for example) the workmen
of any legally constituted public authorities which the Contractor appoints to carry out
particular elements of the Works.
The Sub-Clause also requires him to co-ordinate other contractors employed by the
Employer, to the extent specified in the Employer's Requirements. If this co-ordination
is not specified, the Contractor is not responsible for co-ordinating other contractors.
The extent of co-ordination activities in respect of other contractors must be carefully
thought out by the Employer when preparing the tender documents, notwithstanding the
difficulties: the details of the Works may be unknown at that stage. He should consider
how the Contractor can co-ordinate the work of others. For example, is the Contractor
to be empowered to instruct other contractors to amend their works or activities in

44 © FIDIC 1996
co-ordination with those of the Contractor? If so, it may be preferable for the Employer's
Requirements to include copies of the provisions, contained in the contracts with these
other contractors, which vest in the Contractor the necessary authority to enable him to
discharge the responsibilities specified in the Employer's Requirements.
Because the involvement of other contractors is generally inappropriate for design-build
projects, Sub-Clause 4.4 only contains outline provisions for the Contractor's co-
ordination of other contractors. For example, these provisions do not specify what
happens if the other contractors are unwilling to being co-ordinated. The provisions are
based on the assumption that the other contracts would require these contractors to
comply with co-ordination instructions from the Contractor. He clearly cannot be held
responsible for the consequences of any non-compliance by the other contractors,
because he will have no method of enforcing their compliance.
These and other aspects would all have to be taken into account when specifying the
Contractor's co-ordination activities in the Employer's Requirements. Note that, under
Sub-Clause 14.1, the Employer's Representative may vary the Employer's Require-
ments; it is advisable to seek prior agreement of the consequences of each Variation, but
it may not be possible to do so.
4.5 Subcontractors
The Contractor shall not subcontract the whole of the Works. Unless
otherwise stated in Part II:
(a) the Contractor shall not he required to obtain consent for purchases of
Materials or for suhcontracts for which the Subcontractor is named in
the Contract;
(h) the prior consent of the Employer's Representative shall he obtained to
other proposed Subcontractors;
(c) not less than 28 days before the intended date of each Subcontractor
commencing work on the Site, the Contractor shall notify the
Employer's Representative of such intention; and
(d) where practicable, the Contractor shall give a fair and reasonable
opportunity fr contractors from the Countiy to he appointed as Sub-
contractors.
The Contractor shall he responsible for observance by all Subcontractors of
all the provisions of the Contract. The Contractor shall he responsible for
the acts or defaults of any Suhcontractoi his agents or employees, as fully
as if they were the acts or defaults of the Contractoi; his agents or employees.

© FIDIC 1996 45
"Subcontractors" include persons named in the Contract as subcontractors,
manufacturers or suppliers, and persons to whom work has been subcontracted in
accordance with this Sub-Clause, but not their assignees. Manufacturers and other
suppliers of Materials are Subcontractors for whom the Contractor is responsible, even
if he finds them difficult to control.
The four criteria are considered applicable to many contracts but, depending on matters
such as the nature of the Works, some of the four criteria may need to be amended in
the contract Part II. Under Sub-Clause 1.8, the consent of the Employer's
Representative under (b), and the notice from the Contractor under (c), shall be given in
writing and shall not be unreasonably withheld or delayed. In respect of a design Sub-
contractor, the prior consent of the Employers Representative is required under Sub-
Clause 5.1.
Under Sub-Clause 7.6 (a), the Contractor relinquishes ownership of Plant and Materials
on delivery at Site. If he is not then to be in breach of the Contract, he must ensure that
the terms of his supply subcontract permit him to do so.
4.6 Assignment of Subcontractor's Obligations
if a Subcontractor has undertaken a continuing and assignable obligation to
the Contractor for the work designed or executed, or Plant, Materials or
services supplied, by such Subcontractor, and if such obligation extends
beyond the expiry of the Contract Period, the Contractor shall, upon the
expiry of the Contract Period, assign the benefit of such obligation to the
Employer for its unexpired duration, at the request and cost of the Employer.
There are no provisions in Part I requiring Subcontractors to undertake any continuing
and assignable obligation, nor for the Contractor to advise the Employer of the
possibility of this assignment: these provisions are rarely appropriate. The Sub-Clause
would therefore only be likely to be enforced if circumstances brought the existence of
the assignable obligation to the Employer's attention. For example, if the Contractor
proposed a Variation and the Employer considered it to be inferior to the details in the
Contractor's Proposal, the Subcontractor performing the Variation might be required to
provide an extended guarantee for it.
The Contractor and Employer might need to consider carefully the terms of the
assignment, in case it removed the Contractor's right to seek legal redress from the Sub-
contractor for latent defects discovered subsequently. If the Contractor is required to
assign all benefits under the subcontract, including his right to make any future claim
against the Subcontractor for defective performance, it may be appropriate for the terms
of the assignment to entitle the Contractor to require the Employer to make the claim on
the Contractor's behalf, and/or to relieve the Contractor from any further liability in
respect of any work carried out by this Subcontractor.

46 ©FIDIC 1996
4.7 Setting Out
The Contractor shall set out the Works in relation to original points, lines
and levels of reference specified in the Employer's Requirements oi; if not
specified, given by the Employer's Representative in writing. The Contractor
shall rectify, at his cost, any error in the positions, levels, dimensions or
alignment of the Works.
These items of reference would normally comprise one point, one bearing and a level.
From these minimum survey data references, all setting out can be established.
Under Sub-Clause 4. 1, the Contractor is required to check these items (the points, lines
and levels) of reference, from which the Works are to be set out, and to complete these
checks before commencing design. Thereafter, he is responsible for setting out from
these items, which should by then have been agreed with the Employer's Representative,
and for rectifying positional errors without additional payment.
Alternatively, the Employer's Requirements might not contain particular constraints on
the exact position of the Works. For example, the scope of the Contractor's design might
include determining all positions. In this case, if the Employer prefers not to provide
these items of reference, the Employer's Requirements must be written accordingly.
4.8 Quality Assurance
Unless otherwise stated in Part I!, the Contractor shall institute a quality
assurance system to demonstrate compliance with the requirements of the
Contract. Such system shall he in accordance with the details stated in the
Contract. Compliance with the quality assurance system shall not relieve the
Contractor of his duties, obligations or responsibilities.
Details of all procedures and compliance documents shall he submitted to
the Employer's Representative fr his information hejbre each design and
execution stage is commenced. When any document is issued to the
Employer's Representative, it shall he accompanied by the signed quality
statements for such document, in accordance with the details stated in the
Contract. The Employer's Representative shall he entitled to audit any aspect
of the system and require corrective action to he taken.
The international standard ISO 9001 introduces the concept of quality assurance, but
Part I recognises that such a system may be inappropriate for some Works or for work
in some countries. If this Sub-Clause applies, details of the quality assurance system
should be included in the Contract: the Employer's Requirements could specify
minimum requirements, and/or the Contractor's Proposal could describe his procedures.

© FIDIC 1996 47
4.9 Site Data
The Employer shall have made available to the Contractor, prior to the Base
Date, all the data on hydrological and sub-surface conditions at the Site, and
studies on environmental impact, which have been obtained by or on behalf
of the Employer from investigations for the Works. The Contractor shall be
responsible for interpreting all data.
The Contractor shall he deemed to have inspected and examined the Site, its
surroundings, the above data and other available information, and to have
satisfied himself (so far as is practicable, taking account of cost and time)
before submitting the Tender, as to:
(a) the form and nature of the Site, including the sub-surface conditions,
(h) the hydrological and climatic conditions,
(c) the extent and nature of the work and Materials necessary for the
execution and completion of the Works, and the remedying of any
defects, and
(d) the means of access to the Site and the accommodation he may require.
The Contractor shall be deemed to have obtained all necessary information
as to risks, contingencies and all other circumstances which may influence
or affect the Tender.
For many types of Works, the Employer may have carried out many types of
investigations. The latter could include studies of feasibility (to verify the likelihood of
the Works being economically advantageous), and studies in respect of hydrology, sub-
surface conditions and environmental impact, all of which could be essential to tenderers
for their design and pricing of the Works. In this Sub-Clause, the Employer asserts that
all this data and environmental studies were made available before the Base Date.
Failure in this respect could have significant consequences, under the Contract in general
and under Sub-Clause 4.11 in particular. In some countries, the failure could entitle the
Contractor to termination.
Although the Employer only asserts that he has made available data "obtained by or on
behalf of the Employer from investigations for the Works", most experienced tenderers
will normally wish to consult other information, including that which is publicly
available. For a successful contract, it is in both parties interests for them both to have
as much information, relevant to the Site and Works, as is available.
The Contractor is responsible for the interpretation of the Site data, and for obtaining
other information, so far as was practicable. The practicability of obtaining information
will clearly depend on the time allowed for the preparation of the Proposal, and aspects
such as the accessibility of the Site.

48 © FIDIC 1996
No specific provisions are made in respect of the possibility of encountering hazardous
contaminants on the Site: for example, sub-surface chemicals or obnoxious wastes.
These contaminants are not explicitly made the responsibility of either party. If they are
foreseen by the Employer, he is required under this Sub-Clause (and, possibly, the
applicable law) to have made the information available. If they are unforeseen, Sub-
Clause 4.11 may be applicable.
Unlike the provisions in some other forms of contract, Sub-Clause 4.9 does not specify
that the Tender was (or is deemed to be) "based on" the data to which reference is made.
Whilst the necessity or consequences of such a statement is debatable for other forms
of contract, it was considered inappropriate for many contractor-designed works.
Although a prudent Employer will have arranged for sub-surface and other investigations
to be carried out before inviting tenders, these investigations may not have been the most
appropriate investigations for the structural solution contained in the Contractor's design.
In this case, it would not be appropriate for his design or Tender to be regarded as being
"based on" these investigations. For example, the data may be limited to boreholes at
certain locations (anticipated bridge pier positions) and the tenderers design may require
data at different locations (new pier positions, or a new alignment for a tunnel).
4.10 Matters Affecting the Execution of the Works
The Contractor shall he deemed to have satisfied himself as to the correct-
ness and sufficiency of the Contract Price. Unless otherwise stated in the
Contract, the Contract Price shall cover all his obligations under the
Contract (including those under Provisional Sums, if any) and all things
necessary for the proper design, execution and completion of the Works and
the remedying of any defects.
This Sub-Clause confimis the Contractor's responsibility for the adequacy of the
Contract Price. It will be noted that this Clause does not include any statement that he
based his Tender on specific items, such as the data referred to in Sub-Clause 4.9: see
the above comments on Sub-Clause 4.9.
Unless otherwise stated in the Contract (which includes the Contractor's Proposal), the
Contract Price is deemed to cover all the Contractor's obligations. Work carried out
under Provisional Sums (see Sub-Clause 14.5) must therefore be covered under the
Clause 18 insurances, for example.
4.11 Unforeseeable Sub-Surface Conditions
If sub-surface conditions are encountered by the Contractor which in his
opinion were not foreseeable by an experienced contractoJ the Contractor
shall give notice to the Employer's Representative so that the Employer's
Representative can inspect such conditions. After receipt of such notice and
after his inspection and investigation, the Employer's Representative shall, if
such conditions were not (by the Base Date) foreseeable by an experienced
contra ctoi; proceed in accordance with Sub-Clause 3.5 to agree or
determine:
© FIDIC 1996 49
 (a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the additional Cost due to such conditions, which shall be added to the
Contract Price,
and shall notify the Contractor accordingly.
This Sub-Clause entitles the Contractor to an extension of time for delay, and to
reimbursement of additional Cost, which result from sub-surface conditions which were
not foreseeable by the Base Date. As asserted in Sub-Clause 4.9, the Employer will
have made available all information he procured, and (because of this Sub-Clause 4.11)
he should also have made available any other information which he has, relating to the
Site. This Sub-Clause not only protects the Contractor if the actual conditions were not
foreseeable; it also protects the Employer by providing a method of dealing with the
possibility of inaccuracies in the data referred to in Sub-Clause 4.9.
The conditions are stated as being those not foreseeable at the Base Date, because that
is the date referred to in Sub-Clause 4.9. In the rare event of data becoming available
after the Base Date but before the Effective Date, the parties should consider making
specific provision, referring to the new information. If specific provision is not made,
this Sub-Clause will have the effect that the Contractor's entitlement will have to be
judged by reference to the conditions anticipated at the Base Date, which may (or may
not) be the actual basis of the Tender.
Having encountered the sub-surface conditions, the Contractor issues a notice, which
could also serve as the notice referred to in the first sentence of Sub-Clause 20.1. This
notice should be issued as soon as practicable, because the Employer's Representative:
(a) should be given the maximum opportunity to carry out an inspection and assess
for himself whether the sub-surface conditions were foreseeable, and
(b) might wish to consider initiating a Variation, although there is no obligation to do
so.
Sub-Clause 4.11 does not specify any procedures for the subsequent construction of the
Works: the Contractor is still responsible. Some sub-surface conditions may involve no
change in design; others may necessitate revised details under Sub-Clauses 5.2(c)
and/or 14.2.
Note that, under Sub-Clause 1.8, notices and determinations shall be in writing and not
be unreasonably withheld or delayed.
4.12 Access Route
The Contractor shall be deemed to have satisfied himself as to the suitability
and availability of the access routes he chooses to use. The Contractor shall
(as between the parties) he responsible for the maintenance of access routes.
The Contractor shall provide any signs or directions which he may consider

50 © FIDIC 1996
 necessary for the guidance of his staff, labour and others. The Contractor
shall obtain any permission that may he required from the relevant
authorities for the use of such routes, signs and directions.
The Employer will not he responsible for any claims which may arise from
the use or otherwise of any access route. The Employer does not guarantee
the suitability or availability of any particular access route, and will not
entertain any claim for any non-suitability or non-availability for continuous
use during construction of any such route.
Under Sub-Clause 2.2, the Employer is required to grant the Contractor the right of
access to the Site; in other words, the Contractor is entitled to go on to the Site. It is
assumed that there is a route by which access is physically practicable; the word "route"
implies an alignment which can be represented as a line on a map (usually overland),
but does not imply a roadway. The Contractor is entitled to make use of the route without
negotiating with its owners, but this entitlement does not indicate that the route is suitable
for transport: he might have to construct a road along it.
The practical difficulties in getting to and from the Site are to be solved by the
Contractor. Under Sub-Clause 4.12, he is held responsible for maintaining his chosen
access routes. The reference "as between the parties" recognises that the Sub-Clause
may well apply to highways which are the responsibility of third parties, but the
Employer has no responsibility for any failure on their part.
If the Site is totally surrounded by land owned by third parties, the Contract should
clarify:
(a) the alignment of the route through the third parties' lands, along which the
Employer will be granting the right of access, and
(b) how the Contractor can gain access; for example, whether access will be hindered
by third parties' control measures.
If the Site is surrounded by private land, but there is a route to the Site along the
Employer's land, it may be appropriate for the Employer's Requirements to include
similar details to those of (a) and (b) above. In some countries, it might even be
appropriate (and in the interests of both parties) for the Employer to be responsible for
the maintenance of the part of the access road which is on his land, notwithstanding Sub-
Clause 4.12. For example, the Contractor may be installing Plant on a Site on which
most personnel are employed by an entity other than the Contractor; this entity, who
might be the Employer or another contractor, may be the most appropriate maintainer
of access roads. This aspect should be considered by the Employer when preparing the
tender documents.

©F1D1C1996 51
4.13 Rights of Way and Facilities
The Contractor shall hear all costs and charges for special or temporary
rights-of-way required by him for access to the Site. The Contractor shall
also provide, at his own cost, any additional facilities outside the Site
required by him for the purposes of the Works.
This Sub-Clause similarly assumes that access to the Site is physically practicable, but
that the Contractor may require special or temporary rights-of-way, or additional
facilities.
4.14 Programme
The Contractor shall submit a programme to the Employer's Representative,
for information, within the time stated in the Appendix to Tender. The
programme shall include the following.
(a) the order in which the Contractor proposes to carry out the Works
(including each stage of design, procurement, manufacture, delivery to
Site, construction, erection, testing and commissioning),
(b) all major events and activities in the production of Construction
Documents,
(c) the periods for the pre-construction reviews under Sub-Clause 5.2 and
for any other submissions, approvals and consents specified in the
Employer's Requirements, and
(d) the sequence of all tests specified in the Contract.
Unless otherwise stated in the Contract, the programme shall be developed
using precedence networking techniques, showing early start, late start, early
finish and late finish dates.
The Contractor shall, whenever required by the Employer's Representative,
provide in writing,for information, a general description of the arrangements
and methods which the Contractor proposes to adopt for the execution of the
Works. No significant alteration to the programme, or to such arrangements
and methods, shall be made without informing the Employer's Repres-
entative. If the progress of the Works does not conform to the programme,
the Employer's Representative may instruct the Contractor to revise the
programme, showing the modifications necessary to achieve completion
within the Time for Completion.
An experienced contractor will always prepare an up-to-date programme, and it will be
required by the Employer's Representative so that he can monitor progress and arrange
his own activities. However, this Sub-Clause does not empower the Employer's
Representative to give or withhold consent to the programme, because the design,
specification and construction are all carried out by the Contractor.

52 ©FIDIC 1996
Therefore, the Contractor cannot use the programme to impose constraints on the
Employer's Representative, and cannot insist on the programme being used as a basis
for calculating any extension of time. It would not be reasonable for obligations to be
imposed on the Employer by reason of a document which was prepared after the
Effective Date and to which he did not give his consent. He will, of course, be bound by
any constraints (such as the periods for pre-construction reviews) contained in the
Contract; and the programme might be an appropriate basis for calculating an extension
of time.
Precedence networking techniques are to be used unless otherwise stated in the Contract,
which includes the Contractor's Proposal. Tenderers may have more expertise than the
Employer in the preparation of programmes for their particular fields of activity, and
may wish to specify, possibly with examples, how they propose to comply with this Sub-
Clause.
The final sentence of Sub-Clause 4.14 is an important provision for the Employer's
Representative, who can apply it whenever actual progress is either behind or ahead of
the current version of the programme. Note that Sub-Clause 8.5 requires the Contractor
to revise the programme whenever actual progress has fallen behind the current version
of the programme, without an instruction from the Employer's Representative in
accordance with Sub-Clause 1.8.
4.15 Progress Reports
Monthly progress reports shall be prepared by the Contractor and submitted
to the Employer's Representative in six copies. The first report shall cover
the period up to the end of the calendar month after that in which the
Commencement Date occurred; reports shall he submitted monthly
thereafter; each within 14 days of the last day of the period to which it relates.
Reporting shall continue until the Contractor has completed all work which
is known to be outstanding at the completion date stated in the Taking-Over
Certificate for the Works. Each report shall include:
(a) photographs and detailed descriptions of progress, including each
stage of design, procurement, manufacture, delivery to Site,
construction, erection, testing and commissioning;
(b) charts showing the status of Construction Documents, purchase orders,
manufacture and construction;
(c) for the manufacture of each main item of Plant and Materials, the name
of manufricturer, manufacture location, percentage progress, and the
actual or expected dates of commencement of manufacture,
Contractor's inspections, tests and delivery;
(d) records of personnel and Contractor's Equipment on Site;

© FIDIC 1996 53
 (e) copies of quality assurance documents, test results and certificates of
Materials;
(f) safety statistics, including details of any hazardous incidents and
activities relating to environmental aspects and public relations; and
(g) comparisons of actual and planned progress, with details of any aspects
which may jeopardize the completion in accordance with the Contract,
and the measures being (or to be) adopted to overcome such aspects.
This detailed report on the progress during the month is an essential part of the
management of the project. Therefore, this Sub-Clause specifies that it is to be submitted
by the fourteenth day of each calendar month, preferably before the application for
payment.
Under Sub-Clause 13.3, the Contractors application for payment has to be submitted
together with supporting documents which include the report in accordance with Sub-
Clause 4.15. The period for payment under Sub-Clause 13.7 does not commence until
the Employers Representative has received all these documents.
4.16 Contractor's Equipment
Unless otherwise stated in Part II, the Contractor shall provide all
Contractor's Equipment necessary to complete the Works. All Contractor's
Equipment shall, when brought on to the Site, be deemed to be exclusively
intended for the execution of the Works. The Contractor shall not remove
from the Site any such Contractor's Equipment without the consent of the
Employer's Representative.
The programme, reports and other documents received under Sub-Clauses 4.14 and 4.15
may influence the Employer's Representative when considering an application for
consent to the removal of an item of Contractor's Equipment. Under Sub-Clause 1.8,
consent shall be given in writing and shall not be unreasonably withheld or delayed.
4.17 Safety Precautions
The Contractor shall comply with all applicable safety regulations in his
design, access arrangements and operations on Site. Unless otherwise stated
in Part II, the Contractor shall,from the commencement of work on Site until
taking-over by the Employer, provide:
(a) fencing, lighting, guarding and watching of the Works, and
(b) temporary roadways, footways, guards and fences which may he
necessary for the accommodation and protection of owners and
occupiers of adjacent land, the public and others.
All these arrangements should be included in the details provided to the Employer's
Representative under the final paragraph of Sub-Clause 4.14.

54 © FIDIC 1996
4.18 Protection of the Environment
The Contractor shall take all reasonable steps to protect the environment
(both on and off the Site) and to limit damage and nuisance to people and
property resulting from pollution, noise and other results of his operations.
The Contractor shall ensure that air emissions, surface discharges and
effluent from the Site during the Contract Period shall not exceed the values
indicated in the Employer's Requirements, and shall not exceed the values
prescribed by law.
After the Employer has taken over the Works, the Contractor is not in a position to ensure
that the Employer will operate the Works in compliance with these criteria. Matters such
as emission requirements for the completed Works should be specified in the Employer's
Requirements, and could form part of the Tests after Completion.
Note the following aspects from other Sub-Clauses. Under Sub-Clause 3.1: any
proposal, inspection, examination, testing, consent or approval shall not relieve the
Contractor from any responsibility. Under Sub-Clause 14.1: the Employer's
Representative may vary the Employer's Requirements; it is advisable to seek prior
agreement of the consequences of each Variation, but it may not be possible to do so.
4.19 Electricity, Water and Gas
The Contractor shall be entitled to use for the purposes of the Works such
supplies of electricity, water, gas and other services as may he available on
the Site and of which details are given in the Employer's Requirements. The
Contractor shall pay the Employer at the prices stated in the Employer's
Requirements. The quantities consumed shall be determined by the
Employers Representative, who shall include the amounts due as deductions
in Interim and Final Payment Certificates. The Contractor shall, at his risk
and cost, provide any apparatus necessary for such determination and for
his use of these services.
This Sub-Clause includes basic provisions in respect of utility services on the Site, which
are assumed to be under the control of the Employer. The provisions entitle the
Contractor to use these services and impose the obligation to make payment. The Sub-
Clause does not apply to off-Site services, nor to services which are not detailed in the
Employer's Requirements. When preparing the tender documents, the Employer may
wish to consider whether it would be advisable to take any responsibility in respect of
existing services. For example, if the Site was a previously-unoccupied (green-field)
site, the Employer may prefer to let the Contractor make any necessary arrangements
direct with the providers of these services, and not involve the Employer in the
arrangements, nor in the risks.
If the Employer is to make any of these services available, the Employer's Requirements
should specify the details, including prices and reliability. If the Contractor needs to
rely on the continued availability of a service, the Contract should indicate who bears
© FIDIC 1996
the cost of a failure in the supply. It is suggested that services over which the Employer
has no control should be at the risk of the Contractor, and other services could be at the
risk of the Employer, but it is advisable for the Contract to allocate the risk specifically.
4.20 Employer Supplied Machinery and Materials
The Employer undertakes to provide the items of machinery and materials (if
any) in accordance with the details given in the Employer's Requirements.
The Employer shall, at his risk and cost, transport such machinery and
materials to the Contractor, at the time and place specified in the Contract.
The Contractor shall visually inspect the machinery and materials upon
receipt at such place, and shall notify the Employer and the Employer's
Representative of any shortage, defect or default; then, either the Employer
shall immediately rectify any shortage, defect or default, or the Contractor
(if the Contractor and the Employers Representative so agree) shall carry
out such rectification as a Variation. After visual inspection, this machinery
and materials shall come under the care, custody and control of the
Contractor. The Contractor's obligations of inspection, care, custody and
control shall not relieve the Employer of liability for any undetectable
shortage, defect or default.
The Employer also undertakes to operate the items of machinery and
equipment in accordance with the details, arrangements and charges given
in the Employer's Requirements. The Contractor shall pay such charges to
the Employer; the amounts due shall he determined by the Employer's
Representative and included as deductions in Interim and Final Payment
Certificates.
This Sub-Clause includes basic provisions in respect of two categories of Employer's
items made available to the Contractor:
(a) free-issue machinery, plant and materials for incorporation into the Works, and
(b) the Employer's machinery and equipment for use in executing the Works.
The provisions entitle the Contractor to use these items and impose obligations on the
Employer (to provide the items in accordance with the Contract) and on the Contractor
(to inspect items (a) and to make payment for items (b)). Note that the Contract
requirements in respect of Plant and Materials, including fitness for purpose, do not
impose obligations on the Contractor in respect of plant and materials provided by the
Employer.
When preparing the tender documents, the Employer may wish to consider whether it
would be advisable to take any responsibility for making any items available. It is
usually preferable to let the Contractor make all the arrangements direct with

56 ©FIDIC 1996
manufacturers and suppliers, and to let him choose and use his (Contractor's) Equipment.
However, the Employer may, for example, elect to provide the following, accepting the
risks of so doing:
(a) certain items of plant and/or materials which will take so long to procure that the
Works would be completed sooner if they are ordered before the Effective Date;
(b) any Employer's cranes which are permanently allocated to the Site.
If the Employer undertakes to provide these items, he must be aware that he takes on
certain risks, including quality and availability. The plant and materials should be of the
required quality and be delivered without delay. The Employer's machinery and
equipment for use in construction should be of the specified capability and be available
in accordance with the Employer's Requirements; the latter should specify the details,
including reliability and matters such as who will drive or operate the items, and who
will be responsible for their care, custody, control and insurance.
4.21 Clearance of Site
During the execution of the Works, the Contractor shall keep the Site free
from all unnecessary obstruction, and shall store or dispose of any
Contractor's Equipment or surplus materials. The Contractor shall clear
away and remove from the Site any wreckage, rubbish or Temporary Works
no longer required.
Upon the issue of any Taking-Over Certificate, the Contractor shall clear
away and remove,from that part of the Site and Works to which such Taking-
Over Certificate refers, all Contractor's Equipment, surplus material,
wreckage, rubbish and Temporary Works. The Contractor shall leave such
part of the Site and the Works in a clean and safe condition to the satisfaction
of the Employer's Representative. Except that, the Contractor shall be
entitled to retain on Site, until the expiry of the Contract Period, such
Contractor's Equipment, Materials and Temporary Works as required by him
for the purpose of fulfilling his obligations under the Contract.
If the Contractor fails to remove, by 28 days after the issue of the
Performance Certificate, any remaining Contractor's Equipment, surplus
material, wreckage, rubbish and Temporary Works, the Employer may sell or
otherwise dispose of such items. The Employer shall he entitled to retain,
from the proceeds of such sale, a sum sufficient to meet the costs incurred in
connection with the sale or disposal, and in restoring the Site. Any balance
of the proceeds shall he paid to the Contractor. if the proceeds of the sale
are insufficient to meet the Employer's costs, the outstanding balance shall
he recoverable from the Contractor by the Employei
The Contractor is held responsible for keeping the Site tidy, and for removing rubbish
from a part of the Works for which a Taking-Over Certificate has already been issued.

© FIDIC 1996 57
Therefore, the Certificate cannot be withheld by reason only of the outstanding removal
of rubbish, unless the latter makes it impracticable for the Employer to take over the part
and use it.
Although it is not an obligation under this Sub-Clause (but may be implied under the
applicable law), the Employer should give reasonable notice to the Contractor of his
intention to apply the last sentence of this Sub-Clause. The notice should identify the
items concerned: the Contractor may have no record of them having been left on the
Site.
4.22 Security of the Site
Unless otherwise stated in Part II:
(a) the Contractor shall be responsible for keeping unauthorised persons
off the Site, and
(b) authorised persons shall be limited to the employees of the Contractor,
employees of his Subcontractors and persons authorised by the
Employer or the Employer's Representative.
On many sites, it is important (for legal and practical reasons) to allocate responsibility
for security. If not amended in the contract Part II, this Sub-Clause places responsibility
on the Contractor. Typically, he may be the only organisation whose personnel are on
the Site full-time. When preparing the tender documents, the Employer may wish to
consider amending this Sub-Clause and accepting responsibility for security.
4.23 Contractor's Operations on Site
The Contractor shall confine his operations to the Site, and to any additional
areas which may be provided by the Contractor and agreed by the Employer's
Representative as working areas. The Contractor shall take all necessary
precautions to keep his personnel and equipment within the Site and such
additional areas, and to keep and prohibit them from encroaching on
adjacent land.
These restrictions are usually necessary to facilitate inspection by the Employer's
Representative and to minimise inconvenience to the occupiers of land which is adjacent
to the Site. The Employer will, of course, wish to prevent claims from these occupiers,
in preference to relying on Sub-Clause 17.1.
4.24 Fossils
All fossils, coins, articles of value or antiquity, and structures and other
remains or things of geological or archaeological interest discovered on the
Site shall (as between the parties) be the property of the Employer. The
Contractor shall take reasonable precautions to prevent his staff labour or

58 ©F1D1C1996
 other persons from removing or damaging any such article or thing. The
Contractor shall, immediately upon discovery of such article or thing, advise
the Employer's Representative, who may issue instructions for dealing with it.
If the Contractor suffers delay and/or incurs Cost in following these
instructions of the Employer's Representative, and if such delay and/or Cost
was not (by the Base Date) foreseeable by an experienced contractor, the
Contractor shall give notice to the Employer's Representative, with a copy to
the Employer. After receipt of such notice, the Employer's Representative
shall proceed in accordance with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly.
Although the mention of foreseeability might seem strange, it may be relevant. Usually,
a foreseeable situation like this would have been covered by provisions in the Employers
Requirements. Note that, under Sub-Clause 1.8, notices, instructions and determinations
shall be in writing and not be unreasonably withheld or delayed.

Clause 5 Design
Part I makes no mention of the various stages in the design process, which therefore
were not defined. However, FIDIC envisages three stages:
(a) conceptual design by (or on behalf of) the Employer, for inclusion in the
Employers Requirements, in order to demonstrate what he expects to get; this
might involve less than 10% of total design input, and it might be necessary to
distinguish between early ideas and definite requirements;
(b) preliminary design by (or on behalf of) each tenderer for inclusion in the Proposal;
the Instructions to Tenderers should have indicated the extent of detail required,
taking account of tenderers' understandable reluctance to incur excessive tendering
costs if the likelihood of success seemed low;
(c) final design for the working drawings (Construction Documents), which might
involve two sub-stages: general arrangement drawings and detailed drawings. Note
that the second paragraph of Sub-Clause 5.2 refers to documents being "ready for
use", which could cover the completion of a general drawing which is to be used
for the next design stage, but not for construction.
The basic principle behind the drafting of Part I was to avoid indicating that there could
be elements of the design for which the Contractor would not be responsible.
Contractors may have difficulty in accepting the validity of this approach. They may

© FIDIC 1996 59
ask why contractors should bear responsibility for the Employer's conceptual design.
Consulting engineers are more accustomed to accepting the concept of taking
responsibility for designs carried out by others. Many Employers appoint designers to
check the current design, to take full responsibility for it (having had the opportunity to
substantiate any need for changes) and to prepare any further drawings required for
construction.
The principle of the Orange Book is that design responsibility falls on the Contractor,
who must therefore check the Employer's Requirements in accordance with Sub-Clause
4.1.
5.1 General Obligations
The Contractor shall carry out, and be responsible fo,; the design of the
Works. Design shall be prepared by qualified designers who are engineers
or other professionals who comply with the criteria (if any) stated in the
Employer's Requirements. For each part of the Works, the prior consent of
the Employer's Representative shall be obtained to the designer and design
Subcontractor, if they are not named as such in the Contract. Nothing
contained in the Contract shall create any contractual relationship or
professional obligations between any designer, or a design Subcontractor,
and the Employer.
The Contractor holds himself, his designers and design Subcontractors as
having the experience and capability necessary for the design. The
Contractor undertakes that the designers shall be available to attend
discussions with the Employer's Representative at all reasonable times
during the Contract Period.
Although this Sub-Clause sets out the general design obligations, it does not specify the
standard for any design, because of the overall requirement in Sub-Clause 4.1 that the
Works are to be fit for the purposes for which they are intended. Designers (individuals
and Subcontractors) are subject to the consent of the Employer's Representative, if not
named in the Contract: in a Schedule or the Contractor's Proposal, usually. Under Sub-
Clause 1.8, consent shall be given in writing and shall not be unreasonably withheld or
delayed.
If the Employer retains the services of a consulting engineer, it is to be expected that the
agreement between them would prohibit the engineer subsequently accepting an
appointment with any of the tenderers. Similarly, the Employer should not require the
Contractor to employ the Employer's designer, whose allegiance would thus be
transferred from Employer to Contractor after the Effective Date. This latter arrange-
ment might cause problems:

60 © FIDIC 1996
(a) for the tenderers, because they would each need a designer, and
(b) for the transferred designer, because of conflict of interest: initially, whilst
anticipating his role as Contractor's designer, and subsequently, because he had
been the Employer's designer.
Provision is made for the Employer's Requirements to specify criteria for the selection
of designers for particular parts, or all, of the Works. These criteria might, for example,
be necessary for structures where the consequences of failure might be catastrophic.
In addition, the Employer might require the Contractor's principal designers to be fluent
in a particular language.
The Contract does not establish a contractual relationship between the Employer and an
individual designer. However, the applicable law may impose duties of care. The law
may also affect the Contractor's liability if his designers do not, in fact, have the
experience or capability necessary for the design.
5.2 Construction Documents
The Contractor shall prepare Construction Documents in sufficient detail to
satisfy all regulatory approvals, to provide suppliers and construction
personnel sufficient instruction to execute the Works, and to describe the
operation of the completed Works. The Employer's Representative shall have
the right to review and inspect the preparation of Construction Documents,
wherever they are being prepared.
Each of the Construction Documents shall, when considered ready for use,
be submitted to the Employer's Representative for pre-construction review.
In this Sub-Clause, "review period" means the period required by the
Employer's Representative, which (unless otherwise stated in the Employer's
Requirements) shall not exceed 21 days, calculated from the date on which
the Employer's Representative receives a Construction Document and the
Contractor's notice that it is considered ready, both for a pre-construction
review in accordance with this Sub-Clause, and for use. If the Employer's
Representative, within such review period, notifies the Contractor that such
Construction Document fails (to the extent stated) to comply with the
Employer's Requirements, it shall he rectified, resubmitted and reviewed in
accordance with this Sub-Clause, at the Contractor's cost.
For each part of the Works, and except to the extent that the prior consent of
the Employer's Representative shall have been obtained:
(a) construction shall not commence prior to the expiry of the review
periods for the Construction Documents which are relevant to the
design and construction of such part;
(h) construction shall be in accordance with such Construction
Documents; and
©F1D1C1996 61
 (c) if the Contractor wishes to modify any design or document which has
previously been submitted for such pre-construction review, the
Contractor shall immediately notify the Employer's Representative, and
shall subsequently submit revised documents to the Employer's Repres-
entative for pre-construction review.
If the Employer's Representative instructs that further Construction
Documents are necessary for carrying out the Works, the Contractor shall
upon receiving the Employer's Representative's instructions prepare such
Construction Documents.
Errors, omissions, ambiguities, inconsistencies, inadequacies and other
defects shall be rectified by the Contractor at his cost.
The Construction Documents are all the drawings, calculations, computer software
(programs), samples, patterns, models and manuals, including the items specified in Sub-
Clauses 5.5 to 5.7. The Employers Requirements should describe the extent of detail
required for the submissions to the Employer's Representative (who may not want to
review every minor detail) and the procedures and periods for the pre-construction
reviews; different procedures and/or periods may be appropriate for different types of
documents. For example, the Contractor may be required to submit drawings of the
reinforcement for concrete, for which the review period would be one week (because the
Employer's Representative will not be carrying out a detailed check), but not to submit
the bending schedules detailing this reinforcement.
For some types of Works, it may be appropriate for the Employer's Requirements to refer
to the various stages of design development and to specify pre-construction reviews for
certain types of documents which will be produced in the initial stages. Although these
design development documents may not be required for construction, they would (if
specified as being required for review) become Construction Documents and have to be
submitted "when considered ready for use" for the subsequent stages of design
development.
The purposes of the pre-construction review are:
(a) to permit the Employer's Representative to verify that Construction Documents
comply with the Contract, and
(b) to give him the earliest possible opportunity to consider whether the proposed
works are what the Employer actually requires; if not, it may be necessary to
initiate a Variation.
The pre-construction review is specified in Sub-Clause 5.2 in such a way as not to
impose on the Employer's Representative any duty to approve or consent, although it
does not prevent him doing so if it is appropriate. Equally, it does not authorise him to
withhold consent, but envisages that he would notify the Contractor of any non-
compliance with the Contract. A notification of non-compliance with the Employer's

62 ©FIDIC 1996
Requirements entitles the Employer to reimbursement of the costs of the subsequent
review, assuming the cost is ascertainable.
Before the expiry of the review period for Construction Documents which are relevant
to the design and construction of a part of the Works, the Employers Representative may
either give prior written consent to construction commencing, or notify the Contractor
that the review period is shorter or has expired. Note that the review period is defined
as the period required by the Employers Representative, but not exceeding 21 days.
Alternatively, he may do neither, in which case the Contractor can commence
construction when the specified review period expires.
With a review procedure, it is possible that the Contractor may submit Construction
Documents which he knows do not comply with the Contract. In effect, he would be
proposing a Variation, without including all the items listed in Sub-Clause 14.3. Such
a careless disregard for the Contract is fraught with risks, irrespective of whether the
Employer's Representative notifies non-compliance. The Works must nevertheless
comply with the Contract.
Sub-paragraph (c) requires the Contractor to notify the Employer's Representative if a
Construction Document, which was previously subject to a review, is to be amended.
This notice should be accompanied by an explanation of the need for amendment;
prompt correction of errors should be encouraged.
The penultimate paragraph of Sub-Clause 5.2 empowers the Employer's Representative
to request further Construction Documents, if necessary. He should consider carefully
whether they are actually "necessary" (and not just of interest), preferably by reference
to the extent of detail prescribed in the Employer's Requirements. If he requests further
Construction Documents, and they are not "necessary" under the Contract, the request
would probably constitute a Variation.
Under Sub-Clause 1.8, notices and consents shall be given in writing and shall not be
unreasonably withheld or delayed.
5.3 Contractor's Undertaking
The Contractor undertakes that, if legally and physically possible, the design,
the Construction Documents, the execution and the completed Works will he
in accordance with the following, in order of priority:
(a) the law in the Country, and
(b) the documents forming the Contract, as altered or modified by
Variations.
This Sub-Clause defines the precedence of the criteria with which the Works must
comply: the law, Variations, and the Contract documents in the order of precedence
specified in Sub-Clause 1.6. If certain laws specifically relate to the Works, the
Employer might wish to consider drawing them to the attention of tenderers, and/or

© FIDIC 1996 63
dealing with their effects in the Contract. For example, major works may require
legislation before they can legally be initiated, and/or may require various agreements
with other affected parties. It is not envisaged that the Employer needs to list out all
relevant legislation for the convenience of tenderers or the Contractor. If the Employer
only lists some of the relevant legislation, the limited extent of the list should be stated,
for avoidance of doubt.
Note that the "Contract" is not itself changed by a Variation, which is instructed by the
Employers Representative: he is not empowered to change the Contract. Although a
Variation constitutes an amendment to the document entitled "Employer's
Requirements", it is the original version of the latter document which was, and still is,
part of "the Contract".
5.4 Technical Standards and Regulations
The design, the Construction Documents, the execution and the completed
Works shall comply with the Country's national specifications, technical
standards, building, construction and environmental regulations, regulations
applicable to the product being produced from the Works, and the standards
specified in the Employer's Requirements, applicable to the Contractor's
Proposal and Schedules, or defined by law. References in the Contract to
such specifications and other matters shall be understood to be references to
the edition applicable on the Base Date, unless stated otherwise. If
substantially changed or new applicable national specifications, technical
standards or regulations come into force after the Base Date, the Contractor
shall submit proposals for compliance to the Employer's Representative. In
the event that the Employer's Representative determines that such proposals
constitute a variation, he shall then initiate a Variation in accordance with
Clause 14.
Sub-Clause 1.13 requires the Contractor to comply with, and give notices under, all
relevant regulations, including payment of fees. In Sub-Clause 5.4, the first sentence
specifies various criteria for the design, Construction Documents and Works. If any of
these conflict, it will be necessary to ascertain their order of precedence. Under Sub-
Clause 5.3, the law takes priority over other requirements; however, some of the criteria
included in the first sentence of Sub-Clause 5.4 may also be legal requirements. The
order of precedence of contract documents is specified in Sub-Clause 1.6.
In some countries, certain types of work may have to receive statutory approval and/or
certification. The Sub-Clause imposes on the Contractor the responsibility to comply
with these statutory requirements. However, the Employer's Requirements should take
account of statutory requirements which are applicable to the operation of the Works.
If substantially changed or new criteria are promulgated, they may be legal requirements
(see Sub-Clause 13.16), or they may be optional. The Contractor is required to prepare
and submit proposals for compliance, but the proposals need not include all the items

64 © FIDIC 1996
listed in Sub-Clause 14.3: the final sentence of Sub-Clause 5.4 clarifies that Clause 14
need not be initiated until the Employer's Representative determines, following receipt
of the proposals submitted under Sub-Clause 5.4.
Note the following aspects from other Sub-Clauses. Under Sub-Clause 3.1: any
proposal, inspection, examination, testing, consent or approval by the Employer's
Representative shall not relieve the Contractor from any responsibility. Under Sub-
Clause 14.1: the Employer's Representative may vary the Employer's Requirements; it
is advisable to seek prior agreement of the consequences of each Variation, especially if
it affects the scope or purpose of the Works, but it may not be possible to do so.
5.5 Samples
The Contractor shall submit the following samples and relevant information
to the Employer's Representative for pre-construction review in accordance
with the procedure for Construction Documents described in Sub-Clause
5.2:
(a) manufacturer's standard samples of Materials,
(h) samples (if any) specified in the Employer's Requirements, and
(c) additional samples instructed by the Employer's Representative under
Clause 14.
Each sample shall be labelled as to origin and intended use in the Works.
The Contractor is required to submit samples in accordance with the procedure specified
in Sub-Clause 5.2 and any details specified in the Employer's Requirements. The
"relevant information" would depend on the Material, but typically could include details
relevant to the use (application) of the Material and to maintenance requirements.
5.6 As-Built Drawings
The Contractor shall prepare, and keep up-to-date, a complete set of "as-
built" records of the execution of the Works, showing the exact 'as-built"
locations, sizes and details of the work as executed, with cross references to
relevant specifications and data sheets. These records shall he kept on the
Site and shall he used exclusively for the purposes of this Sub-Clause. Two
copies shall he submitted to the Employer's Representative prior to the
commencement of the Tests on Completion.
In addition, the Contractor shall prepare and submit to the Employer's
Representative "as-built drawings" of the Works, showing all Works as
executed. The drawings shall he prepared as the Works proceed, and shall
be submitted to the Employer's Representative for his inspection. The
Contractor shall obtain the consent of the Employer's Representative as to
their size, the referencing system, and other pertinent details.

© FIDIC 996 65
 Prior to the issue of any Taking-Over Certificate, the Contractor shall submit
to the Employer's Representative one microfiche copy, one full-size original
copy and six printed copies of the relevant "as-built drawings", and any
further Construction Documents specified in the Employer's Requirements.
The Works shall not be considered to be completed for the purposes of taking-
over under Sub-Clause 10.1 until such documents have been submitted to
the Employer's Representative.
The Contractor is required to prepare various documents under this Sub-Clause, which
may need to be amended in the contract Part II (for example, to change the numbers of
copies) and/or to be elaborated in the Employer's Requirements.
The Employer's Representative is to receive these Construction Documents before
issuing the Taking-Over Certificate for the Works: see Clause 10. It may appear onerous
to require these documents to be submitted before taking-over, but the Employer usually
requires the information at that stage. In respect of subsequent changes to these
documents, the Contractor must rectify errors under Sub-Clauses 5.8 and 12.1(a), and
the Employer's Representative can require amendments under Sub-Clauses 12.1(b) and
14.1.
5.7 Operation and Maintenance Manuals
Prior to commencement of the Tests on Completion, the Contractor shall
prepare, and submit to the Employer's Representative, operation and
maintenance manuals in accordance with the Employer's Requirements and
in sufficient detail for the Employer to operate, maintain, dismantle,
reassemble, adjust and repair the Works. The Works shall not be considered
to be completed for the purposes of taking-over under Sub-Clause 10.1 until
such operation and maintenance manuals have been submitted to the
Employer's Representative.
As with Sub-Clause 5.6, further details should be specified in the Employer's
Requirements, and the Employer's Representative is to receive these Construction
Documents before issuing the Taking-Over Certificate for the Works: see Clause 10. No
provision is made for the "approval" of these Construction Documents, except to the
extent specified in the Employer's Requirements. It may appear onerous to require the
manuals to be submitted before taking-over, but the Employer usually requires the
information at that stage. In respect of subsequent changes to these documents, the
Contractor must rectify errors under Sub-Clauses 5.8 and 12.1(a), and the Employer's
Representative can require amendments under Sub-Clauses 12.1(b) and 14.1.
5.8 Error by Contractor
If errors are found in the Construction Documents, they and the Works shall
be corrected at the Contractor's cost.
This Sub-Clause makes no mention of any incorrect data provided by the Employer,
much of which should have been checked (under Sub-Clause 4.1) by the Contractor,
66 ©FIDIC 1996
who may therefore only be protected by Sub-Clause 4.11. In some countries, the law
may impose a duty on the Employers Representative to notify the Contractor of errors.
5.9 Patent Rights
The Contractor shall indemnify the Employer against all claims of infringe-
ment of any patent, registered design, copyright, trade mark or trade name,
or other intellectual property right, if:
(a) the claim or proceedings arise out of the design, construction,
manufacture or use of the Works;
(b) the infringement (or allegation of infringement) was not the result of
part (or all) of the Works being used for a purpose other than that
indicated by, or reasonably to he inferred from, the Contract;
(c) the infringement (or allegation of infringement) was not the result of
part (or all) of the Works being used in association or combination with
any thing not supplied by the Contractoi; unless such association or
combination was disclosed to the Contractor prior to the Base Date or
is stated in the Contract; and
(d) the infringement (or allegation of infringement) was not the
unavoidable result of the Contractor's compliance with the Employer's
Requirements.
The Contractor shall be promptly notified of any claim under this Sub-Clause
made against the Employer. The Contractor may, at his cost, conduct
negotiations for the settlement of such claim, and any litigation or arbitration
that may arise from it. The Employer or the Employer's Representative shall
not make any admission which might he prejudicial to the Contractor, unless
the Contractor has failed to take over the conduct of the negotiations,
litigation or arbitration within a reasonable time after having been so
requested.
Except to the extent that the Employer agrees otherwise, the Contractor shall
not make any admission which might be prejudicial to the Employer, until the
Contractor has given the Employer such reasonable security as the Employer
may require. The security shall be for an amount which is an assessment of
the compensation, damages, charges and costs for which the Employer may
become liable, and to which the indemnity under this Sub-Clause applies.
The Employer shall, at the request and cost of the Contractor, assist him in
contesting any such claim or action, and shall he repaid all reasonable
incurred.
This Sub-Clause protects the Employer from any breaches of copyright or of other intell-
ectual property right arising from the Contractor's design of the Works, other than
(for example) those arising from items specified in the Employer's Requirements: see
© FIDIC 1996 67
sub-paragraph (d). In the event of a third party making a claim in respect of any of the
matters mentioned in this Sub-Clause, the Contractor and the Employer should each
consider taking legal advice. In particular, the Sub-Clause does not specifically attempt
to resolve the major problem of the Employer being prevented by a competent court from
operating the Works by reason of the infringement of a third party's alleged intellectual
property right; the consequences would be determined by the applicable law.
When preparing the tender documents, the Employer may need to consider what
procedures are relevant to the continuing operation of the Works, since they may not be
covered by this Sub-Clause. For example, further wording may be required if the Works
include process plant requiring some form of operational licence authorising the
Employer to continue using the Works after the Contract Period. Some processes are in
the public domain: the supplier of a generator cannot expect a fee for allowing it to be
used to generate electricity. However, process plants which manufacture products from
raw materials are usually protected by intellectual property rights, the owner of which
would grant a licence to the Employer, entitling him to use (and benefit from) the
protected process. This licence is sometimes referred to as a process licence: it can only
be granted by the owner of the intellectual property right (the process owner), but can
be granted to the Employer or to the Contractor.
If the process owner grants the process licence directly to the Employer (or plant
operator), the Contractor will utilise it to design and construct the Works based on the
process design which would form part of the Employer's Requirements. The Contractor
would then be reluctant to take responsibility for process performance. The extent of
the process owner's liability to the Employer would depend on the terms of their
agreement for the process licence. However, the Employer may prefer this option,
having a direct agreement with the process owner, with whom he could also arrange a
long-term consultancy. This type of agreement would need to incorporate provisions
covering the possibilities of the Contractor going into liquidation or of a termination of
the construction contract.
If the Contract specifies that the Contractor is to grant the process licence to the
Employer (or plant operator), the liability of the Contractor may include process
performance and fitness for purpose of the process, giving the Employer undivided
liability. However, this undivided liability might be more onerous than the liability
which the process owner would accept in his agreement with the Contractor, who may
therefore be reluctant to accept this liability to the Employer. The acceptability to the
Employer of this option would therefore depend on the contract provisions in respect of
the Contractor's liabilities and on the potential consequences of him going into
liquidation or of a termination of the contract.
All these aspects would have to be considered by the Employer, taking account of the
type of process and of the identity of process owner(s), before inviting tenders for a
process plant.

68 © FIDIC 1996
Clause 6 Staff and Labour
6.1 Engagement of Staff and Labour
The Contractor shall make his own arrangements for the engagement of all
staff and labour, local or otherwise, and for their payment, housing,feeding
and transport.
In some countries, the Contractor may have other obligations under the local law, but
this Sub-Clause removes any implication of obligation on the Employer.
6.2 Rates of Wages and Conditions of Labour
The Contractor shall pay rates of wages, and observe conditions of labour,
not less favourable than those established for the trade or industry where the
work is carried out. If no such established rates or conditions are applicable,
the Contractor shall pay rates of wages and observe conditions not less
favourable than the general level of wages and conditions observed by
employers whose trade or industry is similar to that of the Contractoc
If the Contractor fails to comply with this Sub-Clause, the Employer might have
difficulty enforcing it, but he would be able to resist claims from the Contractor in
respect of events caused by the non-compliance.
6.3 Persons in the Service of Others
The Contractor shall not recruit, or attempt to recruit, his staff and labour
from amongst persons in the service of the Employer or the Employer's
Representative.
See comments on Sub-Clause 6.2. The parties would be obliged to seek prior agreement
to the recruitment of each other's personnel.
6.4 Labour Laws
The Contractor shall comply with all the relevant labour laws applying to
his employees, and shall duly pay and afford to them all their legal rights.
The Contractor shall require all such employees to obey all applicable laws
and regulations concerning safety at work.
See comments on Sub-Clause 6.2. The law of the Country would probably also be
relevant.
6.5 Working Hours
No work shall he carried out on the Site outside the normal working hours
stated in the Appendix to Tende,; or on the locally recognised days of rest,
unless:

© FIDIC 1996 69
 (a) the Contract so provides,
(b) the work is unavoidable, or necessary for the saving of life or property
or for the safety of the Works, in which case the Contractor shall
immediately advise the Employer's Representative, or
(c) the Employer's Representative gives his consent.
This Sub-Clause may be applicable to either or both of two situations. Firstly, the
Employer may wish to specify maximum working hours in the Appendix to Tender,
especially for work on an existing operational facility. Secondly, his Representative may
simply wish to know the working hours well in advance, so as to manage his own
personnel. Under Sub-Clause 1.8, the Employer's Representative's consent shall be
given in writing and shall not be unreasonably withheld or delayed.
6.6 Facilities for Staff and Labour
Unless otherwise stated in Part II, the Contractor shall provide and maintain
all necessary accommodation and welfare facilities for his (and his Sub-
contractor) staff and labour. The Contractor shall also provide the facilities
specified in the Employer's Requirements,for the Employer's and Employer's
Representative's personnel. The Contractor shall not permit any of his
employees to maintain any temporary or permanent living quarters within
the structures forming part of the Works.
It may be difficult to establish what accommodation and facilities are "necessary" under
this Sub-Clause, until the effects of their inadequacy have become apparent. In that
event, the Employer cannot be held responsible for these effects, which could include
significant delay to the Works.
6.7 Health and Safety
Precautions shall be taken by the Contractor to ensure the health and safety
of his staff and labour. The Contractor shall, in collaboration with and to
the requirements of the local health authorities, ensure that medical staff,first
aid facilities, sick bay and ambulance service are available at the accom-
modation and on the Site at all times, and that suitable arrangements are
made for all necessary welfare and hygiene requirements and for the
prevention of epidemics. The Contractor shall maintain records and make
reports concerning health, safety and welfare of persons, and damage to
property, as the Employer's Representative may reasonably require.
The Contractor shall appoint a member of his staff at the Site to be
responsible for maintaining the safety, and protection against accidents, of
personnel on the Site. This person shall be qualified for his work and shall
have the authority to issue instructions and take protective measures to
prevent accidents. The Contractor shall send, to the Employer's Repres-
entative, details of any accident as soon as possible after its occurrence.

70 ©FIDIC 1996
This Sub-Clause sets out the Contractors overall responsibility for health and safety.
Liaison with local health authorities may result in their facilities being used as
ambulance service, for example. The importance of planning for possible accidents must
not be overlooked. If the local facilities seem likely to be insufficient for the numbers
of personnel on Site, the Contractor must overcome the shortfall. In certain
circumstances, it may be appropriate for him to provide a fully-equipped hospital.
6.8 Contractor's Superintendence
The Contractor shall provide all necessary superintendence during the
design and execution of the Works, and as long thereafter as the Employer's
Representative may consider necessary for the proper fulfilling of the
Contractor's obligations under the Contract. Such superintendence shall be
given by sufficient persons having adequate knowledge of the operations to
be carried out (including the methods and techniques required, the hazards
likely to he encountered and methods of preventing accidents) for the satis-
factory and safe execution of the Works.
Again, the questions of what is "necessary" and how many are "sufficient" under this
Sub-Clause could be difficult to establish. Failure to comply might be evident by
constructional problems, which might be serious enough to entitle the Employer's
Representative to suspend the Works under Sub-Clause 8.7.
6.9 Contractor's Personnel
The Contractor shall employ (or cause to he employed) only persons who are
careful and appropriately qualified, skilled and experienced in their
respective trades or occupations. The Employer's Representative may
require the Contractor to remove (or cause to be removed) any person
employed on the Site or Works, including the Contractor's Representative,
who in the opinion of the Employer's Representative:
(a) persists in any misconduct,
(b) is incompetent or negligent in the performance of his duties,
(c) fails to conform with any provisions of the Contract, or
(d) persists in any conduct which is prejudicial to safety, health, or the
protection of the environment.
if appropriate, the Contractor shall then appoint (or cause to be appointed)
a suitable replacement person.
It is rare for the Employer's Representative to need to take action under this Sub-Clause
in circumstances where the Contractor would not wish to take his own action, without
instruction. Before taking action under this Sub-Clause, the Employer's Representative
should first seek to persuade the Contractor to remove the person. Removal by
agreement is preferable to enforcement under this Sub-Clause.
©F1D1C1996 71
6.10 Disorderly Conduct
The Contractor shall at all times take all reasonable precautions to prevent
any unlai4ful, riotous or disorderly conduct by or amongst his staff and
labour, and to preserve peace and protection of persons and property in the
neighbourhood of the Works against such conduct.
Again, it may be difficult to define "reasonable precautions". If they are not taken, it
might be necessary for the civil police to be involved.

Clause 7 Plant, Materials and Workmanship

7.1 Manner of Execution
All Plant and Materials to be supplied shall he manufactured, and all work
to be done shall he executed, in the manner set out in the Contract. Where
the manner of manufacture and execution is not set out in the Contract, the
work shall he executed in a proper, workmanlike and careful manner, with
properly equipped facilities and non-hazardous Materials, and in accordance
with recognized good practice.
The manner in which work is to be executed can be derived, in part, from Sub-Clauses
4.1, 5.1. 5.3 and 5.4 of Part I, and probably also from the Employer's Requirements
and/or the Contractor's Proposal. This Sub-Clause covers those aspects which cannot
be derived from other provisions in the Contract.
The reference to "non-hazardous Materials" prohibits the use of materials which may be
hazardous, either in application or during their expected life, except to the extent that
the use of particular Materials is "set out in the Contract".
The Employer's Representative is not empowered to relax this provision of the Contract.
If he consents (under Sub-Clause 5.2 or 5.5) to the use of Material which is subsequently
found to be hazardous, the Contractor will be in breach of this Sub-Clause and will have
to replace the Material; see Sub-Clause 3.1.
If the Contractor wishes to use a Material which does not comply with Sub-Clause 7.1,
he may propose its use under the procedures specified in Sub-Clause 14.2, drawing
attention to the hazards.
7.2 Delivery to Site
The Contractor shall he responsible for procurement, transport, receiving,
unloading and safe keeping of all Plant, Materials, Contractor's Equipment
and other things required for the completion of the Works.
Except as may be specifically stated otherwise in the contract Part II and the Employer's
Requirements (which, under Sub-Clause 1.6, take precedence over Part I), the
Contractor is responsible for all arrangements for Plant, Materials, etc.

72 © FIDIC 1996
7.3 Inspection
The Employer and the Employer's Representative shall be entitled, during
manufacture, fabrication and preparation at any places where work is being
carried out, to inspect, examine and test the materials and workmanship, and
to check the progress of manufacture, of all Plant and Materials to he
supplied under the Contract. The Contractor shall give them full opportunity
to inspect, examine, measure and test any work on Site or wherever carried
out.
The Contractor shall give due notice to the Employer's Representative
whenever such work is ready, before packaging, covering up or putting out
of view. The Employer's Representative shall then either carry out the
inspection, examination, measurement or testing without unreasonable delay,
or notify the Contractor that it is considered unnecessary. If the Contractor
fails to give such notice, he shall, when required by the Employer's Repres-
entative, uncover such work and thereafter reinstate and make good at his
own cost.
The Employer and his Representative are to be given all reasonable access to inspect and
test materials and workmanship. Note that they carry out the tests covered in Sub-Clause
7.3: these tests might not be described anywhere in the Contract, because the Employer
might find it difficult to specify them when writing his Requirements. The tests referred
to in Sub-Clause 7.3 are thus in a different category to those covered in Sub-Clause 7.4
and Clauses 9and 11:
Sub-Clause 7.3 relates to the testing by the Employer and/or his Repres-
entative during execution of work;
Sub-Clause 7.4 relates to the specified testing by the Contractor during
execution of work and/or upon completion;
Clause 9 relates to the specified testing by the Contractor upon completion,
before the taking over;
Clause 11 relates to the specified testing by the Employer, after his taking
over.
Except for any details in the Employers Requirements, the Contractor would not have
made any allowance in the Contract Price for the tests under Sub-Clause 7.3, such as
the provision of test equipment or special access arrangements. Whilst he is obliged to
give the Employer and others an opportunity to inspect and test, this Sub-Clause assumes
that no significant Cost will be incurred; delay may involve an extension of time under
Sub-Clause 8.3(e). If the Contractor is required to provide additional facilities, these
may be instructed under Clause 14.

© FIDIC 1996 73
The Contractor is required to give notice (in writing: see Sub-Clause 1.8) when any
Plant or Materials is about to be packaged or covered up. If he fails to notify, and
proceeds with packaging and/or covering up, he must unpack and uncover at his own
cost, notwithstanding that the Plant or Materials may be in accordance with the Contract.
If the Contractor does notify, the Employer's Representative must be reasonably prompt
in responding, by carrying out the inspection, examination, measurement or testing
without unreasonable delay, or by notifying the Contractor that it is considered
unnecessary. In the event of unreasonable delay, the Contractor may be entitled to an
extension of time.
In many countries, a delay, impediment or prevention by the Employer, which might
arise from the situation described in this Sub-Clause, would entitle the Contractor to
compensation under the law.
7.4 Testing
If the Contract provides for tests, other than the Tests after Completion, the
Contractor shall provide all documents and other information necessary for
testing and such assistance, labour, materials, electricity, fuel, stores,
apparatus and instruments as are necessary to carry out such tests efficiently.
The Contractor shall agree, with the Employer's Representative, the time and
place for the testing of any Plant and other parts of the Works as speqfied
in the Contract. The Employer's Representative shall give the Contractor not
less than 24 hours' notice of his intention to attend the tests. The Contractor
shall provide sufficient suitably qualified and experienced staff to carry out
the tests specified in the Contract.
If the Employer's Representative does not attend at the time and place agreed,
or if the Contractor and the Employer's Representative agree that the
Employer's Representative shall not attend, the Contractor may proceed with
the tests, unless the Employer's Representative instructs the Contractor
otherwise. Such tests shall be deemed to have been made in the Employer's
Representative presence.
The Contractor shall promptly forward to the Employer's Representative duly
certified reports of the tests. If the Employer's Representative has not
attended the tests, he shall accept the readings as accurate. When the
specified tests have been passed, the Employer's Representative shall endorse
the Contractor's test certificate, or issue a certificate to him, to that effect.
Whereas the preceding Sub-Clause obliges the Contractor to give certain people an
opportunity to carry out tests, some of which may not be described in the Contract, Sub-
Clause 7.4 refers to the Contractor's responsibility to carry out all the tests specified in
the Contract, except for the Tests after Completion (Clause 11). Sub-Clause 7.4 thus
also applies to the Tests on Completion, and is referred to in Clause 9.

74 © FIDIC 1996
Sub-Clause 7.4 makes no specific mention of the possible addition of tests not provided
for in the Contract, because additional tests would be instructed as Variations under
Clause 14. It is advisable to seek prior agreement of the consequences of each Variation,
but it may not be possible to do so.
The Employer's Requirements will have defined most of the tests to which Sub-Clause
7.4 applies. However, the Contractor may have specified other tests in his Proposal.
Tests may be required at many stages of manufacture, construction, erection and
commissioning, and could be significant in terms of verifying that the Plant, Materials
and Works are fit for their intended purposes. The final paragraph therefore requires the
outcome of the specified tests (i.e., those specified in the Contract) to be properly
recorded in a Contractor's report and a certificate.
7.5 Rejection
If, as a result of inspection, examination or testing, the Employer's Repres-
entative decides that any Plant, Materials, design or workmanship is
defective or otherwise not in accordance with the Contract, the Employer's
Representative may reject such Plant, Materials, design or workmanship and
shall notify the Contractor promptly, stating his reasons. The Contractor
shall then promptly make good the defect and ensure that the rejected item
complies with the Contract.
If the Employer's Representative requires such Plant, Materials, design or
workmanship to he retested, the tests shall be repeated under the same terms
and conditions. If such rejection and retesting cause the Employer to incur
additional costs, such costs shall he recoverable from the Contractor by the
Employer, and may be deducted by the Employer from any monies due, or to
become due, to the Contractor.
The first paragraph applies if, as a result of the activities described in Sub-Clause 7.3
or 7.4, the Employer's Representative decides that something is defective. The
Contractor is then required to rectify it; he may request clarification (in borderline cases)
of the reasons why it is considered to be defective, but the Employer's Representative
need not identify the cause of the defect. He may not wish to prescribe the method of
rectification, which must remain the Contractor's responsibility.
7.6 Ownership of Plant and Materials
Each item of Plant and Materials shall become the property of the Employer
at whichever is the earlier of the following times:
(a) when it is delivered to Site;
(h) when by virtue of Sub-Clause 8.9, the Contractor becomes entitled to
payment of the value of the Plant and Materials.

© FIDIC 1996 75
In many countries, it may be important in law to establish the ownership of Plant and
Materials, particularly in the event of liquidation of the person who is in possession of
them. In some countries, the Employer may have certain rights in respect of items for
which he has paid, entitling him to take possession of them.
The Sub-Clause does not transfer ownership upon payment, except in the special case
under sub-paragraph (b). Under the applicable law, the owner of goods may be liable
for the payment of taxes or duties, and ownership may also be a factor in determining
liability for care, custody and control.
Under sub-paragraph (a), the Contractor relinquishes ownership on delivery at Site. If
he is not then able to transfer ownership (because of the terms of his supply subcontract,
for example), he is in breach of the Contract.
Under sub-paragraph (b), payment follows ownership: see Sub-Clause 8.9.
Contractors are sometimes reluctant to have these provisions in the Contract, because of
the possibility of inconsistency with supply subcontracts. This Sub-Clause was never-
theless drafted as shown, with the intention that the supply subcontract should be drafted
consistent with Part I, not vice versa.

Clause 8 Commencement, Delays and Suspension

8.1 Commencement of Works
The Contractor shall commence the design and execution of the Works as
soon as is reasonably possible after the receipt of a notice to this effect from
the Employers Representative. Such notice shall be issued within the time
stated in the Appendix to Tender after the Effective Date. The Contractor
shall then proceed with the Works with due expedition and without delay.
until completion.
The Contractor is required to commence as soon as possible after receipt of notice from
the Employer's Representative, but may want to start design immediately. No period is
specified within which he has to commence, because of the practical difficulties in
defining what constitutes commencement. For the Employer, the completion date is
more important than the commencement date.
The wording of the notice should constitute an instruction to commence the design and
execution of the Works. The date on which it is received by the Contractor must be
established: this date is defined as the Commencement Date. The period within which
the notice is to be issued must be stated in the Appendix to Tender.
Although the Employer should not issue the Letter of Acceptance until any pre-
conditions have been met, he may find it necessary to prevent immediate
commencement. Therefore, the Contractor is not entitled to start work on the Site until
the date on which the Employer grants possession under Sub-Clause 2.2. This date is

76 ©FTDIC 1996
usually defined by reference to the date of receipt of the notice (the Commencement
Date): see the example Appendix to Tender, which is reproduced at the end of this Guide.
Generally, both parties will prefer a short time for the issue of the notice: the Contractor
would want an early start, reducing the time between tendering and commencement
(especially in respect of the limited validity of subcontractors' offers); the Employer
would want the earliest completion under Sub-Clause 8.2.
The importance of the last sentence of Sub-Clause 8.1 should not be overlooked.
Notwithstanding extensions to the Time for Completion, particularly for delays which
only affect part of the Works, the Contractor has to proceed expeditiously. This may,
depending on the circumstances, oblige him to complete other parts (which were not
affected by a delay which entitled him to an extension of time) before the expiry of the
Time for Completion. However, the circumstances may give rise to practical difficulties
in defining what constitutes "due expedition".
8.2 Time for Completion
The whole of the Works, and each Section (if any), shall he completed and
shall have passed the Tests on Completion within the Time for Completion
for the Works or such Section (as the case may he).
This is the fundamental time-related obligation. Sub-Clauses 5.6 and 5.7 specify
obligations to be fulfilled before the Tests on Completion, and hence within the Time
for Completion. Although "completed" implies that there are no outstanding works,
Sub-Clause 10.1 permits the subsequent execution, after substantial completion, of
"minor outstanding work that does not affect the use of the Works or Section for their
intended purpose".
8.3 Extension of Time for Completion
The Contractor may apply for an extension of the Time for Completion if he
is or will be delayed either before or after the Time for Completion by any
of the following causes:
(a) a Variation (unless an adjustment to the Time for Completion is agreed
under Sub-Clause 14.3),
(b) a force majeure event (as defined in Sub-Clause 19.1),
(c) a cause of delay giving an entitlement to extension of time under a Sub-
Clause of these Conditions, unless the Contractor has not complied
with such Sub-Clause,
(d) physical conditions or circumstances on the Site, which are except-
ionally adverse and were not (by the Base Date) foreseeable by an
experienced contracto,; or
(e) any delay, impediment or prevention by the Employer.

© FIDIC 1996 77
 If the Contractor intends to apply for an extension of the Time for
Completion, the Contractor shall give notice to the Employer's Repres-
entative of such intention as soon as possible and in any event within 28 days
of the start of the event giving rise to the delay, together with any other notice
required by the Contract and relevant to such cause. The Contractor shall
keep such contemporary records as may be necessary to substantiate any
application, either on the Site or at another location acceptable to the
Employer's Representative, and such other records as may reasonably be
requested by the Employer's Representative. The Contractor shall permit the
Employer's Representative to inspect all such records, and shall provide the
Employer's Representative with copies as required.
Within 28 days of the first day of such delay (or such other period as may he
agreed by the Employer's Representative), the Contractor shall submit full
supporting details of his application. Except that, if the Contractor cannot
submit all relevant details within such period because the cause of delay
continued for a period exceeding 7 days, the Contractor shall submit interim
details at intervals of not more than 28 days (from the first day of such delay)
and full and final supporting details of his application within 21 days of the
last day of delay.
The Employer's Representative shall proceed in accordance with Sub-Clause
3.5 to agree or determine either prospectively or retrospectively such
extension of the Time for Completion as may be due. The Employer's Repres-
entative shall notify the Contractor accordingly. When determining each
extension of time, the Employer's Representative shall review his previous
determinations and may revise, hut shall not decrease, the total extension of
time.
Provisions for extension of time are for the benefit of both parties. This Sub-Clause
entitles the Contractor to more time to carry out the Works, unless he does not apply for
an extension or does not comply with notification requirements; the Sub-Clause protects
the Employer (especially in the event of a delay, impediment or prevention by the
Employer) from the possibility of Sub-Clause 8.2 being invalidated under the applicable
law. This Sub-Clause does not include a complete listing of the events which can give
rise to an extension: the inclusion of a listing would risk inconsistency with the Sub-
Clauses referred to in sub-paragraph (c).
The Contractor is required to notify the Employer's Representative promptly, so that he
can carry out any investigations and so that both parties can keep adequate records,
preferably on an agreed basis. Many other Sub-Clauses require the Contractor to notify
the Employer's Representative, who then proceeds in accordance with Sub-Clause 3.5
to agree or determine an extension of time, and that notice may also constitute the notice
required by Sub-Clause 8.3. The Employer's Representative can monitor these records
without admitting any entitlement to extension, although early agreement on the
principles usually simplifies resolution and minimises dispute.
78 ©FIDIC 1996
The inclusion of sub-paragraph (e) is intended to prevent Sub-Clause 8.2being invalid-
ated by matters for which the Employer is responsible, such as a delay by the Employer's
Representative in taking an action (such as the giving of a consent) which he is required
to take under the Contract.
The Sub-Clause makes no mention of financial consequences of delay, so there is no
entitlement to additional payment under this Sub-Clause; any entitlement can only be
valid if explicitly stated in another applicable Sub-Clause. Most of the Sub-Clauses
referred to in sub-paragraph (c) provide for the financial consequences; 8.4 is one
exception. As sub-paragraph (c) states, the Contractor must comply with the notification
requirements of the applicable Sub-Clause. Also, although the circumstances mentioned
in sub-paragraph (d) could give rise to significant additional cost, the Contractor could
only seek to recover it if another Sub-Clause, such as 4.11, was applicable. However,
some of these circumstances may be insurable risks.
In accordance with Sub-Clauses 1.8 and 3.5, the Employer's Representative proceeds
without unreasonable delay to agree or determine the extension of time, and to notify
the Contractor and the Employer of the agreement or determination (even if it is a nil
extension).
8.4 Delays Caused by Authorities
If the following conditions apply, namely:
(a) the Contractor has diligently followed the procedures laid down by the
relevant legally constituted public authorities in the Country,
(b) such authorities delay, impede or prevent the Contractor, and
(c) the resulting delay to the Works was not (by the Base Date) foreseeable
by an experienced contractor,
then such delay will he considered as a cause of delay giving an entitlement
to extension of time under Sub-Clause 8.3.
As with Sub-Clause 8.3, Sub-Clause 8.4 makes no mention of the financial
consequences of delay. Financial entitlements may be affected by the circumstances
related to the authorities' involvement in the work: see Sub-Clause 5.4, for example.
The Contractor would be well advised to keep meticulous records.
8.5 Rate of Progress
If, at any time, the Contractor's actual progress falls behind the programme
referred to in Sub-Clause 4.14, or it becomes apparent that it will so fall
behind, the Contractor shall submit to the Employer's Representative a
revised programme taking into account the prevailing circumstances. The
Contractor shall, at the same time, notify the Employer's Representative of
the steps being taken to expedite progress, so as to achieve completion within
the Time for Completion.
© FIDIC 1996 79
 If any steps taken by the Contractor in meeting his obligations under this
Sub-Clause cause the Employer to incur additional costs, such costs shall
he recoverable from the Contractor by the Employer, and may be deducted
by the Employer from any monies due, or to become due, to the Contractor.
The final sentence of Sub-Clause 4.14 empowers the Employer's Representative to
instruct the Contractor to revise the programme whenever it is inconsistent with actual
progress; i.e., progress may be ahead or behind the programme. Under Sub-Clause 8.5,
the Contractor must revise the programme whenever actual progress falls behind, or will
fall behind, the current programme; no instruction is required. The revised programme
will, of course, take account of any extensions of time determined by the Employer's
Representative.
8.6 Liquidated Damages for Delay
If the Contractor fails to comply with Sub-Clause 8.2, the Contractor shall
pay to the Employer the relevant sum stated in the Appendix to Tender as
liquidated damages for such default (which sum shall be the only monies due
from the Contractor for such default) for every day or part of a day which
shall elapse between the relevant Time for Completion and the date stated in
the Taking-Over Certificate; except that the total payment shall not exceed
the limit of liquidated damages (if any) stated in the Appendix to Tender.
The Employer may, without prejudice to any other method of recovery, deduct
the amount of such damages from any monies due, or to become due, to the
Contractor. In the event of an extension of time being granted under Sub-
Clause 8.3, the amount due under this Sub-Clause shall be recalculated
accordingly, and any over-payment refunded. The payment or deduction of
such damages shall not relieve the Contractor from his obligation to complete
the Works, or from any other of his duties, obligations or responsibilities
under the Contract.
At any time after the Employer has become entitled to liquidated damages,
the Employer's Representative may give notice to the Contractor under Sub-
Clause 15.1, requiring the Contractor to complete within a specified
reasonable time for completion. Such action shall not prejudice the
Employer's entitlements to payment under this Sub-Clause and to terminate
under Sub-Clause 15.2.
This Sub-Clause defines the extent of the compensation paid by the Contractor to the
Employer in the event that the Works, or a Section (if any), are not completed within the
Time for Completion. Although its operation may be affected by the applicable law, the
Sub-Clause generally provides the mechanism for compensation, without the Employer
having to demonstrate his actual loss. Note that the Contractor cannot prevent the
deduction by submitting claims for extension of time.

80 ©FIDIC 1996
The sum per day is to be stated in the Appendix to Tender. The sum may be expressed
as a percentage of the Contract Price: see the example Appendix reproduced at the end
of this Guide. Typically, the sum could be calculated by considering the Employers
losses or foregone benefits (which might be comparable with the financing charges for
the Contract Price, per day); and the daily cost of the Employers Representative. For
the limit of liquidated damages, if stated in the Appendix to Tender, the usual percentage
in international contracts generally varies between 5% and 15%. The currencies of
payment may affect the Employers calculation of the sum per day and the limit. When
preparing their tenders, tenderers will wish to assess their potential liability to the
Employer, and take account of the liquidated damages specified in the Appendix to
Tender.
In the rare event of a subsequent extension of time, the amount recoverable has to be
recalculated, and any over-payment refunded. No express provision is made for payment
of financing charges in respect of this refund. The applicable law may entitle the
Contractor to financing charges, unless he is partly responsible for the delay in the
determination of this subsequent extension.
The Employer is entitled to deduct liquidated damages from moneys due to the
Contractor. Before so doing, he could consider whether the delay is a reflection of cash
flow shortfall from progress payments. If so, further diminution of cash flow (by the
deduction of liquidated damages) could exacerbate the situation.
Liquidated damages are stated to be the only damages due to late completion; in other
words, the Employer cannot recover his actual losses due to late taking over. However,
he can recover additional costs which arose directly from the steps taken by the
Contractor to expedite progress, under Sub-Clause 8.5.
The final paragraph provides for the possibility that the Contractor may be so late in
completion that the Employer may realize that the limit of liquidated damages may be
reached. The options open to the Employer include a formal notice under this Sub-
Clause and Sub-Clause 15.1. The notice should specify a reasonably achievable date
for completion: see comments on Clause 15.
Note that Sub-Clause 8.6 applies notwithstanding that the Contractor is not entitled
(under Part I) to the payment of a bonus for accelerated completion. When preparing
the tender documents, the Employer may wish to consider incorporating arrangements
for bonus payments: see page 12 of the published Part II.
8.7 Suspension of Work
The Employer's Representative may at any time instruct the Contractor to
suspend progress of part or all of the Works. During suspension, the
Contractor shall protect, store and secure such part or the Works against any
deterioration, loss or damage.

©F1D1C1996 81
The Employers Representative is not required to give reasons for instructing a
suspension, but may do so in order to indicate how he proposes to apply the subsequent
Sub-Clauses. The instruction must be in writing: see Sub-Clause 1.8.
The suspension may have been necessitated by a situation for which the Employer is
responsible, or by a situation for which the Contractor is responsible. In the latter event,
the Employer's Representative may consider it advisable, if instructing a suspension, to
ensure that the Contractor's shortcoming is recorded as having necessitated the
suspension. His shortcomings may not necessitate a suspension, particularly if they
relate to manufacture off-Site. When contemplating whether to instruct a suspension,
the Employer's Representative should consider all the alternatives carefully.
The Employer's Representative does not have a duty under the Contract to instruct a
suspension, even if it is obvious that certain works must be suspended: for example,
because of a flood season. In these obvious cases, it is the Contractor who is at risk if
he persists in executing work which should obviously be suspended. In some cases, his
persistence may make a suspension necessary for reasons attributable to the Contractor,
so Sub-Clause 8.8 would not apply.
No mention is made of the Employer's Representative having to instruct the Contractor's
activities of protecting, storing and securing. However, he should be involved, because
of the entitlement to reimbursement under Sub-Clause 8.8.
8.8 Consequences of Suspension
If the Contractor suffers delay and/or incurs Cost in following the Employer's
Representative's instructions under Sub-Clause 8.7, and in resumption of the
work, and if such delay and/or Cost was not (by the Base Date) foreseeable
by an experienced contractor, the Contractor shall give notice to the
Employer's Representative, with a copy to the Employer. After receipt of such
notice the Employer's Representative shall proceed in accordance with Sub-
Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly. Except that the Contractor shall
not be entitled to such extension and payment of Cost if the suspension is due
to a cause attributable to the Contractor, or is necessitated by a Contra ctors
risk as defined in Sub-Clause 17.5.
The Contractor shall not be entitled to extension of time for, or payment of
the costs incurred in, making good any deterioration, defect or loss caused
by faulty design, workmanship or materials, or by the Contractor's failure to
take the measures specified in Sub-Clause 8.7.

82 © FIDIC 1996
This Sub-Clause sets out the procedure to deal with a suspension which is not due to the
Contractors shortcomings. Firstly, he gives notice to the Employers Representative.
Although no time is prescribed for him to give the notice (except in Sub-Clause 1.8),
he should do so as soon as possible after receipt of the instruction to suspend, making
reference to Sub-Clauses 8.8 and 20.1. The latter prescribes the procedure for
submission of relevant records and evaluation.
The Contractor is not entitled to an extension of time for a delay, and/or to payment of
a Cost:
(a) if the suspension is due to a cause attributable to the Contractor,
(b) if the suspension is necessitated by a Contractor's risk (his risks are all risks other
than the Employer's risks listed in Sub-Clause 17.3),
(c) in respect of the making good of any deterioration, defect or loss caused by faulty
design, workmanship or materials,
(d) which was due to the Contractor's failure to take the measures specified in Sub-
Clause 8.7, or
(e) which was foreseeable by an experienced contractor.
It will be unusual for (e) to apply, unless (a), (b), (c) or (d) also applies. However, the
provision gives further protection to the Employer in the event of the Contractor
persisting in the execution of work which should obviously be suspended.
8.9 Payment for Plant and Materials in Event of Suspension
The Contractor shall he entitled to payment for Plant and/or Materials which
have not been delivered to Site, if the work on Plant or delivery of Plant
and/or Materials has been suspended for more than 28 days. This entitlement
shall he to payment of the value of such Plant and/or Materials as at the date
of suspension, if
(a) the Contractor has marked the Plant and/or Materials as the
Employer's properly in accordance with the Employer's Repres-
entative's instructions, and
(b) the suspension is not due to a cause attributable to the Contractoi
The Employer shall then, if requested by the Contractoi; take over the
responsibility for protection, storage, security and insurance of such
suspended Plant and/or Materials; the risk of loss or damage to the
suspended works shall then pass to the Employe'
For a suspension which is not due to the Contractor's shortcomings, he becomes entitled
to payment for Plant and Materials, after 28 days, if they become the Employer's
property and are marked accordingly. In some countries, the law may require certain
actions to be taken in order to make the items the property of the Employer.

© FIDIC 1996 83
During these 28 days, the only entitlement to payment would be under Clause 13. An
immediate entitlement to payment would not be reasonable, because the suspension
might only be a few days and might occur prior to payment becoming due under Clause
13. If the Contractor then requests the Employer to take over responsibility, the
Employer must comply, but the Contractor must make the Plant and/or Materials
available for these purposes.
8.10 Prolonged Suspension
If suspension under Sub-Clause 8.7 has continued for more than 84 days,
and the suspension is not due to a cause attributable to the Contractor, the
Contractor may by notice to the Employer's Representative require
permission to proceed within 28 days. If permission is not granted within
that time, the Contractor may treat the suspension as an omission under
Clause 14 of the affected part of the Works. If such suspension affects the
whole of the Works, the Contractor may terminate his employment, under
Sub-Clause 16.2.
Clearly, a twelve week suspension brings into question whether it is reasonable to delay
progress to this extent, unless it is due to the Contractor's shortcomings. No time limit
is specified for the Contractor's notice; under Sub-Clause 1.8, the notice shall be in
writing and not unreasonably delayed.
8.11 Resumption of Work
After receipt of permission or of an instruction to proceed, the Contractor
shall, after notice to the Employer's Representative, and together with the
Employer's Representative, examine the Works and the Plant and Materials
affected by the suspension. The Contractor shall make good any
deterioration or defect in or loss of the Works or Plant or Materials, which
has occurred during the suspension.
If the Employer has taken over risk and responsibility for the suspended
Works under Sub-Clause 8.9, risk and responsibility shall revert to the
Contractor 14 days after receipt of the permission or instruction to proceed.
For some types of Works, the Employer may be understandably reluctant to allow the
Contractor to resume his activities before risk and responsibility revert after the 14 days.
No mention is made of any payment due for these activities, because the Contractor's
entitlement to compensation for the Cost incurred "in resumption of the work" is
included in Sub-Clause 8.8: see above.

84 © FIDIC 1996
Clause 9 Tests on Completion
9.1 Contractor's Obligations
The Contractor shall carry out the Tests on Completion in accordance with
this Clause and Sub-Clause 7.4, after providing the documents in
accordance with Sub-Clauses 5.6 and 5.7. The Contractor shall give, to the
Employer's Representative, 21 days' notice of the date after which the
Contractor will he ready to carry out the Tests on Completion. Unless
otherwise agreed, such Tests shall be carried out within 14 days after this
date, on such day or days as the Employer's Representative shall instruct.
In considering the results of the Tests on Completion, the Employer's Repres-
entative shall make allowances for the effect of any use of the Works by the
Employer on the performance or other characteristics of the Works. As soon
as the Works, or a Section, have passed the Tests on Completion, the
Contractor shall provide the Employer's Representative and the Employer
with a certified report of the results of all such Tests.
The Tests on Completion are the tests, defined in the Employer's Requirements and
(possibly) Contractor's Proposal, which are required by the Employer in order to
determine whether the Works (or a Section, if any) have reached the stage at which the
Employer should take over the Works or Section. These Tests would normally include
some performance tests, in order to determine whether the Works or Section comply with
specified performance criteria. Clause 9 is intended to be applicable to any type of tests
which the Contractor is required to carry out at completion, before the Employer takes
over the Works or Section.
The Sub-Clause makes no specific mention of the possible addition of tests not provided
for in the Contract, because Tests on Completion are defined in Sub-Clause 1.1.4.1 as
including additional tests instructed as Variations under Clause 14. It is advisable to
seek prior agreement of the consequences of each Variation, but it may not be possible
to do so. See comments on Sub-Clauses 1.1.4, 7.3 and 11.1.
The Tests need not cover every aspect necessary to define completion. Under Sub-
Clause 10.1, the passing of these Tests is only part of the criteria to be satisfied before
taking over. However, since the Contractor has designed the Works, the Tests will
probably be sufficiently detailed to necessitate the preparation of the report required by
the last sentence. Particular requirements for this report may need to be included in the
Employer's Requirements.
Tests on Completion might include a combination of electrical, hydraulic and
mechanical tests, with the Works being operated continuously to determine their reliab-
le output and efficiency. Specification of these performance tests may be made more
difficult by the Employer's Requirements having to be written before the details of the
Works are known, and possibly some years before the Tests will be carried out.

© FIDIC 1996 85
However, inadequate specification could give rise to dispute as to whether completion
of the Works has been achieved. Typically, the provisions might have to take account
of the quality and availability of feedstock and other materials, the quality and
production rates of the output (product) and of by-products (including treatment and
disposal of effluent), and efficiency in the use of power, materials and other resources.
The Contractor may act in advance of substantial completion; he is required to give three
weeks' notice of when he will be ready to carry out the Tests on Completion, after
providing the documents in accordance with Sub-Clauses 5.6and 5.7. He then carries
out the Tests, in accordance with the testing requirements of Sub-Clause 7.4, at times
agreed with the Employer's Representative, within 14 days after the notified date of
readiness.
Unless otherwise agreed, the Tests on Completion are to be carried out (within the period
of 14 days) on such days as the Employer's Representative shall instruct. Under Sub-
Clause 1.8, the instruction shall be in writing and not be unreasonably delayed or with-
held. If no instruction is given, the Contractor is not entitled to proceed with these
important tests, but may be entitled to an extension of time under Sub-Clause 8.3(e),
and/or to recovery of damages for breach of Sub-Clause 1.8.
9.2 Delayed Tests
If the Tests on Completion are being unduly delayed by the Contractor, the
Employer's Representative may by notice require the Contractor to carry out
such Tests within 21 days after the receipt of such notice. The Contractor
shall carry out such Tests on such day or days within that period as the
Contractor may fix and of which he shall give notice to the Employer's
Representative.
If the Contractor fails to carry out the Tests on Completion within 21 days,
the Employer's Representative may himse If proceed with such Tests. All such
Tests so carried out by the Employer's Representative shall be at the risk and
cost of the Contractor. These Tests on Completion shall then be deemed to
have been carried out in the presence of the Contractor and the results of
such Tests shall be accepted as accurate.
This Sub-Clause deals with the unusual situation of the Contractor delaying the Tests on
Completion, giving the Employer's Representative the right to carry out these Tests. He
is under no obligation to carry out the Tests, and may well consider that it would be
unwise to do so. He should advise the Contractor of the arrangements, so as to give him
the opportunity to rectify his default, or at least to be represented at the Tests. However,
the Contractor is nevertheless required to accept the results of the Tests, although he is
not entitled to receive a report.

86 ©FIDIC 1996
9.3 Retesting
If the Works, or a Section, fail to pass the Tests on Completion, Sub-Clause
7.5 shall apply, and the Employer's Representative or the Contractor may
require such failed Tests, and the Tests on Completion on any related work,
to he repeated under the same terms and conditions.
If tests are repeated, usually after rectification work, other (related) work may have been
affected by the rectification, and may therefore need to be retested.
9.4 Failure to Pass Tests on Completion
If the Works, or a Section,fail to pass the Tests on Completion repeated under
Sub-Clause 9.3, the Employer's Representative shall be entitled to:
(a) order further repetition of Tests on Completion under Sub-Clause 9.3;
(b) reject the Works or Section (as the case may he), in which event the
Employer shall have the same remedies against the Contractor as are
provided under Clause 15; or
(c) issue a Taking-Over Certificate, if the Employer so requires: the
Contract Price shall then be reduced by such amount as may be agreed
by the Employer and the Contractor (in full satisfaction of such failure
only), and the Contractor shall then proceed in accordance with his
other obligations under the Contract.
There is no limit on the number of repetitions which may be ordered, because (after any
Test) it may appear that only minor rectification work will be required to overcome the
apparent reasons for the failure. If rectification seems unlikely, the Employer may apply
Clause 15 or seek agreement to a reduction in the Contract Price. Typically, he might
first indicate the reduction he would require, and seek the Contractor's agreement prior
to the issue of a Taking-Over Certificate; if agreement cannot be reached prior to the
issue of the Taking-Over Certificate under sub-paragraph (c), the Employer may prefer
to apply sub-paragraph (a) or (b).
Since this Sub-Clause gives no indication that the Test is deemed to have been passed,
no Retention Money would be released under Sub-Clause 13.9, unless the parties agree
otherwise (under 9.4(c)). If the whole of the Works failed the Test, the first half of
Retention Money might then not be due for release until the same time as the second
half of the Retention Money.
Sub-Clause 9.4 does not contain all the provisions of Sub-Clause 11.4, although they
both cover performance tests. In the event of a failure to pass the Tests on Completion,
the Contractor cannot simply pay liquidated damages (as he can for the Tests after
Completion): he should rectify problems and repeat the Tests. For some types of Works,
it may be appropriate for the Tests after Completion to be repetition of some of the Tests
on Completion, possibly with more onerous acceptance criteria.

© FIDIC 1996 87
When preparing the tender documents, the Employer may wish to consider incorporating
in the contract Part II, in respect of a failure to pass the Tests on Completion:
(a) provisions entitling the Employers Representative to issue a Taking-Over
Certificate as in sub-paragraph (c), but which would be followed by repetition
under Clause 11 of the failed Tests on Completion; or
(b) provisions similar to those in Sub-Clause 11.4, but applicable to the Tests on
Completion, assuming there are to be no Tests after Completion.

Clause 10 Employer's Taking Over

10.1 Taking-Over Certificate
Except as stated in Sub-Clause 9.4, the Works shall he taken over by the
Employer when they have been completed in accordance with the Contract
(except as described in sub-paragraph (a) below), have passed the Tests on
Completion and a Taking-Over Certificate for the Works has been issued, or
has deemed to have been issued in accordance with this Sub-Clause. If the
Works are divided into Sections, the Contractor shall be entitled to apply for
a Taking-Over Certificate for each Section.
The Contractor may apply by notice to the Employer's Representative for a
Taking-Over Certificate not earlier than 14 days before the Works or Section
(as the case may be) will, in the Contractor's opinion, he complete and ready
for taking over. The Employer's Representative shall, within 28 days after
the receipt of the Contractor's application:
(a) issue the Taking-Over Certificate to the Contractor, stating the date on
which the Works or Section were completed in accordance with the
Contract (except for minor outstanding work that does not affect the
use of the Works or Section for their intended purpose) including
passing the Tests on Completion; or
(h) reject the application, giving his reasons and specifying the work
required to be done by the Contractor to enable the Taking-Over
Certificate to he issued: the Contractor shall then complete such work
before issuing a further notice under this Sub-Clause.
If the Employer's Representative fails either to issue the Taking-Over
Certificate or to reject the Contractor's application within the period of 28
days, and if the Works or Section (as the case may be) are substantially in
accordance with the Contract, the Taking-Over Certificate shall he deemed
to have been issued on the last day of that period.

88 ©FIDIC 1996
The Employer is required to take over the Works (or a Section, if any) when they are
complete in accordance with the Contract, except for minor outstanding work that does
not affect the use of the Works or Section for their intended purpose, and they have
passed the Tests on Completion (if any) under Clause 9. The Contractor applies for the
Taking-Over Certificate by written notice to the Employer's Representative, which may
precede the completion and/or passing of the Tests. Note that "completion" is not
qualified as "substantial", but only limited by the reference to minor outstanding work.
However, substantial completion is sufficient to entitle the Contractor to the deemed
certification mentioned in the last sentence of Sub-Clause 10.1, if he receives no
response from the Employer's Representative and the Works or Section are substantially
in accordance with the Contract.
The Employer has no right to use the Works if the Contractor has failed to complete
them in accordance with the Contract, except after termination. If the Works appear to
be complete (except for minor outstanding work that does not affect the use of the Works
for their intended purpose) but fail the Tests on Completion, Sub-Clause 9.4 may be
applied.
Under the final sentence of Sub-Clauses 5.6 and 5.7 respectively, the Employer's
Representative is not empowered to issue a Taking-Over Certificate if certain
Construction Documents have not been received. Nevertheless, the Employer may wish
to take over and operate the Works. If the Employer wishes to take over any works
before they meet the completion criteria set out in Sub-Clause 10.1, Sub-Clause 10.2
provides him with an appropriate procedure.
10.2 Use by the Employer
The Employer shall not use any part of the Works unless the Employer's
Representative has issued a Taking-Over Certificate for such part. If a
Taking-Over Certiticate has been issued for any part of the Works (other than
a Section), the liquidated damages for delay in completion of the remainder
of the Works (and of the Section of which it forms part) shall,for any period
of delay after the date stated in such Taking-Over Certificate, he reduced in
the proportion which the value of the part so certified bears to the value of
the Works or Section (as the case may he); such values shall he determined
by the Employer's Representative in accordance with the provisions of Sub-
Clause 3.5. The provisions of this paragraph shall only apply to the rate of
liquidated damages under Sub-Clause 8.6, and shall not affect the limit of
such damages.
If the Employer does use any part of the Works before the Taking-Over
Certificate is issued:
(a) the part which is used shall he deemed to have been taken over at the
date on which it is used,

© FIDIC 1996 89
 (b) the Employer's Representative shall, when requested by the Contractor,
issue a Taking-Over Certificate accordingly, and
(c) the Contractor shall cease to be liable for the care of such part from
such date, when responsibility shall pass to the Employer.
After the Employer's Representative has issued a Taking-Over Certificate for
a part of the Works, the Contractor shall he given the earliest opportunity to
take such steps as may be necessary to carry out any outstanding Tests on
Completion, and the Contractor shall carry out such Tests on Completion as
soon as practicable, before the expiry of the Contract Period.
Under Sub-Clause 2.2, the Employer grants the Contractor possession of the Site.
Taking over a part of the Works brings possession to an end. If the Employer expected
to take over any part of the Works, it should have been defined, in the Appendix to
Tender, as a Section. Sub-Clause 10.2 covers the possibility that the Employer may
eventually decide to take over a part of the Works (other than a Section) before
completion of the other parts.
The Employer must first arrange for the issue of a Taking-Over Certificate for the part,
recognising that it will reduce his entitlement to liquidated damages. In some countries,
it might prejudice his entire entitlement, because the reduction is to be determined by
his Representative, pro rata to the value of the part. The laws of some countries require
liquidated damages to be predetermined, and not to be subject to assessment by the
payees Representative. Under Sub-Clause 10.2, he has to determine the value of the
part which has been taken over, probably without a documented basis such as a bill of
quantities.
10.3 Interference with Tests on Completion
If the Contractor is prevented from carrying out the Tests on Completion by
a cause for which the Employer (or another contractor employed by the
Employer) is responsible, the Employer shall be deemed to have taken over
the Works or Section (as the case may be) on the date when the Tests on
Completion would otherwise have been completed. The Employer's Repres-
entative shall then issue a Taking-Over Certificate accordingly, and the
Contractor shall carry out the Tests on Completion as soon as practicable,
before the expiry of the Contract Period. The Employer's Representative
shall require the Tests on Completion to be carried out by 14 days' notice
and in accordance with the relevant provisions of the Contract. If the
Contractor incurs additional Cost as a result of this delay in carrying out the
Tests on Completion, such Cost plus reasonable profit shall be determined by
the Employer's Representative in accordance with the provisions of Sub-
Clause 3.5 and shall be added to the Contract Price.

© FIDIC 1996
Typically, the Tests on Completion are the events which immediately precede completion
and taking over. It is therefore reasonable that, if they are prevented by the Employer,
he nevertheless becomes responsible for the relevant Works or Section (not just the part),
taking over of which he is, in effect, preventing. This deemed taking over will apply to
the scope of the prevented Tests; i.e., to the Works or Section, whichever would other-
wise have been taken over when the prevented Tests had been passed. Even if the
prevented Tests were limited to those which should have been carried out on a Section,
they may result in a deemed taking over of the Works, depending upon the relevant
circumstances.

Clause 11 Tests after Completion

11.1 Employer's Obligations
If Tests after Completion are specified in the Contract, this Clause shall
apply. Unless otherwise stated in Part II, the Employer shall provide the
necessary labour, materials, electricity, fuel and water, and shall carry out
the Tests after Completion in accordance with the manuals provided by the
Contractor under Sub-Clause 5.7 and such guidance as the Contractor may
be required to give during the course of such Tests.
The Tests after Completion shall he carried Out as soon as is reasonably
practicable after the Works, or Section, have been taken over by the
Employer. The Employer shall give to the Contractor 21 days' notice of the
date after which the Tests after Completion will be carried out. Unless
otherwise agreed, such Tests shall be carried out within 14 days after this
date, on the day or days determined by the Employer. If the Contractor does
not attend at the time and place agreed, the Employer may proceed with the
Tests after Completion, which shall be deemed to have been made in the
Contractors presence, and the Contractor shall accept the readings as
accurate.
The results of the Tests after Completion shall be compiled and evaluated by
the Employer and the Contractor. Any effect on the results of the Tests after
Completion which can reasonably he shown to he due to the prior use of the
Works by the Employer shall be taken into account in assessing such results.
The Tests after Completion are the tests, defined in the Employer's Requirements and/or
Contractor's Proposal, which are required to be carried out as soon as possible after
taking over in order to determine whether the Works (or a Section, if any) comply with
specified performance criteria. See comments on Sub-Clauses 1.1.4, 7.3 and 9.1.
For some types of Works, it may be appropriate for the Tests after Completion to include
the repetition of some of the Tests on Completion, possibly with more onerous
acceptance criteria. If there are to be no Tests after Completion, the Employer's Requ-
irements should include a statement to this effect, for avoidance of doubt.
© FIDIC 1996 91
The Clause was written assuming that, before they carry out these Tests, the personnel
of the Employer (or other operating organisation) would require a few weeks after taking
over for training and/or familiarisation, and in order to allow an initial period for
commissioning and for minor teething troubles to be resolved. This training would be
specified in the Employer's Requirements as a task for the Contractor to perform prior
to and/or during the Tests after Completion.
Tests after Completion might include a combination of electrical, hydraulic and
mechanical tests, with the Works being operated continuously during a reliability run,
the duration of which would have to be specified: 28 days is often appropriate.
Specification of these performance tests may be made more difficult by the Employer's
Requirements having to be written before the details of the Works are known, and
possibly some years before the Tests will be carried out. However, inadequate
specification could give rise to dispute, because the Tests have a major role in
determining the acceptability of the Works. Typically, the provisions might have to take
account of the quality and availability of feedstock and other materials, the quality and
production rates of the output (product) and of by-products (including treatment and
disposal of effluent), and efficiency in the use of power, materials and other resources.
For some types of Works, it might be necessary to carry out these Tests during a
particular season of the year. Under Part I, the Employer decides the date after which
the Tests after Completion are to be carried out, and is responsible for making the
necessary arrangements.
Evaluation of the results should be carried out jointly by the Employer and the
Contractor, in order to resolve any technical differences at an early stage. They may find
it difficult to take account of the prior use of the Works by the Employer, depending on
the required long term performance specified in the Employer's Requirements. Ideally,
the Tests after Completion should be specified in such a way that, provided they are
carried out before the expiry of the Contract Period, the results should not be influenced
by the foreseeable use prior to testing.
11.2 Delayed Tests
If the Contractor incurs additional Cost as a result of any unreasonable delay
by the Employer in carrying out the Tests after Completion, such Cost plus
reasonable profit shall be determined by the Employer's Representative in
accordance with the provisions of Sub-Clause 3.5 and shall he added to the
Contract Price.
If, for reasons not attributable to the Contractor, a Test after Completion of
the Works or any Section cannot be completed during the Contract Period
(or any other period agreed upon by the Employer and the Contractor), then
the Works or such Section shall be deemed to have passed such Test after
Completion.

92 © FIDIC 1996
The Employer might be reluctant to enter into a contract which required him to carry
out the Tests after Completion immediately after taking over, before training and/or
familiarisation. The Contractor might be reluctant to enter into a contract which entitled
the Employer to carry them out as late as possible, because of the cost of financing the
delayed repayment of the first half of the Retention Money under Sub-Clause 13.9. This
Sub-Clause therefore protects the Contractor from undue delay, and entitles him to
recover the Cost caused by the delay, plus reasonable profit. What constitutes "unreas-
onable delay" must depend on the nature of the Works and on any indications of timing
specified in the Employer's Requirements, which should include as much detail as
possible.
11.3 Retesting
If the Works, or a Section, fail to pass the Tests after Completion, the
Employer or the Contractor may require such failed Tests, and the Tests after
Completion on any related work, to he repeated under the same terms and
conditions. If such failure and retesting result from a default of the
Contractor and cause the Employer to incur additional costs, such costs shall
be recoverable from the Contractor by the Employer, and may be deducted
by the Employer from any monies due, or to become due, to the Contractor.
Note that either party may require Tests after Completion to be repeated, including tests
on "related work" which may have been affected by any rectification work. For certain
types of Plant, technological development can only be maintained by utilising feedback
from testing. The party requiring repetition should do so promptly.
11.4 Failure to Pass Tests after Completion
If the following conditions apply, namely:
(a) the Works, or a Section, fail to pass any or all of the Tests after
Completion,
(b) the relevant sum payable as liquidated damages for such failure is
stated (or its method of calculation is defined) in the Appendix to
Tender, and
(c) the Contractor pays such relevant sum to the Employer during the
Contract Period,
then the Works or such Section shall he deemed to have passed such Tests
after Completion.
If the Works, or a Section, fail to pass a Test after Completion and the
Contractor in consequence proposes to make any adjustment or modification
thereto, the Employer's Representative may instruct the Contractor that the
Employer does not wish such adjustment or modification to he made until a
time that is convenient to the Employer. In such event, the Contractor shall

© FIDIC 1996 93
 remain liable to carry out the adjustment or modification, and to satisfy such
Test within a reasonable time of being notified to do so by the Employer's
Representative. If, however, the Employer's Representative fails to give any
such notice during the Contract Period, the Contractor shall be relieved of
any such obligation and the Works or Section (as the case may be) shall be
deemed to have passed such Test after Completion.
If the Contractor incurs additional Cost as a result of any unreasonable delay
by the Employer in permitting access to the Works or Plant by the Contractor,
either to investigate the causes of failure to pass a Test after Completion, or
to carry out any adjustments or modifications, then the Contractor shall be
paid the additional Cost, plus reasonable profit, caused by such delay.
The first part of this Sub-Clause provides a mechanism to compensate the Employer in
the event of a failure to pass any of the Tests after Completion, unless the Appendix to
Tender does not include details defining how to calculate the liquidated damages for the
particular failure. If the liquidated damages are not thus ascertainable, this first part may
not be applicable.
When preparing the tender documents, the Employer should define minimum acceptable
criteria (the maximum permissible extent of the test failure), and not mistakenly define
it as a limit to such liquidated damages. The latter limit would only provide a limitation
on the payment by the Contractor and may not impose any restriction on what is
acceptable. The importance of assessing these liquidated damages carefully cannot be
over-emphasised, because of the eventual possibility that the Employer will find that he
has taken over non-compliant Works, paid the Contract Price and only been able to
deduct these liquidated damages.
The second paragraph seeks to deal with the practical difficulty which the Employer may
have in giving the Contractor access to overcome a failure. The Contractor remains
liable to carry out the work, unless he receives no notice during the Contract Period, but
becomes entitled to compensation (under the final paragraph) in the event of
unreasonable delay.

94 © FIDIC 1996
Clause 12 Defects Liability
12.1 Completion of Outstanding Work and Remedying Defects
In order that the Construction Documents and the Works shall he in the
condition required by the Contract (fair wear and tear excepted) at, or as
soon as practicable after, the expiry of the Contract Period, the Contractor
shall:
(a) complete any work which is outstanding on the date stated in a Taking-
Over Certificate, as soon as practicable after such date, and
(h) execute all work of amendment, reconstruction, and remedying defects
or damage, as may be instructed by the Employer or the Employer's
Representative during the Contract Period.
If any such defect appears or damage occurs, the Employer or the Employer's
Representative shall promptly notify the Contractor in writing.
The operation of this Sub-Clause is wider than similar provisions in some other forms
of contract, because the Contract Period (referred to in sub-paragraph (b)) is the entire
period from commencement up to the date a year after taking over. However, the Sub-
Clause only applies during the Contract Period: the Employer's Representative must
notify the Contractor of defects on or before the last day of the Period. The parties'
representatives should therefore convene a joint inspection of the Works a few days
before the Contract Period expires. If the period for notifying defects is to be other than
365 days, the contract Part II can amend the definition in Sub-Clause 1.1.3.5
accordingly.
Note that Sub-Clause 12.1 applies to all the Construction Documents as well as the
Works.
Subject to Sub-Clause 12.3, the Contract Period expires a year after the whole of the
Works are taken over. There is no separate provision for Sections and other parts taken
over earlier, for which the defects liability period is thus longer. This might seem unfair
to the Contractor, but should give him some incentive to minimise defects. When writing
Sub-Clauses 12.1 and 1.1.3.5, it seemed anomalous to permit a situation where the
Contractor was still on Site but his obligation to rectify defects in a Section had expired.
12.2 Cost of Remedying Defects
All work referred to in Sub-Clause 12.1(b) shall be executed by the
Contractor at his own cost, if the necessity for such work is due to:
(a) the design of the Works,
(h) Plant, Materials or workmanship not being in accordance with the
Contract, or

© FIDIC 1996 95
 (c) failure by the Contractor to comply with any of his other obligations.
if such necessity is due to any other cause, the Employer's Representative
shall notify the Contractor accordingly and seek agreement to an adjustment
to the Contract Price. In this event, Sub-Clause 14.3 shall apply to such
work.
Note that the Employer's Representative is only to notify the Contractor if he considers
that the necessity for the work is "due to any other cause", in which case Sub-Clause
14.3 shall apply. If the cause is not set out in a notice, the Contractor will not be entitled
to an adjustment of the Contract Price. If he considers that he is entitled to an
adjustment, he should notify the Employers Representative accordingly, but continue to
execute the work in accordance with his obligations under Sub-Clauses 3.4 and 12.1.
12.3 Extension of Contract Period
The Contract Period shall be extended by a period equal to the sum of any
periods, after the Works are taken-over, during which the Works or any
Section or item of Plant cannot be used, for the purposes for which they are
intended, by reason of a defect or damage; except that the Contract Period
shall not be extended by more than two years.
When delivery of Plant and/or Materials, or erection of Plant, or installation
of Materials, has been suspended under Sub-Clause 8.7, the Contractor's
obligations under this Sub-Clause shall not apply to any defects or damage
occurring more than three years after the Plant and/or Materials would
otherwise have been delivered, erected and taken-over.
If a defect prevents the Works, Section or Plant being operated, the Contract Period is
extended so that the Employer operates them for a total of 365 (non-consecutive) days
before the Contract is completed under Sub-Clause 12.9. However, the Employer might
not get 365 days' operation of every part, because some defective parts might not prevent
any Section or item of Plant being used for their intended purpose(s).
Sub-Clause 12.3 applies whenever works cannot be used by reason of a defect or
damage, which may have occurred before or after taking over and which may (or may
not) have been due to the Contractor's shortcomings. If the Contractor is not responsible
for the defect or damage, the Employer might prefer to waive these provisions, in order
to avoid the Contractor's reimbursable costs.
12.4 Failure to Remedy Defects
If the Contractor fails to remedy any defect or damage within a reasonable
time, the Employer or the Employer's Representative may fix a date on or by
which to remedy the defect or damage, and give the Contractor reasonable
notice of such date.

96 ©FIDIC 1996
 If the Contractor ftiils to remedy the defect or damage by such date and the
necessity for such work is due to a cause stated in Sub-Clause 12.2(a), (h)
or (c), the Employer may (at his sole discretion):
(a) carry out the work himself or by others, in a reasonable manner and at
the Contractor's risk and cost, hut the Contractor shall have no
responsibility for such work: the costs properly incurred by the
Employer in remedying the defect or damage shall he recoverable from
the Contractor by the Empker;
(b) require the Employer's Representative to determine and certify a
reasonable reduction in the Contract Price; or
(c) if the defect or damage is such that the Employer has been deprived of
substantially the whole of the benefit of the Works or parts of the Works,
terminate the Contract in respect of such parts of the Works as cannot
be put to the intended use: the Employer shall then he entitled to
recover all sums paid for such parts of the Works together with the cost
of dismantling the same, clearing the Site and returning Plant and
Materials to the Contractor, and Sub-Clause 15.1 shall not apply.
What constitutes "reasonable", for the Contractor's remedial work and for the period
prescribed by the notice, must depend on such factors as the proximity of the Site to the
Contractor's Equipment and personnel (who may have left the Country), the delivery
periods for replacement Plant, and the operational status of the Works. When giving the
described notice, the Employer may (but is not bound to) indicate which of the sub-
paragraphs will be applied.
If sub-paragraph (a) applies, the Employer should take account of any progress in
manufacturing replacements, which the Contractor might be willing to supply but might
find it difficult to install. The work is carried out at the risk of the Contractor (who bears
responsibility for accidental damage, for example), but the Employer is responsible for
the performance of the rectification. Therefore, the Employer's best interests lie in
persuading the Contractor to remedy the defect or damage, in order to avoid dispute as
to whether any element of under-performance of the Works is due to a rectification by
the Employer.
12.5 Removal of Defective Work
If the defect or damage is such that it cannot he remedied expeditiously on
the Site, the Contractor may, with the consent of the Employer's Repi-es-
entative or the Employer, remove from the Site for the purposes of repair any
part of the Works which is defective or damaged.
This Sub-Clause covers the possibility of it being necessary (for technical reasons) to
take items off Site for rectification work. If consent is sought under this Sub-Clause,
the Employer will be entitled to impose conditions for the consent, which must be in

© FIDIC 1996 97
writing and not unreasonable delayed or withheld (Sub-Clause 1.8). For example, if the
value of an item is not significantly less than that of the performance security, the
Employer may wish to consider an additional security in respect of the item, which is
his property, as well as appropriate insurance.
12.6 Further Tests
If the remedying of any defect or damage is such that it may affect the
performance of the Works, the Employer may require that Tests on
Completion or Tests after Completion, or both, be repeated to the extent
necessary. The requirement shall be made by notice within 28 days after the
defect or damage is remedied. Such Tests shall be carried out in accordance
with Clause 9 or Clause 11 (as the case may be).
No provisions for payment are made in this Sub-Clause, because of the various circum-
stances which could cause it to be applied. If the Contractor disputed the need for the
tests, he might notify the Employer in order to request payment, but he would still be
obliged to comply.
12.7 Right of Access
Until the Performance Certificate has been issued, the Contractor shall have
the right of access to all parts of the Works and to records of the working and
performance of the Works, except as may be inconsistent with any reasonable
security restrictions by the organisation responsible for operating the Works.
For certain types of Plant, technological development can only be maintained by utilising
feedback from operational records. The Contractor has right of access to these records,
which should allow his designers to give their comments.
12.8 Contractor to Search
The Contractor shall, if required by the Employers Representative, search
for the cause of any defect, under the direction of the Employer's
Representative. Unless the defect is one for which the Contractor is liable,
the Cost of such search, plus reasonable profit, shall be added to the Contract
Price.
Although the Employer's Representative is entitled to give "direction", in many cases it
may be preferable for him to agree the search methods with the Contractor and/or the
designer(s).
12.9 Performance Certificate
The Contract shall not he considered to be completed until the Performance
Certificate has been signed by the Employer's Representative and delivered
to the Contractor, stating the date on which the Contractor completed his
obligations to the Employer's Representative's satisfaction.

98 © FIDIC 1996
 The Performance Certificate shall he given by the Employer's Representative
by the date 28 days after the expiry of the Contract Period, or as soon after
such date as the Contractor has provided all the Construction Documents
and completed and tested all the Works, including remedying any defects.
Only the Performance Certificate shall be deemed to constitute approval of
the Works.
The Performance Certificate is the Contractor's evidence that the Employer's
Representative:
(a) is satisfied that the Contractor has completed his obligations under the Contract,
and
(b) approves the Works.
The Employer's Representative is required to issue the Certificate within 28 days of the
expiry of the Contract Period, unless the Contractor is then known to have outstanding
obligations. The latter could (for example) include further Construction Documents to
be supplied, tests to be passed, searches to be completed under Sub-Clause 12.8, and/or
defects to be remedied. Typically, it may not be possible for the Contractor to have
remedied, within these 28 days, all the defects notified (under Sub-Clause 12.1) during
the last few days of the Contract Period.
12.10 Unfulfilled Obligations
After the Performance Certificate has been issued, the Contractor and the
Employer shall remain liable for the fulfilment of any obligation which
remains unperformed at that time. For the purposes of determining the
nature and extent of any such obligation, the Contract shall be deemed to
remain in force.
Although the Works may have been approved under Sub-Clause 12.9, each party may
have outstanding obligation(s), and the Contract must therefore remain in force. At the
time when the Performance Certificate is issued, the Employer will probably not have
made all the payments which will be due under the Contract, nor released the
performance security. Thereafter, it may be discovered that the Works do not wholly
comply with the Contract, because of latent defects for example. The Contractor may
remain liable, notwithstanding having received the Performance Certificate.

© FIDIC 1996 99
Clause 13 Contract Price and Payment
13.1 The Contract Price
Unless otherwise stated in Part II:
(a) payment for the Works shall he made on a fixed lump sum basis;
(h) the Contract Price shall not he adjusted for changes in the cost of
labour, materials or other matters;
(c) the Contractor shall pay all duties and taxes in consequence of his
obligations under the Contract, and the Contract Price shall not be
adjusted for such costs, except as stated in Sub-Clause 13.16;
(d) any quantities which may he set out in a Schedule are only estimated
quantities and are not to be taken as the actual and correct quantities
of the Works to he executed by the Contractor in fulfilment of his
obligations under the Contract; and
(e) any quantities, prices or rates of payment per unit quantity which may
he set out in a Schedule are only to he used for the purposes stated in
such Schedule.
If any part of the Works is to be paid according to quantity supplied or work
done, the provisions for measurement and valuation shall be as stated in Part
II.
This Sub-Clause lists five basic elements of the Contract as regards money.
(a) The Contract Price is a fixed lump sum for the Works defined in the Contract, and
is not to be adjusted by reference (for example) to actual quantities.
(b) The Contract Price is not to be adjusted for escalation (inflationary changes in the
cost of labour, materials, etc).
(c) The Contractor pays all duties and taxes, and is deemed to have included for them
(and for associated administrative costs) in the Contract Price, based on the rates
of duty/tax levied at the Base Date. If the rates of duty/tax increase after the Base
Date, Sub-Clause 13.16 applies.
(d) If quantities are set out in a Schedule, they might not be the precise quantities,
because they have only been estimated (either by the Employer or by the
Contractor) prior to submission of the Tender. The Contractor's obligation is to
complete the Works, which may require the execution of different quantities. If
these scheduled quantities were deemed to be correct, it could be argued that his
obligation would only be to execute these scheduled quantities.
(e) If a Schedule includes any quantities, prices or rates of payment per unit quantity,
they are only to be used for the purposes stated in the Schedule; for example, it

100 ©FIDIC 1996

 might state that they are to be used for the preparation of Interim Payment
Certificates. If no purpose is stated in the Schedule, the quantities, prices, etc may
only have the status of non-binding information.
These provisions may be appropriate for many contracts, but they should not be taken
as being recommended for all contracts. They are listed together as the principles
adopted in Part I, and are made subject to any provisions in the contract Part II. See
the guidance and example wording included on pages 14 to 22 of the published Part II.
In particular, payment procedures are likely to be affected by the project financing
arrangements, and may have to be agreed with the financing institution/bank when the
tender documents are being prepared. Some guidance is included in the published Part
II, but the actual requirements should be ascertained direct from the project financing
institution/bank.
13.2 Advance Payments
The Employer will make interest-free advance payments to the Contractor for
his mobilization and design. The total of such advance payments, and the
number and timing of instalments (if more than one), shall he as stated in the
Appendix to Tendei; payable in the proportions of currencies in which the
Contract Price is payable. The Employer's Representative shall issue an
Interim Payment Certificate for the first instalment after the Contractor has
delivered, to the Employei; the peiformance security in accordance with Sub-
Clause 4.2 and a hank guarantee in a form and by a hank acceptable to the
Employer in amounts and currencies equal to the advance payments. Such
bank guarantee shall remain effective until the advance payments have been
repaid, hut its amount shall he progressively reduced by the amount repaid
by the Contractor as indicated in Interim Payment Certificates.
The advance payments shall he repaid through percentage deductions in
Interim Payment Certificates certified by the Employer's Representative in
accordance with this Clause. Unless other percentages are stated in the
Appendix to Tender:
(a) deductions shall commence in the Interim Payment Certificate in which
the total of all certified interim payments (excluding the advance
payments and deductions and repayments of retention) exceeds ten per
cent (10%) of the Contract Price less Provisional Sums; and
(h) deductions shall he made at the amortization rate of one quarter (25%)
of the amount of all Interim Payment Certificates (excluding the
advance payments and deductions and repayments of retention) in the
types and proportionate amounts of currencies of the advance
payments, until such time as the advance payments have been repaid.

© FIDIC 1996 101

 If the advance payments have not been repaid prior to the issue of the Taking-
Over Certificate for the Works or prior to termination under Clauses 15, 16
or 19 (as the case may be), the whole of the balance then outstanding shall
immediately become due and payable by the Contractor to the Employer.
For this Sub-Clause to be applicable, the amount of the advance(s) must be stated in the
Appendix to Tender. If the number and timing of instalments is not mentioned, all the
advance will be paid in one instalment. If no amount is specified in the Appendix to
Tender, this Sub-Clause will not apply.
The purpose of the advances is to minimise the Contractors financing costs. These costs,
which he will have included in the Contract Price, will reflect the extent to which he can
maintain a positive cash flow, which in turn will be affected by the interim payment
procedures.
The Sub-Clause envisages that the advances will be used for:
(a) "mobilization", which includes purchase of items such as Contractor's Equipment,
Plant and Materials, and other early expenditure such as advances to Sub-
contractors, and
(b) "design", which recognises that the interim payment procedures may not
adequately cover early design costs.
Whenever the Contractor is required to be paid prior to the Employer having received
anything in return, the Employer will probably (as here) require some security for his
outlay. Therefore, provision is made for a guarantee to ensure that the Employer can
recover the advances, even if the Contractor fails to repay them.
Payment of the first instalment is to be made after the Employer receives the guarantee
and performance security, at the cost of the Contractor, in accordance with any
acceptable forms included in the Contract. The wording of these securities should take
account of the law under which they would be called, and of the conditions entitling the
call. Example wording is included in the published Part II, which is reproduced at the
end of this Guide. However, being legal documents, it may be appropriate for them to
be drawn up by lawyers familiar with the law under which they will be called.
13.3 Application for Interim Payment Certificates
The Contractor shall submit a statement in six copies to the Employer's
Representative after the end of each month, in a form approved by the
Employer's Representative, showing the amounts to which the Contractor
considers himself to he entitled, together with supporting documents which
shall include the detailed report on the progress during the month in
accordance with Sub-Clause 4.15. The statement shall include the following
items, as applicable, which shall he expressed in the various currencies in
which the Contract Price is payable, in the sequence listed:

102 © FIDIC 1996

 (a) the estimated contract value of the Construction Documents produced
and the Works executed up to the end of the month (including Variations
but excluding items described in sub-paragraphs (b) to (g) below);
(h) any amounts to he added and deducted for changes in legislation in
accordance with Sub-Clause 13.16;
(c) any amount to be deducted for retention, calculated by applying the
percentage of retention stated in the Appendix to Tender to the total of
the above amounts, until the amount so retained by the Employer
reaches the limit of Retention Money (if any) stated in the Appendix to
Tender;
(d) any amounts to be added and deducted for the advance payments and
repayments in accordance with Sub-Clause 13.2;
(e) any amounts to be added and deducted for Plant and Materials in
accordance with Sub-Clause 13.5;
(f,) any other additions or deductions which may have become due in
accordance with the Contract (including those under Clause 20), other
than under Sub-Clause 8.6; and
(g) the deduction of the amounts certified in all previous Interim Payment
Certificates.
This Sub-Clause entitles the Contractor to a payment for the work executed during each
calendar month. He has to make application in the approved form, namely a statement
accompanied (or preceded) by his monthly report. Unless and until he submits his
statement, report and other necessary supporting documents, he is not entitled to the
interim payment.
The "approved" form should be that which facilitates rapid checking and certification
by the Employer's Representative, and takes account of any additional financial
provisions in the Contract: for example, a Schedule of Payments. Under Sub-Clause
1.8, approval shall not be unreasonably withheld. The Employer's Representative should
seek to allow the Contractor to utilise any computerised system with which his staff are
familiar, provided it produces clear and comprehensible monthly statements.
When pricing, the tenderers will take particular account of the extent to which they can
reduce their prices in anticipation of positive cash flow.
The difficulty, which has to be addressed when preparing tender documents for a lump
sum contract, is the determination of the procedure whereby the contract value is
estimated each month for sub-paragraph (a). Clearly, estimating cannot be left to be
determined by one of the parties to the Contract. Nor can this important matter be left
to the whim of the Employer's Representative because, even if he is an independent
engineer whose impartiality is accepted by tenderers, cash flow and consequential
financing costs cannot be predicted with any degree of reliability.
© FIDIC 1996 103
The tender documents should indicate how the interim payments to the Contractor are
to be assessed. It is preferable, but not essential, for the tender documents to include a
Schedule of Payments, specifying the amounts due based upon achievement; i.e., upon
the actual progress achieved in executing the Works.
13.4 Schedule of Payments
if the Contract includes a Schedule of Payments specifying the instalments in
which the Contract Price will he paid, then, unless otherwise stated in such
Schedule:
(a) the instalments quoted in such Schedule shall he used to determine the
contract value Jbr the purposes of sub-para graph (a) of Sub-Clause
13.3;
(h) Sub-Clause 13.5 shall not apply; and

(c) if the payment instalments are not defined by refrrence to the actual
progress achieved in executing the Works, the Employer's Repres-
entative shall be entitled to amend such Schedule: such amendment
shall he made in accordance with the provisions of Sub-Clause 3.5 and
shall only take account of the extent to which the actual progress
achieved is less than that on which the instalments in the Schedule were
based.
This Sub-Clause only becomes applicable if interim payments are to be based on a
Schedule of Payments, which could be in one of the following forms:
(i) an amount (or percentage of the Contract Price) could be entered for each month
during the Time for Completion, which can prove unsatisfactory because payment
instalments may become unreasonable if the Contractor's progress differs
significantly from the expectation on which the Schedule was based: therefore,
sub-paragraph (c) specifies that a Schedule which prescribes payment instalments
by calendar dates can be adjusted to take account of actual progress; or
(ii) the Schedule could be based on actual progress achieved in executing the Works,
i.e., on completion of defined milestones: this method is considered preferable, but
it necessitates careful definition of the payment milestones. Otherwise,
disagreements may arise when the work required for a payment milestone is
99.99% achieved but the balance cannot be completed until some months later.
Sub-Clause 13.4(a) clarifies that the figures in the Schedule of Payments are to be used
to determine the "contract value" under Sub-Clause 13.3(a). This contract value is thus
subject to additions and deductions under sub-paragraphs (b) to (g) of Sub-Clause 13.3,
including the deduction of retention. If the Schedule is as described in sub-paragraph
(i) above, and if progress falls behind (but not if it is ahead of) the programme on which
the Schedule was based, the Employer's Representative is empowered to amend the
payment instalments, applying the procedure of Sub-Clause 3.5.

104 © FIDIC 1996

A Schedule of Payments allows both parties to plan their obligations in the knowledge
of likely cash flow. Therefore, Sub-Clause 13.4(b) invalidates Sub-Clause 13.5, which
would otherwise have introduced a variable aspect of cash flow.
13.5 Plant and Materials for the Permanent Works
If this Sub-Clause applies, Interim Payment Certificates shall include (i) an
additional amount for Plant and Materials which have been brought to the
Site for incorporation in the Permanent Works, and (ii) a deduction when
they have been incorporated in the Permanent Works. The Employer's
Representative shall determine each addition and deduction in accordance
with the following provisions:
(a) no addition shall he included in the Interim Payment Certificate unless,
in the opinion of the Employer's Representative:
(i) the Plant and Materials are considered to he in accordance with
the Contract;
(ii) the Plant and Materials have been delivered to the Site and are
properly stored on Site and protected against loss, damage or
deterioration;
(iii) the Contractor's records of the requirements, orders, receipts and
use of Plant and Materials are kept in a frrm approved by the
Employer's Representative, and such records are available for
inspection by the Employer's Representative;
(iv) the Contractor has submitted a statement of the Cost of acquiring
and delivering the Plant and Materials to the Site, together with
such documents as may he required for the purpose of evidencing
such Cost; and
(v) the Plant and Materials are those listed in the Appendix to
Tender;
(h) the additional amount to he certified shall he the equivalent of eighty
percent of the cost of the Plant and Materials delivered to the Site, as
determined by the Employer's Representative after review of the
documents mentioned in sub-paragraph (a) above, taking account of
the contract value of such Plant and Materials as determined and
considered appropriate by the Employer's Representative;
(c) the amount of the deduction for any Plant and Materials incorporated
in the Permanent Works shall he equivalent to the addition previously
certified by the Employer's Representative for such Plant and Materials
under sub-paragraph (h) above; and

© FIDIC 199€ 105

 (d) the currencies for such additions and deductions shall be determined
by the Employer's Representative as follows:
(i) in the case of each addition, the currencies shall he those in which
the payment will eventually become due for the relevant item of
Plant or Materials, upon their incorporation in the Permanent
Works, and
(ii) in the case of a deduction, the currencies shall be those in which
the addition for the respective item of Plant or Materials had been
certified.
This Sub-Clause will not apply if:
(a) it is rendered inapplicable by a statement to this effect in the Appendix to Tender,
in lieu of the list referred to in sub-paragraph (a)(v),
(b) it is deleted, by a statement to this effect in the contract Part II, or
(c) the Contract includes a Schedule of Payments, unless otherwise stated in such
Schedule: see Sub-Clause 13.4(b).
The purpose of the provisions is to minimise the Contractor's financing costs. These
costs, which he will have included in the Contract Price, will reflect the extent to which
he can maintain a positive cash flow, which in turn will be affected by these and other
interim payment procedures. Payment is only due when the Contractor has satisfied all
the requirements listed in sub-paragraph (a) of the Sub-Clause.
In sub-paragraph (a)(i), the Plant and Materials are only "considered" to be in
accordance with the Contract. They are not deemed approved until the Performance
Certificate is issued under Sub-Clause 12.9.
In sub-paragraph (a)(ii), the Plant and Materials are to have been delivered to the Site.
When preparing the tender documents, the Employer may wish to consider making
payment for certain items prior to their arrival at Site: see the published Part II.
These payments are, in effect, further advances which have to be repaid when the Plant
or Materials become due for payment under Sub-Clause 13.3(a), the advances being
made in the same currency proportions as then become due.
13.6 Issue of Interim Payment Certificates
No amount will be certified or paid until the Employer has received, and
approved, the performance security in accordance with Sub-Clause 4.2.
Thereafter, the Employer's Representative shall, within 28 days of receiving
a statement and supporting documents, deliver to the Employer with a copy
to the Contractor an Interim Payment Certificate showing the amount which
the Employers Representative considers to he due; if no payment is
considered to he due, the Employer's Representative shall promptly notify the

106 fFIDIC 1996

 Contractor accordingly. Except that the Employer's Representative shall not
he hound to certify any payment under this Sub-Clause, if the net amount to
be certified (after retention and other deductions) would be less than the
minimum amount of Interim Payment Certificates (if any) stated in the
Appendix to Tender
An Interim Payment Certificate shall not be withheld on account of:
(a) defects: if any thing supplied or work done by the Contractor is not in
accordance with the Contract, the cost of rectification or replacement shall
be deducted by the Employer's Representative from any amount otherwise
due;
(h) part (only) of the payment applied for being disputed: in such case, a
payment certificate shall he issued for the undisputed amount.
The Employer's Representative may in any payment certificate make any
correction or modification that should properly he made to any previous cert-
ificate.
The Employer's Representative is required to issue the Interim Payment Certificate
within 28 days of receiving the Contractor's application for payment, namely the
statement in accordance with Sub-Clause 13.3 and the supporting documents. The latter
documents are required to include the detailed report on the progress during the month
in accordance with Sub-Clause 4.15. Each period of 28 days does not commence until
the Employer's Representative receives the application and all these documents. Under
Sub-Clause 1.8, certificates shall be in writing and not be unreasonably withheld or
delayed.
Under sub-paragraph (a), the cost of rectifying defects may be withheld. These defects
may be contained in Construction Documents, Materials, Plant or other parts of the
Works, but not in the application for payment (if defective, it would presumably not
comply with Sub-Clause 13.3). In some circumstances, the "cost of rectification or
replacement" may be the same as the estimated contract value of the defective item.
Note that no account is taken of any retention money withheld: all the estimated cost of
rectifying known defects may be withheld, as well as deducting the appropriate retention.
If the Employer's Representative considers that the amount requested by the Contractor
is in excess of what is due under the Contract, he must certify the amount due, and not
seek to delay payment by asking the Contractor to prepare a revised application. Under
Sub-Clause 13.7, payment is due within 56 days from receipt of the original application
and supporting documents.

©FIDIC 1996 107

13.7 Payment
Unless otherwise stated in Part II,
(a) the Employer shall pay the amount certified in each Interim Payment
Certificate within 56 days from the date on which the Employer's
Representatii'e received the Contractor's statement and supporting
documents, and
(h) the Employer shall pay the amount certified in the Final Payment
Certificate within 56 days from the date of issue of the Certificate.
Payments shall be made into a bank account, nominated by the Contractor,
in the payment country named as such in the Contract. If payments are to
he made in more than one currency, separate hank accounts may be
nominated by the Contractor for each currency, and payments shall be made
by the Employer accordingly.
Interim payments are to be made within 56 days of the application for payment, provided
it includes the statement and all the necessary supporting documents. By not timing
payment to the date of issue of the Interim Payment Certificate, the Employer has more
time to pay in the event that the Certificate is issued promptly, but the Contractor has
some degree of protection under Sub-Clauses 13.8 and 16.1 in the event that the
Employers Representative takes longer to certify than the period specified in Sub-Clause
13.6.
For example, if the Certificate is a week late, the Contractor will be entitled to financing
charges under Sub-Clause 13.8 unless the Employer manages to accelerate his
procedures and comply with this Sub-Clause 13.7. If the Employer's Representative
takes even longer to certify, having not notified the Contractor (under 13.6) that no
payment is considered to be due, circumstances could entitle the Contractor to suspend
under Sub-Clause 16.1. Precise guidance cannot be given on the latter entitlement,
because it will depend on circumstances and on the applicable law.
The Employer is required to make payment into the Contractor's bank account(s), with
provision being made for the Contractor's Proposal (or another Contract document) to
have specified the country or countries of the Contractor's bank(s). Thus, a "payment
country" may have been specified for each of the currencies of payment, and might be
the country of the currency of payment; or all payments may have been specified as
being made into the Contractor's bank in the Country.
When pricing their tenders, tenderers will take account of the option to specify a payment
country, and of the periods for payment, particularly that specified in sub-paragraph (a).
Longer periods for payment increase the Contractor's financing costs, so tenderers would
wish to increase their prices accordingly.

108 ©FIDIC 1996

13.8 Delayed Payment
If payment of any sum payable under Sub-Clause 13.7 is delayed, the
Contractor shall he entitled to receive financing charges compounded
monthly on the amount unpaid during the period of delay. Unless otherwise
stated in Part II, these financing charges shall he calculated at the annual
rate three percentage points above the discount rate of the central hank in
the country of the currency of payment. The Contractor shall he entitled to
such payment without formal notice and without prejudice to any other right
or remedy.
Although these payments (in some countries called "interest") may be included in
Interim Payment Certificates for accounting purposes, they are due irrespective of
certification. Note that the Contractor is entitled to these payments without being
required to give notice, and that they do not prejudice his rights and remedies under
Clause 16.
13.9 Payment of Retention Money
When the Employer's Representative has issued the Taking-Over Certiticate
for the Works, and the Works have passed all specified tests (including the
Tests after Completion, if any), the first half of the Retention Money shall he
certified by the Employer's Representative for payment to the Contractor If
the Works are taken over in Sections, the percentage of the first half of the
Retention Money released following the issue of a Taking-Over Certificate
for a Section, and it passing all tests, shall he the percentage value of the
Section as stated in the Appendix to Tender
Upon the expiry of the Contract Period, the second half of the Retention
Money shall he certified by the Employer's Representative for payment to the
Contractor. Except that, if at such time any work shall remain to he executed
under Clause 11 or Clause 12, the Employer's Representative shall he
entitled to withhold certification, until completion of such work, of so much
of the balance of the Retention Money as shall represent the cost of the work
remaining to be executed.
The first half of the Retention Money is released when the Works are complete and tested
satisfactorily. If Tests after Completion are specified in the Contract, these Tests must
also be completed before the first half of the Retention Money is released. In the event
of any unreasonable delay by the Employer in carrying out the Tests after Completion,
the Contractor will probably incur financing cost in respect of the delay to this release
of retention. This financing cost may be recoverable from the Employer under Sub-
Clause 11.2.

© FIDIC 1996 109

The other half of the Retention Money is released at the expiry of the Contract Period,
except that the cost of outstanding rectification work may be withheld. This cost might
exceed the Cost which the Contractor expects to incur when carrying out the rectification
work. In order to protect the Employer's interests, the amount withheld should be
sufficient to cover the cost of another contractor completing the work.
13.10 Statement at Completion
Not later than 84 days after the issue of the Taking-Over Certificate for the
Works, the Contractor shall submit, to the Employer's Representative, six
copies of a statement at completion with supporting documents showing in
detail, in the form approved by the Employer's Representative under Sub-
Clause 13.3:
(a) the final value of all work done in accordance with the Contract up
to the date stated in such Taking-Over Certificate,
(h) any further sums which the Contractor considers to be due, and
(c) an estimate of amounts which the Contractor considers will become
due to him under the Contract.
The estimated amounts shall be shown separately in such statement at
completion. The Employer's Representative shall certify payment under
Sub-Clause 13.6.
The statement at completion has to comply with the requirements in Sub-Clause 13.3
for an interim statement. Thus the statement has to have supporting documents which
shall include the detailed report on the progress during the month in accordance with
Sub-Clause 4.15, unless all the reports required have been submitted. The statement at
completion is the basis of the constraint contained in Sub-Clause 13.14, and encourages
the early settlement of financial aspects.
13.11 Application for Final Payment Certificate
Not later than 56 days after the issue of the Performance Certificate, the
Contractor shall submit to the Employer's Representative six copies of a
draft final statement with supporting documents showing in detail, in aforin
approved by the Employer's Representative:
(a) the value of all work done in accordance with the Contract, and
(b) any further sums which the Contractor considers to he due to him
under the Contract or otherwise.
If the Employer's Representative disagrees with or cannot verify any part
of the draft final statement, the Contractor shall submit such further
information as the Employer's Representative may reasonably require and

© FIDIC 1996
 shall make such changes in the draft as may he agreed between them. The
Contractor shall then prepare and submit to the Employer's Representative
the final statement as agreed (for the purposes of these Conditions referred
to as the "Final Statement")
If, following discussions between the Employer's Representative and the
Contractor and any changes to the draft final statement which may he
agreed between them, it becomes evident that a dispute exists, the
Employer's Representative shall deliver to the Employer (with a copy to the
Contractor) an Interim Payment Certificate for those parts of the draft final
statement which are not in dispute. The dispute may then be resolved under
Clause 20, in which case the Contractor shall then prepare and submit to
the Employer (with a copy to the Employer's Representative) a Final
Statement in accordance with the outcome of the dispute.
This Sub-Clause sets out the procedure for settling the financial aspects of the Contract.
The Contractor must initiate the procedure by the date eight weeks after the issue of the
Performance Certificate under Sub-Clause 12.9. He may feel able to initiate it as soon
as the Contract Period expires.
If the Contractor and the Employer's Representative cannot agree, the latter issues an
Interim Payment Certificate. After further attempts to agree, the dispute proceeds to the
resolution procedures of Clause 20. The final sentence of Sub-Clause 13.11 specifies
the preparation of a Final Statement in accordance with the outcome of the dispute, so
that the following Sub-Clauses can then be applicable.
13.12 Discharge
When submitting the Final Statement, the Contractor shall submit a written
discharge which confirms that the total of the Final Statement represents
full and final settlement of all monies due to the Contractor under the
Contract. Such discharge may state that it shall become effective only after
payment due under the Final Payment Certificate has been made and the
performance security referred to in Sub-Clause 4.2 has been returned to
the Contractoc
The Contractor submits the "Final Statement" (defined in Sub-Clause 13.11), as agreed
with the Employer's Representative or when disagreements have been determined by
arbitration. The Contractor's agreement is confirmed in this written discharge; the
agreement of the Employer's Representative is confirmed in the Final Payment
Certificate.
13.13 Issue of Final Payment Certificate
The Employer's Representative shall issue to the Employei; with a copy to
the Contractor, the Final Payment Certificate within 28 days after receiving
the Final Statement and written discharge in accordance with Sub-Clauses
13.11 and 13.12, stating:
©F1D1C1996 111
 (a) the amount which is finally due, and
(h) after giving credit to the Employer for all amounts previously paid by
the Employer and for all sums to which the Employer is entitled, other
than under Sub-Clause 8.6, the balance, if any, due from the Employer
to the Contractor or from the Contractor to the Employer as the case
may he.
If the Contractor has not applied for a Final Payment Certificate in
accordance with Sub-Clauses 13.11 and 13.12, the Employer's Repres-
entative shall request the Contractor to do so. If the Contractor fails to make
such an application within a period of 28 days, the Employer's Repres-
entative shall issue the Final Payment Certificate for such amount as he
considers to he due.
Usually, the Contractor will submit the Final Statement and discharge in accordance with
the first sentence, in order to receive payment.
If (as envisaged in the last paragraph) he fails to apply for a Final Payment Certificate,
the Employer's Representative must request the Contractor to submit his application
within 28 days. In the event that the Employer's Representative does not receive it within
28 days, he is required to issue the Final Payment Certificate without further delay.
Under Sub-Clause 1.8, certificates shall be in writing and not be unreasonably withheld
or delayed.
13.14 Cessation of Employer's Liability
The Employer shall not be liable to the Contractor for any matter or thing
arising out of (or in connection with) the Contract or execution of the
Works, unless the Contractor shall have included a claim for it in his Final
Statement and (except for matters or things arising after the issue of the
Taking-Over Certificate Jr the Works) in the statement at completion
described in Sub-Clause 13.10.
This Sub-Clause provides a constraint on the Contractor's entitlements to submit claims
at a late stage in the Contract Period, or thereafter.
13.15 Calculation of Payments in Foreign Currency
If the Contract Price is expressed in Local Currency only, but some
payments are to he made in another currency, the proportions or amounts
of the Local and Foreign Currencies, and the fixed rates of exchange to he
used for calculating the payments, shall be as stated in the Appendix to
Tender. If no rates of exchange are stated therein, they shall, unless
otherwise stated in Part II, he those prevailing for the Base Date, as
determined by the central bank of the Country.

112 © FIDIC 1996

For a lump sum contract, it is usually preferable to define each of the amounts due in
each of the currencies in which payment is to be made; in which case, this Sub-Clause
will not apply. However, it may sometimes be appropriate to adopt the procedure often
used on contracts which include large numbers of rates or prices, namely a currency of
account and defined proportions and rates of exchange.
Unless redefined in the contract Part II, the Local Currency is the currency of the
Country. It is preferable, in order to determine the matter from the outset, for the rates
of exchange to be set out in the Appendix to Tender. If no rates of exchange are stated
therein, the rates are to be those determined by the central bank.
13.16 Changes in Legislation
The Contract Price shall he adjusted to take account of any increase or
decrease in Cost resulting from changes in legislation of the Country, made
after the Base Date. Such legislation means any law, order, regulation or
by-law having the force of law, including currency restrictions, which
affects the Contractor in the performance of his obligations.
If the Contractor suffers (or will suffer) delay and/or incurs (or will incur)
additional Cost resulting from such changes in legislation, made after the
Base Date, the Contractor shall give notice to the Employer's
Representative. After receipt of such notice the Employer's Representative
shall proceed in accordance with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(h) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly.
This Sub-Clause protects the Contractor from the consequences of changes in legislation
in the Country, made after the Base Date. Under Sub-Clause 1.8, his notice must be in
writing and not unreasonably delayed.
No protection is provided in respect of changes in other countries, because the Employer
will not be able to influence those changes; he may (or may not) have some influence
in his own Country. Even if he has little influence, it is reasonable, in international
contracts, for the Employer to accept the risk as allocated by Sub-Clause 13.16.
It may be necessary to obtain legal advice as to whether a particular event constitutes a
change in legislation under this Sub-Clause. For example, does the judicial decision of
a high court constitute such a change? This is a matter on which no general advice can
be given, but it is suggested that judicial decisions are usually a representation of the law
as it stands, not a change.

© FIDIC 1996
Clause 14 Variations
14.1 Right to Vary
Variations may be initiated by the Employer's Representative at any time
during the Contract Period, either by instruction or by a request for the
Contractor to submit a proposal. If the Employer's Representative requests
the Contractor to submit a proposal and subsequently elects not to proceed
with the change, the Contractor shall be reimbursed for the Cost incurred,
including design services.
The Contractor shall not make any alteration and/or modification of the
Works, unless and until the Employer's Representative instructs or approves
a Variation. If the Construction Documents or Works are not in accordance
with the Contract, the rectification shall not constitute a Variation.
Although variations can cause problems on a design-build contract, the Employer will
want to be able to amend his requirements so that the completed Works can meet his
needs. The Employer's Requirements may have been written without a clear and
complete concept of the opportunities or technicalities relevant to the product. However,
problems may arise if the effects of a Variation are not anticipated and agreed before it
becomes a contractual requirement.
In particular, it is important that the Contractor remains responsible for design, unless
the Employer has been unduly prescriptive in specifying the Variation. For this reason,
the definition of a "Variation" indicates that it is a change to the Employer's Require-
ments (with which the Contractor's design must comply), and not a change to the Works
(which would indicate a transfer of responsibility). However, notwithstanding this
indication from the wording of the definition, the actual content of a Variation is more
significant and would take precedence over the indications from the definition. Clearly,
the Employer must be responsible for any design solution which he imposes: he cannot
vary the width of a road (for example) and then assert that the road is too narrow and
thus not fit for purpose.
In order that the Employer receives proposals and competitive prices in respect of his
requirements, he should have ensured that the Employer's Requirements provide as much
detail as possible of his requirements, minimising the need for Variations. Nevertheless,
with the passing of time and the production of Construction Documents, his
requirements may develop, necessitating Variations. The latter should not be too basic,
such as changing the productive capacity or other basic statistic of the Works (unless the
Contractor agrees to do so), but could be in the form of refinements. For example, the
varied requirement may have the effect of improving the quality of the Works (by
reducing the cost of maintenance or operation, or improving productivity or efficiency)
and may involve additional access arrangements, or extra offices, parking or feedstock
facilities.
Although a Variation may arise under Sub-Clause 1.6,4.1, 5.4, 5.5, 8.10 or 12.2,procedures
are specified in this Clause 14. Variations can be initiated by any of three ways:
© FIDIC 1996
(a) the Employer's Representative may, if he considers it necessary, instruct the
Variation under Sub-Clause 14.1, without prior agreement as to feasibility, price
or extension of time;
(b) the Contractor may initiate his own proposals under Sub-Clause 14.2; the
Employer's Representative may then approve the proposals as a Variation, or reject
them and/or proceed as described in (c) below;
(c) the Employer's Representative may, under Sub-Clause 14.1, request the
Contractor to submit a proposal under Sub-Clause 14.3; the Employer's
Representative may then:
(i) reject the proposal, but the Contractor will be paid for preparing it,
(ii) accept the proposal, approving it as a Variation,
(iii) if the proposal is not wholly acceptable, proceed under option (a) above, or
(iv) attempt to reach prior agreement with the Contractor on any adjustments to
the Contract Price, Time for Completion and Schedule of Payments, and then
proceed under (i), (ii) or (iii) based on the outcome, which could include an
amended proposal.
For the Employer, option (c) is usually preferable to option (a) if time allows, because
he can ascertain the full effects of the prospective variation before it is instructed. It
may be difficult for the Employer's Representative to anticipate the disruptive effects,
extent of abortive work, or design feasibility, of some types of variations, and prior
agreement on price should minimise dispute. If the Employer considers that the
Contractor is seeking an unreasonably high price, he must decide whether to abandon
his desire for the variation, or instruct it under option (a) and accept the risk that the
Contractor's previous proposal is later found to have been reasonable.
In accordance with Sub-Clause 3.4, the Contractor is required to comply with the
Variation, unless it is legally or physically impossible for him to do so. Such
impossibility should have been ascertained in advance. If the Variation was instructed
under option (a) without prior discussions, the Contractor should notify the Employer's
Representative as soon as he becomes aware of any impossibility. After notifying, the
Contractor should await further instructions from the Employer's Representative.
14.2 Value Engineering
The Contractor may, at any time, submit to the Employers Representative a
written proposal which in the Contractor's opinion will reduce the cost of
constructing, maintaining or operating the Works, or improve the efficiency
or value to the Employer of the completed Works, or otherwise he of benefit
to the Employer Any such proposal shall be prepared at the cost of the
Contractor and shall include the items listed in Sub-Clause 14.3.

© FIDIC 1996 115

The Contract requirement is that the Works shall include any work which is necessary
to satisfy the Employer's Requirements, Contractor's Proposal and Schedules, and be in
accordance with these documents in the order of priority specified in Sub-Clause 1.6.
Under Sub-Clause 14.1, the Contractor is not allowed to make any alteration and/or
modification of this requirement, unless and until the Employer's Representative
instructs or approves a Variation under Clause 14. Sub-Clause 5.2(c) recognises that
the Contractor may find it necessary to modify any design or construction document, but
Sub-Clauses 4.1 and 5.3 impose compliance with all Contract documents.
Thus, the Contractor cannot (for example) economise by failing to provide what he
promised in his Proposal, whilst still complying with the Employer's Requirements. The
reason for this principle is to allow for the situation where the Employer's Requirements
are not very precise and the Employer enters into the Contract following his acceptance
of a detailed Proposal. The latter would probably have been studied in detail by the
Employer before accepting the Tender, and he may have considered the Proposal
superior to those of other tenderers. In this situation, the Employer would want the
Contractor to comply with the Proposal upon which the Employer had based the award
of the Contract.
Under Sub-Clause 14.2, the Contractor may propose variations in (for example) the
following situations:
(a) the proposal may appear to be of benefit to the Contractor, in which case he may
offer a reduction in the Contract Price in order to encourage the Employer's
acceptance;
(b) the proposal may appear to be of benefit to the Employer, by improving the quality
of the Works (reducing the cost of maintenance or operation, or improving
productivity or efficiency); for example, additional access arrangements, or extra
offices, parking or feedstock facilities.
In some cases, the Contractor might submit his proposal in stages, the first stage being
conceptual, with details of how he proposed to carry out (and be paid for) the expensive
design of the prospective variation.
Although the new proposal is required to include the items listed in Sub-Clause 14.3,
the Contractor may initiate his own proposal but not include all such items, and the
Employer's Representative has no effective way of insisting on their inclusion. However,
if they are not included, the proposal may be less likely to be accepted, and the
Employer's Representative's obligation under Sub-Clause 14.3 will not apply: its penulti-
mate paragraph requires him to respond as soon as practicable after receipt of compliant
proposals.
Sub-Clause 14.2 makes no mention of:
(i) the Contractor being reimbursed for the cost of an acceptable proposal: it is to be
expected that his proposed price would include these costs and other elements in
recognition of his endeavours, as envisaged in the last sentence of Sub-Clause
14.3;
116 ©FIDIC996
(ii) the subsequent actions of the Employer's Representative: if the proposals include
the items listed in Sub-Clause 14.3, it requires him to respond as soon as
practicable;
(iii) any saving being shared between the parties, because of (b) above and because of
the practical difficulties in any determination of a Cost saving, if any.
Under the Orange Book, the Contractor's value engineering proposals could include
improvements to what he is required to provide under the Contract, which might involve
more, not less, Cost. He should be confident, because of the last sentence of Sub-Clause
14.3, that he will get some benefit from having originally proposed a variation, unless
his proposal does not comply with Sub-Clause 14.2.
14.3 Variation Procedure
If the Employer's Representative requests a proposal, prior to instructing a
Variation, the Contractor shall submit as soon as practicable:
(a) a description of the proposed design and/or work to be performed and
a programme for its execution,
(b) the Contractor's proposal for any necessary modifications to the
programme according to Sub-Clause 4.14, and
(c) the Contractor's proposal for adjustment to the Contract Price, Time
for Completion and/or modifications to the Contract.
The Employer's Representative shall, as soon as practicable after receipt of
such proposals, respond with approval, rejection or comments.
If the Employer's Representative instructs or approves a Variation, he shall
proceed in accordance with Sub-Clause 3.5 to agree or determine
adjustments to the Contract Price, Time for Completion and Schedule of
Payments. Adjustment of the Contract Price shall include reasonable profit,
and shall take account of the Contractor's submissions under Sub-Clause
14.2 if applicable.
The Employer's.Representative should usually initiate Variations under this Sub-Clause
by requesting a proposal, clearly stating the scope of the proposed Variation and stating
that the proposal is to comply with this Sub-Clause. He may also set out time constraints
on the Contractor's submission. If these constraints are in the form of instructions under
Sub-Clause 3.4, it might not be possible for the Contractor to comply with this Sub-
Clause.
The Contractor is not empowered to impose time constraints on the response to his
proposals, but may need to define the validity of any offered adjustments to the Contract
Price and Time for Completion. Typically, these adjustments would be affected by the
timing of a variation order.

© FIDIC 1996
The penultimate paragraph of Sub-Clause 14.3 requires the Employer's Representative
to respond as soon as practicable after receipt of the Contractor's proposals. This
requirement applies to proposals requested by the Employer's Representative, and also
to proposals in accordance with Sub-Clause 14.2, namely those which include the items
described in sub-paragraphs (a) to (c) of Sub-Clause 14.3. No period is specified: what
constitutes "as soon as practicable" could be affected by the amount of documentation
which constitutes the proposal and the possibility of substantial submissions at particular
stages of the design-build process.
The last sentence of the Sub-Clause specifies that adjustments shall take account of
submissions under Sub-Clause 14.2, if the Variation arose from a Contractor's proposal
thereunder. No specific mention is made of him receiving any special benefit from
having thought up the proposed variation, because of the difficulty of preventing such
entitlement arising in situations where he did little to develop his initial ideas. Therefore,
the sentence only requires account to be taken of his submissions, including recognition
of his endeavours in seeking improvements beneficial to the Employer.
Under Sub-Clause 14.1, if the Employer's Representative requests the Contractor to
submit a proposal and subsequently elects not to proceed with the change, the Contractor
shall be reimbursed for the Cost incurred, including design services. If he does elect to
proceed with the change, the adjustment to the Contract Price (in respect of the Variation)
should include payment for the design, which might have been most of the Cost of
preparing the proposal.
Note the following aspects from other Sub-Clauses. Under Sub-Clause 1.8:
instructions, consents, approvals, etc shall be in writing and not be unreasonably with-
held or delayed. Under Sub-Clause 3.1: any proposal, consent or approval shall not
relieve the Contractor from any responsibility.
14.4 Payment in Applicable Currencies
If the Contract provides for payment of the Contract Price in more than one
currency, and an adjustment is agreed or fixed as stated above, the amount
payable in each of the applicable currencies shall be specified when the
adjustment is agreed or fixed. In specifying the amount in each currency, the
Contractor and the Employer's Representative (or, failing agreement, the
Employer's Representative) shall take account of the actual or expected
currency proportions of the Cost of the varied work, without being bound by
the proportions of various currencies specified for payment of the Contract
Price.
This Sub-Clause applies whenever an adjustment is agreed or fixed (determined),
irrespective of the arrangements by which payment of the Contract Price is made in more
than one currency. The usual arrangement is to define each of the amounts due in each
of the currencies. Alternatively, the Contract Price may have been expressed in a
currency of account with defined proportions and rates of exchange, in accordance with
Sub-Clause 13.15.
© FIDIC 1996
14.5 Provisional Sums
Each Provisional Sum shall only he used, in whole or in part, in accordance
with the Employer's Representative's instructions. The total sum paid to the
Contractor shall include only such amounts for the work, supplies or services
to which such Provisional Sums relate as the Employer's Representative shall
have instructed. For each Provisional Sum, the Employer's Representative
may order:
(a) work to he executed (including Plant, Materials or services to be
supplied) by the Contractor and valued under Sub-Clause 14.3;
(h) Plant, Materials or services to he purchased by the Contracto, for
which payment will he made as follows:
(i) the actual price paid (or due to he paid) by the Contractor, and
(ii) a percentage of the actual price paid (or due to he paid), as stated
in the Appendix to Tender, to cover all other Costs, charges and
profit.
The Contractor shall, when required by the Employer's Representative,
produce quotations, invoices, vouchers and accounts or receipts in substant-
iation.
Sub-Clause 1.1.5.5 defines "Provisional Sum" as a sum specified in the Contract and
designated as such, for the execution of any part of the Works or for the supply of Plant,
Materials or services. Although generally inappropriate for this type of contract, a
Provisional Sum may be required for parts of the Works which are not required to be
priced at the risk of the Contractor: for example, to cover goods which the Employer
wants to select, or to deal with a major uncertainty regarding sub-surface conditions.
Alternatively, a tenderer may include a Provisional Sum in his Proposal (unless dis-
allowed by the Instructions to Tenderers) to give the Employer the option of various
alternatives. A Provisional Sum for daywork might be considered appropriate, with the
method of evaluation prescribed in a Schedule.
The Contract should include a precise definition of the scope of each Provisional Sum
(in a Schedule, probably), which may affect the operation of Sub-Clause 14.5. Precise
definition is required because the scope will be excluded from the other elements of the
Contract Price. It might be necessary to clarify the timing of any relevant instructions
related to the work covered in a Provisional Sum.
Because Provisional Sums are generally inappropriate for Contractor-designed Works,
Sub-Clause 14.5 only contains outline provisions. If the Employer intends to nominate
a subcontractor for a part of the Works, further provisions may have to be included in
the contract Part II.

©FIDIC 1996 119

Clause 15 Default of Contractor
15.1 Notice to Correct
if the Contractor fails to carry out any of his obligations, or if the Contractor
is not executing the Works in accordance with the Contract, the Employer's
Representative may give notice to the Contractor requiring him to make good
such failure and remedy the same within a specified reasonable time.
The Employer's Representative is under no obligation to give notice, so the Contractor
cannot rely on the absence of a notice as indicating that the Contractor and his personnel
are carrying out his obligations or that the Works are in accordance with the Contract.
If the Contractor's failure is sufficiently serious for the Employer to consider termination
under Sub-Clause 15.2, the Employer should, before the notice is issued, consider
whether termination appears to be the most appropriate course of action. If so, the
Employer should consider taking legal advice, with a view to minimising the possibility
of a termination being considered unjustified.
If the Employer intends to rely on a notice as having been issued under this Sub-Clause,
the notice should specify:
(a) the nature of the Contractor's failure,
(b) the reasonable time within which the Contractor is to remedy the failure, and
(c) that the notice is given under this Sub-Clause.
15.2 Termination
if the Contractor:
(a) fails to comply with a notice under Sub-Clause 15.1,
(b) abandons or repudiates the Contract,
(c) without reasonable excuse fails:
(i) to commence the Works in accordance with Sub-Clause 8.],
(ii) to proceed with the Works in accordance with Clause 8, or
(iii) to demonstrate that sufficient design capability is employed in the
design of the Works to achieve completion within the Time for
Completion,
(d) becomes bankrupt or insolvent, goes into liquidation, has a receiving
or administration order made against him, compounds with his
creditors, or carries on business under a receive,; trustee or manager
for the benefit of his creditors, or if any act is done or event occurs
which (under any applicable law) has a similar effect to any of these
acts or events,
© FIDIC 1996
 (e) fi2ils to comply with a notice issued under Sub-Clause 7.5 within 28
days after having received it, or
(f) assigns the Contract or subcontracts the Works without the required
consent,
then the Employer may, after having given 14 days' notice to the Contracto,;
terminate the Contractor's employment under the Contract and expel him
from the Site. The Contractor shall then deliver all Construction Documents,
and other design documents made by or for him, to the Employer's Repres-
entative. The Contractor shall not be released from any of his obligations or
liabilities under the Contract. The rights and authorities conferred on the
Employer and the Employer's Representative by the Contract shall not be
affected.
The Employer may upon such termination complete the Works himself and/or
by any other contractoi The Employer or such other contractor may use for
such completion so much of the Construction Documents, other design
documents made by or on behalf of the Contractor, Contractor's Equipment,
Temporary Works, Plant and Materials as he or they may think proper. Upon
completion of the Works, or at such earlier date as the Employer's Repres-
entative thinks appropriate, the Employer's Representative shall give notice
that the Contractor's Equipment and Temporary Works will be released to the
Contractor at or near the Site. The Contractor shall remove or arrange
removal of the same from such place without delay and at his cost.
If the Contractor's action or inaction is sufficiently serious to justify termination under
this Sub-Clause, the Employer should consider taking legal advice, with a view to
minimising the possibility of the termination being considered unjustified. It may be
advisable for the notice to mention the Contractor's actions and inactions, although it
may not be essential to classify them under the listed items (a) to (f). The Employer's
Representative may then consider it necessary to issue instructions under Sub-Clause
3.4: for example, in order to make the Works safe and secure.
The Sub-Clause does not mention assignment of subcontracts to the Employer, who may
want to continue construction of the Works using the same subcontractors. The Employer
should start considering, before notifying termination, whether in the event of
termination he would wish to seek agreement to assignments, or to renegotiate direct
contracts with any previous subcontractors. In either case, it may be preferable to achieve
each arrangement with the agreement of the subcontractor, rather than relying on a term
of the Contract to impose assignment on an unwilling subcontractor.
Under Sub-Clause 1.10, the Employer can use Construction Documents for the purposes
of completing and altering the Works.

© FIDIC 1996 121

15.3 Valuation at Date of Termination
The Employer s Representative shall, as soon as possible after termination
under Sub-Clause 15.2, determine and advise the Contractor of the value of
the Construction Documents, Plant, Materials, Contractor is Equipment and
Works and all sums then due to the Contractor as at the date of termination.
Following the Employer's termination of the Contractor's employment because of his
shortcomings, the Employer's Representative is required to determine the value of the
Contractor's work. This determination does not constitute certification under Clause 13,
and the Employer is not obliged to make immediate payment: see Sub-Clause 15.4. Note
that Sub-Clause 13.2 requires the advance payment to be repaid immediately upon
termination, thereby reducing to zero the value of the advance payment guarantee, which
should then be promptly returned to the Contractor.
15.4 Payment after Termination
After termination under Sub-Clause 15.2, the Employer shall not be liable to
make any further payments to the Contractor until the costs of design,
execution, completion and remedying of any defects, damages for delay in
completion (f any), and all other costs incurred by the Employer, have been
established.
The Employer shall he entitled to recover from the Contractor the extra costs,
if any, of completing the Works after allowing for any sum due to the
Contractor under Sub-Clause 15.3. If there are no such extra costs, the
Employer shall pay any balance to the Contractor.
After termination, the Employer would probably have had to make other arrangements
for the completion of the Works, including the rectification of any defects. If these
arrangements include the appointment of a new contractor, it would probably not be until
the latter's Contract Period had expired that the costs of design, execution, completion
and remedying of any defects, damages for delay in completion (if any), and all other
costs incurred by the Employer, could be established.
15.5 Bribes
If the Contractor, or any of his Subcontractors, agents or servants gives or
offers to give to any person any bribe, gift, gratuity or commission as an
inducement or reward:
(a) for doing or forbearing to do any action in relation to the Contract or
any other contract with the Employer, or
(b) for showing or forbearing to show favour or disfavour to any person
in relation to the Contract or to any other contract with the Employer,

122 ©FIDIC 1996

 then the Employer may, after having given 14 days' notice to the Contractor,
terminate the Contractor's employment under the Contract and expel him
from the Site, and the provisions of this Clause shall apply as if such
termination and expulsion had been made under Sub-Clause 15.2.
Unless the applicable law requires otherwise, the Employer's entitlement to terminate
does not require the Contractor to be aware that any of his Subcontractors, agents or
servants have given or offered to give to any person any bribe, gift, gratuity or
commission.

Clause 16 Default of Employer

16.1 Contractor's Entitlement to Suspend Work
If the Employer fails to pay the Contractor the amount due under any
certificate of the Employer's Representative, and fails to explain why the
Contractor is not entitled to such amount, within 21 days after the expiry of
the time stated in Sub-Clause 13.7 within which payment is to be made,
except for any deduction that the Employer is entitled to make under the
Contract, the Contractor may suspend work or reduce the rate of work after
giving not less than 7 days' prior notice to the Employer (with a copy to the
Employer's Representative). Such action shall not prejudice the Contractor's
entitlements to payment under Sub-Clause /3.8 and to terminate under Sub-
Clause 16.2.
If the Contractor suspends work or reduces the rate of work, and the
Employer subsequently pays the amount due (including payment in
accordance with Sub-Clause 13.8), the Contractor's entitlement under Sub-
Clause 16.2 shall lapse in respect of such delayed payment, unless notice of
termination has already been given, and the Contractor shall resume normal
working as soon as is reasonably possible.
If the Contractor suffers delay and/or incurs Cost as a result of suspending
work or reducing the rate of work in accordance with this Sub-Clause, the
Contractor shall give notice to the Employer's Representative. After receipt
of such notice, the Employer's Representative shall proceed in accordance
with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost plus reasonable profit, which shall he added
to the Contract Price,
and shall notify the Contractor accordingly.

© FIDIC 1996 123

The Contractor's first entitlement, if the Employer fails to pay the Contractor the certified
amount due, is to payment of financing charges under Sub-Clause 13.8.
Secondly, if after 21 days (plus 7 days' notice) the Employer has neither paid the amount
due nor explained why the Contractor "is not entitled" to the amount due, the Contractor
is entitled to slow down or stop work. From the description of the Employer's failure, it
might appear that the Employer can fail to pay, provided he gives an explanation.
However, the Contractor's entitlement to suspend arises when "the Employer fails to pay
the amount due under any certificate . . . except for any deduction that the Employer is
entitled to make under the Contract". Although the Employer may be entitled to effect
a deduction, he is obliged to pay the balance amount (i.e., the amount certified less the
entitled deduction) and will usually have difficulty explaining why the Contractor is
actually not entitled to this balance amount.
In other words, whilst the Employer may be able to explain why he is of the opinion that
the Contractor is not so entitled, the Sub-Clause requires the Employer to provide a
factual explanation, not an opinion. Although the requirement for an explanation may
therefore seem superfluous, it should encourage the Employer to provide an explanation
whenever he does not intend to pay the amount certified. He should thus explain the
"deduction that the Employer is entitled to make under the Contract".
If the Employer neither pays the amount certified nor provides an explanation, the
Contractor should first assess whether the non-payment arose from any deduction that
the Employer is entitled to make. If so, the Contractor loses the entitlement to suspend,
notwithstanding the Employer's unwise failure to provide an explanation. In the light of
this two-fold failure, it is considered that a court or arbitrator should be lenient in
reviewing the Contractors assessment of his entitlement.
In many countries, the applicable law may constrain the Employers rights of "set-off",
which might otherwise permit him to deduct amounts which he considered recoverable
from the amounts due to the Contractor. If the Employer is unsure of each party's
entitlement and does not want to give the Contractor the opportunity to proceed as
described in Sub-Clause 16.1, the Employer may prefer to pay the certified amount but
notify his disagreement. If not resolved, the dispute would be dealt with under Clause
20.
Note that Sub-Clause 16.1 states that it applies if the Employer fails to pay the amount
due under any certificate of the Employer's Representative. If the latter fails to certify,
having not notified the Contractor (under 13.6) that no payment is considered to be due,
circumstances could entitle the Contractor to suspend under Sub-Clause 16.1. Although
Sub-Clause 13.8 cannot be applied because it requires definition of an amount, Sub-
Clause 16.1 only requires definition of a date, which can be ascertained from the date
defined in Sub-Clause 13.7(a). Precise guidance cannot be given on this entitlement,
because it will depend on circumstances and on the applicable law.

124 © FIDIC 996

The third (and final) stage is termination, which the Contractor can initiate by giving a
notice of termination after becoming entitled under Sub-Clause 16.2(a), if he has not
received payment. If payment is received after the notice has been given, the notice of
termination still takes effect 14 days after it was given, unless the parties agree otherwise.
16.2 Termination
If the Employer:
(a) fails to pay the Contractor the amount due under any certificate of the
Employer's Representative within 42 days after the expiry of the time
stated in Sub-Clause 13.7 within which payment is to be made (except
for any deduction that the Employer is entitled to make under the
Contract),
(h) becomes bankrupt or insolvent, goes into liquidation, has a receiving
or administration order made against him, compounds with his
creditors, or carries on business under a receiver, trustee or manager
for the benefit of his creditors, or if any act is done or event occurs
which (under any applicable law) has a similar effect to any of these
acts or events,
(c) consistently fails to meet the Employer's obligations under the
Contract, or
(d) assigns the Contract without the Contractor's consent,
or, if a prolonged suspension affects the whole of the Works as described in
Sub-Clause 8.10,
then the Contractor may terminate his employment under the Contract by
giving notice to the Employer, with a copy to the Employer's Representative.
Such notice shall take effect 14 days after the giving of the notice.
If the Employer's action or inaction is sufficiently serious to justify termination under
this Sub-Clause, the Contractor should consider taking legal advice, with a view to
minimising the possibility of the termination being considered unjustified. The
Contractor's entitlement to terminate his employment mirrors, to some extent, the
Employer's entitlement following the Contractor's shortcomings.
16.3 Cessation of Work and Removal of Contractor's Equipment
After termination under Sub-Clause 2.4 or Sub-Clause 16.2, the Contractor
shall:
(a) cease all further work, except for such work as may he necessary and
instructed by the Employer's Representative for the purpose of making
safe or protecting those parts of the Works already executed, and any
work required to leave the Site in a clean and safe condition,

© FIDIC 1996 125

 (b) hand over all Construction Documents, Plant and Materials for which
the Contractor has received payment,
(c) hand over those other parts of the Works executed by the Contractor up
to the date of termination, and
(d) remove all Contractor Equipment which is on the Site and repatriate
all his staff and labour from the Site.
Any such termination shall he without prejudice to any other right of the
Contractor under the Contract.
After termination, for the Employer's convenience or because of default, the Contractor
is required to hand over the things for which the Employer has paid, and the parts of the
Works executed on the Site. Whilst it may seem unrealistic to expect the Contractor to
be willing to carry out much of the work described in sub-paragraph (a), it may be
essential for safety and/or for compliance with the law.
16.4 Payment on Termination
After termination under Sub-Clause 16.2, the Employer shall return the
performance security, and shall pay the Contractor an amount calculated
and certified in accordance with Sub-Clause 19.6 plus the amount of any
loss or damage, including loss of profit, which the Contractor may have
suffered in consequence of termination.
The Contractor is entitled to payment of an amount to be calculated and certified as
described in Sub-Clause 19.6, and to the amount of loss or damage. The latter amount
is not subject to certification by the Employer's Representative, who may find it difficult
to certify under Sub-Clause 19.6, bearing in mind that he was appointed by the
Employer.
Note that Sub-Clause 13.2 requires the advance payment to be repaid immediately upon
termination, thereby reducing to zero the value of the advance payment guarantee, which
should then be promptly returned to the Contractor.

Clause 17 Risk and Responsibility

17.1 Indemnity
The Contractor shall indemnify and hold harmless the Employer, the
Employer's Representative, their contractors, agents and employees from and
against all claims, damages, losses and expenses arising out of or resulting
from the Works, including professional services provided by the Contractor.
These indemnification obligations shall be limited to claims, damages, losses
and expenses which are attributable to bodily injury, sickness, disease or
death, or to injury to or destruction of physical property (other than the

126 ©FIDTC 1996

 Works), including consequential loss of use. Such obligations shall also be
limited to the extent that such claims, damages, losses or expenses are caused
in whole or in part by a breach of a duty of care, imposed by law on the
Contractor or anyone directly or indirectly employed by the Contractor.
The Contractor is required to protect the Employer and others from claims, including
those from third parties, arising out of the Contractor's execution of the Works. The
indemnity applies widely, but its scope is subject to the limitations set out in the second
paragraph. The claims must relate to injury, sickness, etc, and not (for example) to a
dislike of the very existence of the Works. Also, the claims must arise from a legal duty
of care, breach of which is often called negligence.
17.2 Contractor's Care of the Works
The Contractor shall take full responsibility for the care of the Works from
the Commencement Date until the date of issue of the Taking-Over
Certificate, when responsibility shall pass to the Employer. If the Employer's
Representative issues a Taking-Over Certificate for any Section or part of the
Works, the Contractor shall cease to he responsible for the care of that
Section or part from the date of issue of such Taking-Over Certificate, when
responsibility shall pass to the Employer.
The Contractor shall take responsibility for the care of any outstanding work
which is required to he completed prior to the expiry of the Contract Period,
until the Employer's Representative confirms in writing that such outstanding
work has been completed.
If any loss or damage happens to the Works, arising from any cause other
than the Employer's risks listed in Sub-Clause 17.3, during the period for
which the Contractor is responsible, the Contractor shall rectify such loss or
damage, at his cost, so that the Works conform with the Contract. The
Contractor shall also he liable for any loss or damage to the Works caused
by any operations carried out by the Contractor after the date of issue of the
Taking-Over Certificate.
The Contractor is responsible for the care of the Works, and is required to rectify any
loss or damage which is not due to any of the Employer's risks. The Employer does not
need to demonstrate what caused the loss or damage; in many cases, the cause may be
uncertain. The Contractor must rectify loss or damage at his own cost (or that of his
insurers), except to the extent that he can demonstrate that the loss or damage was due
to any of the Employer's risks listed in Sub-Clause 17.3.
Under Sub-Clause 1.9, the Contractor is responsible for the care of each of the
Construction Documents until it is supplied to the Employer or his Representative. This
responsibility is unaffected by the transfer of responsibility under Sub-Clause 17.2.

© FIDIC 1996 127

The liability transfers to the Employer on the date when the Employer's Representative
issues the Taking-Over Certificate, although the Certificate may record that the Works
(or a Section) were taken over on a date a few days previously. Therefore, if the
Employer wishes to effect insurance, it should have become effective by the date of issue
of the Taking-Over Certificate. Even if the Employer's Representative was unable to
forecast completion, he would have been able to advise the Employer, upon receipt of
the Contractor's notice under Sub-Clause 10.1, that the Works or a Section were nearly
ready for taking over and transfer of liability.
Difficulties may arise in respect of a Taking-Over Certificate for a Section or part of the
Works, if the physical extent of the Section or part is not adequately defined. When
preparing the tender documents, the Employer should define each Section (if any)
clearly; defining it as a construction milestone may not be sufficiently precise for the
purposes of defining what liability is transferred upon the issue of the Certificate. For
example, a construction milestone might consist of the closure of diversion arrangements
in a dam, allowing impounding to commence, although dam construction has not reached
crest level. If this type of construction stage/milestone had been defined as a Section, it
might be impossible to determine the extent of the structure which the Contract requires
the Employer to take over.
The Contractor is also required to take responsibility for the care of any outstanding
work which is required to be completed prior to the expiry of the Contract Period, until
the Employer's Representative confirms in writing that this outstanding work has been
completed. There is no formal procedure specified in Part I covering the request for, and
issue of, this confirmation by the Employer's Representative. However, it is in both
parties' interests to manage the remedying of defects, possibly by monthly confirmation
of what outstanding work has been completed and what defects have yet to be rectified.
17.3 Employer's Risks
The Employer's risks are:
(a) war, hostilities (whether war be declared or not), invasion, act of
foreign enemies,
(b) rebellion, revolution, insurrection, or military or usurped power, or
civil war,
(c) ionising radiations, or contamination by radio-activity from any
nuclear fuel, or from any nuclear waste from the combustion of nuclear
fuel, radio-active toxic explosive, or other hazardous properties of any
explosive nuclear assembly or nuclear component of such assembly,
(d) pressure waves caused by aircraft or other aerial devices travelling at
sonic or supersonic speeds,

128 © FIDIC 1996

 (e) riot, commotion or disorde, unless solely restricted to employees of the
Contractor or of his Subcontractors and arising from the conduct of the
Works,
(f) loss or damage due to the use or occupation by the Employer of any
Section or part of the Works, except as may be provided for in the
Contract, and
(g) any operation of the forces of nature against which an experienced
contractor could not reasonably have been expected to take
precautions.
International construction projects can be subject to various risks, many unforeseen. A
contract should provide mechanisms to deal with the possible occurrence of the various
types of risk. Sub-Clause 17.3 defines the risks which are to be borne by the Employer.
Some of these risks may constitute force majeure events under Clause 19, depending on
their consequences. Conversely, certain actions of the Country's government might
constitute events of force majeure, but are not listed as Employer's risks: see Sub-Clause
13.16. Only "risks" are listed: no mention is made of matters covered by other Clauses,
such as the Employer's own shortcomings.
17.4 Consequences of Employer's Risks
The Contractor shall give notice, to the Employer's Representative, of an
Employer's risk upon it being foreseen by, or becoming known to, the
Contractor. If an Employer's risk results in loss or damage, the Contractor
shall rectify such loss or damage to the extent required by the Employer's
Representative. If the Contractor suffers delay and/or incurs Cost as a result
of an Employer's risk, the Contractor shall give further notice to the
Employer's Representative. After receipt of such further notice the
Employer's Representative shall proceed in accordance with Sub-Clause 3.5
to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(h) the amount of such Cost, which shall he added to the Contract Price,
and shall notify the Contractor accordingly.
In order to seek protection under this Sub-Clause, the Contractor must first notify the
Employer's Representative of the nature of the Employer's risk. A notice asserting an
unidentified risk will be insufficient to substantiate that it has been "foreseen" by, or
become "known" to, the Contractor.
The Employer's Representative will want to monitor its effect and may require the
Contractor to rectify any loss or damage. If he does not actively require (i.e., instruct or
agree) rectification, the Contractor is not obliged by this Sub-Clause to carry out

© FIDIC 1996 129

rectification. However, depending on the nature and extent of the loss or damage, the
Contractor may be entitled and/or obliged to do so, under the applicable law and/or other
provisions of the Contract. Note that, under Sub-Clause 1.8, notices and determinations
shall be in writing and not be unreasonably withheld or delayed.
17.5 Contractor's Risks
The Contractor's risks are all risks other than the Employer's risks listed in
Sub-Clause 17.3.
Although Sub-Clause 17.4 entitles the Contractor to payment in respect of Employer's
risks, there is no equivalent entitlement for the Employer to receive payment in respect
of any of the Contractor's risks. Generally, "risk" is that related to the "Cost" (which is
incurred by the Contractor) of designing, executing and completing the Works, and
remedying of any defects.
17.6 Limitation of Liability
The Contractor shall in no event be liable to the Employer, by way of
indemnity or by reason of any breach of the Contract or in tort or otherwise,
for loss of use of any part (or all) of the Works or for loss of production, loss
of profit or loss of any contract or for any indirect special or consequential
loss or damage which may be suffered by the Employer in connection with
the Contract. The total liability of the Contractor to the Employer under the
Contract shall not exceed the Contract Price. Except that this Sub-Clause
shall not limit the liability of the Contractor:
(a) under Sub-Clauses 4.19, 4.20, 5.9, 8.6 and 11.4,
(b) under any other provisions of the Contract which expressly impose a
greater liability,
(c) in cases of fraud, wilful misconduct or illegal or unlawful acts, or
(d) in cases of acts or omissions of the Contractor which are contrary to
the most elementary rules of diligence which a conscientious contractor
would have followed in similar circumstances.
When preparing their tenders, tenderers will wish to assess their potential liability to the
Employer and include in their prices some allowance for their risks. The basis of this
Sub-Clause is to maintain a reasonable balance between the differing objectives of the
parties. The Employer will wish to receive full compensation in respect of any shortfall
from his expectations; the Contractor will wish to restrict his liability to the particular
defaults which he feels most able to prevent and/or insure against.
As an alternative, the Sub-Clause may be amended (in the contract Part II) by the
insertion of an agreed multiplier after the word "exceed" in the second sentence.

130 ©FIDIC 1996

Sub-paragraph (a) removes the following Sub-Clauses from the limitation of liability:
(a) Sub-Clauses 4.19 and 4.20, for payments for the services actually used by the
Contractor,
(b) Sub-Clause 5.9, for his infringement of patents and other intellectual property
rights, and
(c) Sub-Clauses 8.6 and 11.4, for liquidated damages: the Contract will have defined
the rate(s) and limit(s) of such damages, which may include elements in respect of
loss of production, loss of profit, loss of any contract, and/or indirect special or
consequential loss or damage.
The operation of Sub-Clause 17.6 may be affected by the applicable law.

Clause 18 Insurance
18.1 Insurance for Design
The Contractor shall effect professional indemnity insurance, which shall
insure the Contractor's liability by reason of professional negligence in the
design of the Works. Such insurance shall be for a limit of not less than the
amount specified in the Appendix to Tendei
The Contractor shall use his best endeavours to maintain such professional
indemnity insurance in full force and effect throughout the periods of his
liability, under the Contract and under the law of the Country. The
Contractor undertakes to give the Employer reasonable notice in the event
of difficulty (if any) in extending, renewing or reinstating such insurance.
The Contractor is required to effect professional indemnity insurance in an amount not
less than the amount specified in the Appendix to Tender, When preparing the tender
documents, the Employer should consider whether he requires this insurance, taking
account of the status of the prequalified tenderers and their apparent ability to self-insure.
If no amount is specified in the Appendix to Tender, this Sub-Clause will not apply.
The insurance must be maintained for the full period of the Contractor's liability. No
period is stated in Part I, because it may depend on the law applicable to the Contract
and/or to the Contractor.
Sub-Clause 18.5 requires each insurance policy to be consistent with the general terms
agreed prior to the Effective Date, including in respect of excesses and exclusions. There
are many possible exclusions: in particular, the Contractor may be unable to obtain
professional indemnity insurance to the level of duty prescribed in Sub-Clause 4.1,
namely fitness for purpose, at commercially reasonable rates. At present, most insurers
limit indemnity cover to the professional designers' duty to exercise skill, care and
diligence.

© FIDIC 1996
Tenderers will usually find it necessary to include details of exclusions, excesses and
other general terms in their Proposals.
18.2 Insurance for Works and Contractor's Equipment
The Contractor shall insure the Construction Documents, Plant, Materials
and Works in the joint names of the Employer, the Contractor and Sub-
contractors, against all loss or damage. This insurance shall cover loss or
damage from any cause other than the Employer's risks listed in Sub-Clause
17.3 sub-paragraphs (a), (b), (c) and (d) in so far as such insurance is readily
obtainable. Such insurance shall he for a limit of not less than the full
replacement cost (including profit) and shall also cover the costs of
demolition and removal of debris. Such insurance shall he in such a manner
that the Employer and the Contractor are covered from the date by which the
evidence is to he submitted under Sub-Clause 18.5(a), until the date of issue
of the Taking-Over Certificate for the Works. The Contractor shall extend
such insurance to provide cover until the date of issue of the Performance
Certificate,for loss or damage for which the Contractor is liable arising from
a cause occurring prior to the issue of the Taking-Over Certificate, and for
loss or damage occasioned by the Contractor or Subcontractors in the course
of any other operations (including those under Clauses 11 and 12).
The Contractor shall insure the Contractor's Equipment in the joint names
of the Employer, the Contractor and Subcontractors, against all loss or
damage. This insurance shall cover loss or damage from any cause other than
the Employer's risks listed in Sub-Clause 17.3 sub-paragraphs (a), (h), (c)
and (d) in so far as such insurance is readily obtainable. Such insurance shall
he for a limit of not less than the full replacement value (including delivery
to Site). Such insurance shall he in such a manner that each item of
equipment is insured while it is being transported to the Site and throughout
the period it is on or near the Site.
This Sub-Clause specifies that insurance of the Works is to be effected by the Contractor,
who will probably wish to consult insurance experts. Insurances are virtually an essential
part of major construction projects. When preparing the tender documents, the Employer
may wish to consider whether these insurances should be effected by the Contractor
(who may have long-term arrangements), or by the Employer (who may effect one policy
to cover many contracts). Proposals in respect of Employer-provided insurance are
included in the published Part II.
The Contractor is required to effect insurance of the Works and other things, including
Construction Documents. The latter include drawings, calculations, computer software
(programs), samples, patterns, models, and operation and maintenance manuals: the
consequences of loss or damage to these items usually justifies insurance. Note that the
insurance imposed by this Sub-Clause covers loss or damage, and does not cover the
cost of rectifying defects.
132 ©FIDIC 1996
The date from which the insurance is to be effective must be not later than the date
defined in Sub-Clause 18.5(a), which is to be stated in the Appendix to Tender. Some
forms of contract require the insurance to be effective from the Commencement Date.
However, this latter requirement is frequently impractical (it could delay the
Commencement Date) and/or may be unnecessary because no insurable activities may
be initiated for some time.
The insurance is required to be in the "joint names" of the Employer and Contractor, so
that each is covered and can claim under the policy. Typically, the Contractor may submit
the claim under the policy, because it is his Costs (in overcoming the risk which
occurred) which are being claimed. However, the claim may relate to parts of the Works
for which the Employer has paid. The policy should therefore entitle the Employer to
make a claim, in case the Contractor goes into liquidation or the risk is one of the
Employer's risks which is covered under the policy: Sub-Clause 17.3(e), (f) or (g). The
intention of the Sub-Clause is thus to require the Contractor to effect insurance to cover
all insurable risks, including those Employer's risks for which insurance may be
available although the Contractor does not have an insurable interest in them. This should
avoid the need for the Employer to effect insurances for any works until he takes them
over.
For these reasons, the insurance of the Contractor's Equipment is also required to be
effected, by the Contractor, in the joint names of the parties and including those
Employer's risks which are insurable as part of the general terms to be agreed in
accordance with the first sentence of Sub-Clause 18.5.
When preparing the tender documents, the Employer should review the insurable
Employer's risks, taking advice from insurance experts, and consider whether to amend
them and/or add further insurance requirements. The detailed requirements should only
call for insurances which are likely to be available for the particular project.
18.3 Insurance against Injury to Persons and Damage to Property
The Contractor shall insure against liability to third parties, in the joint
names of the Employer, the Contractor and Subcontractors, for any loss,
damage, death or bodily injury which may occur to any physical property
(except things insured under Sub-Clause 18.2) or to any person (except
persons insured under Sub-Clause 18.4), which may arise Out of the
performance of the Contract and occurring before the issue of the
Performance Certificate. Such insurance shall he for a limit of not less than
the amount specified in the Appendix to Tender
The Contractor is required to effect insurance, in the joint names of the Employer and
Contractor, against liability to other parties. This Sub-Clause does not require the
insurance to cover any liability of the Contractor to the Employer. However, it would
usually be advisable for this insurance to be extended to include cover in respect of the
Contractor's liability to the Employer for loss or damage to any physical property (except

©FIDIC 1996 133

the Works). This additional cover might be available from the insurers without much
increase in the premiums. When preparing the tender documents, the Employer should
consider whether to require this or other additional insurance cover, as appropriate for
the particular project.
18.4 Insurance for Workers
The Contractor shall effect and maintain insurance against losses and claims
arising from the death or injury to any person employed by the Contractor
or any Subcontractor, in such a manner that the Employer and the Employer's
Representative are indemnified under the policy of insurance. For a Sub-
contractors employees, such insurance may be effected by the Subcontractor,
but the Contractor shall be responsible for compliance with this Clause.
In many countries, this type of insurance is required by law. If the law requires each
employer to effect this insurance in respect of his employees, the provisions of the last
sentence would be equally applicable to sub-subcontractors.
18.5 General Requirements for Insurances
Each insurance policy shall be consistent with the general terms agreed in
writing prior to the Effective Date, and such agreement shall take precedence
over the provisions of this Clause.
The Contractor shall, within the respective periods stated in the Appendix to
Tender (calculated from the Commencement Date), submit to the Employer:
(a) evidence that the insurances described in this Clause have been
effected, and
(b) copies of the policies for the insurances described in Sub-Clauses 18.2
and 18.3.
When each premium has been paid, the Contractor shall submit copy receipts
to the Employer. The Contractor shall also, when providing such evidence,
policies and receipts to the Employei; notify the Employer's Representative
of so doing.
The Contractor shall effect all insurances for which he is responsible with
insurers and in terms approved by the Employer. Each policy insuring against
loss or damage shall provide for payments to be made in the currencies
required to rectify such loss or damage. Payments received from insurers
shall be used for the rectification of such loss or damage.
The Contractor (and, if appropriate, the Employer) shall comply with the
conditions stipulated in each of the insurance policies. The Contractor shall
make no material alteration to the terms of any insurance without the prior
approval of the Employer. If an insurer makes (or purports to make) any such
alteration, the Contractor shall notify the Employer immediately.

134 ©FIDIC 1996

 If the Contractor fails to effect and keep in force any of the insurances
required under the Contract, or fails to provide satisfactory evidence, policies
and receipts in accordance with this Sub-Clause, the Employer may, without
prejudice to any other right or remedy, effect insurance for the coverage
relevant to such default, and pay the premiums due. Such payments shall he
recoverable from the Contractor by the Employer, and may be deducted by
the Employer from any monies due, or to become due, to the Contractoc
Nothing in this Clause limits the obligations, liabilities or responsibilities of
the Contractor or the Employer, under the other terms of the Contract or
otherwise. Any amounts not insured or not recovered from the insurers shall
be borne by the Contractor and/or the Employer accordingly.
At any given time, it is difficult for any published form of construction contract to define
the precise insurance requirements which the parties will be able to (and should) procure
for any particular Works. Therefore, Clause 18 sets out the requirements in general terms,
allowing the Contractor and the Employer to elaborate on the detailed terms, as agreed
prior to the Effective Date, and as envisaged in the first sentence of Sub-Clause 18.5.
Tenderers may be invited to include, in their Proposals, details of their insurer(s) and of
the insurances to be provided under Clause 18, including conditions, limits,
exclusions/exceptions, deductibles/excesses and (possibly) operative clauses. In order to
minimise dispute on this matter, it is suggested that the Instructions to Tenderers should
invite tenderers to provide details of their insurances, and should also indicate the
Employer's preferences (if any): for example, permitted exclusions and levels of
deductibles/excesses. Any particular requirements of the Employer may be made
compulsory by including them in the Employer's Requirements. Even if tenderers are
not invited to provide details of their proposed insurances, they may consider it advisable
to do so.
If no general terms of insurance are agreed prior to the Effective Date, the policies must
comply with Clause 18. However, Sub-Clause 18.1 is worded in very general terms,
and the cover specified in Sub-Clause 18.2 is subject to the limitation defined by the
phrase "in so far as such insurance is readily obtainable".
The insurers and the terms are subject to the approval of the Employer. Under Sub-
Clause 1.8, approvals shall be in writing and not be unreasonably withheld or delayed.
The Contractor is required, within the prescribed periods, to submit to the Employer:
(a) evidence, which could be in the form of appropriate certificates from the insurers,
that all the insurances described in this Clause have been effected;
(b) copies of the policies for the insurances described in Sub-Clauses 18.2 and 18.3;
insurers might also be prepared to release copies of operative clauses of the policies
for the insurances prescribed in the other Sub-Clauses of Clause 18.

© FIDIC 1996 135

If a party fails to comply with a condition of an insurance policy, he will be in breach
of the fifth paragraph of Sub-Clause 18.5. No mention is made of the consequences, the
most serious being the possibility of the insurer becoming entitled to withhold cover
under the policy. The party in breach might have to bear responsibility for the
consequences of the breach, unless he was unaware of the relevant condition.
The penultimate paragraph entitles the Employer to effect insurance if he does not
receive "satisfactory evidence, policies and receipts in accordance with this Sub-Clause".
He does not have to ascertain whether insurance cover is actually in force: his entitlement
to effect insurance only depends on the lack of evidence from the Contractor. Although
not a requirement of Sub-Clause 18.5, the Employer should issue a formal notice to the
Contractor, specifying the evidence required (which the Contractor has failed to submit)
and the reasonable date by which the Employer must receive it, and stating that, if the
evidence is not received by that date, the Employer may effect the insurance at the cost
of the Contractor. In most countries, the Employer would be obliged to act reasonably
in issuing this notice and subsequently procuring economical insurance.
Clause 18 is not intended to impose, on either party, an obligation to insure all his risks
under the Contract. Under the last paragraph of Sub-Clause 18.5, the insurance
requirements of Clause 18 do not reduce the obligations or liabilities of either party. The
Clause only requires certain insurances to be effected, each of which will apply in
accordance with the actual terms of the policy. Actual terms will probably include
conditions, limits, exclusions (exceptions) and deductibles (excesses).
The liabilities of the parties (other than to effect insurance) are not to be interpreted from
this Clause 18. It is these liabilities, in accordance with the other terms of the Contract,
which will be relevant whenever an element of loss or damage is not covered by
insurance. For example, an insurer may bear the amount of a claim except for the deduct-
ible. The latter would be borne by the Employer if the claim arose from an Employer's
risk, or by the Contractor if it arose from a Contractor's risk; these risks are defined in
Clause 17.

Clause 19 Force Majeure

19.1 Definition of Force Majeure
In this Clause, "force majeure" means an event beyond the control of the
Employer and the Contractor, which makes it impossible or illegalfor a party
to perform, including but not limited to:
(a) act of God;
(b) wa,; hostilities (whether war he declared or not), invasion, act of
foreign enemies, mobilization, requisition, or embargo;
(c) rebellion, revolution, insurrection, or military or usurped power, or
civil war;
136 ©FIDIC 1996
 (d) contamination by radio-activity from any nuclear fuel, or from any
nuclear waste from the combustion of nuclear fuel, radio-active toxic
explosive, or other hazardous properties of any explosive nuclear
assembly or nuclear component of such assembly;
(e) riot, commotion or disordei unless solely restricted to employees of the
Contractor or of his Subcontractors.
In many countries, particularly those codifying civil law, "force majeure" is a concept
defined by law. In the Contract, the term is defined to include certain events beyond the
control of the Employer and the Contractor, namely those which make it impossible or
illegal for either (or both) of them to perform. The Clause is intended to cover major
(and thus unusual) prevention of performance, similar to the doctrine of frustration in
many common law countries, but is not intended to cover every event which impedes or
disrupts either party's performance.
In order for an event to be classified as force majeure, the event has to make it impossible
or illegal for the Employer and/or the Contractor to carry out their obligations under the
Contract. The event does not have to be one of those listed, which are only examples.
Conversely, if one of the listed events occurs but it is still possible and legal for the
Employer and the Contractor to perform, the event will not constitute force majeure.
Examples of events which could constitute force majeure include the operation of uncon-
trollable natural forces such as an earthquake, govemmental confiscation, mass labour
action (strikes, unless restricted to the Contractor's employees or affected by his breach
of Sub-Clause 6.2) and port congestion due to obstruction.
19.2 Effect of Force Majeure Event
Neither the Employer nor the Contractor shall he considered in detult or in
contractual breach to the extent that performance of obligations is prevented
by a force majeure event which arises after the Effective Date.
Note that the excused performance has to have been "prevented" by the force majeure
event, which has to have arisen after the date on which the Contract entered into legal
force and effect. In order for it to be a force majeure event, the event must have made it
impossible or illegal for a party to perform some obligation. This Sub-Clause might also
relate to the effect of that force majeure event upon the performance of any other
prevented obligation.
This Sub-Clause provides important protection for the party prevented from performing,
by excusing the unperformed obligation to the extent prevented by the force majeure
event. As regards time, Sub-Clause 8.3(b) also provides protection.
19.3 Contractor's Responsibility
Upon occurrence of an event considered by the Contractor to constitute force
majeure and which may affect performance of his obligations, he shall
promptly notify the Employer's Representative, and shall endeavour to
©FIDIC 1996 137
 continue to perform his obligations as far as reasonably practicable. The
Contractor shall also notify the Employer's Representative of any proposals,
including any reasonable alternative means for performance, but shall not
effect such proposals without the consent of the Employer's Representative.
The Contractor is required to notify the Employers Representative, who must notify the
Employer (see last sentence of Sub-Clause 3.1) so that the parties can reach agreement
on whether the event does actually constitute force majeure.
19.4 Employer's Responsibility
Upon occurrence of an event considered by the Employer to constitute force
majeure and which may affect performance of his obligations, he shall
promptly notify the Contractor and the Employer's Representative, and shall
endeavour to continue to perform his obligations as far as reasonably
practicable. The Employer shall also notify the Employer's Representative
and the Contractor of any proposals, with the objectives of completing the
Works and mitigating any increased costs to the Employer and the
Contractor.
The Employer is required to notify the Contractor and the Employer's Representative,
so that the parties can reach agreement on whether the event does actually constitute
force majeure. Note that one of the consequences of the force majeure event might be
prevention of payment.
19.5 Payment to Contractor
If, in consequence of force majeure, the Works shall suffer loss or damage,
the Contractor shall be entitled to have included, in an Interim Payment
Certificate, the Cost of work executed in accordance with the Contract, prior
to the event of force majeure. If the Contractor incurs additional Cost in
complying with Sub-Clause 19.3, such Cost shall he determined by the
Employer's Representative in accordance with the provisions of Sub-Clause
3.5 and shall be added to the Contract Price.
This Sub-Clause deals with the immediate effects of the force majeure event, which may
subsequently dissipate, allowing the parties to resume performance. The Contractor is
entitled to be paid for the work executed, even if damaged due to the force majeure event,
unless it was not originally executed in accordance with the Contract.
Even if the Works are not damaged, the Contractor is entitled to be paid for endeavouring
to continue performing his obligations, and for preparing and executing any proposals,
including any reasonable alternative means for performance. Sub-Clauses 13.3 to 13.9
and 16.1 will still apply, providing some measure of protection for the Contractor.

138 ©FIDIC 1996

19.6 Optional Termination, Payment and Release
Irrespective of any extension of time, if a force majeure event occurs and its
effect continues for a period of 182 days, either the Employer or the
Contractor may give to the other a notice of termination, which shall take
effect 28 days after the giving of the notice. If, at the end of the 28-day period,
the effect ofthe force majeure continues, the Contract shall terminate. If the
Contract is terminated under this Sub-Clause, Sub-Clause 2.4 or Sub-
Clause 16.2, the Employer's Representative shall determine the value of the
work done and:
(a) the amounts payable for any work carried out for which a price is
stated in the Contract;
(b) the Cost of Plant and Materials ordered for the Works which have been
delivered to the Contractor, or of which the Contractor is liable to
accept delivery: such Plant and Materials shall become the property of
(and be at the risk of) the Employer when paid for by the Employer, and
the Contractor shall place the same at the Employer's disposal;
(c) any other Cost or liability which in the circumstances was reasonably
incurred by the Contractor in the expectation of completing the Works;
(d) the reasonable Cost of removal of Temporary Works and Contractor's
Equipment from the Site and the return of such items to the Contractor's
works in his country (or to any other destination at no greater cost);
and
(e) the reasonable Cost of repatriation of the Contractor's staff and labour
employed wholly in connection with the Works at the date of such
termination;
and issue an Interim Payment Certificate in accordance with Clause 13.
When preparing the tender documents, the Employer may wish to consider amending
the period of 182 days, after which either party is entitled to initiate termination,
particularly for contracts having a Time for Completion of less than a year.
For some events of force majeure, it may be immediately apparent that its effect will
continue for the relevant period. In this case, the parties might wish to agree an
amendment to the Contract by reducing the period and initiating termination
immediately. Note that Sub-Clause 13.2 requires the advance payment to be repaid
immediately upon termination, thereby reducing to zero the value of the advance
payment guarantee, which should then be promptly returned to the Contractor.
Under sub-paragraph (a), the Contractor is entitled to payment for any work carried out
"for which a price is stated in the Contract". In many cases, the completed work may
not have been priced in the Contract, because there was no breakdown of the Contract

©FIDIC 1996 139

Price. Therefore, sub-paragraphs (b) and (c) provide a method for determining a
reasonable payment in respect of work carried out which was not separately priced.
19.7 Release from Performance under the Law
If under the law of the Contract the Employer and the Contractor are
released from further performance, the sum payable by the Employer to the
Contractor shall be the same as would have been payable under Sub-Clause
19.6 if the Contract had been terminated under that Sub-Clause.
This Sub-Clause only takes effect if the applicable law prescribes that the parties are
released from performance: in many countries, the Contract is said to have been
frustrated. Sub-Clause 19.6 specifies the consequences, unless the law prescribes other-
wise. Legal advice may be required to verify the validity of the assumptions, namely
frustration and the applicability of Sub-Clause 19.6. Note that the Sub-Clause relies on
the law, not on the question of whether a force majeure event occurred under the
definition in Sub-Clause 19.1.

Clause 20 Claims, Disputes and Arbitration

20.1 Procedure for Claims
If the Contractor intends to claim any additional payment under any Clause
of these Conditions or otherwise, the Contractor shall give notice to the
Employer's Representative as soon as possible and in any event within 28
days of the start of the event giving rise to the claim.
The Contractor shall keep such contemporary records as may be necessary
to substantiate any claim, either on the Site or at another location acceptable
to the Employer's Representative. Without admitting the Employer's liability,
the Employer's Representative shall, on receipt of such notice, inspect such
records and may instruct the Contractor to keep further contemporary
records. The Contractor shall permit the Employer's Representative to
inspect all such records, and shall (if instructed) submit copies to the
Employer's Representative.
Within 28 days of such notice, or such other time as may be agreed by the
Employer's Representative, the Contractor shall send to the Employer's
Representative an account, giving detailed particulars of the amount and
basis of the claim. Where the event giving rise to the claim has a continuing
effect, such account shall be considered as interim. The Contractor shall
then, at such intervals as the Employer's Representative may reasonably
require, send further interim accounts giving the accumulated amount of the
claim and any further particulars. Where interim accounts are sent to the
Employer's Representative, the Contractor shall send a final account within
28 days of the end of the effects resulting from the event.
© FIDIC 1996
 If the Contractor fails to comply with this Sub-Clause, he shall not be entitled
to additional payment.
This is a procedural Sub-Clause: it does not of itself entitle the Contractor to additional
payment for any particular type of event, but can disqualify him from an entitlement if
he fails to comply with these procedural requirements. Although not specifically
mentioned, in most countries the Contractor will have a duty to take any wholly
reasonable measures in endeavours to mitigate the losses to the Employer which a claim
represents.
The Contractor is required to notify the Employer's Representative promptly, so that he
can carry out any investigations and so that both parties can keep adequate records,
preferably on an agreed basis. The Employer's Representative can monitor these records
without admitting the claim, although early agreement on the principles usually
simplifies resolution and minimises dispute.
If the Employer does not receive the requisite notice and/or access to the records, the
last sentence resolves the resulting dispute in his favour.
20.2 Payment of Claims
The Contractor shall he entitled to have included in any Interim Payment
Certificate such amount for any claim as the Employer's Representative
considers due. If the particulars supplied are insufficient to substantiate the
whole of the claim, the Contractor shall he entitled to payment for such part
of the claim as has been substantiated.
This Sub-Clause confirms a basic principle of Sub-Clause 13.6, namely that the
Employer's Representative must certify amounts which he considers are due, and not
await every element of substantiation before certifying any part of a particular claim.
Since the basis of the claim is unlikely to be of the Contractor's own making, it is clearly
unfair for him not to be paid promptly. However, he cannot expect to receive a payment
until it has been substantiated under the Contract.
20.3 Dispute Adjudicalion Board
Unless the member or members of the Dispute Adjudication Board have been
previously mutually agreed upon by the parties and named in the Contract,
the parties shall, within 28 days of the Effective Date, jointly ensure the
appointment of a Dispute Adjudication Board. Such Dispute Adjudication
Board shall comprise suitably qualified persons as members, the number of
members being either one or three, as stated in the Appendix to Tender. If the
Dispute Adjudication Board is to comprise three members, each party shall
nominate one member for the approval of the other party, and the parties
shall mutually agree upon and appoint the third member (who shall act as
chairman).

© FIDIC 1996
 The terms of appointment of the Dispute Adjudication Board shall:
(a) incorporate the model terms published by the Fédération Inter-
nationale des Ingénieurs-Conseils (FIDIC),
(b) require each member of the Dispute Adjudication Board to be, and to
remain throughout the appointment, independent of the parties,
(c) require the Dispute Adjudication Board to act impartially and in
accordance with the Contract, and
(d) include undertakings by the parties (to each other and to the Dispute
Adjudication Board) that the members of the Dispute Adjudication
Board shall in no circumstances be liable for breach of duty or of
contract arising out of their appointment; the parties shall indemnify
the members against such claims.
The terms of the remuneration of the Dispute Adjudication Board, including
the remuneration of each member and of any specialist from whom the
Dispute Adjudication Board may require to seek advice, shall be mutually
agreed upon by the Employer, the Contractor and each member of the
Dispute Adjudication Board when agreeing such terms of appointment. In the
event of disagreement, the remuneration of each member shall include
reimbursement for reasonable expenses, a daily fee in accordance with the
daily fee established from time to time for arbitrators under the
administrative and financial regulations of the International Centre for
Settlement of Investment Disputes, and a retainer fee per calendar month
equivalent to three times such daily fee.
The Employer and the Contractor shall each pay one-half of the Dispute
Adjudication Board's remuneration in accordance with its terms of
remuneration. If, at any time, either party shall fail to pay its due proportion
of such remuneration, the other party shall be entitled to make payment on
his behalf and recover it from the party in default.
The Dispute Adjudication Board's appointment may be terminated only by
mutual agreement of the Employer and the Contractor. The Dispute Adjud-
ication Board's appointment shall expire when the discharge referred to in
Sub-Clause 13.12 shall have become effective, or at such other time as the
parties may mutually agree.
If, at any time, the parties so agree, they may appoint a suitably qualified
person to replace (or to be available to replace) any or all members of the
Dispute Adjudication Board. The appointment will come into effect if a
member of the Dispute Adjudication Board declines to act or is unable to act
as a result of death, disability, resignation or termination of appointment. If

142 © FIDIC 1996

 a member so declines or is unable to act, and no such replacement is
available to act, the member shall he replaced in the same manner as such
member was to have been nominated.
If any of the following conditions apply, namely:
(a) the parties fail to agree upon the appointment of the sole member of a
one-person Dispute Adjudication Board within 28 days of the Effective
Date,
(h) either party fails to nominate an acceptable member, for the Dispute
Adjudication Board of three members, within 28 days of the Effective
Date,
(c) the parties fail to agree upon the appointment of the third member (to
act as chairman) within 28 days of the Effective Date, or
(d) the parties fail to agree upon the appointment of a replacement member
of the Dispute Adjudication Board within 28 days of the date on which
a member of the Dispute Adjudication Board declines to act or is
unable to act as a result of death, disability, resignation or termination
of appointment,
then the person or administration named in the Appendix to the Tender shall,
after due consultation with the parties, nominate such member of the Dispute
Adjudication Board, and such nomination shall be final and conclusive.
In the current editions of the other FIDIC forms of contract, which are informally titled
the Red and Yellow Books, there is an "Engineer" who is required to issue a decision on
disputes referred to him, and who is required to act impartially in this (and other) actions.
Under the Orange Book, there is no impartial "Engineer" available to make these pre-
arbitral decisions. These decisions can form a vital ingredient in preventing minor
problems escalating into major disputes, and in encouraging economic resolution of all
disputes. This Sub-Clause sets out the procedure for appointing a Dispute Adjudication
Board ("DAB"), ready to make pre-arbitral decisions on disputes, if they arise.
The DAB can consist of either one or three members, the number being prescribed in
the Appendix to Tender; as with any other element of the Contract, the parties can, of
course, agree to change this number. The main factors to be taken into account in
prescribing the number of members are:
(a) the respective nationalities of the parties;
(b) the types of activities to be carried out; and
(c) the estimated Contract Price: it is suggested that three members would probably
be appropriate if the estimated Contract Price exceeds 10 000 multiplied by the
daily fee for each of the members of the DAB.

© FIDIC 1996 143

If the parties cannot agree, the daily fee is required to be in accordance with the daily
fee established from time to time for arbitrators under the administrative and financial
regulations of the International Centre for Settlement of Investment Disputes (at the
World Bank). At the beginning of 1996, their established daily fee was approximately
US$ 900.
Although some disputes may have to be decided by arbitration, the DAB provides the
second procedure for early resolution: the first procedure is the previous direct
discussion between the Representatives of the parties. In order to maximise the DABs
chances of success in avoiding arbitration, its member(s) must be suitably qualified,
impartial, and accepted and trusted by both parties. Therefore, although the Employer
usually prepares the tender documents and will therefore prescribe the number of
members, it is essential that the constitution of the DAB (including its members, Terms
and Rules) are mutually agreed upon by the parties, and not imposed by either party.
Although it is desirable to agree the DAB before the Contract becomes effective, circum-
stances may sometimes prevent this, with pre-contract discussions concentrating on the
Works.
The Sub-Clause anticipates that the one-person DAB, or the third member (to act as
chairman) of a three-person DAB, is mutually agreed, and that the first two members of
a three-person DAB are each nominated by one party and approved by the other. For the
chairman/third-member, this method is considered preferable to the procedure by which
the two persons choose their chairman, but the Sub-Clause does not prevent the parties
adopting the latter procedure.
For the one-person DAB or chairman to be mutually agreed, the Employer (or the
tenderer) could provide the names and curriculum vitae of suitable persons in a
Schedule, for the tenderer (or Employer) to select. Alternates may be required in case
some subsequently decline the appointment, assuming that they have not previously
indicated a willingness to accept; there may be a reluctance to choose names from a list
of people who have already been contacted by the other party.
For the first two members of a three-person DAB, each party is entitled to nominate a
person for the approval of the other party. These members must not be regarded, and
must not regard themselves, as representatives or advocates of their nominating party,
although they may be of similar nationality as that party and/or involved in similar
business activities. The Employer (or the tenderer) could provide the name and curric-
ulum vitae of their proposal for this member, in a Schedule, for the tenderer (or
Employer) to approve.
In respect of any members of the DAB who are not agreed and named in the Contract,
the above procedures can continue in an endeavour to reach agreement. However, these
discussions cannot continue indefinitely, so the Sub-Clause concludes by empowering a
nominating authority (a person or administration) to complete the nomination of the
DAB. The nominating authority must be named in the Appendix to Tender, after
ascertaining that it will be willing and able to perform the role at the appropriate time.
144 ©FIDIC 1996
In the example Appendix, reproduced at the end of this Guide, the President of FIDIC
is suggested for this nominating authority, with power to delegate. FIDIC does not have
the facilities to administer or support the DAB's procedures in any other way.
The terms of appointment of the DAB should be agreed and signed as soon as possible
after the member(s) have agreed to be appointed. The second paragraph of this Sub-
Clause 20.3 requires the DAB's terms:
(a) to incorporate the Model Terms published by FIDIC, which are printed in this
Guide after the comments on Clause 20, and
(b) to include certain essential requirements and undertakings, all of which are
contained in FIDIC's Model Terms.
20.4 Procedure for Obtaining Dispute Adjudication Board's Decision
If a dispute arises between the Employer and the Contractor in connection
with, or arising out of the Contract or the execution of the Works, including
any dispute as to any opinion, instruction, determination, certification or
valuation of the Employer's Representative, the dispute shall initially he
referred in writing to the Dispute Adjudication Board for its decision, with a
copy to the other party. Such reference shall state that it is made under this
Sub-Clause. The parties shall promptly make available to the Dispute
Adjudication Board all such information, access to the Site, and appropriate
facilities, as the Dispute Adjudication Board may require for the purposes of
rendering its decision. No later than the fifty-sixth day after the day on which
it received such reference, the Dispute Adjudication Board, acting as a panel
of expert(s) and not as arbitrator(s), shall give notice of its decision to the
parties. Such notice shall include reasons and shall state that it is given under
this Sub-Clause.
Unless the Contract has already been repudiated or terminated, the
Contractor shall, in every case, continue to proceed with the Works with all
due diligence, and the Contractor and the Employer shall give effect forth-
with to every decision of the Dispute Adjudication Board, unless and until
the same shall be revised, as hereinafter provided, in an amicable settlement
or an arhitral award.
If eitherparsy is dissatisfied with the Dispute Adjudication Board's decision,
then either party, on or before the twenty-eighth day after the day on which
it received notice of such decision, may notify the other party of its dissatis-
faction. If the Dispute Adjudication Board fails to give notice of its decision
on or before the fifty-sixth day after the day on which it received the
reference, then either party, on or before the twenty-eighth day after the day
on which the said period of fifty-six days has expired, may notify the other
party of its dissatisfaction. In either event, such notice of dissatisfaction shall
state that it is given under this Sub-Clause, such notice shall set out the
© FIDIC 1996
 matters in dispute and the reason(s) for dissatisfaction and, subject to
Sub-Clauses 20.7 and 20.8, no arbitration in respect of such dispute may be
commenced unless such notice is given.
if the Dispute Adjudication Board has given notice of its decision as to a
matter in dispute to the Employer and the Contractor and no notice of
dissatisfaction has been given by either party on or before the twenty-eighth
day after the day on which the parties received the Dispute Adjudication
Board's decision, then the Dispute Adjudication Boards decision shall
become final and binding upon the Employer and the Contractor.
This Sub-Clause sets out the procedure for obtaining the decision of the Dispute Adjud-
ication Board ("DAB") on any matter in dispute. However, the parties should not have
disregarded the possibility of jointly seeking an opinion from the DAB on any matter
relevant to the avoidance of a potential dispute. The Model Terms referred to in Sub-
Clause 20.3(a) prevent either party consulting the DAB privately, but do not prevent a
joint approach, which may settle the matter and avoid a reference under Sub-Clause
20.4. For example, the validity of a claim under Sub-Clause 4.11 may depend upon the
interpretation of the record of a particular borehole or sample: the parties may find it
useful to seek the DAB's interpretation prior to the preparation and evaluation of a fully
detailed claim.
No matter can be referred to the DAB unless it is in dispute, except (as stated above)
with the agreement of both parties. No formal notice of dispute is required by Sub-Clause
20.4, but the written reference by the claimant to the DAB should describe the situation
and set out the principles, including what the claimant wishes the decision to be. A copy
of this written reference must be passed by the claimant to the other party (the
respondent), so that the latter can respond by making its written submission to the DAB.
Sometimes, it may be difficult to ascertain whether a dispute has in fact arisen, usually
because discussions are continuing and one party has not yet reached a definite position
in disagreement with that of the other party. However, even in these situations, there must
come a time when the claimant can fairly conclude that agreement cannot be reached.
The first sentence of Sub-Clause 20.4 provides little constraint on the type of dispute
which can be referred to the DAB. Notwithstanding Sub-Clause 3.4, the Contractor can
dispute an instruction of the Employer's Representative, whilst complying with it. For
example, an instruction may have been issued under Sub-Clause 1.6, and/or in clarif-
ication of an ambiguous or imprecise provision in the Employer's Requirements; the
Contractor may be reluctant to comply, if he knows that the Employer seems reluctant
to acknowledge the financial consequences of his Representative's instruction. It is there-
fore possible to envisage a situation where the reference to the DAB gives it the power
to decide upon the design and the details of the Works which the Contract requires the
Contractor to provide.

146 ©FIDIC 1996

In this type of situation, the Employer may prevent the DAB deciding what the
Contractor is to provide, by insisting on the Contractor's compliance with the instruction
(under Sub-Clause 3.4) and thus insisting on the completed Works complying with the
Employer's actual achievable requirements. The matters in dispute would then be the
interpretation of the ambiguous or imprecise provision in the Employer's Requirements,
and whether the clarification instruction was a Variation: the parties would be seeking
the DAB's decision as to time and money only. In most cases, it is to be expected that
neither party would want the DAB to make a decision requiring the Contractor to execute
Works unacceptable to the Employer.
If the matter in dispute is of a technical nature, such as deciding upon the design and the
details of the Employer's Works, the DAB may need expert advice in order to make their
decision. FIDIC's Model Terms do not empower the DAB to procure advice from
experts. The Model Terms are an agreement between the two contracting parties and one
individual DAB member, who may be unwilling to be responsible for paying expert(s).
It is probably preferable for the parties jointly to appoint each expert, on an individual
basis similar to the appointment of each DAB member.
In the event of expert(s) being appointed, their role would be to advise the DAB, and
not to join the DAB in making its decision.
FIDIC's Model Terms, referred to in Sub-Clause 20.3(a), encourage the inclusion, in the
terms for the DAB, of procedural arrangements for the DAB's deliberations. Sub-Clause
20.4 provides no requirements, but natural justice would necessitate each party being
given similar opportunities to present its case and respond to the other party's assertions.
The DAB is then required to give notice of its decision, including reasons. As with those
of an arbitrator, the DAB's reasons should set out the matter in dispute, the DAB's
opinions on the principles and the basis for the decision. Reasons are an essential part
of the decision: properly written, they may persuade both parties that the DAB has fully
studied all relevant matters and reached a similar conclusion as that which might be
expected of arbitrator(s).
The better the reasons, the greater is the likelihood of acceptance by the parties. In the
event that a party eventually decides to reject the DAB's decision, a formal "notice of
dissatisfaction" is to be given within four weeks of receiving the decision. The notice
establishes the notifying party's right to commence arbitration at any time after a further
eight weeks. There is no specified period within which arbitration must be commenced,
because it was felt that the claimant may prefer to defer pursuing the claim whilst
attempting to resolve the final account. However, if the claimant seems to have discon-
tinued procedures in support of its claim, the applicable law may invalidate the claim
due to non-pursuance (sometimes referred to as want of prosecution).
20.5 Amicable Settlement
Where notice of dissatisfaction has been given under Sub-Clause 20.4, the
parties shall attempt to settle such dispute amicably before the commence-
ment of arbitration. Provided that unless the parties agree otherwise,
© FIDIC 1996 147
 arbitration may he commenced on or after the fifty-sixth day after the day on
which notice of dissatisfaction was given, even if no attempt at amicable
settlement has been made.
During the first eight weeks after the notice of dissatisfaction, and by agreement there-
after, the parties should attempt amicable settlement. No method is prescribed in the Sub-
Clause, in order that the parties have the greatest flexibility in the choice of procedure.
Alternatives include direct negotiation, mediation, conciliation and other forms of
Alternative Dispute Resolution: except that a formal review board is probably
inappropriate, being too similar to the Dispute Adjudication Board. The latter may have
suggestions for the approach which the parties might wish to consider for amicable
settlement, but should not themselves be involved in amicable settlement procedures
until their appointment as a Dispute AdjUdication Board has expired.
FIDIC maintains a list of qualified persons from which the parties can seek to agree the
appointment of mediator(s), but is not prepared to nominate mediator(s) in the event of
disagreement. FIDIC does not have the facilities to administer or support amicable
settlement in any way.
Although the first sentence of the Sub-Clause imposes an obligation to attempt amicable
settlement, the second sentence specifies that, if a party fails to make any attempt, the
other party cannot insist on it. The apparent contradiction is unavoidable, because of the
impossibility of providing any meaningful method of imposing a requirement for the
parties to reach a consensual agreement of their differences.
It is in the best interests of both parties that they attempt amicable settlement, and that
these procedures are not made more difficult by imposed conditions or by lack of confid-
entiality. In many countries, the law would recognise that the parties might be prepared
to make admissions during these procedures, in an endeavour to reach a settlement,
provided the admissions will not prejudice the case which may eventually have to be
presented in arbitration.
20.6 Arbitration
Any dispute in respect of which:
(a) the decision, if any, of the Dispute Adjudication Board has not become
final and binding pursuant to Sub-Clause 20.4, and
(h) amicable settlement has not been reached,
shall be finally decided by international arbitration. The arbitration rules
under which the arbitration is conducted, the institution to nominate the
arbitrator(s) or to administer such rules (unless named therein), the number
of arbitrators, and the language and place of such arbitration shall he as set
out in the Appendix to Tender. The arbitrator(s) shall have full power to open
up, review and revise any decision of the Dispute Adjudication Board.

148 © FIDIC 1996

 Neither party shall he limited, in the proceedings before such arbitrator(s),
to the evidence or arguments previously put before the Dispute Ad/udication
Board to obtain its decision.
Arbitration may he commenced prior to or after completion of the Works. The
obligations of the parties and the Dispute Adjudication Board shall not he
altered by reason of the arbitration being conducted during the progress of
the Works.
Compared to litigation, arbitration is a private procedure in which a sole arbitrator, or
panel of three arbitrators, receives written and/or oral submissions from the parties,
usually with a private hearing, and delivers an award which is intended to be enforce-
able by due legal process. The parties will wish to be able to choose appropriately
qualified arbitrators, convenient dates and places for the hearings, and other matters. The
1958 New York "Convention on the Recognition and Enforcement of Foreign Arbitral
Awards" may make the award easier to enforce in some countries, particularly if the
award has been certified by a recognised arbitral institution: for example, the
International Chamber of Commerce ("ICC").
The arbitration may be administered by an arbitral institution, many of which (including
ICC) have their own rules, but administration is not essential. As an alternative to the
rules published by arbitral institutions, arbitration may be conducted under the
arbitration rules issued by UNCITRAL, the United Nations Commission on International
Trade Law. Arbitrations under UNCITRAL rules may be administered by ICC or another
arbitral institution, or they may be ad hoc, not administered except by the arbitrators; in
either case, the arbitration may be subject to the degree of court supervision prescribed
by law. If ad hoc non-administered arbitration is intended, the Contract should provide
a workable mechanism for nominating the arbitrator(s) in the event that the parties
cannot agree on the appointment, unless the applicable law provides a satisfactory
mechanism.
It is important that the arbitration rules should be specified in the Appendix to Tender.
If these rules define the institution which will administer them, or which will nominate
the arbitrator(s) but take no other part in the proceedings, it is not essential for an
institution to be named in the Appendix to Tender. However, if the institution (to
administer or only to nominate) is not defined in the rules, it must be named in the
Appendix to Tender, after ascertaining that the institution will be willing and able to do
so at the appropriate time. The applicable law might not enforce this Sub-Clause's
requirement for arbitration in the event that it becomes unworkable by reason of the
named institution being unable or unwilling to carry out the performance stipulated in
the Contract.
FIDIC maintains a list of qualified persons from which the parties can seek to agree the
appointment of the arbitrator(s), but is not prepared to nominate arbitrator(s) in the event
of disagreement. FIDIC does not have the facilities to administer or support the
arbitration in any way, and should not be mentioned in the Appendix to Tender (except
as shown in the example Appendix, in respect of Sub-Clause 20.3).
© FIDIC 1996 149
If the arbitration is conducted during the progress of the Works, the parties and the
Dispute Adjudication Board are required to continue their other activities: their
obligations are not affected.
Sub-Clause 20.6 does not provide for multi-party arbitration, to deal with the possibility
of similar disputes between Employer-Contractor and Contractor-Subcontractor. If
multi-party arbitration is to be anticipated in the Contract, it is advisable for the Contract
to specify suitable rules, which are acceptable to the Employer, Contractor and Sub-
contractor. In order to achieve the Subcontractor's acceptance of these rules before the
parties enter into the Contract, it would have been necessary for him to have previously
been selected and been given the opportunity to participate in the choice of rules: this
procedure might only be possible for major subcontracts or where the Subcontractor is
a member firm of a joint venture Contractor. If this procedure was impossible, arbitration
rules for the particular subcontract might have to be imposed, under the terms of the sub-
contract, upon the (possibly reluctant) Subcontractor.
20.7 Failure to Comply with Dispute Adjudication Board's Decision
Where neither party has given notice of dissatisfaction within the period
stated in Sub-Clause 20.4 and the Dispute Adjudication Board's related
decision, if any, has become final and binding, either party may, if the other
party fails to comply with such decision, and without prejudice to any other
rights it may have, refer the failure itself to arbitration under Sub-Clause
20.6. The provisions of Sub-Clauses 20.4 and 20.5 shall not apply to any
such reference.
If the DAB makes a decision and it has become binding, both parties must give effect
to it. If a party fails to do so, the other party may refer this failure to arbitration, without
having to request a DAB decision or to attempt amicable settlement. Alternatively, that
other party may prefer to seek enforcement through due legal process. Unless allowed
by law, neither party can challenge the DAB's decision after it has become binding under
the Contract.
20.8 Expiry of Dispute Adjudication Board's Appointment
When the appointment of the Dispute Adjudication Board and of any
replacement has expired, any such dispute referred to in Sub-Clause 20.4
shall be finally settled by arbitration pursuant to Sub-Clause 20.6. The
provisions of Sub-Clauses 20.4 and 20.5 shall not apply to any such
reference.
The appointment of the Dispute Adjudication Board may have expired when the
discharge referred to in Sub-Clause 13.12 became effective. Alternatively, the parties
may have mutually agreed the expiry of the DAB's appointment. If a dispute arises there-
after, either party can initiate arbitration immediately, without having to reconvene a
DAB for a decision, and without having to attempt amicable settlement. However, the
advantages of amicable settlement may encourage the parties to attempt it, by mutual
agreement.
150 ©F1D1C1996
CONDITIONS OF CONTRACT FOR DESIGN-BUILD AND TURNKEY

FIDIC Model Terms of Appointment

for a Dispute Adjudication Board
TERMS OF APPOINTMENT FOR A BOARD OF THREE MEMBERS'
THESE TERMS OF APPOINTMENT OF A BOARD MEMBER ARE MADE BETWEEN:

(1) [name of Employer] of [address of Employer] (hereinafter called "the Employer")

(2) [name of Contractor] of [address of Contractor] (hereinafter called "the
Contractor")
(3) [name of Board Member] of [address of Board Member] (hereinafter called "the
Board Member")
WHEREAS
A. The Employer and the Contractor (hereinafter jointly referred to as "the Parties")
have on the [ ] day of l99[] entered into a Contract (hereinafter called "the
Contract") for the execution of [ ] (hereinafter called "the Project").
B. By Sub-Clause 20.3 of the Conditions of Contract (hereinafter called "the
Conditions") provision is made for the constitution of a Dispute Adjudication
Board (hereinafter called "the Board") which shall comprise three suitably
qualified persons as stated in the Appendix to Tender.
C. The Board Member has agreed to serve as [one of the members of] [chairman ofi
the Board on the terms set out herein.
NOW IT IS HEREBY AGREED as follows:
1. The Board Member
(1) hereby accepts this appointment to the Board which is a personal
appointment and agrees to be bound by these Terms of Appointment and Sub-
Clauses 20.3 and 20.4 of the Conditions as if they were set out herein;
(2) shall be entitled notwithstanding such acceptance to resign this appointment
on giving reasonable notice to the Parties.
2. These Terms of Appointment when executed by the Parties and the Board Member
shall take effect when the Parties and the last of the three members of the Board
have executed terms of appointment.
3. The Board Member shall be and remain impartial and independent of the Parties
and shall be under a continuing duty to disclose in writing to each of them and to
the other members of the Board any fact or circumstance which might be such as
to call into question his impartiality or independence.
©F1D1C1996 151
 Without prejudice to the generality of the foregoing the Board Member
(a) shall have no interest financial or otherwise in either of the Parties or the
Employers Representative as described in the Contract, or financial interest
in the Contract except for payment for services on the Board;
(b) shall not previously have been employed as a consultant or otherwise by
either of the Parties or the Employers Representative except in those
circumstances which have been disclosed in writing to the Parties prior to
this appointment;
(c) shall have disclosed in writing to the Parties and to the other members of the
Board prior to this appointment any professional or personal relationships
with any director, officer or employee of the Parties or the Employer's
Representative, and any prior involvement in the Project;
(d) shall not while a Board Member be employed as a consultant or otherwise
by either of the Parties or the Employer's Representative without the prior
written consent of the Parties and the other members of the Board;
(e) shall not give advice to either of the Parties or to the Employer's
Representative concerning the conduct of the Project other than in
accordance with the Procedural Rules annexed hereto as Appendix A ("the
Rules");
(f) shall not while a Board Member unless the Parties shall otherwise agree in
writing] enter into discussions or make any agreement with either of the
Parties or the Employer's Representative regarding employment by any of
them whether as a consultant or otherwise after ceasing to be a Board
Member.
4. The Board Member shall
(a) be experienced in the type of work involved in the Project and the
interpretation of the contract documents and shall be fluent in the language
of the Contract;
(b) ensure his availability for all site visits and hearings as are necessary and shall
observe the provisions of the Rules;
(c) become conversant with the Contract and the progress of the Project by
studying all documents received which shall be maintained in a current
working file;
(d) treat the details of the Contract and all activities and hearings of the Board
as private and confidential and shall not publish or disclose the same without
the prior written consent of the Parties;
(e) not assign delegate or subcontract any of the tasks under these Terms of
Appointment or the Rules2;
152 ©FIDIC 1996
 (f) be available to give evidence and opinions in conjunction with other members
of the Board on any matter relevant to the Project not being a dispute when
requested so to do by the Parties.
5. Neither the Employer, the Contractor or their respective Representatives shall seek
advice from or consultation with the Board Member regarding the Project
otherwise than in the normal course of the Boards activities under the Contract
and the Rules. The only exception to this prohibition shall be where the Parties
jointly agree to do so and the other Board Members also agree.
6. The Board Member will be paid as follows3:
(a) a retainer fee of I per calendar month, which shall be considered as
payment in full for:
i. being available on 28 days' notice for all site visits, hearings and Board
meetings;
ii. becoming conversant with all Project developments and maintaining
relevant files;
iii. all office and overhead expenses such as secretarial services,
photocopying and office supplies incurred in connection with his
duties;
iv. all services performed hereunder except those referred to in Sub-Clause
(c) below.
Beginning with the month following that in which the Taking Over
Certificate referred to in Clause 10 of the Conditions (or if there is more than
one, the one last issued) has been issued, the Board Member shall receive
[only one third of the monthly retainer feel. [Beginning with the next month
after expiry of the Contract Period as defined in the Conditions the Board
Member shall no longer receive a monthly retainer feel;
(b) a daily fee of [1 which shall be considered as payment in full for:
i. each day or part of a day up to a maximum of two days travel time in
each direction for the journey between the Board Member's home and
the site or other location of a Board meeting;
ii. each working day on site visits, hearings or Board meetings;
iii. each day spent reading the Parties' submissions in preparation for a
hearing.
(c) cost of telephone calls, courier charges, faxes and telexes incurred in
connection with his duties; all reasonable and necessary travel expenses
including [less thani first class air fare, subsistence and other direct travel

©FIDIC 1996 153

 expenses. These costs shall be reimbursed in the same currency as that in
which fees are payable. Receipts shall be required for all expenses in excess
of [ 1 percent of the daily fee referred to in Sub-Clause (b) above;
(d) any taxes properly levied in the country of the site on payments made to the
Board Member (unless a national or permanent resident of the country of the
site) pursuant to this Clause 6. Such reimbursement will be in the same
currency as that in which the fees are payable.
The retainer and fees shall remain fixed for the [initiall period of tenure of the
Board Member [of twelve monthsj. [Thereafter they shall be adjusted by
agreement between the Parties and the Board Member at each anniversary of the
execution of these Terms of Appointmentj.
Payments to the Board Member shall be shared equally by the Employer and the
Contractor. The Board Member shall submit invoices for payment of the monthly
retainer quarterly in advance. Invoices for daily fees and expenses shall be
submitted following the conclusion of a site visit or hearing. All invoices shall be
accompanied by a brief description of activities performed during the relevant
period and addressed as to 50 percent thereof to the Contractor and 50 percent
thereof to the Employer. The Parties will discharge invoices addressed to them
within [281 calendar days after receipt.
7. The Parties may jointly terminate the Board Member's appointment hereunder by
reasonable notice in writing. Such termination shall be without prejudice to any
accrued rights of either of the Parties or the Board Member.
8. The Parties undertake to each other and to the Board Member that the Board
Member shall in no circumstances:
(a) be called as a witness to give evidence concerning any dispute before an
arbitrator appointed under the Conditions;
(b) be liable for any claims for breach of duty, breach of contract or
professional negligence arising out of this appointment other than for the
consequences of fraud or dishonesty.
The Parties hereby jointly and severally indemnify the Board Member against all
or any such claims.
9. If the Board Member shall breach any of the provisions of Clause 3 he shall not
be entitled to any fees or expenses hereunder and shall reimburse each of the
Employer and the Contractor for any fees and expenses properly paid to him and
to any other Board Member if as a consequence of such breach any proceedings
or decisions of the Board are rendered void or ineffective.
10. The law of these Terms of Appointment shall be the law of [1

154 ©FIDIC 1996

11. Any dispute or claim arising out of or in connection with these Terms of
Appointment or the breach, termination or invalidity thereof, shall be settted by
arbitration in accordance with the Rules of the International Chamber of
Commerce in force at the date hereof. The Parties and the Board Member agree to
comply with the awards resulting from arbitration and waive their rights to any
form of appeal insofar as such waiver can validly be made.

SIGNED by for and

on behalf of the Employer in the presence of
\Vitness'
Name'
Address
Date'
SIGNED by for and
on behatf of the Contractor in the presence of
SYitness'
Name'
Address'
Date'
SIGNED by
the Board Member in the presence of:
Witness'
Name'
Address'
Date',.,,,,,,,..,,..,.....,,,.,.....

APPENDIX A PROCEDURAL RULES OF THE DISPUTE ADJUDICATION

BOARD (OF THREE MEMBERS)
1, The Board shall visit the site at regular intervals [and/or at times of critical
construction events] at the request of either the Employer or the Contractor, and in
any event not less than [three] times in any twetve month period.

© FIDIC 1996
2. The timing of and agendas for site visits shall be as agreed jointly by the Board
the Employer and the Contractor or in the absence of agreement shall be decided
by the Board.
3. Site visits are to enable the Board to become acquainted with the progress of the
Project and of any actual or potential problems or claims.
Site visits shall be attended by the Employer, the Contractor and the Employer's
Representative and shall be coordinated by the Employer in cooperation with the
Contractor. The Employer shall ensure the provision of appropriate conference
facilities and secretarial and copying services.
At the conclusion of each site visit and before leaving the site the Board shall
prepare a report on its activities during the visit and shall send copies to those
parties who attended.
4. The Employer and the Contractor shall promptly provide the Board with sufficient
copies of any documentation and information relevant to the Project that it may
request.
5. If any dispute is referred to the Board in accordance with Sub-Clause 20.4 of the
Conditions the Board shall proceed as described therein. The Board may in its
discretion decide to conduct a hearing on the dispute in which event it will decide
on the date and place for the hearing and may request that written documentation
and arguments from the Employer and the Contractor be presented to it prior to or
at the hearing.
The Board shall act as a Board of impartial experts, not arbitrators, and shall have
full authority to conduct any hearing as it thinks fit, not being bound by any rules
or procedures other than those set out herein. [Without limiting the foregoing it
shall have power to adopt an inquisitorial procedure, to refuse admission to
hearings or audience at hearings to any persons other than the Employer the
Contractor and their respective Representatives and to proceed in the absence of
any party who the Board is satisfied received notice of the hearing].
The Board shall not express any opinions during any hearing concerning the merits
of any arguments advanced by the parties. After a hearing is concluded the Board
shall convene in private to formulate its decision.
[If a member fails to attend a meeting or hearing, or to fulfil any required function,
the other two members may nevertheless proceed and make decisions unless the
absent member is the chairman and instructs the other two members not to proceed,
or the Parties otherwise agree].
6. The Board shall submit its decision in writing to the Employer and the Contractor
in accordance with Sub-Clause 20.4 of the Conditions or as otherwise agreed by
the Employer and the Contractor in writing.

156 ©FIDIC 1996

 The Board shall endeavour to reach decisions unanimously, but if this is impossible
decisions shall be by a majority and the minority member shall prepare a written
report for submission to the Employer, the Employers Representative and the
Contractor.
7. All communications between either of the Parties and a Board Member and all
hearings shall be in the j language. All such communications shall be copied to
the other Party and to other members of the Board and shall comply with the
provisions of Sub-Clause 1.8 of the Conditions.

TERMS OF APPOINTMENT FOR A BOARD OF ONE MEMBER'

THESE TERMS OF APPOINTMENT OF THE BOARD MEMBER ARE MADE
BETWEEN:
(1) [name of Employerl of [address of Employer] (hereinafter called "the Employer")
(2) [name of Contractor] of [address of Contractor] (hereinafter called "the
Contractor")
(3) [name of Board Member] of [address of Board Member] (hereinafter called "the
Board Member")
WHEREAS
A. The Employer and the Contractor (hereinafter jointly referred to as "the Parties")
have on the [ ] day of 199[] entered into a Contract (hereinafter called "the
Contract") for the execution of [ I (hereinafter called "the Project").
B. By Sub-Clause 20.3 of the Conditions of Contract (hereinafter called "the
Conditions") provision is made for the constitution of a Dispute Adjudication
Board (hereinafter called "the Board") which shall comprise one suitably qualified
person as stated in the Appendix to Tender.
C. The Board Member has agreed to serve as the sole member of the Board on the
terms set out herein.
NOW IT IS HEREBY AGREED as follows:
1. The Board Member
(I) hereby accepts this appointment to the Board which is a personal
appointment and agrees to be bound by these Terms of Appointment and Sub-
Clauses 20.3 and 20.4 of the Conditions as if they were set out herein;
(2) shall be entitled notwithstanding such acceptance to resign this appointment
on giving reasonable notice to the Parties.

©FIDIC 1996 157

2. These Terms of Appointment when executed by the Parties and the Board Member
shall take effect when the Parties and the Board Member shall have executed terms
of appointment.
3. The Board Member shall be and remain impartial and independent of the Parties
and shall be under a continuing duty to disclose in writing to each of them any fact
or circumstance which might be such as to call into question his impartiality or
independence.
Without prejudice to the generality of the foregoing the Board Member
(a) shall have no interest financial or otherwise in either of the Parties or the
Employers Representative as described in the Contract, or financial interest
in the Contract except for payment for services on the Board;
(b) shall not previously have been employed as a consultant or otherwise by
either of the Parties or the Employer's Representative except in those
circumstances which have been disclosed in writing to the Parties prior to
this appointment;
(c) shall have disclosed in writing to the Parties prior to this appointment any
professional or personal relationships with any director, officer or employee
of the Parties or the Employer's Representative, and any prior involvement in
the Project;
(d) shall not while a Board Member be employed as a consultant or otherwise
by either of the Parties or the Employer's Representative without the prior
written consent of the Parties;
(e) shall not give advice to either of the Parties or to the Employer's
Representative concerning the conduct of the Project other than in
accordance with the Procedural Rules annexed hereto as Appendix A ("the
Rules");
(f) shall not while a Board Member [unless the Parties shall otherwise agree in
writingi enter into discussions or make any agreement with either of the
Parties or the Employer's Representative regarding employment by any of
them whether as a consultant or otherwise after ceasing to be a Board
Member.
4. The Board Member shall
(a) be experienced in the type of work involved in the Project and the
interpretation of the contract documents and shall be fluent in the language
of the Contract;
(b) ensure his availability for all site visits and hearings and shall observe the
provisions of the Rules;

158 ©F1D1C1996
 (c) become conversant with the Contract and the progress of the Project by
studying all documents received which shall be maintained in a current
working file;
(d) treat the details of the Contract and all activities and hearings of the Board
as private and confidential and shall not publish or disclose the same without
the prior written consent of the Parties;
(e) not assign delegate or subcontract any of the tasks under these Terms of
Appointment or the Rules2;
(f) be available to give evidence and opinions on any matter relevant to the
Project not being a dispute when requested so to do by the Parties.
5. Neither the Employer, the Contractor or their respective Representatives shall seek
advice from or consultation with the Board Member regarding the Project
otherwise than in the normal course of the Board's activities under the Contract
and the Rules. The only exception to this prohibition shall be where the Parties
jointly agree to do so.
6. The Board Member will be paid as follows:
(a) a retainer fee of I per calendar month, which shall be considered as
payment in full for:
i. being available on 28 days' notice for all site visits and hearings;
ii. becoming conversant with all Project developments and maintaining
relevant files;
iii. all office and overhead expenses such as secretarial services,
photocopying and office supplies incurred in connection with his
duties;
iv. all services performed hereunder except those referred to in Sub-Clause
(c) below.
Beginning with the month following that in which the Taking-Over
Certificate referred to in Clause 10 of the Conditions (or if there is more than
one, the one last issued) has been issued, the Board Member shall receive
[only one third of the monthly retainer feel. [Beginning with the next month
after expiry of the Contract Period as defined in the Conditions the Board
Member shall no longer receive a monthly retainer feel;
(b) a daily fee of [ I which shall be considered as payment in full for:
i. each day or part of a day up to a maximum of two days travel time in
each direction for the journey between the Board Member's home and
the site;

© FIDIC 1996 159

 ii. each working day on site visits or hearings;
iii. each day spent reading the Parties submissions in preparation for a
hearing;
(c) cost of telephone calls, courier charges, faxes and telexes incurred in
connection with his duties; all reasonable and necessary travel expenses
including [less than] first class air fare, subsistence and other direct travel
expenses. These costs shall be reimbursed in the same currency as that in
which fees are payable. Receipts shall be required for all expenses in excess
of [ 1 percent of the daily fee referred to in Sub-Clause (b) above;
(d) any taxes properly levied in the country of the site on payments made to the
Board Member (unless a national or permanent resident of the country of the
site) pursuant to this Clause 6. Such reimbursement will be in the same
currency as that in which the fees are payable.
The retainer and fees shall remain fixed for the [initial] period of tenure of the
Board Member [of twelve months]. [Thereafter they shall be adjusted by
agreement between the Parties and the Board Member at each anniversary of the
execution of these Terms of Appointment].
Payments to the Board Member shall be shared equally by the Employer and the
Contractor. The Board Member shall submit invoices for payment of the monthly
retainer quarterly in advance. Invoices for daily fees and expenses shall be
submitted following the conclusion of a site visit or hearing. All invoices shall be
accompanied by a brief description of activities performed during the relevant
period and addressed as to 50 percent thereof to the Contractor and 50 percent
thereof to the Employer. The Parties will discharge invoices addressed to them
within [28] calendar days after receipt.
7. The Parties may jointly terminate the Board Member's appointment hereunder by
reasonable notice in writing. Such termination shall be without prejudice to any
accrued rights of either of the Parties or the Board Member.
8. The Parties undertake to each other and to the Board Member that the Board
Member shall in no circumstances:
(a) be called as a witness to give evidence concerning any dispute before an
arbitrator appointed under the Conditions;
(b) be liable for any claims for breach of duty, breach of contract or
professional negligence arising out of this appointment other than for the
consequences of fraud or dishonesty.
The Parties hereby jointly and severally indemnify the Board Member against all
or any such claims.

© FIDIC 1996
9. If the Board Member shall breach any of the provisions of Clause 3 he shall not
be entitled to any fees or expenses hereunder and shall reimburse each of the
Employer and the Contractor for any fees and expenses previously paid to him if
as a consequence of such breach any proceedings or decisions of the Board are
rendered void or ineffective.
10. The law of these Terms of Appointment shall be the law of [1.
11. Any dispute or claim arising out of or in connection with these Terms of
Appointment or the breach, termination or invalidity thereof, shall be settled by
arbitration in accordance with the Rules of the International Chamber of
Commerce in force at the date hereof. The Parties and the Board Member agree to
comply with the awards resulting from arbitration and waive their rights to any
form of appeal insofar as such waiver can validly be made.

SIGNED by for and

on behalf of the Employer in the presence of
Witness
Name
Address
Date
SIGNED by for and
on behalf of the Contractor in the presence of
\Vitness
Name
Address
Date
SIGNED by
the Board Member in the presence of:
Witness
NameS

Address
Date

©F1D1C1996 161
APPENDIX A PROCEDURAL RULES OF THE DISPUTE ADJUDICATION
BOARD (OF ONE MEMBER)
The Board shall visit the site at regular intervals [and/or at times of critical
construction events] at the request of either the Employer or the Contractor, and in
any event not less than [threel times in any twelve month period.
2. The timing of and agendas for site visits shall be as agreed jointly by the Board
the Employer and the Contractor or in the absence of agreement shall be decided
by the Board.
3. Site visits are to enable the Board to become acquainted with the progress of the
Project and of any actual or potential problems or claims.
Site visits shall be attended by the Employer, the Contractor and the Employer's
Representative and shall be coordinated by the Employer in cooperation with the
Contractor. The Employer shall ensure the provision of appropriate conference
facilities and secretarial and copying services.
At the conclusion of each site visit and before leaving the site the Board shall
prepare a report on its activities during the visit and shall send copies to those
parties who attended.
4. The Employer and the Contractor shall promptly provide the Board with sufficient
copies of any documentation and information relevant to the Project that it may
request.
5. If any dispute is referred to the Board in accordance with Sub-Clause 20.4 of the
Conditions the Board shall proceed as described therein. The Board may in its
discretion decide to conduct a hearing on the dispute in which event it will decide
on the date and place for the hearing and may request that written documentation
and arguments from the Employer and the Contractor be presented to it prior to or
at the hearing.
The Board shall act as an impartial expert, not as an arbitrator, and shall have full
authority to conduct any hearing as it thinks fit, not being bound by any rules or
procedures other than those set out herein. [Without limiting the foregoing it shall
have power to adopt an inquisitorial procedure, to refuse admission to hearings or
audience at hearings to any persons other than the Employer the Contractor and
their respective Representatives and to proceed in the absence of any party who
the Board is satisfied received notice of the hearing].
The Board shall not express any opinions during any hearing concerning the merits
of any arguments advanced by the parties. After a hearing is concluded the Board
shall formulate its decision.

162 ©FIDIC 1996

6. The Board shall submit its decision in writing to the Employer and the Contractor
in accordance with Sub-Clause 20.4 of the Conditions or as otherwise agreed by
the Employer and the Contractor in writing.
7. All communications between either of the Parties and the Board Member and all
hearings shall be in the [ 1 language. All such communications shall be copied to
the other Party and shall comply with the provisions of Sub-Clause 1.8 of the
Conditions.

NOTES
Various clauses of these Terms and Rules contain words in brackets. The
signatories should consider whether or not these are appropriate in the
circumstances of their Project or require amendment.
2
Circumstances may arise when the Board considers it needs specialist advice in
order to fulfil its duties to the Parties. These Terms do not empower the Board to
take such advice at the Parties expense. It is recommended that in such a situation
the Board invite the Parties to agree to secure such advice at their own expense if
they accept it is necessary or desirable.
It is preferable to agree identical fees for the three Board Members, with the
possible exception of the chairman.

©FIDIC 1996 163

FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS
INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS
INTERNATIONALE VEREINIGUNG BERATENDER INGENIEURE
FEDERACION INTERNACIONAL DE INGENIEROS CONSULTORES

CONDITIONS OF CONTRACT FOR

DESIGN - BUILD AND TURNKEY

PART I GENERAL CONDITIONS

PART II GUIDANCE FOR THE PREPARATION OF

CONDITIONS OF PARTICULAR APPLICATION

FORMS OF TENDER AND AGREEMENT

FIRST EDITION 1995

ISBN 2-SS432-I)10-5
FIDIC is the International Federation of Consulting Engineers comprised of
National Associations whose members comply with FIDIC's Code of Ethics

FIDIC was founded in 1913 by three national associations of independent

consulting engineers within Europe. The objectives of forming the federation were
to promote in common the professional interests of the member associations and to
disseminate information of interest to members of its component national
associations. Today FIDIC membership numbers 60 countries from all parts of the
globe, representing most of the independent consulting engineers in the world.

FIDIC arranges seminars, conferences and other events in the furtherance of its
goals: maintenance of high ethical and professional standards; exchange of views
and information; discussion of problems of mutual concern among member
associations and representatives of the intemational financial institutions; and
development of the engineering profession in developing countries.

FIDIC publications include proceeding of the various conferences and seminars,

information for consulting engineers, project owners and intemational development
agencies, standard pre-qualification forms contract documents and client/consultant
agreements. They are available from the FIDIC secretariat in Switzerland.

© Copyright FIDIC 1995

All rights reserved.

No part of this publication may be
reproduced or transmitted in any
form or by any means without
permission of the publisher.

Published by
Fédération Internationale des
lngenieurs-Conseils (FIDIC)
P.O. Box 86
1000 Lausanne 12
Switzerland
Phone +41 21 65444 15
Fax +41216544417
/(o5
ACKNOWLEDGEMENTS

Fédération Intemationale des Ingenieurs-Conseils (FIDIC) extends special thanks to the following
members of its "Orange Book" Task Group: AxeI-Volkmar Jaeger (Task Group Leader), Schmidt Reuter
Partner, Germany; Peter L Booen, Sir Alexander Gibb & Partners Ltd, UK; Philip Jenkinson, W S Atkins,
UK; Bob Kavanagh, Stanley Industrial Consultants Ltd, Canada; and Charles B Molineaux, Wickwire
Gavin PC, USA.

Various drafts were reviewed by the following persons or organisations: Peter Batty, TAMS Consultants
Inc., USA; Geoffrey F Hawker, Consulting Engineer, UK; Joseph A Huse, Freshlields, France; Gordon
L Jaynes, Whitman Breed Abbott & Morgan, UK; A E J (Tony) Sanders, Mouchel Management Ltd, UK;
R J (Rob) Falconi, Delcan Corporation, Canada; Harold Fairfull, European Capital, UK; Martyn J Nixon,
Willis Corroon, UK; Per Fagerholt, COWlConsult A/S, Denmark; Christopher Wade, VBB VIAK AB,
Sweden; Dr Grollekatthhfer, Germany; David R Wightman and Andrew Inkester, Nabarro Nathanson, UK;
Christopher R Seppala, White & Case, France; Mark Griffiths, Griffiths & Armour, UK; A J M (Tony)
Blackler, Rowe & Maw, UK; the World Bank; and the International Bar Association.

The preparation was carried out under the general direction of the FIDIC Contracts Committee comprising
K B (Tony) Norris, Consulting Engineer, UK (Chairman); Michael Mortimer-Hawkins, SwedPower AB,
Sweden; and John B Bowcock, Sir Alexander Gibb & Partners Ltd, UK.
FIDIC wishes to record its appreciation of the time and effort devoted by all the above.
The ultimate decision on the form and content of the document rests with FIDIC.

Iwo
FOREWORD

The terms of the Conditions of Contract for Design-Build and Turnkey have been prepared by the
Fédération Internationale des Ingenieurs-Conseils (FIDIC) and are recommended for general use for the
purpose of the design and construction of works where tenders are invited on an international basis; with
minor modifications, the Conditions are also suitable for use on domestic contracts. There are no
universally-accepted definitions of the terms "design-build" and "turnkey", except that both involve the
Contractor's total liability for design. For the Employer, such single-point responsibility may be
advantageous, but the benefits may be offset by having less control over the design process and more
difficulty in imposing varied requirements.
Under the usual arrangements for a design-build contract, the Contractor is responsible for the design and
provision, in accordance with the Employer's requirements, of works which may include any combination
of engineering (including civil, mechanical, electrical, etc) and building works; and interim payments are
made as construction proceeds. In Part I, Clause 13 sets out the payment arrangements.
The Conditions are also intended for use on turnkey contracts, under which the Employer's requirements
usually include provision of a fully-equipped facility, ready for operation (at the turn of the "key"); such
contracts are often contractor-financed. Turnkey contracts typically include design, construction, fixtures,
fittings and equipment, the scope of which would be defined in other contract documents. In addition, the
contract may impose a requirement for the Contractor to operate the Works, either for a few months'
commissioning period, or for some years' operation on a build-operate-transfer contract. Advice on
turnkey arrangements is included in Part II, together with sample wording for contractor-finance.
The version in English of the Conditions is considered by FIDIC as the official and authentic text for the
purposes of translation.
In the preparation of the Conditions it was recognised that, while there are many sub-clauses which will
be generally applicable, there are some sub-clauses which must necessarily vary to take account of the
circumstances relevant to the particular contract. The sub-clauses which were considered to be applicable
to the majority of contracts have therefore been presented in Part I - General Conditions, which will
facilitate their incorporation into the contract. Part I - General Conditions and Part II - Conditions of
Particular Application will together comprise the Conditions governing the rights and obligations of the
parties. It will be necessary to prepare the Part 11 for each individual contract, taking particular account
of the references to Part II which are contained in some sub-clauses in Part I.
In order to assist in the preparation of Part II and the other tender documents, explanatory material and
example wording are published with these Conditions in the Guidance for the Preparation of Conditions
of Particular Application. More detailed guidance will be included in a guide to the use of these
conditions, to be published by early 1996.

/
FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS
[NTERNATIONAL FEDERATION OF CONSULTING ENGINEERS
INTERNATIONALE VEREINIGUNG BERATENDER INGENIEURE
FEDERACION INTERNACIONAL DE INGENIEROS CONSIJLTORES

CONDITIONS OF CONTRACT FOR

DESIGN - BUILD AND TURNKEY

PART I GENERAL CONDITIONS

FIRST EDITION 1995

ISBN 2-88432-OlD-S
CONTENTS

PART I: GENERAL CONDITIONS

1 THE CONTRACT 173

1.1 Definitions
1.2 Headings and Marginal Notes
1.3 Interpretation
1.4 Law and Language
1.5 Contract Agreement
1.6 Priority of Documents
1.7 Documents on Site
1.8 Communications
1.9 Provision of Construction Documents
1.10 Employer's Use of Contractor's Documents
1.11 Contractor's Use of Employer's Documents
1.12 Confidential Details
1.13 Compliance with Statutes, Regulations and Laws
1.14 Joint and Several Liability

2 THE EMPLOYER 178

2.1 General Obligations
2.2 Access to and Possession of the Site
2.3 Permits, Licences or Approvals
2.4 Employer's Entitlement to Terminate

3 THE EMPLOYER'S REPRESENTATIVE 178

3.1 Employer's Representative's Duties and Authority
3.2 Requirements for Employer's Representative
3.3 Employer's Representative's Authority to Delegate
3.4 Employer's Representative's Instructions
3.5 Employer's Representative to Attempt Agreement
4 THE CONTRACTOR 179
4.1 General Obligations
4.2 Performance Security
4.3 Contractor's Representative
4.4 Co-ordination of the Works
4.5 Subcontractors
4.6 Assignment of Subcontractor's Obligations
4.7 Setting Out
4.8 Quality Assurance
4.9 Site Data
4.10 Matters Affecting the Execution of the Works
411 Unforeseeable Sub-Surface Conditions
4.12 Access Route
4.13 Rights of Way and Facilities
4.14 Programme
4.15 Progress Reports
4.16 Contractor's Equipment
4.17 Safety Precautions
4.18 Protection of the Environment
4.19 Electricity, Water and Gas
4.20 Employer Supplied Machinery and Materials

I
4.21 Clearance of Site
4.22 Security of the Site
4.23 Contractor's Operations on Site
4.24 Fossils

5 DESIGN 186
5.1 General Obligations
5.2 Construction Documents
5.3 Contractor's Undertaking
5.4 Technical Standards and Regulations
5.5 Samples
5.6 As-Built Drawings
5.7 Operation and Maintenance Manuals
5.8 Error by Contractor
5.9 Patent Rights

6 STAFF AND LABOUR 189

6.1 Engagement of Staff and Labour
6.2 Rates of Wages and Conditions of Labour
6.3 Persons in the Service of Others
6.4 Labour Laws
6.5 Working Hours
6.6 Facilities for Staff and Labour
6.7 Health and Safety
6.8 Contractor's Superintendence
6.9 Contractor's Personnel
6.10 Disorderly Conduct

7 PLANT, MATERIALS AND WORKMANSHIP 190

7.1 Manner of Execution
7.2 Delivery to Site
7.3 Inspection
7.4 Testing
7.5 Rejection
7.6 Ownership of Plant and Materials

8 COMMENCEMENT, DELAYS AND SUSPENSION 192

8.1 Commencement of Works
8.2 Time for Completion
8.3 Extension of Time for Completion
8.4 Delays Caused by Authorities
8.5 Rate of Progress
8.6 Liquidated Damages for Delay
8.7 Suspension of Work
8.8 Consequences of Suspension
8.9 Payment for Plant and Materials in Event of Suspension
8.10 Prolonged Suspension
8.11 Resumption of Work

9 TESTS ON COMPLETION 195

9.1 Contractor's Obligations
9.2 Delayed Tests
9.3 Retesting
9.4 Failure to Pass Tests on Completion
10
10.1
EMPLOYER'S TAKING OVER .
Taking-Over Certificate
195

10.2 Use by the Employer

10.3 Interference with Tests on Completion

11 TESTS AFTER COMPLETION 197

11.1 Employer's Obligations
11.2 Delayed Tests
11.3 Retesting
11.4 Failure to Pass Tests after Completion

12 DEFECTS LIABILITY 198

12.1 Completion of Outstanding Work and Remedying Defects
12.2 Cost of Remedying Defects
12.3 Extension of Contract Period
12.4 Failure to Remedy Defects
12.5 Removal of Defective Work
12.6 Further Tests
12.7 Right of Access
12.8 Contractor to Search
12.9 Performance Certificate
12.10 Unfulfilled Obligations

13 CONTRACT PRICE AND PAYMENT 200

13.1 The Contract Price
13.2 Advance Payments
13.3 Application for Interim Payment Certificates
13.4 Schedule of Payments
13.5 Plant and Materials for the Permanent Works
13.6 Issue of Interim Payment Certificates
13.7 Payment
13.8 Delayed Payment
13.9 Payment of Retention Money
13.10 Statement at Completion
13.11 Application for Final Payment Certificate
13.12 Discharge
13.13 Issue of Final Payment Certificate
13.14 Cessation of Employer's Liability
13.15 Calculation of Payments in Foreign Currency
13.16 Changes in Legislation

14 VARIATIONS 206
14.1 Right to Vary
14.2 Value Engineering
14.3 Variation Procedure
14.4 Payment in Applicable Currencies
14.5 Provisional Sums

15 DEFAULT OF CONTRACTOR 207

15.1 Notice to Correct
15.2 Termination
15.3 Valuation at Date of Termination
15.4 Payment after Termination
15.5 Bribes

(7!
16 DEFAULT OF EMPLOYER 208
16.1 Contractor's Entitlement to Suspend Work
16.2 Termination
16.3 Cessation of Work and Removal of Contractor's Equipment
16.4 Payment on Termination

17 RISK AND RESPONSIBILITY 210

17.1 Indemnity
17.2 Contractor's Care of the Works
17.3 Employer's Risks
17.4 Consequences of Employer's Risks
17.5 Contractor's Risks
17.6 Limitation of Liability

18 INSURANCE 212
18.1 Insurance for Design
18.2 Insurance for Works and Contractor's Equipment
18.3 Insurance against Injury to Persons and Damage to Property
18.4 Insurance for Workers
18.5 General Requirements for Insurances

19 FORCE MAJEURE 213

19.1 Definition of Force Majeure
19.2 Effect of Force Majeure Event
19.3 Contractor's Responsibility
19.4 Employer's Responsibility
19.5 Payment to Contractor
19.6 Optional Termination, Payment and Release
19.7 Release from Performance under the Law

20 CLAIMS, DISPUTES AND ARBITRATION 215

20.1 Procedure for Claims
20.2 Payment of Claims
20.3 Dispute Adjudication Board
20.4 Procedure for Obtaining Dispute Adjudication Board's Decision
20.5 Amicable Settlement
20.6 Arbitration
20.7 Failure to Comply with Dispute Adjudication Board's Decision
20.8 Expiry of Dispute Adjudication Board's Appointment

INDEX
 PART I - GENERAL CONDITIONS

The Contract
Definitions 1.1 In the Contract (as defined below) the words and expressions defined below
shall have the meanings assigned to them, except where the context requires
otherwise:
1.1 Documents
1.1.1 1 'Contract" means these Conditions of Contract (Parts I and II), the
Employer's Requirements, the Tender, the Contractor's Proposal, the
Schedules, the Letter of Acceptance, the Contract Agreement (if
completed) and such further documents as may be expressly
incorporated in the Letter of Acceptance or Contract Agreement (if
completed).
1.1.1.2 "Employer's Requirements" means the description of the scope,
standard, design criteria (if any) and programme of work, as included
in the Contract, and any alterations and modifications thereto in
accordance with the Contract.
1.1.1.3 "Tender" means the Contractor's priced offer to the Employer for the
Works, as accepted by the Letter of Acceptance.
1.1.1.4 "Appendix to Tender" means the completed appendix comprised in
the Tender.
1.1.1.5 "Contractor's Proposal" means the preliminary design submitted with
the Tender, as included in the Contract.
1.1.1.6 "Schedules" means the information and data submitted with the
Tender, as included in the Contract.
1.1.1.7 "Schedule of Payments" means the Schedule designated as such (if
any), referred to in Sub-Clause 13.4.
1.1.1.8 "Letter of Acceptance" means the formal acceptance by the Employer
of the Tender.
1.1.1.9 "Contract Agreement" means the contract agreement (if any) referred
to in Sub-Clause 1.5.
1.1.2 Persons
1.1.2.1 "Employer" means the person named as such in the Appendix to
Tender and the legal successors in title to such person, but not (except
with the consent of the Contractor) any assignee of such person.
1.1.2.2 "Contractor" means the person whose Tender has been accepted by
the Employer and the legal successors in title to such person, but not
(except with the consent of the Employer) any assignee of such
person.
1.1.2.3 "Employer's Representative" means the person appointed by the
Employer to act as Employer's Representative for the purposes of the
Contract and named as such in the Appendix to Tender, or other
person appointed from time to time by the Employer and notified as
such to the Contractor.

©FIDIC 1995
 1.1.2.4 "Contractor's Representative" means the person (if any) named as
such in the Contract or other person appointed from time to time by
the Contractor under Sub-Clause 4.3.
1.1.2.5 "Subcontractor" means any person named in the Contract as a
subcontractor, manufacturer or supplier for a part of the Works or any
person to whom a part of the Works has been subcontracted in
accordance with Sub-Clause 4.5, and the legal successors in title to
such person, hut not any assignee of such person.
1.1.2.6 "Dispute Adjudication Board" means the person or persons named as
such in the Contract, or other person or persons appointed from time
to time under Sub-Clause 20.3.
1.1.3 Dates, Times and Periods
1.1.3.1 "Base Date" means the date 28 days prior to the latest date for
submission of the Tender for acceptance by the Employer.
.1.3.2 "Effective Date" means the date on which the Contract entered into
legal force and effect.
1.1 .3.3 "Commencement Date" means the date on which the Contractor
receives the notice to commence issued by the Employer's
Representative under Sub-Clause 8.1.
1.1.3.4 "Time for Completion" means the time for completing the Works or
a Section (as the case may be), and passing the Tests on Completion,
as stated in the Appendix to Tender (or as extended under Sub-
Clause 8.3), calculated from the Commencement Date.
t.1.3.5 "Contract Period" means the period from the Commencement Date to
the date 365 days after the date on which the whole of the Works shall
have been completed as certified by the Employer's Representative
under Clause 10 (or as extended under Sub-Clause 12.3).
1.1.3.6 "day" means a calendar day and "year" means 365 days.
1.1.4 Tests and Completion
1.1.4.1 "Tests on Completion" means the tests specified in the Cootract and
designated as such, and any other such tests as may be agreed by the
Employer's Representative and the Contractor or instructed as a
Variation, which are to be carried out before the Works or any Section
are taken over by the Employer.
1.1.4.2 "Taking-Over Certificate" means a certificate issued under Clause 10.
1.1.4.3 "Tests after Completion" means the tests specified in the Contract and
designated as such, which are to be carried out after the Works or any
Section are taken over by the Employer.
1.1.4.4 "Performance Certificate" means the certificate issued by the
Employer's Representative under Sub-Clause 12.9.
1.1.5 Money and Payments
1.1.5.1 "Contract Price" means the sum stated in the Letter of Acceptance as
payable to the Contractor for the design, execution and completion of
the Works and the remedying of any defects in accordance with the
provisions of the Contract.

©FIOIC 1995
 1.1.5.2 'Local Currency" means the currency of the Country.
1.1.5.3 "Foreign Currency" means a freely convertible currency, named in the
Appendix to Tender as a currency in which part of the Contract Price
is payable, but not the Local Currency.
1.1.5.4 "Retention Money" means the accumulated retention monies retained
by the Employer under Sub-Clause 13.3.
1.1.5.5 "Provisional Sum" means a sum (if any) specified in the Contract and
designated as such, for the execution of any part of the Works or for
the supply of Plant, Materials or services.
1.1.5.6 "Cost" means all expenditure properly incurred (or to be incurred) by
the Contractor, whether on or off the Site, including overhead and
similar charges, but does not include profit.
1.1.5.7 "Interim Payment Certificate" means any payment certificate issued
by the Employer's Representative under Clause 13, other than the
Final Payment Certificate.
1.1.5.8 'Final Payment Certificate" means the payment certificate issued by
the Employer's Representative under Sub-Clause 13.13.
.1.5.9 "Final Statement" means the agreed statement defined in Sub-
Clause 13.11.
1.1.6 Other Definitions
1.1.6.1 "Construction Documents" means all drawings, calculations,
computer software (programs), samples, patterns, models, operation
and maintenance manuals, and other manuals and information of a
similar nature, to be submitted by the Contractor.
1.1.6.2 "Variation" means any alteration and/or modification to the
Employer's Requirements, which is instructed by the Employer's
Representative or approved as a Variation by the Employer's
Representative, in accordance with Clause 14.
1.1.6.3 "Works" means the Permanent Works and the Temporary Works or
either of them as appropriate.
1.1.6.4 "Permanent Works" means the permanent works to be designed and
executed in accordance with the Contract.
1.1.6.5 "Temporary Works" means all temporary works of every kind (other
than Contractor's Equipment) required for the execution and
completion of the Works and the remedying of any defects.
1.1.6.6 "Plant" means machinery and apparatus intended to form or forming
part of the Permanent Works, including the supply-only items (if any)
which are to be supplied by the Contractor as specified in the Contract.
1.1.6.7 "Materials" means things of all kinds (other than Plant) to be provided
and incorporated in the Permanent Works by the Contractor, including
the supply-only items (if any) which are to be supplied by the
Contractor as specified in the Contract.
1 .1.6.8 "Contractor's Equipment" means all machinery, apparatus and other
things (other than Temporary Works) required for the execution and
completion of the Works and the remedying of any defects, but does
not include Plant, Materials, or other things intended to form or
forming part of the Permanent Works.

©FIDIC 1995
 1.1.6.9 "Section" means a part of the Works specifically defined in the
Appendix to Tender as a Section (if any).
1.1.6.10 "Site" means the places provided by the Employer where the Works
are to be executed and to which Plant and Materials are to be
delivered, and any other places as may be specifically designated in
the Contract as forming part of the Site.
1.1.6.11 "Country" means the country in which the Works are to be executed
and to which Plant and Materials are to be delivered.
Headings and 1.2 The headings and marginal notes are not part of these Conditions, and shall not
Marginal Notes be taken into consideration in their interpretation.
Interpretation 1.3 Words importing persons or parties shall include firms and corporations and
any organization having legal capacity. Words iniporting the singular also
include the plural and vice versa where the context requires. Words importing
one gender also include other genders.
Law and Language 1.4 The law of the Contract is named in the Appendix to Tender.
Where versions of the Contract are prepared in different languages, the version
which is in the ruling language named in the Appendix to Tender shall prevail.
The language for day to day communications shall be as stated in the Appendix
to Tender.
Contract Agreement 1.5 Either party shall, if requested by the other party, execute a Contract Agreement,
in the form annexed with such modifications as may be necessary to record the
Contract. The costs of stamp duties and similar charges imposed by law shall
be bome by the Employer.
Priority of 1.6 The documents forming the Contract are to be taken as mutually explanatory
Documents of one another. If there is an ambiguity or discrepancy in the documents, the
Employer's Representative shall issue any necessary clarification or instruction
to the Contractor, and the priority of the documents shall be as follows:
(a) The Contract Agreement;
(b) The Letter of Acceptance;
(c) The Employer's Requirements;
(d) The Tender;
(e) The Conditions of Contract, Part II;
(f) The Conditions of Contract, Part I;
(g) The Schedules; and
(h) The Contractor's Proposal.
Documents on Site 1.7 The Contractor shall keep on the Site one complete Set of the documents
forming the Contract, the Construction Documents, Variations, other
communications given or issued under Sub-Clause 1.8 and the documents
mentioned in Sub-Clause 5.4. The Employer, the Employer's Representative
and assistants (as referred to in Sub-Clause 3.3) shall have the right to use such
documents at all reasonable times.
Communications 1.8 Wherever provision is made for the giving or issue of any notice, instruction,
consent, approval, certificate or determination by any person, unless otherwise
specified such communication shall be in writing and shall not be unreasonably
withheld or delayed.

©FTDJC 995
 Wherever provision is made for a communication to be "written" or "in
writing", this means any hand-written, type-written or printed Communication,
including the agreed systems of electronic transmission stated in the Appendix
to Tender.
All certificates, notices or written orders to be given to the Contractor by the
Employer or the Employer's Representative, and all notices to be given to the
Employer or to the Employer's Representative by the Contractor, shall either
be delivered by hand against written acknowledgement of receipt, or be sent by
airmail or one of the agreed systems of electronic transmission. The addresses
for the receipt of such communications shall be as stated in the Appendix to
Tender.
Provision of 1.9 The Construction Documents shall be in the custody and care of the Contractor.
Construction Unless otherwise stated in the Employer's Requirements, the Contractor shall
Documents provide six copies for the use of the Employer's Representative and assistants
(as refened to in Sub-Clause 3.3).
Employer's Use of 1.10 Copyright in the Construction Documents and other design documents made
Contractor's by or on behalf of the Contractor shall (as between the parties) remain the
Documents property of the Contractor. The Employer may, at his cost, copy, use and
communicate any such documents (including making and using modifications)
for the purposes of completing, operating, maintaining, altering, adjusting and
repairing the Works. They shall not, without the Contractor's consent, be used,
copied or communicated to a third party by the Employer or the Employer's
Representative for other purposes.
Contractor's Use of 1.11 Copyright in the Employer's Requirements and other documents issued by the
Employer's Employer or the Employer's Representative to the Contractor shall (as between
Documents the parties) remain the property of the Employer. The Contractor may, at his
cost, copy, use and communicate any such documents for the purposes of the
Contract. They shall not, without the Employer's consent, be used, copied or
communicated to a third party by the Contractor, except as necessary for the
purposes of the Contract.
Confidential Details 1.12 The Contractor shall not be required to disclose, to the Employer or the
Employer's Representative, the confidential details listed in the Appendix to
Tender.
Compliance with 1.13 The Contractor shall, in all matters arising in the performance of the Contract,
Statutes, comply with, give all notices under, and pay all fees required by, the provisions
Regulations and of any national or state statute, ordinance or other law, or any regulation of any
Laws legally constituted public authority having jurisdiction over the Works. The
Contractor shall obtain all permits, licences or approvals required for any part
of the Works, in reasonable time taking account of the times for delivery of the
Plant and Materials and for completion of the Works. The Employer and the
Contractor shall comply with the laws of each country where activities are
performed.
Joint and Several 1.14 If the Contractor is a joint venture (or consortium) of two or more persons, all
Liability such persons shall be jointly and severally liable to the Employer for the
fulfilment of the terms of the Contract. Such persons shall designate one of
them to act as leader with authority to bind the joint venture (or consortium)
and each of its members. The composition or the constitution of the joint
venture (or consortium) shall not be altered without the prior consent of the
Employer.

©FIDIC 1995
 2 The Employer
General Obligations 2.1 The Employer shall provide the Site and shall pay the Contractor in accordance
with Clause 13.
Access to and 2.2 The Employer shall grant the Contractor right of access to, and possession of,
Possession of the the Site within the time stated in the Appendix to Tender. Such right and
Site possession may not be exclusive to the Contractor.
If the Contractor suffers delay and/or incurs Cost from failure on the part of the
Employer to grant right of access to or possession of the Site, the Contractor
shall give notice to the Employer's Representative. After receipt of such notice
the Employer's Representative shall proceed in accordance with Sub-Clause 3.5
to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost plus reasonable profit, which shall be added to
the Contract Price,
and shall notify the Contractor accordingly.
Permits, Licences or 2.3 The Employer shall, at the request and cost of the Contractor, assist him in
Approvals applying for permits, licences or approvals, which are required for any part of
the Works, for delivery (including clearance through customs) of Plant,
Materials and Contractor's Equipment, and for the completion of the Works.
Such requests may also include requests for the Employer's assistance in
applying for any necessary govemment consent to the export of Contractor's
Equipment when it is removed from the Site.
Employer's 2.4 The Employer shall be entitled to terminate the Contract, at the Employer's
Entitlement to convenience, at any time after giving 56 days' prior notice to the Contractor,
Terminate with a copy to the Employer's Representative, and retuming the performance
security. In the event of such termination, the Contractor:
(a) shall proceed in accordance with Sub-Clause 16.3, and
(b) shall be paid by the Employer in accordance with Sub-Clause 19.6.
After such termination, execution of the Works shall not be recommenced
within a period of six years without the Contractor's consent.

3 The Employer's Representative

Employer's 3.1 The Employer's Representative shall carry out the duties specified in the
Representative's Contract. The Employer's Representative shall have no authority to amend the
Duties and Contract.
Authority , . . .
The Employer s Representative may exercise the authority specified in or
necessarily to be implied from the Contract. If the Employer's Representative
is required, under the terms of his appointment by the Employer, to obtain the
specific approval of the Employer before exercising such authority, such
requirements shall be as stated in Part II. Any requisite approval shall be
deemed to have been given by the Employer for any such authority exercised
by the Employer's Representative.

©FIDIC 1995
 Except as expressly stated in the Conditions of Contract, the Employer's
Representative shall have no authority to relieve the Contractor of any of his
duties, obligations or responsibilities under the Contract. Any proposal,
inspection, examination, testing, consent, approval or similar act by the
Employer's Representative (including absence of disapproval) shall not relieve
the Contractor from any responsibility, including responsibility for his errors,
omissions, discrepancies, and non-compliance with Sub-Clauses 5.3 and 5.4.
The Employer's Representative shall copy to the Employer all communications
given or received by him in accordance with the Contract.
Requirements for 3.2 The Employer's Representative shall be a suitably qualified engineer or other
Employer's appropriate professional, having the experience and capability necessary for
Representative compliance with this Clause, or shall employ such suitably qualified engineers
and other professionals and make them available for the Contract.
Employer's 3.3 The Employer's Representative may from time to time delegate any of his
Representative's duties to assistants, and may at any time revoke any such delegation. Any such
Authority to delegation or revocation shall be in writing and shall not take effect until a copy
Delegate has been delivered to the Employer and the Contractor.
Any determination, instruction, inspection, examination, testing, consent,
approval or similar act by any such assistant of the Employer's Representative,
in accordance with the delegation, shall have the same effect as though it had
been an act of the Employer's Representative. However:
(a) any failure to disapprove any Plant, Materials, design or workmanship shall
not prejudice the right of the Employer's Representative to reject such
Plant, Materials, design or workmanship;
(b) if the Contractor questions any determination or instruction of an assistant
of the Employer's Representative, the Contractor may refer the matter to
the Employer's Representative, who shall confirm, reverse or vary such
determination or instruction.
Employer's 3.4 Unless it is legally or physically impossible, the Contractor shall comply with
Representative's instructions given by the Employer's Representative in accordance with the
Instructions Contract.
Employer's 3.5 When the Employer's Representative is required to determine value, Cost or
Representative to extension of time, he shall consult with the Contractor in an endeavour to reach
Attempt Agreement agreement. If agreement is not achieved, the Employer's Representative shall
determine the matter fairly, reasonably and in accordance with the Contract.

4 The Contractor

General Obligations 4.1 The Works as completed by the Contractor shall be wholly in accordance with
the Contract and fit for the purposes for which they are intended, as defined in
the Contract. The Works shall include any work which is necessary to satisfy
the Employer's Requirements, Contractor's Proposal and Schedules, or is
implied by the Contract, or arises from any obligation of the Contractor, and
all works not mentioned in the Contract but which may be inferred to be
necessary for stability or completion or the safe, reliable and efficient operation
of the Works.

OFIDIC 995
 The Contractor shall design, execute and complete the Works, including
providing Construction Documents, within the Time for Completion, and shall
remedy any defects within the Contract Period. The Contractor shall provide
all superintendence, labour, Plant, Materials, Contractor's Equipment,
Temporary Works and all other things, whether of a temporary or permanent
nature, required in and for such design, execution, completion and remedying
of defects.
Before commencing design, the Contractor shall satisfy himself regarding the
Employer's Requirements (including design criteria and calculations, if any)
and the items of reference mentioned in Sub-Clause 4.7. The Contractor shall
give notice to the Employer's Representative of any error, fault or other defect
in the Employer's Requirements or such items of reference. After receipt of
such notice, the Employer's Representative shall determine whether Clause 14
shall be applied, and shall notify the Contractor accordingly.
The Contractor shall take full responsibility for the adequacy, stability and
safety of all Site operations, of all methods of construction and of all the Works,
irrespective of any approval or consent by the Employer's Representative.
Performance 4.2 The Contractor shall obtain, at his cost, a performance security from a third
Security party, in the amount and currencies specified in the Appendix to Tender, and
deliver it to the Employer by the date 28 days after the Effective Date. The
performance security shall be provided by an entity approved by the Employer
and shall be in the form annexed, or in another form approved by the Employer.
The performance security shall be valid until the Contractor has executed and
completed the Works and remedied any defects. It shall be returned to the
Contractor within 14 days of the issue of the Performance Certificate. Prior to
making a claim under the performance security, the Employer shall, in every
case, notify the Contractor stating the nature of the default for which the claim
is to be made.
Contractor's 4.3 Unless the Contractor's Representative is named in the Contract, the Contractor
Representative shall, within 14 days of the Effective Date, submit to the Employer's
Representative for consent the name and particulars of the person the
Contractor proposes to appoint. The Contractor shall not revoke the
appointment of the Contractor's Representative without the prior consent of the
Employer's Representative.
The Contractor's Representative shall give his whole time to directing the
preparation of the Construction Documents and the execution of the Works.
Except as otherwise stated in the Contract, the Contractor's Representative shall
receive (on behalf of the Contractor) all notices, instructions, consents,
approvals, certificates, determinations and other communications under the
Contract. Whenever the Contractor's Representative is to be absent from the
Site, a suitable replacement person shall be appointed, and the Employer's
Representative shall be notified accordingly.
The Contractor's Representative may delegate any of his powers, functions and
authorities to any competent person, and may at any time revoke any such
delegation. Any such delegation or revocation shall be in writing and shall not
take effect until the Employer's Representative has received prior notice signed
by the Contractor's Representative, specifying the powers, functions and
authorities being delegated or revoked. The Contractor's Representative and
such persons shall be fluent in the language for day to day communications
defined in Sub-Clause 1.4.

© FIDIC 1995
 Co-ordination of 4.4 The Contractor shall be responsible for the co-ordination and proper execution
the Works of the Works, including co-ordination of other contractors to the extent
specified in the Employer's Requirements. The Contractor shall, as specified in
the Employer's Requirements, afford all reasonable opportunities for carrying
out their work to:
(a) any other contractors employed by the Employer and their workmen,
(b) the workmen of the Employer, and
(c) the workmen of any legally constituted public authorities who may be
employed in the execution on or near the Site of any work not included in
the Contract, which the Employer may require.
The Contractor shall obtain, co-ordinate and submit to the Employer's
Representative for his information all details (including details of work to be
carried Out off the Site) from Subcontractors. The Contractor shall be
responsible for the locations of their work or materials, in order to ensure that
there is no conflict with the work of other Subcontractors, the Contractor or
other contractors.
Subcontractors 4.5 The Contractor shall not subcontract the whole of the Works. Unless otherwise
stated in Part II:
(a) the Contractor shall not be required to obtain consent for purchases of
Materials or for subcontracts for which the Subcontractor is named in the
Contract;
(b) the prior consent of the Employer's Representative shall be obtained to
other proposed Subcontractors;
(c) not less than 28 days before the intended date of each Subcontractor
commencing work on the Site, the Contractor shall notify the Employer's
Representative of such intention; and
(d) where practicable, the Contractor shall give a fair and reasonable
opportunity for contractors from the Country to be appointed as
Subcontractors.
The Contractor shall be responsible for observance by all Subcontractors of all
the provisions of the Contract. The Contractor shall be responsible for the acts
or defaults of any Subcontractor, his agents or employees, as fully as if they
were the acts or defaults of the Contractor, his agents or employees.
Assignment of 4.6 If a Subcontractor has undertaken a continuing and assignable obligation to the
Subcontractor's Contractor for the work designed or executed, or Plant, Materials or services
Obligations supplied, by such Subcontractor, and if such obligation extends beyond the
expiry of the Contract Period, the Contractor shall, upon the expiry of the
Contract Period, assign the benefit of such obligation to the Employer for its
unexpired duration, at the request and cost of the Employer.
Setting Out 4.7 The Contractor shall set out the Works in relation to original points, lines and
levels of reference specified in the Employer's Requirements or, if not
specified, given by the Employer's Representative in writing. The Contractor
shall rectify, at his cost, any error in the positions, levels, dimensions or
alignment of the Works.
Quality Assurance 4.8 Unless otherwise stated in Part II, the Contractor shall institute a quality
assurance system to demonstrate compliance with the requirements of the
Contract. Such system shall be in accordance with the details stated in the
Contract. Compliance with the quality assurance system shall not relieve the
Contractor of his duties, obligations or responsibilities.

©FIDTC 1995
 Details of all procedures and compliance documents shall be submitted to the
Employer's Representative for his information before each design and
execution stage is commenced. When any document is issued to the Employer's
Representative, it shall be accompanied by the signed quality statements for
such document, in accordance with the details stated in the Contract. The
Employer's Representative shall be entitled to audit any aspect of the system
and require corrective action to be taken.
Site Data 4.9 The Employer shall have made available to the Contractor, prior to the Base
Date, all the data on hydrological and sub-surface conditions at the Site, and
studies on environmental impact, which have been obtained by or on behalf of
the Employer from investigations for the Works. The Contractor shall be
responsible for interpreting all data.
The Contractor shall be deemed to have inspected and examined the Site, its
surroundings, the above data and other available information, and to have
satisfied himself (so far as is practicable, taking account of cost and time) before
submitting the Tender, as to:
(a) the form and nature of the Site, including the sub-surface conditions,
(b) the hydrological and climatic conditions,
(c) the extent and nature of the work and Materials necessary for the execution
and completion of the Works, and the remedying of any defects, and
(d) the means of access to the Site and the accommodation he may require.
The Contractor shall be deemed to have obtained all necessary information as
to risks, contingencies and all other circumstances which may influence or
affect the Tender.
Matters Affecting 4.10 The Contractor shall be deemed to have satisfied himself as to the correctness
the Execution of the and sufficiency of the Contract Price. Unless otherwise stated in the Contract,
Works the Contract Price shall cover all his obligations under the Contract (including
those under Provisional Sums, if any) and all things necessary for the proper
design, execution and completion of the Works and the remedying of any
defects.
Unforeseeable 4.11 If sub-surface conditions are encountered by the Contractor which in his
Sub-Surface opinion were not foreseeable by an experienced contractor, the Contractor shall
Conditions give notice to the Employer's Representative so that the Employer's
Representative can inspect such conditions. After receipt of such notice and
after his inspection and investigation, the Employer's Representative shall, if
such conditions were not (by the Base Date) foreseeable by an experienced
contractor, proceed in accordance with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the additional Cost due to such conditions, which shall be added to the
Contract Price,
and shall notify the Contractor accordingly.
Access Route 4.12 The Contractor shall be deemed to have satisfied himself as to the suitability
and availability of the access routes he chooses to use. The Contractor shall (as
between the parties) be responsible for the maintenance of access routes. The
Contractor shall provide any signs or directions which he may consider
necessary for the guidance of his staff, labour and others. The Contractor shall
obtain any permission that may be required from the relevant authorities for the
use of such routes, signs and directions.

©FID!C 1995
 The Employer will not be responsible for any claims which may arise from the
use or otherwise of any access route. The Employer does not guarantee the
suitability or availability of any particular access route, and will not entertain
any claim for any non-suitability or non-availability for continuous use during
construction of any such route.
Rights of Way and 4.13 The Contractor shall bear all costs and charges for special or temporary rights-
Facilities of-way required by him for access to the Site. The Contractor shall also provide,
at his own cost, any additional facilities outside the Site required by him for the
purposes of the Works.
Programme 4.14 The Contractor shall submit a programme to the Employer's Representative, for
information, within the time stated in the Appendix to Tender. The programme
shall include the following:
(a) the order in which the Contractor proposes to carry out the Works
(including each stage of design, procurement, manufacture, delivery to
Site, construction, erection, testing and commissioning),
(b) all major events and activities in the production of Construction
Documents,
(c) the periods for the pre-construction reviews under Sub-Clause 5.2 and for
any other submissions, approvals and consents specified in the Employer's
Requirements, and
(d) the sequence of all tests specified in the Contract.
Unless otherwise stated in the Contract, the programme shall be developed
using precedence networking techniques, showing early start, late start, early
finish and late finish dates.
The Contractor shall, whenever required by the Employer's Representative,
provide in writing, for information, a general description of the arrangements
and methods which the Contractor proposes to adopt for the execution of the
Works. No significant alteration to the programme, or to such arrangements and
methods, shall be made without informing the Employer's Representative. If
the progress of the Works does not conform to the programme, the Employer's
Representative may instruct the Contractor to revise the programme, showing
the modifications necessary to achieve completion within the Time for
Completion.
Progress Reports 4.15 Monthly progress reports shall be prepared by the Contractor and submitted to
the Employer's Representative in six copies. The first report shall cover the
period up to the end of the calendar month after that in which the
Commencement Date occurred; reports shall be submitted monthly thereafter,
each within 14 days of the last day of the period to which it relates. Reporting
shall continue until the Contractor has completed all work which is known to
be outstanding at the completion date stated in the Taking-Over Certificate for
the Works. Each report shall include:
(a) photographs and detailed descriptions of progress, including each stage of
design, procurement, manufacture, delivery to Site, construction, erection,
testing and commissioning;
(b) charts showing the status of Construction Documents, purchase orders,
manufacture and construction;
(c) for the manufacture of each main item of Plant and Materials, the name of
manufacturer, manufacture location, percentage progress, and the actual or
expected dates of commencement of manufacture, Contractor's
inspections, tests and delivery;

©FIDIC 1995 I:3

 (d) records of personnel and Contractor's Equipment on Site;
(e) copies of quality assurance documents, test results and certificates of
Materials;
(f) safety statistics, including details of any hazardous incidents and activities
relating to environmental aspects and public relations; and
(g) comparisons of actual and planned progress, with details of any aspects
which may jeopardize the completion in accordance with the Contract, and
the measures being (or to be) adopted to overcome such aspects.
Contractor's 4.16 Unless otherwise stated in Part II, the Contractor shall provide all Contractor's
Equipment Equipment necessary to complete the Works. All Contractor's Equipment shall,
when brought on to the Site, be deemed to be exclusively intended for the
execution of the Works. The Contractor shall not remove from the Site any such
Contractor's Equipment without the Consent of the Employer's Representative.
Safety Precautions 4.17 The Contractor shall comply with all applicable safety regulations in his design,
access arrangements and operations on Site. Unless otherwise stated in Part II,
the Contractor shall, from the commencement of work on Site until taking-over
by the Employer, provide:
(a) fencing, lighting, guarding and watching of the Works, and
(b) temporary roadways, footways, guards and fences which may be necessary
for the accommodation and protection of owners and occupiers of adjacent
land, the public and others.
Protection of the 4.18 The Contractor shall take all reasonable steps to protect the environment (both
Environment on and off the Site) and to limit damage and nuisance to people and property
resulting from pollution, noise and other results of his operations. The
Contractor shall ensure that air emissions, surface discharges and effluent from
the Site during the Contract Period shall not exceed the values indicated in the
Employer's Requirements, and shall not exceed the values prescribed by law.
Electricity, Water 4.19 The Contractor shall be entitled to use for the purposes of the Works such
and Gas supplies of electricity, water, gas and other services as may be available on the
Site and of which details are given in the Employer's Requirements. The
Contractor shall pay the Employer at the prices stated in the Employer's
Requirements. The quantities consumed shall be determined by the Employer's
Representative, who shall include the amounts due as deductions in Interim and
Final Payment Certificates. The Contractor shall, at his risk and cost, provide
any apparatus necessary for such determination and for his use of these
services.
Employer Supplied 4.20 The Employer undertakes to provide the items of machinery and materials (if
Machinery and any) in accordance with the details given in the Employer's Requirements. The
Materials Employer shall, at his risk and cost, transport such machinery and materials to
the Contractor, at the time and place specified in the Contract.
The Contractor shall visually inspect the machinery and materials upon receipt
at such place, and shall notify the Employer and the Employer's Representative
of any shortage, defect or default; then, either the Employer shall immediately
rectify any shortage, defect or default, or the Contractor (if the Contractor and
the Employer's Representative so agree) shall carry out such rectification as a
Variation. After visual inspection, this machinery and materials shall come
under the care, custody and control of the Contractor. The Contractor's
obligations of inspection, care, custody and control shall not relieve the
Employer of liability for any undetectable shortage, defect or default.

I SLf. ©FIDTC 1995

 The Employer also ondertakes to operate the items of machioery aod equipmeot
io aeeordaoce with the details, arrangements aod charges given io the
Employer's Reqoirements. The Cootractor shall pay soch charges to the
Employer; the amouots due shall be determined by the Employer's
Represeotative aod incloded as deductions in Interim and Final Payment
Certificates.
Clearance of Site 4.21 During the execution of the Works, the Contractor shall keep the Site free from
all unnecessary obstruction, and shall store or dispose of any Contractor's
Equipment or surplus materials. The Cootractor shall clear away and remove
from the Site any wreckage, rubbish or Temporary Works no longer required.
Upon the issue of any Taking-Over Certificate, the Contractor shall clear away
and remove, from that part of the Site and Works to which such Taking-Over
Certificate refers, all Contractor's Equipment, surplus material, wreckage,
mbbish and Temporary Works. The Contractor shall leave such part of the Site
and the Works in a clean and safe condition to the satisfaction of the Employer's
Representative. Except that, the Contractor shall be entitled to retain on Site,
until the expiry of the Contract Period, such Contractor's Equipment, Materials
and Temporary Works as required by him for the purpose of fulfilling his
obligations under the Contract.
tf the Contractor fails to remove, by 28 days after the issue of the Performance
Certificate, any remaining Contractor's Equipment, surplus material, wreckage,
mbbish and Temporary Works, the Employer may sell or otherwise dispose of
such items. The Employer shall be entitled to retain, from the proceeds of such
sale, a sum sufficient to meet the costs incurred in connection with the sale or
disposal, and in restoring the Site. Any balance of the proceeds shall be paid to
the Contractor. If the proceeds of the sale are insufficient to meet the
Employer's costs, the outstanding balance shall be recoverable from the
Contractor by the Employer.
Security of the Site 4.22 Unless otherwise stated in Part It:
(a) the Contractor shall be responsible for keeping unauthoriscd persons off
the Site, and
(b) authoriscd persons shall be limited to the employees of the Contractor,
employees of his Subcontractors and persons authorised by the Employer
or the Employer's Representative.
Contractor's 4.23 The Contractor shall confine his operations to the Site, and to any additional
Operations on Site areas which may be provided by the Contractor and agreed by the Employer's
Representative as working areas. The Contractor shall take all necessary
precautions to keep his personnel and equipment withtn the Sttc and such
additional areas, and to keep and prohibit them from encroaching on adjacent
land.
Fossils 4.24 All fossils, coins, articles of value or antiquity, and structures and other remains
or things of geological or archaeological interest discovered on the Site shall
(as between the parties) be the property of the Employer. The Contractor shall
take reasonable precautions to prevent his staff, labour or other persons from
removing or damaging any such article or thing. The Contractor shall,
immediately upon discovery of such article or thing, advise the Employer's
Representative, who may issue instructions for dealing with it.

©FIolC 1995
 If the Contractor suffers delay and/or incurs Cost in following these instructions
of the Employer's Representative, and if such delay and/or Cost was not (by
the Base Date) foreseeable by an experienced contractor, the Contractor shall
give notice to the Employer's Representative, with a copy to the Employer.
After receipt of such notice, the Employer's Representative shall proceed in
accordance with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly.

5 Design

General Obligations 5.1 The Contractor shall carry out, and be responsible for, the design of the Works.
Design shall be prepared by qualified designers who are engineers or other
professionals who comply with the criteria (if any) stated in the Employer's
Requirements. For each part of the Works, the prior consent of the Employer's
Representative shall be obtained to the designer and design Subcontractor, if
they are not named as such in the Contract. Nothing contained in the Contract
shall create any contractual relationship or professional obligations between
any designer, or a design Subcontractor, and the Employer.
The Contractor holds himself, his designers and design Subcontractors as
having the experience and capability necessary for the design. The Contractor
undertakes that the designers shall be available to attend discussions with the
Employer's Representative at all reasonable times during the Contract Period.
Construction 5.2 The Contractor shall prepare Construction Documents in sufficient detail to
Documents satisfy all regulatory approvals, to provide suppliers and construction personnel
sufficient instruction to execute the Works, and to describe the operation of the
completed Works. The Employer's Representative shall have the right to review
and inspect the preparation of Construction Documents, wherever they are
being prepared.
Each of the Construction Documents shall, when considered ready for use, be
submitted to the Employer's Representative for pre-construction review. In this
Sub-Clause, "review period" means the period required by the Employer's
Representative, which (unless otherwise stated in the Employer's
Requirements) shall not exceed 21 days, calculated from the date on which the
Employer's Representative receives a Construction Document and the
Contractor's notice that it is considered ready, both for a pre-construction
review in accordance with this Sub-Clause, and for use. If the Employer's
Representative, within such review period, notifies the Contractor that such
Construction Document fails (to the extent stated) to comply with the
Employer's Requirements, it shall be rectified, resubmitted and reviewed in
accordance with this Sub-Clause, at the Contractor's cost.
For each part of the Works, and except to the extent that the prior consent of
the Employer's Representative shall have been obtained:
(a) construction shall not commence prior to the expiry of the review periods
for the Construction Documents which are relevant to the design and
construction of such part;

/ b
 (b) construction shall be in accordance with such Construction Documents;
and
(c) if the Contractor wishes to modify any design or document which has
previously been submitted for such pre-construction review, the Contractor
shall immediately notify the Employer's Representative, and shall
subsequently submit revised documents to the Employer's Representative
for pre-construction review.
If the Employer's Representative instructs that further Construction Documents
are necessary for carrying out the Works, the Contractor shall upon receiving
the Employer's Representative's instructions prepare such Construction
Documents.
Errors, omissions, ambiguities, inconsistencies, inadequacies and other defects
shall be rectified by the Contractor at his cost.
Contractor's 5.3 The Contractor undertakes that, if legally and physically possible, the design,
Undertaking the Construction Documents, the execution and the completed Works will be in
accordance with the following, in order of priority:
(a) the law in the Country, and
(b) the documents forming the Contract, as altered or modified by Variations.
Technical Standards 5.4 The design, the Construction Documents, the execution and the completed
and Regulations Works shall comply with the Country's national specifications, technical
standards, building, construction and environmental regulations, regulations
applicable to the product being produced from the Works, and the standards
specified in the Employer's Requirements, applicable to the Contractor's
Proposal and Schedules, or defined by law. References in the Contract to such
specifications and other matters shall be understood to be references to the
edition applicable on the Base Date, unless stated otherwise. If substantially
changed or new applicable national specifications, technical standards or
regulations come into force after the Base Date, the Contractor shall submit
proposals for compliance to the Employer's Representative. In the event that
the Employer's Representative determines that such proposals constitute a
variation, he shall then initiate a Variation in accordance with Clause 14.

Samples 5.5 The Contractor shall submit the following samples and relevant information to
the Employer's Representative for pre-construction review in accordance with
the procedure for Construction Documents described in Sub-Clause 5.2:
(a) manufacturer's standard samples of Materials,
(b) samples (if any) specified in the Employer's Requirements, and
(c) additional samples instructed by the Employer's Representative under
Clause 14.
Each sample shall be labelled as to origin and intended use in the Works.
As.Built Drawings 5.6 The Contractor shall prepare, and keep up-to-date, a complete set of "as-built"
records of the execution of the Works, showing the exact "as-built" locations,
sizes and details of the work as executed, with cross references to relevant
specifications and data sheets. These records shall be kept on the Site and shall
be used exclusively for the purposes of this Sub-Clause. Two copies shall be
submitted to the Employer's Representative prior to the commencement of the
Tests on Completion.

©FIDiC 1995
 In addition, the Contractor shall prepare and submit to the Employer's
Representative 'as-built drawings" of the Works, showing all Works as
executed. The drawings shall be prepared as the Works proceed, and shall be
submitted to the Employer's Representative for his inspection. The Contractor
shall obtain the consent of the Employer's Representative as to their size, the
referencing system, and other pertinent details.
Prior to the issue of any Taking-Over Certificate, the Contractor shall submit to
the Employer's Representative one microfiche copy, one full-size original copy
and six printed copies of the relevant "as-built drawings", and any further
Construction Documents specified in the Employer's Requirements. The Works
shall not be considered to be completed for the purposes of taking-over under
Sub-Clause 10.1 until such documents have been submitted to the Employer's
Representative.
Operation and 5.7 Prior to commencement of the Tests on Completion, the Contractor shall
Maintenance prepare, and submit to the Employer's Representative, operation and
Manuals maintenance manuals in accordance with the Employer's Requirements and in
sufficient detail for the Employer to operate, maintain, dismantle, reassemble,
adjust and repair the Works. The Works shall not be considered to be completed
for the purposes of taking-over under Sub-Clause 10.1 until such operation and
maintenance manuals have been submitted to the Employer's Representative.
Error by Contractor 5.8 If errors are found in the Construction Documents, they and the Works shall be
corrected at the Contractor's cost.
Patent Rights 5.9 The Contractor shall indemnify the Employer against all claims of infringement
of any patent, registered design, copyright, trade mark or trade name, or other
intellectual property right, if:
(a) the claim or proceedings arise out of the design, construction, manufacture
or use of the Works;
(b) the infringement (or allegation of infringement) was not the result of part
(or all) of the Works being used for a purpose other than that indicated by,
or reasonably to be inferred from, the Contract;
(c) the infringement (or allegation of infringement) was not the result of part
(Or all) of the Works being used in association or combination with any
thing not supplied by the Contractor, unless such association or
combination was disclosed to the Contractor prior to the Base Date or is
stated in the Contract; and
(d) the infringement (Or allegation of infringement) was not the unavoidable
result of the Contractor's compliance with the Employer's Requirements.
The Contractor shall be promptly notified of any claim under this Sub-
Clause made against the Employer. The Contractor may, at his cost, conduct
negotiations for the settlement of such claim, and any litigation or arbitration
that may arise from it. The Employer or the Employer's Representative shall
not make any admission which might be prejudicial to the Contractor, unless
the Contractor has failed to take over the conduct of the negotiations, litigation
or arbitration within a reasonable time after having been so requested.
Except to the extent that the Employer agrees otherwise, the Contractor shall
not make any admission which might be prejudicial to the Employer, until the
Contractor has given the Employer such reasonable security as the Employer
may require. The security shall be for an amount which is an assessment of the
compensation, damages, charges and costs for which the Employer may
become liable, and to which the indemnity under this Sub-Clause applies.

©FIDIC 995
 The Employer shall, at the request and cost of the Contractor, assist him in
contesting any such claim or action, and shall be repaid all reasonable costs
incurred.

6 Staff and Labour

Engagement of Staff 6.1 The Contractor shall make his own arrangements for the engagement of all staff
and Labour and labour, local or otherwise, and for their payment, housing, feeding and
transport.
Rates of Wages and 6.2 The Contractor shall pay rates of wages, and observe conditions of labour, not
Conditions of less favourable than those established for the trade or industry where the work
Labour is carried out. If no such established rates or conditions are applicable, the
Contractor shall pay rates of wages and observe conditions not less favourable
than the general level of wages and conditions observed by employers whose
trade or industry is similar to that of the Contractor.
Persons in the 6.3 The Contractor shall not recruit, or attempt to recruit, his staff and labour from
Service of Others amongst persons in the service of the Employer or the Employer's
Representative.
Labour Laws 6.4 The Contractor shall comply with all the relevant labour laws applying to his
employees, and shall duly pay and afford to them all their legal rights. The
Contractor shall require all such employees to obey all applicable laws and
regulations concerning safety at work.
Working Hours 6.5 No work shall be carried out on the Site outside the normal working hours stated
in the Appendix to Tender, or on the locally recognised days of rest, unless:
(a) the Contract so provides,
(b) the work is unavoidable, or necessary for the saving of life or property or
for the safety of the Works, in which case the Contractor shall immediately
advise the Employer's Representative, or
(c) the Employer's Representative gives his consent.
Unless otherwise stated in Part II, the Contractor shall provide and maintain all
Facilities for Staff 6.6 necessary accommodation and welfare facilities for his (and his Sub-
and Labour contractor's) staff and labour. The Contractor shall also provide the facilities
specified in the Employer's Requirements, for the Employer's and Employer's
Representative's personnel. The Contractor shall not permit any of his
employees to maintain any temporary or permanent living quarters within the
structures forming part of the Works.
Precautions shall be taken by the Contractor to ensure the health and safety of
Health and Safety 6.7 his staff and labour. The Contractor shall, in collaboration with and to the
requirements of the local health authorities, ensure that medical staff, first aid
facilities, sick bay and ambulance service are available at the accommodation
and on the Site at all times, and that suitable arrangements are made for all
necessary welfare and hygiene requirements and for the prevention of
epidemics. The Contractor shall maintain records and make reports conceming
health, safety and welfare of persons, and damage to property, as the
Employer's Representative may reasonably require.

©FID!C 1995
 The Contractor shall appoint a member of his staff at the Site to be responsible
for maintaining the safety, and protection against accidents, of personnel on the
Site. This person shall be qualified for his work and shall have the authority to
issue instructions and take protective measures to prevent accidents. The
Contractor shall send, to the Employer's Representative, details of any accident
as soon as possible after its occurrence.
Contractor's 6.8 The Contractor shall provide all necessary superintendence during the design
Superintendence and execution of the Works, and as long thereafter as the Employer's
Representative may consider necessary for the proper fulfilling of the
Contractor's obligations under the Contract. Such superintendence shall be
given by sufficient persons having adequate knowledge of the operations to be
carried Out (including the methods and techniques required, the hazards likely
to be encountered and methods of preventing accidents) for the satisfactory and
safe execution of the Works.
Contractor's 6.9 The Contractor shall employ (Or cause to be employed) only persons who are
Personnel careful and appropriately qualified, skilled and experienced in their respective
trades or occupations. The Employer's Representative may require the
Contractor to remove (or cause to be removed) any person employed on the Site
or Works, including the Contractor's Representative, who in the opinion of the
Employer's Representative:
(a) persists in any misconduct,
(b) is incompetent or negligent in the performance of his duties,
(c) fails to conform with any provisions of the Contract, or
(d) persists in any conduct which is prejudicial to safety, health, or the
protection of the environment.
If appropriate, the Contractor shall then appoint (or cause to be appointed) a
suitable replacement person.
Disorderly Conduct 6.10 The Contractor shall at all times take all reasonable precautions to prevent any
unlawful, riotous or disorderly conduct by or amongst his staff and labour, and
to preserve peace and protection of persons and property in the neighbourhood
of the Works against such conduct.

7 Plant, Materials and Workmanship

Manner of 7.1 All Plant and Materials to be supplied shall be manufactured, and all work to
Execution be done shall be executed, in the manner set Out in the Contract. Where the
manner of manufacture and execution is not set out in the Contract, the work
shall be executed in a proper, workmanlike and careful manner, with properly
equipped facilities and non-hazardous Materials, and in accordance with
recognized good practice.
Delivery to Site 7.2 The Contractor shall be responsible for procurement, transport, receiving,
unloading and safe keeping of all Plant, Materials, Contractor's Equipment and
other things required for the completion of the Works.

/90 ©F!DIC 1995

 Inspection 7.3 The Employer and the Employer's Representative shall be entitled, during
manufacture, fabrication and preparation at any places where work is being
carried out, to inspect, examine and test the materials and workmanship, and to
check the progress of manufacture, of all Plant and Materials to be supplied
under the Contract. The Contractor shall give them full opportunity to inspect,
examine, measure and test any work on Site or wherever carried out.
The Contractor shall give due notice to the Employer's Representative
whenever such work is ready, before packaging, covering up or putting out of
view. The Employer's Representative shall then either carry Out the inspection,
examination, measurement or testing without unreasonable delay, or notify the
Contractor that it is considered unnecessary. If the Contractor fails to give such
notice, he shall, when required by the Employer's Representative, uncover such
work and thereafter reinstate and make good at his own cost.
Testing 7.4 If the Contract provides for tests, other than the Tests after Completion, the
Contractor shall provide all documents and other information necessary for
testing and such assistance, labour, materials, electricity, fuel, stores, apparatus
and instruments as are necessary to carry out such tests efficiently.
The Contractor shall agree, with the Employer's Representative, the time and
place for the testing of any Plant and other parts of the Works as specified in
the Contract. The Employer's Representative shall give the Contractor not less
than 24 hours' notice of his intention to attend the tests. The Contractor shall
provide sufficient suitably qualified and experienced staff to carry out the tests
specified in the Contract.
If the Employer's Representative does not attend at the time and place agreed,
or if the Contractor and the Employer's Representative agree that the
Employer's Representative shall not attend, the Contractor may proceed with
the tests, unless the Employer's Representative instructs the Contractor
otherwise. Such tests shall be deemed to have been made in the Employer's
Representative's presence.
The Contractor shall promptly forward to the Employer's Representative duly
certified reports of the tests. If the Employer's Representative has not attended
the tests, he shall accept the readings as accurate. When the specified tests have
been passed, the Employer's Representative shall endorse the Contractor's test
certificate, or issue a certificate to him, to that effect.
Rejection 7.5 If, as a result of inspection, examination or testing, the Employer's
Representative decides that any Plant, Materials, design or workmanship is
defective or otherwise not in accordance with the Contract, the Employer's
Representative may reject such Plant, Materials, design or workmanship and
shall notify the Contractor promptly, stating his reasons. The Contractor shall
then promptly make good the defect and ensure that the rejected item complies
with the Contract.
If the Employer's Representative requires such Plant, Materials, design or
workmanship to be retested, the tests shall be repeated under the same terms
and conditions. If such rejection and retesting cause the Employer to incur
additional costs, such costs shall be recoverable from the Contractor by the
Employer, and may be deducted by the Employer from any monies due, or to
become due, to the Contractor.
Ownership of Plant 7.6 Each item of Plant and Materials shall become the property of the Employer at
and Materials whichever is the earlier of the following times:

OFIDIC 995 /9/

 (a) when it is delivered to Site;
(b) when by virtue of Sub-Clause 8.9, the Contractor becomes entitled to
payment of the value of the Plant and Materials.

8 Commencement, Delays and Suspension

Commencement of 8.1 The Contractor shall commence the design and execution of the Works as soon
Works as is reasonably possible after the receipt of a notice to this effect from the
Employer's Representative. Such notice shall be issued within the time stated
in the Appendix to Tender after the Effective Date. The Contractor shall then
proceed with the Works with due expedition and without delay, until
completion.
Time for 8.2 The whole of the Works, and each Section (if any), shall be completed and shall
Completion have passed the Tests on Completion within the Time for Completion for the
Works or such Section (as the case may be).
Extension of Time 8.3 The Contractor may apply for an extension of the Time for Completion if he is
for Completion or will be delayed either before or after the Time for Completion by any of the
following causes:
(a) a Variation (unless an adjustment to the Time for Completion is agreed
under Sub-Clause 14.3),
(b) a force majeure event (as defined in Sub-Clause 19.1),
(c) a cause of delay giving an entitlement to extension of time under a Sub-
Clause of these Conditions, unless the Contractor has not complied with
such Sub-Clause,
(d) physical conditions or circumstances on the Site, which are exceptionally
adverse and were not (by the Base Date) foreseeable by an experienced
contractor, or
(e) any delay, impediment or prevention by the Employer.
If the Contractor intends to apply for an extension of the Time for Completion,
the Contractor shall give notice to the Employer's Representative of such
intention as soon as possible and in any event within 28 days of the start of the
event giving rise to the delay, together with any other notice required by the
Contract and relevant to such cause. The Contractor shall keep such
contemporary records as may be necessary to substantiate any application,
either on the Site or at another location acceptable to the Employer's
Representative, and such other records as may reasonably be requested by the
Employer's Representative. The Contractor shall permit the Employer's
Representative to inspect all such records, and shall provide the Employer's
Representative with copies as required.
Within 28 days of the first day of such delay (or such other period as may be
agreed by the Employer's Representative), the Contractor shall submit full
supporting details of his application. Except that, if the Contractor cannot
submit all relevant details within such period because the cause of delay
continued for a period exceeding 7 days, the Contractor shall submit interim
details at intervals of not more than 28 days (from the first day of such delay)
and full and final supporting details of his application within 21 days of the last
day of delay.

/q2. ©FTDIC 1995

 The Employer's Representative shall proceed in accordance with Sub-
Clause 3.5 to agree or determine either prospectively or retrospectively such
extension of the Time for Completion as may be due. The Employer's
Representative shall notify the Contractor accordingly. When determining each
extension of time, the Employer's Representative shall review his previous
determinations and may revise, but shall not decrease, the total extension of
time.
Delays Caused by Autho- 8.4 If the following conditions apply, namely:
rities
(a) the Contractor has diligently followed the procedures laid down by the
relevant legally constituted public authorities in the Country,
(b) such authorities delay, impede or prevent the Contractor, and
(c) the resulting delay to the Works was not (by the Base Date) foreseeable by
an experienced contractor,
then such delay will be considered as a cause of delay giving an entitlement to
extension of time under Sub-Clause 8.3.
Rate of Progress 8.5 If, at any time, the Contractor's actual progress falls behind the programme
referred to in Sub-Clause 4.14, or it becomes apparent that it will so fall behind,
the Contractor shall submit to the Employer's Representative a revised
programme taking into account the prevailing circumstances. The Contractor
shall, at the same time, notify the Employer's Representative of the steps being
taken to expedite progress, so as to achieve completion within the Time for
Completion.
If any steps taken by the Contractor in meeting his obligations under this Sub-
Clause cause the Employer to incur additional costs, such costs shall be
recoverable from the Contractor by the Employer, and may be deducted by the
Employer from any monies due, or to become due, to the Contractor.
Liquidated Damages 8.6 If the Contractor fails to comply with Sub-Clause 8.2, the Contractor shall pay
for Delay to the Employer the relevant sum staled in the Appendix to Tender as liquidated
damages for such default (which sum shall be the only monies due from the
Contractor for such default) for every day or part of a day which shall elapse
between the relevant Time for Completion and the date stated in the Taking-
Over Certificate; except that the total payment shall not exceed the limit of
liquidated damages (if any) stated in the Appendix to Tender.
The Employer may, without prejudice to any other method of recovery, deduct
the amount of such damages from any monies due, or to become due, to the
Contractor. In the event of an extension of time being granted under Sub-
Clause 8.3, the amount due under this Sub-Clause shall be recalculated
accordingly, and any over-payment refunded. The payment or deduction of such
damages shall not relieve the Contractor from his obligation to complete the
Works, or from any other of his duties, obligations or responsibilities under the
Contract.
At any time after the Employer has become entitled to liquidated damages, the
Employer's Representative may give notice to the Contractor under Sub-
Clause 15.1, requiring the Contractor to complete within a specified reasonable
time for completion. Such action shall not prejudice the Employer's
entitlements to payment under this Sub-Clause and to terminate under Sub-
Clause 15.2.
Suspension of Work 8.7 The Employer's Representative may at any time instruct the Contractor to
suspend progress of part or all of the Works. During suspension, the Contractor

FIi)IC 1995
 shall protect, store and secure such part or the Works against any deterioration,
loss or damage.
Consequences of 8.8 If the Contractor suffers delay and/or incurs Cost in following the Employer's
Suspension Representative's instructions under Sub-Clause 8.7, and in resumption of the
work, and if such delay and/or Cost was not (by the Base Date) foreseeable by
an experienced contractor, the Contractor shall give notice to the Employer's
Representative, with a copy to the Employer. After receipt of such notice the
Employer's Representative shall proceed in accordance with Sub-Clause 3.5 to
agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly. Except that the Contractor shall not
be entitled to such extension and payment of Cost if the suspension is due to a
cause attributable to the Contractor, or is necessitated by a Contractor's risk as
defined in Sub-Clause 17.5.
The Contractor shall not be entitled to extension of time for, or payment of the
costs incurred in, making good any deterioration, defect or loss caused by faulty
design, workmanship or materials, or by the Contractor's failure to take the
measures specified in Sub-Clause 8.7.
Payment for Plant 8.9 The Contractor shall be entitled to payment for Plant and/or Materials which
and Materials in have not been delivered to Site, if the work on Plant or delivery of Plant and/or
Event of Suspension Materials has been suspended for more than 28 days. This entitlement shall be
to payment of the value of such Plant and/or Materials as at the date of
suspension, if:
(a) the Contractor has marked the Plant and/or Materials as the Employer's
property in accordance with the Employer's Representative's instructions,
and
(b) the suspension is not due to a cause attributable to the Contractor.
The Employer shall then, if requested by the Contractor, take over the
responsibility for protection, storage, security and insurance of such suspended
Plant and/or Materials; the risk of loss or damage to the suspended works shall
then pass to the Employer.
Prolonged Suspension 8.10 If suspension under Sub-Clause 8.7 has continued for more than 84 days, and
the suspension is not due to a cause attributable to the Contractor, the
Contractor may by notice to the Employer's Representative require permission
to proceed within 28 days. If permission is not granted within that time, the
Contractor may treat the suspension as an omission under Clause 14 of the
affected part of the Works. If such suspension affects the whole of the Works,
the Contractor may terminate his employment, under Sub-Clause 16.2.
Resumption of Work 8.11 After receipt of permission or of an instruction to proceed, the Contractor shall,
after notice to the Employer's Representative, and together with the Employer's
Representative, examine the Works and the Plant and Materials affected by the
suspension. The Contractor shall make good any deterioration or defect in or
loss of the Works or Plant or Materials, which has occurred during the
suspension.
If the Employer has taken over risk and responsibility for the suspended Works
under Sub-Clause 8.9, risk and responsibility shall revert to the Contractor 14
days after receipt of the permission or instruction to proceed.

/c14
 9 Tests on Completion

Contractor's 9.1 The Contractor shall carry out the Tests on Completion in accordance with this
Obligations Clause and Sub-Clause 7.4, after providing the documents in accordance with
Sub-Clauses 5.6 and 5.7. The Contractor shall give, to the Employer's
Representative, 21 days' notice of the date after which the Contractor will be
ready to carry out the Tests on Completion. Unless otherwise agreed, such Tests
shall be carried out within 14 days after this date, on such day or days as the
Employer's Representative shall instruct.
In considering the results of the Tests on Completion, the Employer's
Representative shall make allowances for the effect of any use of the Works by
the Employer on the performance or other characteristics of the Works. As soon
as the Works, or a Section, have passed the Tests on Completion, the Contractor
shall provide the Employer's Representative and the Employer with a certified
report of the results of all such Tests.
Delayed Tests 9.2 If the Tests on Completion are being unduly delayed by the Contractor, the
Employer's Representative may by notice require the Contractor to carry out
such Tests within 21 days after the receipt of such notice. The Contractor shall
carry out such Tests on such day or days within that period as the Contractor
may fix and of which he shall give notice to the Employer's Representative.
If the Contractor fails to carry out the Tests on Completion within 21 days, the
Employer's Representative may himself proceed with such Tests. All such Tests
so carried Out by the Employer's Representative shall be at the risk and cost of
the Contractor. These Tests on Completion shall then be deemed to have been
carried out in the presence of the Contractor and the results of such Tests shall
be accepted as accurate.
Retesting 9.3 If the Works, or a Section, fail to pass the Tests on Completion, Sub-Clause 7.5
shall apply, and the Employer's Representative or the Contractor may require
such failed Tests, and the Tests on Completion on any related work, to be
repeated under the same terms and conditions.
Failure to Pass 9.4 If the Works, or a Section, fail to pass the Tests on Completion repeated under
Tests on Completion Sub-Clause 9.3, the Employer's Representative shall be entitled to:
(a) order further repetition of Tests on Completion under Sub-Clause 9.3;
(b) reject the Works or Section (as the case may be), in which event the
Employer shall have the same remedies against the Contractor as are provided
under Clause 15; or
(c) issue a Taking-Over Certificate, if the Employer so requires: the Contract
Price shall then be reduced by such amount as may be agreed by the Employer
and the Contractor (in full satisfaction of such failure only), and the Contractor
shall then proceed in accordance with his other obligations under the Contract.

10 Employer's Taking Over

Taking-Over 10.1 Except as stated in Sub-Clause 9.4, the Works shall be taken over by the
Certificate Employer when they have been completed in accordance with the Contract
(except as described in sub-paragraph (a) below), have passed the Tests on

OFIDIC 1995 /95

 Completion and a Taking-Over Certificate for the Works has been issued, or has
deemed to have been issued in accordance with this Sub-Clause. If the Works
are divided into Sections, the Contractor shall be entitled to apply for a Taking-
Over Certificate for each Section.
The Contractor may apply by notice to the Employer's Representative for a
Taking-Over Certificate not earlier than 14 days before the Works or Section
(as the case may be) will, in the Contractor's opinion, be complete and ready
for taking over. The Employer's Representative shall, within 28 days after the
receipt of the Contractor's application:
(a) issue the Taking-Over Certificate to the Contractor, stating the date on
which the Works or Section were completed in accordance with the
Contract (except for minor outstanding work that does not affect the use
of the Works or Section for their intended purpose) including passing the
Tests on Completion; or
(b) reject the application, giving his reasons and specifying the work required
to be done by the Contractor to enable the Taking-Over Certificate to be
issued: the Contractor shall then complete such work before issuing a
further notice under this Sub-Clause.
If the Employer's Representative fails either to issue the Taking-Over
Certificate or to reject the Contractor's application within the period of 28 days,
and if the Works or Section (as the case may be) are substantially in accordance
with the Contract, the Taking-Over Certificate shall be deemed to have been
issued on the last day of that period.
Use by The Employer 10.2 The Employer shall not use any part of the Works unless the Employer's
Representative has issued a Taking-Over Certificate for such part. If a Taking-
Over Certificate has been issued for any part of the Works (other than a
Section), the liquidated damages for delay in completion of the remainder of
the Works (and of the Section of which it forms part) shall, for any period of
delay after the date stated in such Taking-Over Certificate, be reduced in the
proportion which the value of the part so certified bears to the value of the
Works or Section (as the case may be); such values shall be determined by the
Employer's Representative in accordance with the provisions of Sub-
Clause 3.5. The provisions of this paragraph shall only apply to the rate of
liquidated damages under Sub-Clause 8.6, and shall not affect the limit of such
damages.
If the Employer does use any part of the Works before the Taking-Over
Certificate is issued:
(a) the part which is used shall be deemed to have been taken over at the date
on which it is used,
(b) the Employer's Representative shall, when requested by the Contractor,
issue a Taking-Over Certificate accordingly, and
(c) the Contractor shall cease to be liable for the care of such part from such
date, when responsibility shall pass to the Employer.
After the Employer's Representative has issued a Taking-Over Certificate for a
part of the Works, the Contractor shall be given the earliest opportunity to take
such steps as may be necessary to carry out any outstanding Tests on
Completion, and the Contractor shall carry Out such Tests on Completion as
soon as practicable, before the expiry of the Contract Period.
Interference with 10.3 If the Contractor is prevented from carrying out the Tests on Completion by a
Tests on Completion cause for which the Employer (or another contractor employed by the

/q
 Employer) is responsible, the Employer shall be deemed to have taken over the
Works or Section (as the case may be) on the date when the Tests on Completion
would otherwise have been completed. The Employer's Representative shall
then issue a Taking-Over Certificate accordingly, and the Contractor shall carry
out the Tests on Completion as soon as practicable, before the expiry of the
Contract Period. The Employer's Representative shall require the Tests on
Completion to be carried out by 14 days' notice and in accordance with the
relevant provisions of the Contract. If the Contractor incurs additional Cost as
a result of this delay in carrying out the Tests on Completion, such Cost plus
reasonable profit shall be determined by the Employer's Representative in
accordance with the provisions of Sub-Clause 3.5 and shall be added to the
Contract Price.

H Tests after Completion

Employer's 11.1 If Tests after Completion are specified in the Contract, this Clause shall apply.
Obligations Unless otherwise stated in Part II, the Employer shall provide the necessary
labour, materials, electricity, fuel and water, and shall carry out the Tests after
Completion in accordance with the manuals provided by the Contractor under
Sub-Clause 5.7 and such guidance as the Contractor may be required to give
during the course of such Tests.
The Tests after Completion shall be carried out as soon as is reasonably
practicable after the Works, or Section, have been taken over by the Employer.
The Employer shall give to the Contractor 21 days' notice of the date after
which the Tests after Completion will be carried out. Unless otherwise agreed,
such Tests shall be carried out within 14 days after this date, on the day or days
determined by the Employer. If the Contractor does not attend at the time and
place agreed, the Employer may proceed with the Tests after Completion, which
shall be deemed to have been made in the Contractor's presence, and the
Contractor shall accept the readings as accurate.
The results of the Tests after Completion shall be compiled and evaluated by
the Employer and the Contractor. Any effect on the results of the Tests after
Completion which can reasonably be shown to be due to the prior use of the
Works by the Employer shall be taken into account in assessing such results.
Delayed Tests 11.2 If the Contractor incurs additional Cost as a result of any unreasonable delay
by the Employer in carrying out the Tests after Completion, such Cost plus
reasonable profit shall be determined by the Employer's Representative in
accordance with the provisions of Sub-Clause 3.5 and shall be added to the
Contract Price.
If, for reasons not attributable to the Contractor, a Test after Completion on the
Works or any Section cannot be completed during the Contract Period (or any
other period agreed upon by the Employer and the Contractor), then the Works
or such Section shall be deemed to have passed such Test after Completion.
Retesting 11.3 If the Works, or a Section, fail to pass the Tests after Completion, the Employer
or the Contractor may require such failed Tests, and the Tests after Completion
on any related work, to be repeated under the same terms and conditions. If
such failure and retesting result from a default of the Contractor and cause the
Employer to incur additional Costs, such costs shall be recoverable from the
Contractor by the Employer, and may be deducted by the Employer from any
monies due, or to become due, to the Contractor.

©FIDIC 995
 Failure to Pass 11.4 If the following conditions apply, namely:
Tests after
(a) the Works, or a Section, fail to pass any or all of the Tests after Completion,
Completion
(b) the relevant sum payable as liquidated damages for such failure is stated
(Or its method of calculation is defined) in the Appendix to Tender, and
(c) the Contractor pays such relevant sum to the Employer during the Contract
Period,
then the Works or such Section shall be deemed to have passed such Tests after
Completion.
If the Works, or a Section, fail to pass a Test after Completion and the
Contractor in consequence proposes to make any adjustment or modification
thereto, the Employer's Representative may instruct the Contractor that the
Employer does not wish such adjustment or modification to be made until a
time that is convenient to the Employer. In such event, the Contractor shall
remain liable to carry out the adjustment or modification, and to satisfy such
Test within a reasonable time of being notified to do so by the Employer's
Representative. If, however, the Employer's Representative fails to give any
such notice during the Contract Period, the Contractor shall be relieved of any
such obligation and the Works or Section (as the case may be) shall be deemed
to have passed such Test after Completion.
If the Contractor incurs additional Cost as a result of any unreasonable delay
by the Employer in permitting access to the Works or Plant by the Contractor,
either to investigate the causes of failure to pass a Test after Completion, or to
carry out any adjustments or modifications, then the Contractor shall be paid
the additional Cost, plus reasonable profit, caused by such delay.

12 Defects Liability
Completion of 12.1 In order that the Construction Documents and the Works shall be in the
Outstanding Work condition required by the Contract (fair wear and tear excepted) at, or as soon
and Remedying as practicable after, the expiry of the Contract Period, the Contractor shall:
Defects . . .
(a) complete any work which is outstanding on the date stated in a Taking-
Over Certificate, as soon as practicable after such date, and
(b) execute all work of amendment, reconstruction, and remedying defects or
damage, as may be instructed by the Employer or the Employer's
Representative during the Contract Period.
If any such defect appears or damage occurs, the Employer or the Employer's
Representative shall promptly notify the Contractor in writing.
Cost of Remedying 12.2 All work referred to in Sub-Clause 12.1(b) shall be executed by the Contractor
Defects at his own cost, if the necessity for such work is due to:
(a) the design of the Works,
(b) Plant, Materials or workmanship not being in accordance with the
Contract, or
(c) failure by the Contractor to comply with any of his other obligations.
If such necessity is due to any other cause, the Employer's Representative shall
notify the Contractor accordingly and seek agreement to an adjustment to the
Contract Price. In this event, Sub-Clause 14.3 shall apply to such work.

©FTOIC 1995
 Extension of 12.3 The Contract Period shall be extended by a period equal to the sum of any
Contract Period periods, after the Works are taken-over, during which the Works or any Section
or Item of Plant cannot be used, for the purposes for which they are intended,
by reason of a defect or damage; except that the Contract Period shall not be
extended by more than two years.
When delivery of Plant and/or Materials, or erection of Plant, or installation of
Materials, has been suspended under Sub-Clause 8.7, the Contractor's
obligations under this Sub-Clause shall not apply to any defects or damage
occurring more than three years after the Plant and/or Materials would
otherwise have been delivered, erected and taken-over.
Failure to Remedy 12.4 If the Contractor fails to remedy any defect or damage within a reasonable time,
Defects the Employer or the Employer's Representative may fix a date on or by which
to remedy the defect or damage, and give the Contractor reasonable notice of
such date.
If the Contractor fails to remedy the defect or damage by such date and the
necessity for such work is due to a cause stated in Sub-Clause 12.2(a), (b) or (c),
the Employer may (at his sole discretion):
(a) carry out the work himself or by others, in a reasonable manner and at the
Contractor's risk and cost, but the Contractor shall have no responsibility
for such work: the costs properly incurred by the Employer in remedying
the defect or damage shall be recoverable from the Contractor by the
Employer;
(b) require the Employer's Representative to determine and certify a
reasonable reduction in the Contract Price; or
(c) if the defect or damage is such that the Employer has been deprived of
substantially the whole of the benefit of the Works or parts of the Works,
terminate the Contract in respect of such parts of the Works as cannot be
put to the intended use: the Employer shall then be entitled to recover all
sums paid for such parts of the Works together with the cost of dismantling
the same, clearing the Site and returning Plant and Materials to the
Contractor, and Sub-Clause 15.1 shall not apply.
Removal of 12.5 If the defect or damage is such that it cannot be remedied expeditiously on the
Defective Work Site, the Contractor may, with the consent of the Employer's Representative or
the Employer, remove from the Site for the purposes of repair any part of the
Works which is defective or damaged.
Further Tests 12.6 If the remedying of any defect or damage is such that it may affect the
performance of the Works, the Employer may require that Tests on Completion
or Tests after Completion, or both, be repeated to the extent necessary. The
requirement shall be made by notice within 28 days after the defect or damage
is remedied. Such Tests shall be carried out in accordance with Clause 9 or
Clause 11 (as the case may be).
Right of Access 12.7 Until the Performance Certificate has been issued, the Contractor shall have the
right of access to all parts of the Works and to records of the working and
performance of the Works, except as may be inconsistent with any reasonable
security restrictions by the organisation responsible for operating the Works.
Contractor to 12.8 The Contractor shall, if required by the Employer's Representative, search for
Search the cause of any defect, under the direction of the Employer's Representative.
Unless the defect is one for which the Contractor is liable, the Cost of such
search, plus reasonable profit, shall be added to the Contract Price.

©FIDIC 1995
 Performance 12.9 The Contract shall not be considered to be completed until the Performance
Certificate Certificate has been signed by the Employer's Representative and delivered to
the Contractor, stating the date on which the Contractor completed his
obligations to the Employer's Representative's satisfaction.
The Performance Certificate shall be given by the Employer's Representative
by the date 28 days after the expiry of the Contract Period, or as soon after such
date as the Contractor has provided all the Construction Documents and
completed and tested all the Works, including remedying any defects.
Only the Performance Certificate shall be deemed to constitute approval of the
Works.
Unfulfilled 12.10 After the Performance Certificate has been issued, the Contractor and the
Obligations Employer shall remain liable for the fulfilment of any obligation which remains
unperformed at that time. For the purposes of determining the nature and extent
of any such obligation, the Contract shall be deemed to remain in force.

13 Contract Price and Payment

The Contract Price 13.1
Advance Payments 13.2
Unless otherwise stated in Part II:
(a) payment for the Works shall be made on a fixed lump sum basis;
(b) the Contract Price shall not be adjusted for changes in the cost of labour,
materials or other matters;
(c) the Contractor shall pay all duties and taxes in consequence of his
obligations under the Contract, and the Contract Price shall not be adjusted
for such costs, except as stated in Sub-Clause 13.16;
(d) any quantities which may be set Out in a Schedule are only estimated
quantities and are not to be taken as the actual and correct quantities of the
Works to be executed by the Contractor in fulfilment of his obligations
under the Contract; and
(e) any quantities, prices or rates of payment per unit quantity which may be
set out in a Schedule are only to be used for the purposes stated in such
Schedule.
If any part of the Works is to be paid according to quantity supplied or work
done, the provisions for measurement and valuation shall be as stated in Part II.
The Employer will make interest-free advance payments to the Contractor for
his mobilization and design. The total of such advance payments, and the
number and timing of instalments (if more than one), shall be as stated in the
Appendix to Tender, payable in the proportions of currencies in which the
Contract Price is payable. The Employer's Representative shall issue an Interim
Payment Certificate for the first instalment after the Contractor has delivered,
to the Employer, the performance security in accordance with Sub-Clause 4.2
and a bank guarantee in a form and by a bank acceptable to the Employer in
amounts and currencies equal to the advance payments. Such bank guarantee
shall remain effective until the advance payments have been repaid, but its
amount shall be progressively reduced by the amount repaid by the Contractor
as indicated in Interim Payment Certificates.

©FIDIC 995
 The advance payments shall be repaid through percentage deductions in Interim
Payment Certificates certified by the Employer's Representative in accordance
with this Clause. Unless other percentages are stated in the Appendix to Tender:
(a) deductions shall commence in the Interim Payment Certificate in which the
total of all certified interim payments (excluding the advance payments and
deductions and repayments of retention) exceeds ten per cent (10%) of the
Contract Price less Provisional Sums; and
(b) deductions shall be made at the amortization rate of one quarter (25%) of
the amount of all Interim Payment Certificates (excluding the advance
payments and deductions and repayments of retention) in the types and
proportionate amounts of currencies of the advance payments, until such
time as the advance payments have been repaid.
If the advance payments have not been repaid prior to the issue of the Taking-
Over Certificate for the Works or prior to termination under Clauses 15, 16 or
19 (as the case may be), the whole of the balance then outstanding shall
immediately become due and payable by the Contractor to the Employer.
Application for 13.3 The Contractor shall submit a statement in six copies to the Employer's
Interim Payment Representative after the end of each month, in a form approved by the
Certificates Employer's Representative, showing the amounts to which the Contractor
considers himself to be entitled, together with supporting documents which
shall include the detailed report on the progress during the month in accordance
with Sub-Clause 4.15. The statement shall include the following items, as
applicable, which shall be expressed in the various currencies in which the
Contract Price is payable, in the sequence listed:
(a) the estimated contract value of the Construction Documents produced and
the Works executed up to the end of the month (including Variations but
excluding items described in sub-paragraphs (b) to (g) below);
(b) any amounts to be added and deducted for changes in legislation in
accordance with Sub-Clause 13.16;
(c) any amount to be deducted for retention, calculated by applying the
percentage of retention stated in the Appendix to Tender to the total of the
above amounts, until the amount so retained by the Employer reaches the
limit of Retention Money (if any) stated in the Appendix to Tender;
(d) any amounts to be added and deducted for the advance payments and
repayments in accordance with Sub-Clause 13.2;
(e) any amounts to be added and deducted for Plant and Materials in
accordance with Sub-Clause 13.5;
(f) any other additions or deductions which may have become due in
accordance with the Contract (including those under Clause 20), other than
under Sub-Clause 8.6; and
(g) the deduction of the amounts certified in all previous Interim Payment
Certificates.
Schedule of 13.4 If the Contract includes a Schedule of Payments specifying the instalments in
Payments which the Contract Price will be paid, then, unless otherwise stated in such
Schedule:
(a) the instalments quoted in such Schedule shall be used to determine the
contract value for the purposes of sub-paragraph (a) of Sub-Clause 13.3;
(b) Sub-Clause 13.5 shall not apply; and

©FIDIC 1995
 (c) if the payment instalments are not defined by reference to the actual
progress achieved in executing the Works, the Employer's Representative
shall be entitled to amend such Schedule: such amendment shall be made
in accordance with the provisions of Sub-Clause 3.5 and shall only take
account of the extent to which the actual progress achieved is less than that
on which the instalments in the Schedule were based.
Plant and Materials 13.5 If this Sub-Clause applies, Interim Payment Certificates shall include (i) an
for the Permanent additional amount for Plant and Materials which have been brought to the Site
Works for incorporation in the Permanent Works, and (ii) a deduction when they have
been incorporated in the Permanent Works. The Employer's Representative
shall determine each addition and deduction in accordance with the following
provisions:
(a) no addition shall be included in the Interim Payment Certificate unless, in
the opinion of the Employer's Representative:
(i) the Plant and Materials are considered to be in accordance with the
Contract;
(ii) the Plant and Materials have been delivered to the Site and are
properly stored on Site and protected against loss, damage or
deterioration;
(iii) the Contractor's records of the requirements, orders, receipts and use
of Plant and Materials are kept in a form approved by the Employer's
Representative, and such records are available for inspection by the
Employer's Representative;
(iv) the Contractor has submitted a statement of the Cost of acquiring and
delivering the Plant and Materials to the Site, together with such
documents as may be required for the purpose of evidencing such
Cost; and
(v) the Plant and Materials are those listed in the Appendix to Tender;
(b) the additional amount to be certified shall be the equivalent of eighty
percent of the cost of the Plant and Materials delivered to the Site, as
determined by the Employer's Representative after review of the
documents mentioned in sub-paragraph (a) above, taking account of the
contract value of such Plant and Materials as determined and considered
appropriate by the Employer's Representative;
(c) the amount of the deduction for any Plant and Materials incorporated in
the Permanent Works shall be equivalent to the addition previously
certified by the Employer's Representative for such Plant and Materials
under sub-paragraph (b) above; and
(d) the currencies for such additions and deductions shall be determined by the
Employer's Representative as follows:
(i) in the case of each addition, the currencies shall be those in which the
payment will eventually become due for the relevant item of Plant or
Materials, upon their incorporation in the Permanent Works; and
(ii) in the case of a deduction, the currencies shall be those in which the
addition for the respective item of Plant or Materials had been
certified.

DFIDIC 995
Issue of Interim Pay- 13.6 No amount will be certified or paid until the Employer has received, and
ment Certificates approved, the performance security in accordance with Sub-Clause 4.2.
Thereafter, the Employer's Representative shall, within 28 days of receiving a
statement and supporting documents, deliver to the Employer with a copy to
the Contractor an Interim Payment Certificate showing the amount which the
Employer's Representative considers to be due; if no payment is considered to
be due, the Employer's Representative shall promptly notify the Contractor
accordingly. Except that the Employer's Representative shall not be bound to
certify any payment under this Sub-Clause, if the net amount to be certified
(after retention and other deductions) would be less than the minimum amount
of Interim Payment Certificates (if any) stated in the Appendix to Tender.
An Interim Payment Certificate shall not be withheld on account of:
(a) defects: if any thing supplied or work done by the Contractor is not in
accordance with the Contract, the cost of rectification or replacement shall
be deducted by the Employer's Representative from any amount otherwise
due;
(b) part (only) of the payment applied for being disputed: in such case, a
payment certificate shall be issued for the undisputed amount.
The Employer's Representative may in any payment certificate make any
correction or modification that should properly be made to any previous
certificate.
Payment 13.7 Unless otherwise stated in Part II,
(a) the Employer shall pay the amount certified in each Interim Payment
Certificate within 56 days from the date on which the Employer's
Representative received the Contractor's statement and supporting
documents; and
(b) the Employer shall pay the amount certified in the Final Payment
Certificate within 56 days from the date of issue of the Certificate.
Payments shall be made into a bank account, nominated by the Contractor, in
the payment country named as such in the Contract. If payments are to be made
in more than one currency, separate bank accounts may be nominated by the
Contractor for each currency, and payments shall be made by the Employer
accordingly.
Delayed Payment 13.8 If payment of any sum payable under Sub-Clause 13.7 is delayed, the
Contractor shall be entitled to receive financing charges compounded monthly
on the amount unpaid during the period of delay. Unless otherwise stated in
Part II, these financing charges shall be calculated at the annual rate three
percentage points above the discount rate of the central bank in the country of
the currency of payment. The Contractor shall be entitled to such payment
without formal notice and without prejudice to any other right or remedy.
Payment of Retention 13.9 When the Employer's Representative has issued the Taking-Over Certificate for
Money the Works, and the Works have passed all specified tests (including the Tests
after Completion, if any), the first half of the Retention Money shall be certified
by the Employer's Representative for payment to the Contractor. If the Works
are taken over in Sections, the percentage of the first half of the Retention
Money released following the issue of a Taking-Over Certificate for a Section,
and it passing all tests, shall be the percentage value of the Section as stated in
the Appendix to Tender.

©FIDIC 995
 Upon the expiry of the Contract Period, the second half of the Retention Money
shall be certified by the Employer's Representative for payment to the
Contractor. Except that, if at such time any work shall remain to be executed
under Clause 11 or Clause 12, the Employer's Representative shall be entitled
to withhold certification, until completion of such work, of so much of the
balance of the Retention Money as shall represent the cost of the work
remaining to be executed.
Statement at 13.10 Not later than 84 days after the issue of the Taking-Over Certificate for the
Completion Works, the Contractor shall submit, to the Employer's Representative, six
copies of a statement at completion with supporting documents showing in
detail, in the form approved by the Employer's Representative under Sub-
Clause 13.3:
(a) the final value of all work done in accordance with the Contract up to the
date stated in such Taking-Over Certificate,
(b) any further sums which the Contractor considers to be due, and
(c) an estimate of amounts which the Contractor considers will become due
to him under the Contract.
The estimated amounts shall be shown separately in such statement at
completion. The Employer's Representative shall certify payment under Sub-
Clause 13.6.
Application for 13.11 Not later than 56 days after the issue of the Performance Certificate, the
Final Payment Contractor shall submit to the Employer's Representative six copies of a draft
Certificate final statement with supporting documents showing in detail, in a form
approved by the Employer's Representative:
(a) the value of all work done in accordance with the Contract, and
(b) any further sums which the Contractor considers to be due to him under
the Contract or otherwise.
If the Employer's Representative disagrees with or cannot verify any part of the
draft final statement, the Contractor shall submit such further information as
the Employer's Representative may reasonably require and shall make such
changes in the draft as may be agreed between them. The Contractor shall then
prepare and submit to the Employer's Representative the final statement as
agreed (for the purposes of these Conditions referred to as the "Final
Statement").
If, following discussions between the Employer's Representative and the
Contractor and any changes to the draft final statement which may be agreed
between them, it becomes evident that a dispute exists, the Employer's
Representative shall deliver to the Employer (with a copy to the Contractor) an
Interim Payment Certificate for those parts of the draft final statement which
are not in dispute. The dispute may then be resolved under Clause 20, in which
case the Contractor shall then prepare and submit to the Employer (with a copy
to the Employer's Representative) a Final Statement in accordance with the
outcome of the dispute.
Discharge 13.12 When submitting the Final Statement, the Contractor shall submit a written
discharge which confirms that the total of the Final Statement represents full
and final settlement of all monies due to the Contractor under the Contract.
Such discharge may state that it shall become effective only after payment due
under the Final Payment Certificate has been made and the performance
security referred to in Sub-Clause 4.2 has been retumed to the Contractor.

©FJDIC 1995
 Issue of Final 13.13 The Employer's Representative shall issue to the Employer, with a copy to the
Payment Certificate Contractor, the Final Payment Certificate within 28 days after receiving the
Final Statement and written discharge in accordance with Sub-Clauses 13.11
and 13.12, stating:
(a) the amount which is finally due, and
(b) after giving credit to the Employer for all amounts previously paid by the
Employer and for all sums to which the Employer is entitled, other than
under Sub-Clause 8.6, the balance, if any, due from the Employer to the
Contractor or from the Contractor to the Employer as the case may be.
If the Contractor has not applied for a Final Payment Certificate in accordance
with Sub-Clauses 13.11 and 13.12, the Employer's Representative shall request
the Contractor to do so. If the Contractor fails to make such an application
within a period of 28 days, the Employer's Representative shall issue the Final
Payment Certificate for such amount as he considers to be due.
Cessation of 13.14 The Employer shall not be liable to the Contractor for any matter or thing
Employer's Liability arising out of (or in connection with) the Contract or execution of the Works,
unless the Contractor shall have included a claim for it in his Final Statement
and (except for matters or things arising after the issue of the Taking-Over
Certificate for the Works) in the statement at completion described in Sub-
Clause 13.10.
Calculation of 13.15 If the Contract Price is expressed in Local Currency only, but some payments
Payments in Foreign are to be made in another currency, the proportions or amounts of the Local and
Currency Foreign Currencies, and the fixed rates of exchange to be used for calculating
the payments, shall be as stated in the Appendix to Tender. If no rates of
exchange are stated therein, they shall, unless otherwise stated in Part 11, be
those prevailing for the Base Date, as determined by the central bank of the
Country.
Changes in 13.16 The Contract Price shall be adjusted to take account of any increase or decrease
Legislation in Cost resulting from changes in legislation of the Country, made after the Base
Date. Such legislation means any law, order, regulation or by-law having the
force of law, including currency restrictions, which affects the Contractor in the
performance of his obligations.
If the Contractor suffers (or will suffer) delay and/or incurs (or will incur)
additional Cost resulting from such changes in legislation, made after the Base
Date, the Contractor shall give notice to the Employer's Representative. After
receipt of such notice the Employer's Representative shall proceed in
accordance with Sub-Clause 3.5 to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly.

©F1DIC 1995 2c5

 14 Variations

Right to Vary 14.1 Variations may be initiated by the Employer's Representative at any time during
the Contract Period, either by instruction or by a request for the Contractor to
submit a proposal. If the Employer's Representative requests the Contractor to
submit a proposal and subsequently elects not to proceed with the change, the
Contractor shall be reimbursed for the Cost incurred, including design services.
The Contractor shall not make any alteration and/or modification of the Works,
unless and until the Employer's Representative instructs or approves a
Variation. If the Construction Documents or Works are not in accordance with
the Contract, the rectification shall not constitute a Variation.
The Contractor may, at any time, submit to the Employer's Representative a
Value Engineering 14.2 written proposal which in the Contractor's opinion will reduce the cost of
constructing, maintaining or operating the Works, or improve the efficiency or
value to the Employer of the completed Works, or otherwise be of benefit to
the Employer. Any such proposal shall be prepared at the cost of the Contractor
and shall include the items listed in Sub-Clause 14.3.
If the Employer's Representative requests a proposal, prior to instructing a
Variation Procedure 14.3 Variation, the Contractor shall submit as soon as practicable:
(a) a description of the proposed design and/or work to be performed and a
programme for its execution,
(b) the Contractor's proposal for any necessary modifications to the
programme according to Sub-Clause 4.14, and
(c) the Contractor's proposal for adjustment to the Contract Price, Time for
Completion and/or modifications to the Contract.
The Employer's Representative shall, as soon as practicable after receipt of
such proposals, respond with approval, rejection or comments.
If the Employer's Representative instructs or approves a Variation, he shall
proceed in accordance with Sub-Clause 3.5 to agree or determine adjustments
to the Contract Price, Time for Completion and Schedule of Payments.
Adjustment of the Contract Price shall include reasonable profit, and shall take
account of the Contractor's submissions under Sub-Clause 14.2 if applicable.
If the Contract provides for payment of the Contract Price in more than one
Payment in 14.4 currency, and an adjustment is agreed or fixed as stated above, the amount
Applicable payable in each of the applicable currencies shall be specified when the
Currencies adjustment is agreed or fixed. In specifying the amount in each currency, the
Contractor and the Employer's Representative (Or, failing agreement, the
Employer's Representative) shall take account of the actual or expected
currency proportions of the Cost of the varied work, without being bound by
the proportions of various currencies specified for payment of the Contract
Price.
Each Provisional Sum shall only be used, in whole or in part, in accordance
Provisional Sums 14.5 with the Employer's Representative's instructions. The total sum paid to the
Contractor shall include only such amounts for the work, supplies or services
to which such Provisional Sums relate as the Employer's Representative shall
have instructed. For each Provisional Sum, the Employer's Representative may
order:

©FID!C 1995
 (a) work to be executed (including Plant, Materials or services to be supplied)
by the Contractor and valued under Sub-Clause 14.3;
(b) Plant, Materials or services to be purchased by the Contractor, for which
payment will be made as follows:
(i) the actual price paid (or due to be paid) by the Contractor, and
(ii) a percentage of the actual price paid (or due to be paid), as stated in
the Appendix to Tender, to cover all other Costs, charges and profit.
The Contractor shall, when required by the Employer's Representative, produce
quotations, invoices, vouchers and accounts or receipts in substantiation.

15 Default of Contractor

Notice to Correct 15.1 If the Contractor fails to carry Out any of his obligations, or if the Contractor is
not executing the Works in accordance with the Contract, the Employer's
Representative may give notice to the Contractor requiring him to make good
such failure and remedy the same within a specified reasonable time.
Termination 15.2 If the Contractor:
(a) fails to comply with a notice under Sub-Clause 15.1,
(b) abandons or repudiates the Contract,
(c) without reasonable excuse fails:
(i) to commence the Works in accordance with Sub-Clause 8.1,
(ii) to proceed with the Works in accordance with Clause 8, or
(iii) to demonstrate that sufficient design capability is employed in the
design of the Works to achieve completion within the Time for
Completion,
(d) becomes bankrupt or insolvent, goes into liquidation, has a receiving or
administration order made against him, compounds with his creditors, or
carries on business under a receiver, trustee or manager for the benefit of
his creditors, or if any act is done or event occurs which (under any
applicable law) has a similar effect to any of these acts or events,
(e) fails to comply with a notice issued under Sub-Clause 7.5 within 28 days
after having received it, or
(f) assigns the Contract or subcontracts the Works without the required
consent,
then the Employer may, after having given 14 days' notice to the Contractor,
terminate the Contractor's employment under the Contract and expel him from
the Site. The Contractor shall then deliver all Construction Documents, and
other design documents made by or for him, to the Employer's Representative.
The Contractor shall not be released from any of his obligations or liabilities
under the Contract. The rights and authorities conferred on the Employer and
the Employer's Representative by the Contract shall not be affected.
The Employer may upon such termination complete the Works himself and/or
by any other contractor. The Employer or such other contractor may use for
such completion so much of the Construction Documents, other design
documents made by or on behalf of the Contractor, Contractor's Equipment,

OFIDIC 1995
 Temporary Works, Plant and Materials as he or they may think proper. Upon
completion of the Works, or at such earlier date as the Employer's
Representative thinks appropriate, the Employer's Representative shall give
notice that the Contractor's Equipment and Temporary Works will be released
to the Contractor at or near the Site. The Contractor shall remove or arrange
removal of the same from such place without delay and at his cost.
Valuation at Date of 15.3 The Employer's Representative shall, as soon as possible after termination
Termination under Sub-Clause 15.2, determine and advise the Contractor of the value of the
Construction Documents, Plant, Materials, Contractor's Equipment and Works
and all sums then due to the Contractor as at the date of termination.
Payment after 15.4 After termination under Sub-Clause 15.2, the Employer shall not be liable to
Termination make any further payments to the Contractor until the costs of design,
execution, completion and remedying of any defects, damages for delay in
completion (if any), and all other costs incurred by the Employer, have been
established.
The Employer shall be entitled to recover from the Contractor the extra costs,
if any, of completing the Works after allowing for any sum due to the Contractor
under Sub-Clause 15.3. If there are no such extra costs, the Employer shall pay
any balance to the Contractor.
Bribes 15.5 If the Contractor, or any of his Subcontractors, agents or servants gives or offers
to give to any person any bribe, gift, gratuity or commission as an inducement
or reward:
(a) for doing or forbearing to do any action in relation to the Contract or any
other contract with the Employer, or
(b) for showing or forbearing to show favour or disfavour to any person in
relation to the Contract or to any other contract with the Employer,
then the Employer may, after having given 14 days' notice to the Contractor,
terminate the Contractor's employment under the Contract and expel him from
the Site, and the provisions of this Clause shall apply as if such termination and
expulsion had been made under Sub-Clause 15.2.

16 Default of Employer

Contractor's 16.1 If the Employer fails to pay the Contractor the amount due under any certificate
Entitlement to of the Employer's Representative, and fails to explain why the Contractor is not
Suspend Work entitled to such amount, within 21 days after the expiry of the time stated in
Sub-Clause 13.7 within which payment is to be made, except for any deduction
that the Employer is entitled to make under the Contract, the Contractor may
suspend work or reduce the rate of work after giving not less than 7 days' prior
notice to the Employer (with a copy to the Employer's Representative). Such
action shall not prejudice the Contractor's entitlements to payment under Sub-
Clause 13.8 and to terminate under Sub-Clause 16.2.
If the Contractor suspends work or reduces the rate of work, and the Employer
subsequently pays the amount due (including payment in accordance with Sub-
Clause 13.8), the Contractor's entitlement under Sub-Clause 16.2 shall lapse in
respect of such delayed payment, unless notice of termination has already been
given, and the Contractor shall resume normal working as soon as is reasonably
possible.

©FIDiC 1995
 If the Contractor suffers delay and/or incurs Cost as a result of suspending work
or reducing the rate of work in accordance with this Sub-Clause, the Contractor
shall give notice to the Employer's Representative. After receipt of such notice,
the Employer's Representative shall proceed in accordance with Sub-Clause 3.5
to agree or determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost plus reasonable profit, which shall be added to
the Contract Price,
and shall notify the Contractor accordingly.
Termination 16.2 If the Employer:
(a) fails to pay the Contractor the amount due under any certificate of the
Employer's Representative within 42 days after the expiry of the time
stated in Sub-Clause 13,7 within which payment is to be made (except for
any deduction that the Employer is entitled to make under the Contract),
(b) becomes bankrupt or insolvent, goes into liquidation, has a receiving or
administration order made against him, compounds with his creditors, or
carries on business under a receiver, trustee or manager for the benefit of
his creditors, or if any act is done or event occurs which (under any
applicable law) has a similar effect to any of these acts or events,
(c) consistently fails to meet the Employer's obligations under the Contract,
or
(d) assigns the Contract without the Contractor's consent,
or, if a prolonged suspension affects the whole of the Works as described in
Sub-Clause 8.10,
then the Contractor may terminate his employment under the Contract by giving
notice to the Employer, with a copy to the Employer's Representative. Such
notice shall take effect 14 days after the giving of the notice.
Cessation of Work 16.3 After termination under Sub-Clause 2.4 or Sub-Clause 16,2, the Contractor
and Removal of shall:
Contractor's (a) cease all further work, except for such work as may be necessary and
Equipment instructed by the Employer's Representative for the purpose of making safe
or protecting those parts of the Works already executed, and any work
required to leave the Site in a clean and safe condition,
(b) hand over all Construction Documents, Plant and Materials for which the
Contractor has received payment,
(c) hand over those other parts of the Works executed by the Contractor up to
the date of termination, and
(d) remove all Contractor's Equipment which is on the Site and repatriate all
his staff and labour from the Site.
Any such termination shall be without prejudice to any other right of the
Contractor under the Contract.
Payment on 16.4 After termination under Sub-Clause 16.2, the Employer shall return the
Termination performance security, and shall pay the Contractor an amount calculated and
certified in accordance with Sub-Clause 19.6 plus the amount of any loss or
damage, including loss of profit, which the Contractor may have suffered in
consequence of termination.

©FIDIC 1995
 17 Risk and Responsibility

Indemnity 17.1 The Contractor shall indemnify and hold harmless the Employer, the
Employer's Representative, their contractors, agents and employees from and
against all claims, damages, losses and expenses arising out of or resulting from
the Works, including professional services provided by the Contractor.
These indemnification obligations shall be limited to claims, damages, losses
and expenses which are attributable to bodily injury, sickness, disease or death,
or to injury to or destruction of physical property (other than the Works),
including consequential loss of use. Such obligations shall also be limited to
the extent that such claims, damages, losses or expenses are caused in whole
or in part by a breach of a duty of care, imposed by law on the Contractor or
anyone directly or indirectly employed by the Contractor.
Contractor's Care of 17.2 The Contractor shall take full responsibility for the care of the Works from the
the Works Commencement Date until the date of issue of the Taking-Over Certificate,
when responsibility shall pass to the Employer. If the Employer's
Representative issues a Taking-Over Certificate for any Section or part of the
Works, the Contractor shall cease to be responsible for the care of that Section
or part from the date of issue of such Taking-Over Certificate, when
responsibility shall pass to the Employer.
The Contractor shall take responsibility for the care of any outstanding work
which is required to be completed prior to the expiry of the Contract Period,
until the Employer's Representative confirms in writing that such outstanding
work has been completed.
If any loss or damage happens to the Works, arising from any cause other than
the Employer's risks listed in Sub-Clause 17.3, during the period for which the
Contractor is responsible, the Contractor shall rectify such loss or damage, at
his cost, so that the Works conform with the Contract. The Contractor shall also
be liable for any loss or damage to the Works caused by any operations carried
Out by the Contractor after the date of issue of the Taking-Over Certificate.
Employer's Risks 17.3 The Employer's risks are:
(a) war, hostilities (whether war be declared or not), invasion, act of foreign
enemies,
(b) rebellion, revolution, insurrection, or military or usurped power, or civil
war,
(c) ionising radiations, or contamination by radio-activity from any nuclear
fuel, or from any nuclear waste from the combustion of nuclear fuel,
radio-active toxic explosive, or other hazardous properties of any explosive
nuclear assembly or nuclear component of such assembly,
(d) pressure waves caused by aircraft or other aerial devices travelling at sonic
or supersonic speeds,
(e) riot, commotion or disorder, unless solely restricted to employees of the
Contractor or of his Subcontractors and arising from the conduct of the
Works,
(f) loss or damage due to the use or occupation by the Employer of any
Section or part of the Works, except as may be provided for in the Contract,
and
(g) any operation of the forces of nature against which an experienced
contractor could not reasonably have been expected to take precautions.

© FIDIC 1995
 Consequences of 17.4 The Contractor shall give notice, to the Employer's Representative, of an
Employer's Risks Employer's risk upon it being foreseen by, or becoming known to, the
Contractor. If an Employer's risk results in loss or damage, the Contractor shall
rectify such loss or damage to the extent required by the Employer's
Representative. If the Contractor suffers delay and/or incurs Cost as a result of
an Employer's risk, the Contractor shall give further notice to the Employer's
Representative. After receipt of such further notice the Employer's
Representative shall proceed in accordance with Sub-Clause 3.5 to agree or
determine:
(a) any extension of time to which the Contractor is entitled under Sub-
Clause 8.3, and
(b) the amount of such Cost, which shall be added to the Contract Price,
and shall notify the Contractor accordingly.
Contractor's Risks 17.5 The Contractor's risks are all risks other than the Employer's risks listed in Sub-
Clause 17.3.
Limitation of 17.6 The Contractor shall in no event be liable to the Employer, by way of indemnity
Liability or by reason of any breach of the Contract or in tort or otherwise, for loss of
use of any part (or all) of the Works or for loss of production, loss of profit or
loss of any contract or for any indirect special or consequential loss or damage
which may be suffered by the Employer in connection with the Contract. The
total liability of the Contractor to the Employer under the Contract shall not
exceed the Contract Price. Except that this Sub-Clause shall not limit the
liability of the Contractor:
(a) under Sub-Clauses 4.19, 4.20, 5.9, 8.6 and 11.4,
(b) under any other provisions of the Contract which expressly impose a
greater liability,
(c) in cases of fraud, wilful misconduct or illegal or unlawful acts, or
(d) in cases of acts or omissions of the Contractor which are contrary to the
most elementary rules of diligence which a conscientious contractor would
have followed in similar circumstances.

©FIDIC 1995
 18 Insurance
Insurance for 18.1 The Contractor shall effect professional indemnity insurance, which shall
Design insure the Contractor's liability by reason of professional negligence in the
design of the Works. Such insurance shall be for a limit of not less than the
amount specified in the Appendix to Tender.
The Contractor shall use his best endeavours to maintain such professional
indemnity insurance in full force and effect throughout the periods of his
liability, under the Contract and under the law of the Country. The Contractor
undertakes to give the Employer reasonable notice in the event of difficulty (if
any) in extending, renewing or reinstating such insurance.
Insurance for Works 18.2 The Contractor shall insure the Construction Documents, Plant, Materials and
and Contractor's Works in the joint names of the Employer, the Contractor and Subcontractors,
Equipment against all loss or damage. This insurance shall cover loss or damage from any
cause other than the Employer's risks listed in Sub-Clause 17.3 sub-paragraphs
(a), (b), (c) and (d) in so far as such insurance is readily obtainable. Such
insurance shall be for a limit of not less than the full replacement cost (including
profit) and shall also cover the costs of demolition and removal of debris. Such
insurance shall be in such a manner that the Employer and the Contractor are
covered from the date by which the evidence is to be submitted under Sub-
Clause 18.5(a), until the date of issue of the Taking-Over Certificate for the
Works. The Contractor shall extend such insurance to provide cover until the
date of issue of the Performance Certificate, for loss or damage for which the
Contractor is liable arising from a cause occurring prior to the issue of the
Taking-Over Certificate, and for loss or damage occasioned by the Contractor
or Subcontractors in the course of any other operations (including those under
Clauses 11 and 12).
The Contractor shall insure the Contractor's Equipment in the joint names of
the Employer, the Contractor and Subcontractors, against all loss or damage.
This insurance shall cover loss or damage from any cause other than the
Employer's risks listed in Sub-Clause 17.3 sub-paragraphs (a), (b), (c) and (d)
in so far as such insurance is readily obtainable. Such insurance shall be for a
limit of not less than the full replacement value (including delivery to Site).
Such insurance shall be in such a manner that each item of equipment is insured
while it is being transported to the Site and throughout the period it is on or
near the Site.
Insurance against 18.3 The Contractor shall insure against liability to third parties, in the joint names
Injury to Persons of the Employer, the Contractor and Subcontractors, for any loss, damage, death
and Damage to or bodily injury which may occur to any physical property (except things
Property insured under Sub-Clause 18.2) or to any person (except persons insured under
Sub-Clause 18.4), which may arise Out of the performance of the Contract and
occurring before the issue of the Performance Certificate. Such insurance shall
be for a limit of not less than the amount specified in the Appendix to Tender.
Insurance for 18.4 The Contractor shall effect and maintain insurance against losses and claims
Workers arising from the death or injury to any person employed by the Contractor or
any Subcontractor, in such a manner that the Employer and the Employer's
Representative are indemnified under the policy of insurance. For a
Subcontractor's employees, such insurance may be effected by the
Subcontractor, but the Contractor shall be responsible for compliance with this
Clause.

2_i 2_. ©FIDIC 1995

 General 18.5 Each insurance policy shall be consistent with the general terms agreed in
Requirements for writing prior to the Effective Date, and such agreemeot shall take precedence
Insurances over the provisions of this Clause.
The Contractor shall, within the respective periods stated in the Appendix to
Tender (calculated from the Commencement Date), submit to the Employer:
(a) evidence that the insurances described in this Clause have been effected,
and
(b) copies of the policies for the insurances described in Sob-Clauses 18.2 and
18.3.
When each premium has been paid, the Contractor shatt submit copy receipts
to the Employer. The Contractor shalt also, when providing such evidence,
policies and receipts to the Employer, notify the Employer's Representative of
so doing.
The Contractor shall effect all insurances for which he is responsible with
insurers and in terms approved by the Employer. Each policy insuring against
loss or damage shall provide for payments to be made in the currencies required
to rectify such loss or damage. Payments received from insurers shall be used
for the rectification of such loss or damage.
The Contractor (and, if appropriate, the Employer) shall comply with the
conditions stipulated in each of the insurance policies. The Contractor shall
make no material alteration to the terms of any insurance without the prior
approval of the Employer. If an insurer makes (or purports to make) any such
alteration, the Contractor shall notify the Employer immediately.
If the Contractor fails to effect and keep in force any of the insurances required
under the Contract, or fails to provide satisfactory evidence, policies and
receipts in accordance with this Sub-Clause, the Employer may, without
prejudice to any other right or remedy, effect insurance for the coverage relevant
to such default, and pay the premiums due. Such payments shall be recoverable
from the Contractor by the Employer, and may be deducted by the Employer
from any monies due, or to become due, to the Contractor.
Nothing in this Clause limits the obligations, liabilities or responsibilities of the
Contractor or the Employer, under the other terms of the Contract or otherwise.
Any amounts not insured or not recovered from the insurers shall be bome by
the Contractor and/or the Employer accordingly.

19 Force Majeure
Definition of Force 19.1 In this Clause, "force majeure" means an event beyond the control of the
Majeure Employer and the Contractor, which makes it impossible or illegal for a party
to perform, including but not limited to:
(a) act of God;
(b) war, hostilities (whether war be declared or not), invasion, act of foreign
enemies, mobilization, requisition, or embargo;
(c) rebellion, revolution, insurrection, or military or usurped power, or civil
war;
(d) contamination by radio-activity from any nuclear fuel, or from any nuclear
waste from the combustion of nuclear fuel, radio-active toxic explosive, or
other hazardous properties of any explosive nuclear assembly or nuclear
component of such assembly;

©rioic issS
 (e) riot, commotion or disorder, unless solely restricted to employees of the
Contractor or of his Subcontractors.
Effect of Force 19.2 Neither the Employer nor the Contractor shall be considered in default or in
Majeure Event contractual breach to the extent that performance of obligations is prevented by
a force majeure event which arises after the Effective Date.
Contractor's 19.3 Upon occurrence of an event considered by the Contractor to constitute force
Responsibility majeure and which may affect performance of his obligations, he shall promptly
notify the Employer's Representative, and shall endeavour to continue to
perform his obligations as far as reasonably practicable. The Contractor shall
also notify the Employer's Representative of any proposals, including any
reasonable alternative means for performance, but shall not effect such
proposals without the consent of the Employer's Representative.
Employer's 19.4 Upon occurrence of an event considered by the Employer to constitute force
Responsibility majeure and which may affect performance of his obligations, he shall promptly
notify the Contractor and the Employer's Representative, and shall endeavour
to continue to perform his obligations as far as reasonably practicable. The
Employer shall also notify the Employer's Representative and the Contractor
of any proposals, with the objectives of completing the Works and mitigating
any increased costs to the Employer and the Contractor.
Payment to 19.5 If, in consequence of force majeure, the Works shall suffer loss or damage, the
Contractor Contractor shall be entitled to have included, in an Interim Payment Certificate,
the Cost of work executed in accordance with the Contract, prior to the event
of force majeure. If the Contractor incurs additional Cost in complying with
Sub-Clause 19.3, such Cost shall be determined by the Employer's
Representative in accordance with the provisions of Sub-Clause 3.5 and shall
be added to the Contract Price.
Optional 19.6 Irrespective of any extension of time, if a force majeure event occurs and its
Termination, effect continues for a period of 182 days, either the Employer or the Contractor
Payment and may give to the other a notice of termination, which shall take effect 28 days
Release after the giving of the notice. If, at the end of the 28-day period, the effect of
the force majeure continues, the Contract shall terminate. If the Contract is
terminated under this Sub-Clause, Sub-Clause 2.4 or Sub-Clause 16.2, the
Employer's Representative shall determine the value of the work done and:
(a) the amounts payable for any work carried out for which a price is stated
in the Contract;
(b) the Cost of Plant and Materials ordered for the Works which have been
delivered to the Contractor, or of which the Contractor is liable to accept
delivery: such Plant and Materials shall become the property of (and be at
the risk of) the Employer when paid for by the Employer, and the
Contractor shall place the same at the Employer's disposal;
(c) any other Cost or liability which in the circumstances was reasonably
incurred by the Contractor in the expectation of completing the Works;
(d) the reasonable Cost of removal of Temporary Works and Contractor's
Equipment from the Site and the retum of such items to the Contractor's
works in his country (or to any other destination at no greater cost); and
(e) the reasonable Cost of repatriation of the Contractor's staff and labour
employed wholly in connection with the Works at the date of such
termination;
and issue an Interim Payment Certificate in accordance with Clause 13.

2
 Release from 19.7 If under the law of the Contract the Employer and the Contractor are released
Performance under from further performance, the sum payable by the Employer to the Contractor
the Law shall be the same as would have been payable under Sub-Clause 19.6 if the
Contract had been terminated under that Sub-Clause.

20 Claims, Disputes and Arbitration

Procedure for 20.1 If the Contractor intends to claim any additional payment under any Clause of
Claims these Conditions or otherwise, the Contractor shall give notice to the
Employer's Representative as soon as possible and in any event within 28 days
of the start of the event giving rise to the claim.
The Contractor shall keep such contemporary records as may be necessary to
substantiate any claim, either on the Site or at another location acceptable to
the Employer's Representative. Without admitting the Employer's liability, the
Employer's Representative shall, on receipt of such notice, inspect such records
and may instruct the Contractor to keep further contemporary records. The
Contractor shall permit the Employer's Representative to inspect all such
records, and shall (if instructed) submit copies to the Employer's
Representative.
Within 28 days of such notice, or such other time as may be agreed by the
Employer's Representative, the Contractor shall send to the Employer's
Representative an account, giving detailed particulars of the amount and basis
of the claim. Where the event giving rise to the claim has a continuing effect,
such account shall be considered as interim. The Contractor shall then, at such
intervals as the Employer's Representative may reasonably require, send further
interim accounts giving the accumulated amount of the claim and any further
particulars. Where interim accounts are sent to the Employer's Representative,
the Contractor shall send a final account within 28 days of the end of the effects
resulting from the event.
If the Contractor fails to comply with this Sub-Clause, he shall not be entitled
to additional payment.
Payment of Claims 20.2 The Contractor shall be entitled to have included in any Interim Payment
Certificate such amount for any claim as the Employer's Representative
considers due. If the particulars supplied are insufficient to substantiate the
whole of the claim, the Contractor shall be entitled to payment for such part of
the claim as has been substantiated.
Dispute 20.3 Unless the member or members of the Dispute Adjudication Board have been
Adjudication Board previously mutually agreed upon by the parties and named in the Contract, the
parties shall, within 28 days of the Effective Date, jointly ensure the
appointment of a Dispute Adjudication Board. Such Dispute Adjudication
Board shall comprise suitably qualified persons as members, the number of
members being either one or three, as stated in the Appendix to Tender. If the
Dispute Adjudication Board is to comprise three members, each party shall
nominate one member for the approval of the other party, and the parties shall
mutually agree upon and appoint the third member (who shall act as chairman).
The terms of appointment of the Dispute Adjudication Board shall:
(a) incorporate the model terms published by the Fédération Intemationale des
Ingenieurs-Conseils (FIDIC),
(b) require each member of the Dispute Adjudication Board to be, and to
remain throughout the appointment, independent of the parties,

C FIDIC 1995
(c) require the Dispute Adjudication Board to act impartially and in
accordance with the Contract, and
(d) include undertakings by the parties (to each other and to the Dispute
Adjudication Board) that the members of the Dispute Adjudication Board
shall in no circumstances be liable for breach of duty or of contract arising
out of their appointment; the parties shall indemnify the members against
such claims.
The terms of the remuneration of the Dispute Adjudication Board, including
the remuneration of each member and of any specialist from whom the Dispute
Adjudication Board may require to seek advice, shall be mutually agreed upon
by the Employer, the Contractor and each member of the Dispute Adjudication
Board when agreeing such terms of appointment. In the event of disagreement,
the remuneration of each member shall include reimbursement for reasonable
expenses, a daily fee in accordance with the daily fee established from time to
time for arbitrators under the administrative and financial regulations of the
Intemational Centre for Settlement of Investment Disputes, and a retainer fee
per calendar month equivalent to three times such daily fee.
The Employer and the Contractor shall each pay one-half of the Dispute
Adjudication Board's remuneration in accordance with its terms of
remuneration. If, at any time, either party shall fail to pay its due proportion of
such remuneration, the other party shall be entitled to make payment on his
behalf and recover it from the party in default.
The Dispute Adjudication Board's appointment may be terminated only by
mutual agreement of the Employer and the Contractor. The Dispute
Adjudication Board's appointment shall expire when the discharge referred to
in Sub-Clause 13.12 shall have become effective, or at such other time as the
parties may mutually agree.
If, at any time, the parties so agree, they may appoint a suitably qualified person
to replace (Or to be available to replace) any or all members of the Dispute
Adjudication Board. The appointment will come into effect if a member of the
Dispute Adjudication Board declines to act or is unable to act as a result of
death, disability, resignation or termination of appointment. If a member so
declines or is unable to act, and no such replacement is available to act, the
member shall be replaced in the same manner as such member was to have been
nominated.
If any of the following conditions apply, namely:
(a) the parties fail to agree upon the appointment of the sole member of a one-
person Dispute Adjudication Board within 28 days of the Effective Date,
(b) either party fails to nominate an acceptable member, for the Dispute
Adjudication Board of three members, within 28 days of the Effective
Date,
(c) the parties fail to agree upon the appointment of the third member (to act
as chairman) within 28 days of the Effective Date, or
(d) the parties fail to agree upon the appointment of a replacement member of
the Dispute Adjudication Board within 28 days of the date on which
a member of the Dispute Adjudication Board declines to act or is unable
to act as a result of death, disability, resignation or termination of
appointment,
then the person or administration named in the Appendix to the Tender shall,
after due consultation with the parties, nominate such member of the Dispute
Adjudication Board, and such nomination shall be final and conclusive.

©FLDIC 1995
 Procedure for 20.4 If a dispute arises between the Employer and the Contractor in connection with,
Obtaining Dispute or arising out of, the Contract or the execution of the Works, including any
Adjudication dispute as to any opinion, instruction, determination, certification or valuation
Board's Decision of the Employer's Representative, the dispute shall initially be referred in
writing to the Dispute Adjudication Board for its decision, with a copy to the
other party. Such reference shall state that it is made under this Sub-Clause. The
parties shall promptly make available to the Dispute Adjudication Board all
such information, access to the Site, and appropriate facilities, as the Dispute
Adjudication Board may require for the purposes of rendering its decision. No
later than the fifty-sixth day after the day on which it received such reference,
the Dispute Adjudication Board, acting as a panel of expert(s) and not as
arbitrator(s), shall give notice of its decision to the parties. Such notice shall
include reasons and shall state that it is given under this Sub-Clause.
Unless the Contract has already been repudiated or terminated, the Contractor
shall, in every case, continue to proceed with the Works with all due diligence,
and the Contractor and the Employer shall give effect forthwith to every
decision of the Dispute Adjudication Board, unless and until the same shall be
revised, as hereinafter provided, in an amicable settlement or an arbitral award.
If either party is dissatisfied with the Dispute Adjudication Board's decision,
then either party, on or before the twenty-eighth day after the day on which it
received notice of such decision, may notify the other party of its dissatis-
faction. If the Dispute Adjudication Board fails to give notice of its decision on
or before the fifty-sixth day after the day on which it received the reference,
then either party, on or before the twenty-eighth day after the day on which the
said period of fifty-six days has expired, may notify the other party of its
dissatisfaction. In either event, such notice of dissatisfaction shall state that it
is given under this Sub-Clause, such notice shall set out the matters in dispute
and the reason(s) for dissatisfaction and, subject to Sub-Clauses 20.7 and 20.8,
no arbitration in respect of such dispute may be commenced unless such notice
is given.
If the Dispute Adjudication Board has given notice of its decision as to a matter
in dispute to the Employer and the Contractor and no notice of dissatisfaction
has been given by either party on or before the twenty-eighth day after the day
on which the parties received the Dispute Adjudication Board's decision, then
the Dispute Adjudication Board's decision shall become final and binding upon
the Employer and the Contractor.
Amicable Settlement 20.5 Where notice of dissatisfaction has been given under Sub-Clause 20.4, the
parties shall attempt to settle such dispute amicably before the commencement
of arbitration. Provided that unless the parties agree otherwise, arbitration may
be commenced on or after the fifty-sixth day after the day on which notice of
dissatisfaction was given, even if no attempt at amicable settlement has been
made.
Arbitration 20.6 Any dispute in respect of which:
(a) the decision, if any, of the Dispute Adjudication Board has not become
final and binding pursuant to Sub-Clause 20.4, and
(b) amicable settlement has not been reached,
shall be finally decided by intemational arbitration. The arbitration rules under
which the arbitration is conducted, the institution to nominate the arbitrator(s)
or to administer the arbitration rules (unless named therein), the number of

OFIDIC 1995 2.14

 arbitrators, and the language and place of such arbitration shall be as set out in
the Appendix to Tender. The arbitrator(s) shall have full power to open up,
review and revise any decision of the Dispute Adjudication Board.
Neither party shall be limited, in the proceedings before such arbitrator(s), to
the evidence or arguments previously put before the Dispute Adjudication
Board to obtain its decision.
Arbitration may be commenced prior to or after completion of the Works. The
obligations of the parties and the Dispute Adjudication Board shall not be
altered by reason of the arbitration being conducted during the progress of the
Works.
Failure to Comply 20.7 Where neither party has given notice of dissatisfaction within the period stated
with Dispute in Sub-Clause 20.4 and the Dispute Adjudication Board's related decision, if
Adjudication any, has become final and binding, either party may, if the other party fails to
Board's Decision comply with such decision, and without prejudice to any other rights it may
have, refer the failure itself to arbitration under Sub-Clause 20.6. The provisions
of Sub-Clauses 20.4 and 20.5 shall not apply to any such reference.
Expiry of Dispute 20.8 When the appointment of the Dispute Adjudication Board and of any
Adjudication replacement has expired, any such dispute referred to in Sub-Clause 20.4 shall
Board's be finally settled by arbitration pursuant to Sub-Clause 20.6. The provisions of
Appointment Sub-Clauses 20.4 and 20.5 shall not apply to any such reference.

©FID!C 1995
Index Sub-Clause Page

Access, Right of 12.7 27

Access Route 4.12 10
Access to and Possession of the Site 2.2 6
Advance Payments 13.2 28
Agreement, Contract 1.5 4
Amicable Settlement 20.5 45
Arbitration 20.6 45

Bribes 15.5 36

Care of the Works 17.2 38

Cessation of Work after Termination 16.3 37
Claims, Payment of 20.2 43
Claims, Procedure for 20.1 43
Commencement of Works 8.1 20
Communications 1.8 4
Conduct, Disorderly 6.10 18
Confidential Details 1.12 5
Contract Period, Extension of 12.3 27
Contract Price 13.1 28
Contractor to Search 12.8 27
Contractor's Entitlement to Suspend Work 16.1 36
Contractor's Equipment 4.16 12
Contractor's Representative 4.3 8
Contractor's Undertaking 5.3 15

Defective Work. Removal of 12.5 27

Defects, Failure to Remedy 12.4 27
Defects, Remedying 12.1 26
Definitions 1.1
Delay, Liquidated Damages for 8.6 21
Delays Caused by Authorities 8.4 21
Delivety to Site 7.2 18
Discharge 13.12 32
Dispute Adjudication Board 20.3 43
Dispute Adjudication Board's Appointment, Expiry of 20.8 46
Dispute Adjudication Board's Decision, Failure to Comply with 20.7 46
Dispute Adjudication Board's Decision, Procedure for Obtaining 20.4 45
Disputes, Amicabte Settlement of 20.5 45
Disputes, Arbitration of 20.6 45
Disputes, Dispute Adjudication Board's Decision on 20.4 45
Documents, Contractor's Use of Employer's 1.11 5
Documents, Employer's Use of Contractor's 1.10 5
Documents on Site 1.7 4
Documents, Preparation of Construction 5.2 14
Documents, Priority of 1.6 4
Documents, Provision of Construction 1.9 5
Drawings, As-Built 5.6 15

Electricity, Water and Gas 4.19 12

Electronic Transmission 1.8 4
Employer Supplied Machinery and Materials 4.20 12
Employer's Liability, Cessation of 13.14 33
Employer's Representative, Requirements for 3.2 7
Employer's Representative's Authority to Delegate 3.3 7
Employer's Representative's Duties and Authority 3.1 6
Index Sub-Clause Page

Employer's Representative's Instructions 3.4 7

Employer's Representative to Attempt Agreement 3.5 7
Environment, Protection of 4.18 12
Error by Contractor 5.8 16
Error by Employer's Representative 3.4 7
Execution, Manner of 7.1 Ig
Extension of Contract Period 12.3 27
Extension of Time for Completion 8.3 20

Final Payment Certificate, Application for 13.11 32

Final Payment Certificate, Issue of 13.13 33
Force Majeure, Contractor's Responsibility afier 19.3 42
Force Majeure, Definition of 19.1 41
Force Majeure, Employer's Responsibility afier 19.4 42
Force Majeure Event, Effect of 19.2 42
Force Majeure: Optional Termination, Payment and Release 19.6 42
Force Majeure, Payment to Contractor afier 19.5 42
Force Majeure: Release from Performance under the Law 19.7 43
Foreign Currency, Calculation of Payments in 13.15 33
Fossils 4.24 13

Headings 1.2 4
Health and Safety 6.7 17

Indemnity 17.1 31
Inspection 7.3 19
Instructions of Employer's Representative 3.4 7
Insurance against Injury to Persons and Damage to Property 18.3 40
Insurance for Design 18.1 39
Insurance for Workers 18.4 40
Insurance for Works and Contractor's Equipment 18.2 40
Insurances, General Requirements for 18.5 40
Interim Payment Certificates, Application for 13.3 29
Interim Payment Certificates, Issue of 13.6 31
Interpretation 1.3 4

Joint and Several Liability 1.14 5

Labour and Staff, Engagement of 6.1 17

Labour and Staff, Facilities for 6.6 17
Labour Laws 6.4 17
Labour, Wages and Conditions of 6.2 17
Language 1.4 4
Law 1.4 4
Laws, Compliance with 1.13 5
Legislation, Changes in 13.16 33
Liability, Joint and Several 1.14 5
Liability, Limitation of 17.6 39
Licences, Permits or Approvals 2.3 6
Liquidated Damages for Delay 8.6 21
Index Sub-Clause Page

Machinery and Materials Supplied by the Employer 4.20 12

Marginal Notes 1.2 4
Materials and Plant, Ownership of 7.6 19
Materials and Plant, Payment for 13.5 30

Notice to Correct 15.1 35

Obligations, Contractor's General 4.1 7

Obligations, Design 5.1 14
Obligations, Employer's General 2.1 6
Obligations, Unfulfilled 12.10 28
Operation and Maintenance Manuals 5.7 16
Outstanding Work, Completion of 12.1 26

Patent Rights 5.9 16

Payment 13.7 31
Payment, Delayed 13.8 31
Payment in Applicable Currencies 14.4 34
Performance Certificate 12.9 28
Performance Security 4.2 8
Permits, Licences or Approvals 2.3 6
Personnel, Contractor's 6.9 18
Persons in the Service of Others 6.3 17
Plant and Materials, Ownership of 7.6 19
Plant and Materials, Payment for 13.5 30
Programme 4.14 II
Progress, Rate of 8.5 21
Progress Reports 4.15 11

Provisional Sums 14.5 34

Quality Assurance 4.8 9

Regulations and Laws, Compliance with 1.13 5

Regulations, Technical 5.4 15
Rejection 7.5 19
Remedying Defects 12.1 26
Remedying Defects, Cost of 12.2 26
Removal of Contractor's Equipment after Termination 16.3 37
Reports on Progress 4.15 II
Representative, Contractor's 4.3 8
Representative, Employer's 3.1 6
Retention Money, Payment of 13.9 31
Rights of Way and Facilities 4.13 II
Risks, Contractor's 17.5 39
Risks, Employer's 17.3 38
Risks, Employer's, Consequences of 17.4 39

Safety 6.7 17
Safety Precautions 4.17 12
Samples 5.5 15
Schedule of Payments 13.4 29
Security, Performance 4.2 8

22J
Index Sub-Clause Page

Setting Out 4.7 9

Site, Access to and Possession of 2.2 6
Site, Clearance of 4.21 13
Site, Contractors Operations on 4.23 13
Site Data 4.9 10
Site, Delivery to 7.2 18
Site, Security of 4.22 13
Staff and Labour, Engagement of 6.1 17
Staff and Labour, Facilities for 6.6 17
Standards and Regulations, Technical 5.4 15
Statement at Completion 13.10 32
Statement, Contractors Monthly 13.3 29
Statement, Final 13.11 32
Statutes, Regulations and Laws, Compliance with 1.1 35
Sub-Surface Conditions, Unforeseeable 4.11 10
Subcontractors 4.5 9
Subcontractor's Obligations, Assignment of 4.6 9
Superintendence, Contractor's 6.8 18
Suspension, Consequences of 8.8 22
Suspension of Work 8.7 21
Suspension, Payment for Plant and Materials in Event of 8.9 22
Suspension, Prolonged 8.10 22
Suspension, Resumption of Work after 8.11 22

Taking-Over Certificate 10.1 23

Technical Standards and Regulations 5.4 15
Terminate, Employer's Entitlement to 2.4 6
Termination by Contractor 16.2 37
Termination by Contractor, Payment on 16.4 37
Termination by Employer 15.2 35
Termination by Employer, Payment after 15.4 36
Termination by Employer, Valuation at Date of 15.3 36
Testing 7.4 19
Tests after Completion, Delayed 11.2 25
Tests after Completion, Failure to Pass 11.4 26
Tests after Completion: Obligations 11.1 25
Tests after Completion: Retesting 11.3 25
Tests, Further 12.6 27
Tests on Completion, Delayed 9.2 23
Tests on Completion, Failure to Pass 9.4 23
Tests on Completion, Interference with 10.3 24
Tests on Completion: Obligations 9.1 23
Tests on Completion: Retesting 9.3 23
Time for Completion 8.2 20
Time for Completion, Extension of 8.3 20

Unforeseeable Sub-Surface Conditions 4.11 10

Use by the Employer 10.2 24

Value Engineering 14.2 34

Variation Procedure 14.3 34
Variations: Right to Vary 14.1 34

Water, Electricity and Gas 4.19 12

Working Hours 6.5 17
Works, Contractor's Care of 17.2 38
Works, Co-ordination of 4.4 9
Works, Matters Affecting the Execution of 4.10 10
 .
- FEDERATION INTERNATIONALE DES INOENIEIJRS-CONSEILS
INTERNATIONAL FEDERATION OF CONSIJLTINO ENGINEERS
STIONALE VEREINIGUNO BERATENDER INOENIEURE
0ACION INTERNACIONAL DE INGENIEROS CONSULTORES

CONDITIONS OF CONTRACT FOR

DESIGN - BUILD AND TURNKEY

PART II GUIDANCE FOR THE PREPARATION OF

CONDITIONS OF PARTICULAR APPLICATION

IRST EDITION 1995

BN 2-88432-010-5

213
CONTENTS

225
INTRODUCTION
1 THE CONTRACT 226

2 THE EMPLOYER 228

3 THE EMPLOYER'S REPRESENTATIVE 228
4 THE CONTRACTOR 229
5 DESIGN 232
6 STAFF AND LABOUR 233
7 PLANT, MATERIALS AND WORKMANSHIP 234
8 COMMENCEMENT, DELAYS AND SUSPENSION 235
9 TESTS ON COMPLETION 235
10 EMPLOYER'S TAKING OVER 236
11 TESTS AFTER COMPLETION 236
12 DEFECTS LIABILITY 236
13 CONTRACT PRICE AND PAYMENT 237
14 VARIATIONS
245
15 DEFAULT OF CONTRACTOR
246
16 DEFAULT OF EMPLOYER
246
17 RISK AND RESPONSIBILITY
246
18 INSURANCE
246
19 FORCE MAJEURE
248
20 CLAIMS, DISPUTES AND ARBITRATION
248
ANNEXES - FORMS OF SECURITY
250

©FIDIC 1995 224.

INTRODUCTION
The terms of the Conditions of Contract for Design-Build and Turnkey have been prepared by the Fédération
Internationale des lngénieurs-Conseils (FIDIC) and are recommended for general use for the purpose of the
design and construction of works where tenders are invited on an international basis; with minor modifications,
the Conditions are also suitable for use on domestic contracts. Under the usual arrangements for a design-build
contract, the Contractor is responsible for the design and provision, in accordance with the Employer's
requirements, of works which may include any combination of engineering (including civil, mechanical,
electrical, etc) and building works; and interim payments are made as construction proceeds.
The Conditions are also intended for use on turnkey contracts, under which the Employer's requirements usually
include provision of a fully-equipped facility, ready for operation (at the turn of the "key"); such contracts are
often contractor-financed.
The version in English of the Conditions is considered by FIDIC as the official and authentic text for the
purposes of translation.
In the preparation of the Conditions it was recognised that, while there are many sub-clauses which will be
generally applicable, there are some sub-clauses which must necessarily vary to take account of the
circumstances relevant to the particular contract. The sub-clauses which were considered to be applicable to
the majority of contracts have been presented in Part I - General Conditions, which will facilitate their
incorporation into the contract. Part I - General Conditions and Part II - Conditions of Particular Application
will together comprise the Conditions goveming the rights and obligations of the parties. It will be necessary
to prepare the Part II for each individual contract, taking particular account of the references to Part II which
are contained in some sub-clauses in Part I.
Part I - General Conditions was prepared on the following basis:
(i) interim payments will be made as construction proceeds: example wording for contractor-financed
contracts is proposed in this Part II;
(ii) if the wording in Part I necessitates further information, the sub-clause makes reference to that information
being contained in the Appendix to Tender: either prescribed by the Employer or inserted by the Tenderer;
(iii) if a sub-clause in Part I concerns a matter on which different terms could apply on different contracts, the
principles applied in writing the sub-clause were:
(a) users would find it more convenient to delete (or not invoke) provisions which they did not want to
apply, than to write additional text (in Part II) if Part I did not cover their requirements; or
(b) in cases where the application of (a) was thought to be inappropriate, the sub-clause contains the
provisions which were considered to apply to the option most often used.
It should be noted that, because of the application of (a), some of the provisions contained in Part I should not
be taken to be the recommended provisions for an apparently-typical contract. The Conditions of Contract must
be prepared for each tender document individually, by personnel with the relevant skills.
The guidance hereafter is intended to assist writers of Part II by giving options for various sub-clauses where
appropriate. As far as possible, example wording is included, in italics; in some cases, however, only an aide-
memoire is given. Before incorporating any example wording, it must be checked to ensure that it is wholly
suitable for the particular circumstances; if not, it must be amended. Where example wording is amended, and
in all cases where other amendments or additions are made, care must be taken to ensure that no ambiguity is
created, either with Part I or between the clauses in Part II.
FIDIC have published a document entitled "Tendering Procedure" which presents a systematic approach to the
selection of tenderers and the obtaining and evaluation of tenders; the second edition was published in 1994.
The document is intended to assist the Employer to receive sound competitive tenders with a minimum of
qualifications. FIDIC also intend to publish a guide to the use of these Conditions of Contract for Design-Build
and Turnkey.

22 ©FiDiC 995
THE PREPARATION OF CONDITIONS OF PARTICULAR
APPLICATION
Clause 1 - The Contract
The tender documents should be prepared on behalf of the Employer by suitably-qualified engineers who are
familiar with his requirements and with the technical aspects of the required works. The tender documents
issued to tenderers will consist of the Conditions of Contract, the Employer's Requirements, and the Tender
and Schedules for completion by the Tenderer. In addition, each of the Tenderers should receive the data
referred to in Sub-Clause 4.9, and the Instructions to Tenderers to advise them of any matters which the
Employer wishes them to include in their Proposal but which do not form part of the Employer's Requirements
for the Works. When the Employer accepts the Tender, the Contract (which then becomes effective) includes
such Proposal and the completed Schedules.
The Employer's Requirements should specify the particular requirements for the completed Works, including
quality and scope, and may require the Contractor to train personnel and/or to supply certain items, such as
consumables which could be listed in a Schedule. The matters referred to in some or all of the following Sub-
Clauses might be included:
1.9 Number of copies (and required extent) of Construction Documents
4.4 Other contractors (and others) on the Site
4.7 Setting-out points, lines and levels of reference
4.14 Periods for any specified submissions, approvals and consents
4.18 Environmental constraints
4.19 Electricity, water, gas and other services available on the Site
4.20 Employer supplied machinery and materials
5.1 Criteria for design personnel
5.2 Extent, and procedures for submission and pre-construction review, of Construction Documents
5.4 Technical standards and building regulations
5.5 Extent, and procedures for submission and pre-construction review, of samples
5.6 As-built drawings and other records of the Works
5.7 Operation and maintenance manuals
6.6 Facilities for the Employer's and Employer's Representative's personnel
7.1 Manner of execution
7.4 Testing during manufacture and/or construction
9.1 Tests on Completion
11.1 Tests after Completion
14.5 Provisional Sums
The Appendix to Tender, based on the example form herein, should be prepared by the Employer, with the
elements completed to the extent of his requirements. The Employer may also be able to anticipate the data he
requires from Tenderers, and include a questionnaire in the Schedules.
The Instructions to Tenderers may need to specify any constraints on the completion of the Appendix to Tender
and/or Schedules, and/or to specify the extent of other information which the Tenderer is to include with his
Tender. The matters referred to in some or all of the following Sub-Clauses might be included:

©F1IJ1C 995
 4.3 Contractor's Representative (name and curriculum vitae)
4.8 Quality Assurance system
4.14 Programming system (precedence networking techniques)
7.4 Testing during manufacture and/or construction
9.1 Tests on Completion
11.1 Tests after Completion
18 Insurances
20 Resolution of disputes
Turnkey contracts typically include design, construction, fixtures, fittings and equipment (f.f.e.), the scope of
which should be defined in the Employer's Requirements. Full consideration should be given to detailed
requirements, such as the extent to which the Works are to be fully equipped, ready for operation, with spare
parts and consumables provided for a stated period's operation by the Employer. In addition, the Contractor
may be required to operate the Works, either for a few months' commissioning period, or for some years'
operation on a build-operate-transfer contract.
Understandably, tenderers are often reluctant, in the face of extensive competition, to incur great expense in the
preparation of tender designs. When preparing the Instructions to Tenderers, thought should be given as to the
extent of detail which tenderers can realistically be expected to prepare and include in their Proposals.
Consideration should be given to offering some remuneration to tenderers if they, in order to provide a
responsive tender, have to undertake studies or carry Out design work of a conceptual nature.

Sub-Clause 1.1 - Definitions

It may be necessary to amend some of the definitions; for example:
1.1.3.1 the Base Date could be defined as a particular calendar date
1.1.3.5 a period other than a year may be required, for remedying any defects
1.1.5.2 a different currency may be required to be the contract Local Currency
1.1.5.3 payments in a Foreign Currency may not be acceptable
1.1.6.11 all parts of a cross-border Site may not be located in the same Country

Sub-Clause 1.5 - Contract Agreement

The form of Agreement should be included in the tender documents as an annex to Part II. If tender negotiations
have been lengthy, it may be considered advisable for the Agreement to include definitions of the details of the
Contract Price and/or of the dates defined in Sub-Clause 1.1.3. The parties should ascertain whether the law
necessitates an Agreement.

Sub-Clause 1.6 - Priority of Documents

An order of precedence is usually necessary, in case a conflict is subsequently found among the Contract
documents. If no order of precedence is to be prescribed, this Sub-Clause may be varied:
EXAMPLE
Delete the text of Sub-Clause 1.6 and substitute:
The several documents forming the Contract are to be taken as mutually explanatory of one another. In
the case of ambiguities or discrepancies, the priority shall be that accorded by law. The Employer's
Representative has authority to issue any instruction which he considers necessary in explanation of such
ambiguities or discrepancies.

© FLLMC 1995
Sub-Clause 1.10 - Employer's Use of Contractor's Documents
Additional provisions may be required, if all rights to particular items of computer software (for example) are
to be assigned to the Employer. The wording of such provisions should take account of the applicable law.

Sub-Clause 1.14 - Joint and Several Liability

For a major tumkey contract, detailed requirements for the joint venture may need to be specified; for example,
it may be desirable for each member to produce a parent company guarantee. Requirements which apply prior
to the Contract becoming effective should be included in the Instructions to Tenderers. The Employer will wish
the leader of the joint venture to be appointed at an early stage, providing a single point of contact thereafter,
and will not wish to be involved in a dispute between the members of a joint venture. The Employer should
scrutinise the joint venture agreement carefully, and it may need to be approved by the project's financing
institutions. It may be necessary to review the effect of this Sub-Clause in relation to the particular legal
personality which the applicable law may give to joint ventures.

Additional Sub-Clause - Details to be Confidential

If confidentiality is required, an additional sub-clause may be added:
EXAMPLE SUB-CLAUSE
The Contractor shall treat the details of the Contract as private and confidential, except to the extent
necessary to carry out his obligations under it. The Contractor shall not publish, permit to be published,
or disclose any particulars of the Contract in any trade or technical paper or elsewhere without the
previous consent in writing of the Employer and at the Employer's sole discretion.

Clause 2 - The Employer

Sob-Clause 2.2 - Access to and Possession of the Site

It may be essential for the Contractor to have early access to the Site for the purposes of survey and sub-surface
investigations. If right of access cannot be granted, both early and thereafter exclusively, details should be given
in the Employer's Requirements.

Clause 3 - The Employer's Representative

Sub-Clause 3.1 - Employer's Representative's Duties and Authority
Any requirements for Employer's approval should be set Out in Part II:
EXAMPLE
The Employer's Representative shall obtain the specific approval of the Employer before taking action
under the following Sub-Clauses of the Conditions of Contract:
(a) Sub-Clause (insert number; describe action, unless all require approval)
(b) Sub-Clause (insert number; describe action, unless all require approval)
This list should be extended or reduced as necessary. If the obligation to obtain the approval of the Employer
only applies beyond certain limits (monetary or otherwise), the example wording should be varied.

©FTDIC 1995
Additional Sub-Clause - Management Meetings
EXAMPLE SUB-CLAUSE
Either the Employer's Representative or the Contractor's Representative may require the other to attend
a management meeting. The business of each management meeting shall he to review the anticipated
arrangements for future work and to resolve any matters raised in accordance with this Sub-Clause. The
Employer's Representative shall record the business of management meetings and provide copies of this
record to those attending the meeting and to the Employer. The responsibility of the parties for any actions
to he taken shall he included in such record and shall, if not agreed in accordance with the Contract, he
decided by the Employer's Representative.
The Contractor's Representative shall notify the Employer's Representative at the earliest opportunity of
specific likely future events or circumstances which may adversely affect the work, increase the Contract
Price or delay the execution of the Works. The Employer's Representative may require the Contractor to
submit an estimate of the anticipated effect of the future event or circumstances, and/or a proposal under
Sub-Clause 14.3. The Contractor shall submit such estimate and/or proposal as soon as practicable. The
Contractor's Representative shall co-operate with the Employer's Representative in making and
considering proposals to mitigate the effect of any such event or circumstances, and in carrying out
instructions of the Employer's Representative.

Clause 4 - The Contractor

Sub-Clause 4.1 - General Obligations
The Contractor is required to check the design criteria and calculations (if any) included in the Employer's
Requirements. It may be necessary for an outline design to be prepared, prior to the preparation of the tender
documents, in order (for example) to establish the feasibility of the project. Tenderers should be advised of the
extent to which such design is a suggestion or a requirement. It may also be necessary to amend the second
sentence of the Tender so that the Tenderer not only checks the Employer's design, but also takes on full
responsibility for it. Altematively, a reasonable period (from the Commencement Date) could be specified for
the Contractor to check such design, after which he assumes full responsibility for it, subject to permitted
exceptions.

Sub-Clause 4.2 - Performance Security

The acceptabk form(s) of performance security should be included in the tender documents, annexed to Part II.
Example forms are annexed to this document as Annex A and Annex B; the alternative of an insolvency
guarantee may be considered appropriate in certain cases. These example forms and the wording of the Sub-
Clause may have to be amended to comply with the law applicable to the Contract.
EXAMPLE
After the second sentence of Sub-Clause 4.2, add:
if the performance security is in the form of a bank guarantee, it shall be issued either (a) by a bank located
in the Country, or (b) directly by aforeign bank acceptable to the Employer, if the performance security
is not in the form of a bank guarantee, it shall be furnished by an institution registered, or licensed to do
business, in the Country.
For a turnkey contract, the Contractor could alternatively be required to provide a performance bond
guaranteeing the due and proper completion of the Works, without specifying the amounts or currencies.

©FIEIIC 995
Sub-Clause 4.3 - Contractor's Representative
If the Representative is known at the time of submission of the Tender, the Proposal can include the
Representative's name; however, the Tenderer may wish to propose alternatives, especially if the contract award
seems likely to be delayed. If the ruling language is not the same as the language for day to day communications
(under Sub-Clause 1.4), or if for any other reason it is necessary to stipulate that the Contractor's
Representatives shall be fluent in a particular language, one of the following sentences may be added.
EXAMPLE
At the end of Sub-Clause 4.3, add:
The Contractor's Representative and such persons shall also he fluent in (insert name of language)
EXAMPLE
At the end of Sub-Clause 4.3, add:
If the Contractor's Representative, or such persons, is not fluent in (insert name of language), the
Contractor shall make a competent interpreter available during all working hours.

Sub-Clause 4.4 - Co-ordination of the Works

If the Employer knows the particular requirements relating to the presence of other contractors, details should
be included in the Employer's Requirements. If the work is let under several separate contracts, it may be
appropriate for the Employer's Requirements to specify that the Contractor shall be responsible for co-
ordinating his work with that of other contractors. However, if the Contractor is to have responsibility to co-
ordinate the work of other contractors, he should be given the power to do so in some effective way. It will
also be necessary for him to know in advance what he is going to co-ordinate, with whom and when.

Sub-Clause 4.5 - Subcontractors

The wording in Part I includes the conditions which will usually apply. If less (or no) consent is required, some
(or all) of sub-paragraphs (a) to (d) may be deleted, or qualified in Part II:
EXAMPLE
Prior consent shall not he required for minor details where the value of the subcontract is less than
(amount to be stated; alternatively:) 0.01% of the Contract Price.
A sentence may be added to increase the extent to which consent is required:
EXAMPLE
The prior consent of the Employer's Representative shall he obtained to the suppliers of the following
Materials: (insert details: for example, manufactured or prefabricated items)

Sub-Clause 4.6 - Assignment of Subcontractor's Obligations

If the Contractor is required to assign his right to subsequently make a claim against the Subcontractor for
defective performance, it may be appropriate for the terms of the assignment to entitle the Contractor to require
the Employer io make such claim on the Contractor's behalf.

Sub-Clause 4.8 - Quality Assurance

The wording in Part I imposes the requirement of a quality assurance system in accordance with details stated
in the Contract (in Part II, the Employer's Requirements or the Contractor's Proposal). If no such system is
appropriate, this Sub-Clause may be deleted.

©FiDiC 1995
Sub-Clause 4.11 - Unforeseeable Sub-Surface Conditions
In the case of major sub-surface works, the allocation of the risk of sub-surface conditions is an aspect which
should be considered when tender documents are being prepared. If this risk is to be shared between the parties,
the Sub-Clause may be amended:
EXAMPLE
Delete sub-paragraph (b) of Sub-Clause 4.11 and substitute:
(b) the additional Cost due to such conditions per cent ( %) of which shall be added to
the Contract Price (the balance percent of such Cost shall be borne by the Contractor),

Sub-Clause 4.14 - Programme

The wording in Part I specifies that the programme uses precedence networking techniques, which may not be
appropriate for some types of Works; for example, linear programmes (time-chainage charts) may be preferable
for tunnels. It may therefore be considered necessary to amend the Sub-Clause, and/or to specify detailed
electronic data-processing requirements.

Sub-Clause 4.16 - Contractor's Equipment

If the Contractor is not to provide all the Contractor's Equipment necessary to complete the Works, the
Employer's obligations should be specified (under Sub-Clause 4.20, for example). If vesting of Contractor's
Equipment is required, further paragraphs may be added, subject to their being consistent with the applicable
law:
EXAMPLE
At the end of Sub-Clause 4.16, add the following paragraphs:
Contractor's Equipment which is owned by the Contractor (either directly or indirectly) shall be deemed
to be the property of the Employer with effect from its time of arrival on the Site. The vesting of such
property in the Employer shall not:
(a) affect the responsibility or liability of the Employer,
(h) prejudice the right of the Contractor to the sole use of such Contractor's Equipment for the purpose
of the Works, or
(c) affect the Contractor's responsibility to operate and maintain the same under the provisions of the
Contract.
The property in each item shall be deemed to revest in the Contractor with effect from the time he is entitled
to remove it from the Site, or when the Employer's Representative issues the Taking-Over Certificate for
the Works, whichever occurs first.

Sub-Clause 4.17 - Safety Precautions

If the Contractor is sharing occupation of the Site with others, it may not be appropriate for him to provide
some of the listed items; in these circumstances, the Employer's obligations should be specified.

Sub-Clause 4.19 - Electricity, Water and Gas

If services are to be available for the Contractor to use, the Employer's Requirements should give details,
including locations and prices.

©FIDIC 1995
Sub-Clause 4.20 - Employer Supplied Machinery and Materials
For this Sub-Clause to apply, the Employer's Requirements should describe each item which the Employer will
provide and/or operate and should specify all necessary details. With some types of facilities, further provisions
may be necessary, to clarify aspects such as liability and insurance.

Sub-Clause 4.22 - Security of the Site

If the Contractor is sharing occupation of the Site with others, it may not be appropriate for him to be responsible
for its security; in these circumstances, the Employer's obligations should be specified.

Clause 5 - Design

Sub-Clause 5.2 - Construction Documents

The "Construction Documents" include all drawings which are to be submitted by the Contractor for
pre-construction review by the Employer's Representative. The extent to which such Documents are required,
and the procedures for submission and review, may need to be clarified in the Employer's Requirements. It may
be appropriate to specify different "review periods", taking account of the time necessary to review the different
types of drawing, and/or of the possibility of substantial submissions at particular stages of the design-build
process.
If the Employer's Representative is to carry out a full approval procedure, it should be described in the
Employer's Requirements, and full consideration should be given to aspects such as liability and the
consequences of delayed approval; the Sub-Clause may be amended:
EXAMPLE
In Sub-Clause 5.2, delete sub-paragraph (a) and substitute.'
(a) Construction shall not commence until the Contractor receives the Employer's Representative's
approval of the Construction Documents which are relevant to the design and construction of such
part;

Sub-Clause 5.9 - Patent Rights

If the Works involves the use by the Contractor of a design previously provided to the Employer by others, an
additional sub-clause may be required:
EXAMPLE SUB-CLAUSE
Employer's Warranty for Patent Rights
If any matter, for which the Contractor is not liable to indemnify the Employer under Sub-Clause 5.9,
causes the infringement (or allegation of infringement) by the Contractor of any patent, registered design,
copyright, trade mark or other intellectual property right, the Employer shall indemnify the Contractor
against all claims, damages, charges and costs which the Contractor may incur,
The Contractor shall promptly notify the Employer of any claim under this Sub-Clause. The Employer
may, at his own cost, conduct negotiations for the settlement of such claim, and any litigation or arbitration
that may arise from it. The Contractor shall not make any admission which might he prejudicial to the
Employer, unless the Employer has jailed to take over the conduct of the negotiations or litigation within
a reasonable time after having been so requested. The Contractor shall, at the request and cost of the
Employer, assist him in contesting any such claim or action, and shall he repaid all reasonable costs
incurred.

©FiDic 1995
Clause 6 - Staff and Labour
Sub-Clause 6.5 - Working Hours
If the Employer does not wish to specify working hours in the Appendix to Tender, or to restrict them to the
times specified by the Tenderer (in order to plan the Employer's Representative's supervision, for example),
this Sub-Clause may be deleted.

Sub-Clause 6.6 - Facilities for Staff and Labour

If the Employer will make some accommodation available, his obligations should be specified.

Sub-Clause 6.8 - Contractor's Superintendence

If the ruling language is not the same as the language for day to day communications (under Sub-Clause 1.4),
or if for any other reason it is necessary to stipulate that the Contractor's superintending staff shall be fluent in
a particular language, the following sentence may be added.
EXAMPLE
At the end of Sub-Clause 6.8, add:
A reasonable proportion of the Contractor's superintending staff shall have a working knowledge of (insert
name of language), or the Contractor shall have sufficient competent interpreters available on Site during
all working hours.

Additional Sub-Clauses
It may be necessary to add a few sub-clauses to take account of the circumstances and locality of the Site:
EXAMPLE SUB-CLAUSE
Foreign Staff and Labour
The Contractor may import such staff, artisans, and labourers as are required in order to execute the
Works. The Contractor must ensure that all such staff and labour are provided with the required residence
visas and work permits. The Contractor shall be responsible for the return to the place where they were
recruited or to their domicile of all persons whom the Contractor recruited and employed for the purposes
of or in connection with the Contract. The Contractor shall he responsible for such persons as are to be
returned until they shall have left the Site or, in the case of foreign nationals who have been recruited
outside the Country, shall have left it.
EXAMPLE SUB-CLAUSE
Measures against Insect and Pest Nuisance
The Contractor shall at all times take the necessary precautions to protect all staff and labour employed
on the Site from insect and pest nuisance, and to reduce the dangers to health and the general nuisance
occasioned by the same. The Contractor shall provide his staff and labour with suitable prophylactics for
the prevention of malaria and take steps to prevent the formation of stagnant pools of water. The
Contractor shall comply with all the regulations of the local health authorities and shall arrange to spray
thoroughly with approved insecticide all buildings erected on the Site. Such treatment shall be carried out
at least once a year or as instructed by such authorities.

©FiDic 995
 EXAMPLE SUB-CLAUSE
Epidemics
In the event of any outbreak of illness of an epidemic nature, the Contractor shall comply with and carry
oul such regulations, orders and requirements as may be made by the Government, or the local medical
or sanitary authorities, for the purpose of dealing with and overcoming the same.
EXAMPLE SUB-CLAUSE
Burial of the Dead
The Conlraclor shall make all necessary arrangemenls for the transport, to any place as required for
burial, of any of his expatriate employees or members of their families who may die in the Country. The
Contractor shall also be responsible, to the extent required by local regulations, for making any
arrangements with regard to burial of any of his local employees who may die while engaged upon the
Works.
EXAMPLE SUB-CLAUSE
Alcoholic Liquor or Drugs
The Contractor shall not, otherwise than in accordance with the statutes, ordinances and government
regulations or orders for the time being in force, import, sell, give, barter or otherwise dispose of any
alcoholic liquor or drugs, or permit or suffer any such importation, sale, gift, barter or disposal by his
Subcontractors, agents, staff or labour.
EXAMPLE SUB-CLAUSE
Arms and Ammunition
The Contractor shall not give, barter or otherwise dispose of to any person or persons, any arms or
ammunition of any kind or permit or suffer the same as aforesaid.
EXAMPLE SUB-CLAUSE
Festivals and Religious Customs
The Contractor shall in all dealings with his staff and labour have due regard to all recognised festivals,
days of rest and religious or other customs.

Clause 7 - Plant, Materials and Workmanship

Additional Sub-Clause
If the Contract is being financed by an institution whose rules or policies require a restriction on the use of its
funds, a further sub-clause may be added:
EXAMPLE SUB-CLAUSE
All Contractor's Equipment, Temporary Works, Plant and Materials shall have its origin in eligible source
countries as defined in (insert name of published guidelines for procurement). Contractor's Equipment,
Temporary Works, Plant and Materials shall he transported by carriers from such eligible source countries,
unless exempted by the Employer's Representative in writing on the basis of potential excessive costs or
delays. Surety, insurance and banking services shall be provided by insurers and hankers from such
eligible source countries.

©FIDiC 1995
Clause 8 - Commencement, Delays and Suspension

Sub-Clause 8.2 - Time for Completion

If the Works are to be taken-over in stages, these stages should be defined as Sections, in the Appendix to Tender.

Sub-Clause 8.6 - Liquidated Damages for Delay

Under many legal systems, these pre-defined damages must be a reasonable pre-estimate of the Employer's
probable loss in the event of delay. If the Contract Price is to be quoted as the sum of figures in more than one
currency, it may be preferable to define these damages (per day) as a percentage reduction applicable to each
of such figures. If the Contract Price is expressed in the Local Currency, the damages per day may either be
defined as a percentage or be defined as a figure in such Local Currency; however, unless all payments are to
be made in the Local Currency, the currencies of payment should be specified.

Additional Sub-Clause
tf it is considered appropriate to include a provision for accelerated completion, one of the following sub-clauses
may be added:
EXAMPLE SUB-CLAUSE
If the Contractor achieves completion of the Works, or Section (if any), prior to the Time for Completion,
the Employer shall pay to the Contractor the relevant sum stated in the Appendix to Tender (as bonus for
early completion) for every calendar day which shall elapse between the date stated in the relevant Ta king-
Over Certificate and the relevant time prescribed in Sub-Clause 8.2.
EXAMPLE SUB-CLAUSE
Sections are required to he completed by the dates given in the Appendix to Tender in order that such
Sections may be occupied and used by the Employer in advance of the completion of the whole of the
Works. Details of the work required to be executed to entitle the Contractor to bonus payments and the
amount of the bonuses are stated in the Employer's Requirements. For the purposes of calculating bonus
payments, the dates given in the Appendix to Tender for completion of Sections are fixed; no adjustments
of the dates by reason of granting an extension of time pursuant to these Conditions will be allowed.

Clause 9 - Tests on Completion

Sub-Clause 9.1 - Contractor's Obligations

The Employer's Requirements should describe the tests he requires, before taking-over, to demonstrate
completion. It may also be appropriate for the Contractor's Proposal to include detailed arrangements,
instrumentation, etc. If the Works are to be tested and taken-over in stages, the tests requirements may have to
take account of the incomplete parts of the Works.

©FIDIC 1995
Clause 10 - Employer's Taking Over
Sub-Clause 10.1 - Taking-Over Certificate
If the Works are to be taken-over in stages, these stages should to be defined as Sections, in the Appendix to
Tender. Precise geographical definitions are advisable, and the Appendix should include a table, so as to define
the aspects relating to the Retention Money releases, Time for Completion and liquidated damages for delay
(the table is shown in the example Appendix).

Clause 11 - Tests after Completion

Sub-Clause 11.1 - Employer's Obligations
The Employer's Requirements should describe the tests he requires, after taking-over, to verify that the Works
fulfil his performance requirements. For some types of Works, these Tests may be the most difficult to specify
well, although they are critical to a successful outcome. It may be appropriate for the Contractor's Proposal to
include detailed arrangements, and/or to define any instrumentation required, in addition to that included in the
Works. With many types of Works, it may be essential to define the physical inputs and/or for tenderers to
prescribe (in a Schedule, probably) the performance criteria which their plant will achieve.
Tests after Completion are usually carried out by the Employer, with guidance from the Contractor's staff. If
other arrangements are envisaged, they should be specified, and amendment of the Sub-Clause may be required.

Sub-Clause 11.4 - Failure to Pass Tests after Completion

If the first part of this Sub-Clause is to apply, the method of calculating liquidated damages (based on the extent
of the failure) should be defined in the Appendix to Tender, and the Employer's Requirements should specify
the minimum acceptable performance criteria.

Clause 12 - Defects Liability

Sub-Clause 12.5 - Removal of Defective Work

If the Plant to be supplied under the Contract is such that the value of an item which might have to be removed
from the site is substantial (compared, for example, with the amount of the performance security), it may be
appropriate to amend the Sub-Clause, so as to require the Contractor to provide additional security in these
circumstances.

Sub-Clause 12.10 - Unfulfilled Obligations

It may be necessary to review the effect of this Sub-Clause in relation to the period of liability which the
applicable law may impose.

©FiDiC 1995
Clause 13 - Contract Price and Payment
Sub-Clause 13.1 - The Contract Price
When writing Part II, consideration should be given to the amount and timing of payment(s) to the Contractor.
A positive cash flow is clearly of benefit to the Contractor, and tenderers will take account of the interim
payment procedures when preparing their tenders.
Normally, this type of contract is based on a lump sum price, with little or no remeasurement; the Contractor
then takes the risk of changes in cost arising from his design. The lump sum price may consist of two or more
amounts, quoted in the currencies of payment (which may, but need not, include the Local Currency).
In order to value Variations, the Tenderer can be required to submit a detailed breakdown of the Contract Price,
including quantities, unit rates and other pricing information; such information can also be used for the Interim
Payment Certificates. However, that information may not have been competitively priced; when the tender
documents are being prepared, the Employer must decide whether he is prepared to be bound by such
information. If not, he should have ensured that the Employer's Representative has the necessary expertise to
value any Variations which may be required.
Additional Sub-Clauses may be required to cover any exceptions to the options set Out in Sub-Clause 13.1, and
any other matters relating to payment.

If Sub-Clause 13.1(a) is not to apply, the method of determining the Contract Price should be defined in
additional Sub-Clauses, as envisaged in the last sentence of Sub-Clause 13.1. If the requirements involve
remeasurement, the following wording might be appropriate for one of such additional Sub-Clauses:
EXAMPLE SUB-CLAUSE ON REMEASUREMENT
The Employer's Representative shall ascertain and determine by measurement the value of those parts of
the Works which are to he remeasured in accordance with the Contract (note: the parts must be defined,
here or elsewhere). Such parts of the Works shall be measured net, notwithstanding any general or local
custom, except where otherwise provided for in the Contract. The Employer's Representative shall, when
he requires any such part of the Works to he measured, give reasonable notice to the Contractor's
Representative, who shall promptly:
(a) attend or send a qualified representative to assist the Employer's Representative in making such
measurement, and
(h) supply all particulars required by the Employer's Representative.
Should the Contractor not attend, or neglect or omit to send such representative, then the measurement
made by the Employer's Representative or approved by him shall be taken to he the correct measurement
of such part of the Works.

If Sub-Clause 13.1(b) is not to apply, the method of determining the adjustments to the Contract Price should
be defined in additional Sub-Clause(s).
EXAMPLE SUB-CLAUSE FOR ADJUSTMENT FOR CHANGES IN COST
The amounts payable to the Contractor and valued at base prices in accordance with Schedule . . . shall
he adjusted for rises or falls in the cost of labour, Contractor's Equipment, Plant, Materials and other
inputs to the Works, by the addition or deduction of the amounts determined by the formulae prescribed
in this Sub-Clause. To the extent that full compensation for any rise or fall in costs to the Contractor is
not covered by the provisions of this or other clauses in the Contract, the Contract Price shall be deemed
to include amounts to cover the contingency of such other rise or fall in costs.

©FIDIC 995
 The amount to he added to or deducted from the Interim Payment Certificates for changes in cost and
legislation shall he determined from formulae for each of the currencies in which the Contract Price is
payable and for each of the sections of work priced in the said Schedule, The formulae will he of the
following general type.'

Pn=a+b!+c!-+dE_n+etc
Lo Mo Eo

where:
"Pn" is the adjustment factor to be applied to the estimated value of the work carried out in month
"n";
"a" is a fixed coefficient, specified in the Appendix to Tender, representing the non-adjustable portion
in contractual payments;
"b', "c", "d", etc are coefficients representing the estimated proportion of each cost element (labour,
materials, etc) in the Works, as specified in the Appendix to Tender;
"Ln", "Mn", "En", etc are the current cost indices or reference prices for month 'n", determined,
in the relevant currency of payment, applicable to each cost element on the date 49 days prior to the
last day of the period to which the particular Interim Payment Certificate is related; and
"Lo", "Mo", "Eo", etc are the base cost indices or reference prices corresponding to the above
cost elements, in the relevant currency of payment, on the Base Date,
The cost indices or reference prices specfied in the Appendix to Tender shall he used. In the event of
ambiguity as to the source, it shall be determined by the Employer's Representative; reference shall be
made to the values of the indices at stated dates (quoted in the fourth and fifth columns respectively of said
Appendix) for the purposes of clarification of the source, hut it is understood that such dates (and thus
such values) may not correspond to the base cost indices. In cases where the Currency of Index is not the
relevant currency of payment, the index shall he converted into the relevant currency of payment at the
selling rate established by the Central Bank of the Country. If at any time a current index (for the date
49 days prior to the last day of the period to which the particular Interim Payment Certificate is related)
is unavailable, a provisional index as determined by the Employer's Representative shall be used, subject
to subsequent correction of the amounts certified when the current index is available.
If the Contractor fails to complete the Works within the Time for Completion, adjustment of prices
thereafter shall he made using either each index or price applicable on the date 49 days prior to the expiry
of the Time for Completion, or the current index or price, whichever is more favourable to the Employer;
provided that, if an extension of time is granted in accordance with Sub-Clause 8.3, the above provision
shall apply to the extended time for completion.
The weightings (coefficients) for each of the factors of cost given in the Appendix to Tender shall only he
adjusted if they have been rendered unreasonable, unbalanced or inapplicable, as a result of Variations.
The following table may be included in the Appendix to Tender (the fixed element, for which 0.10 is often
considered appropriate, is entered before tender documents are issued, the other data being completed by the
Tenderer):

©FIDiC l995
 Price Adjustment Formulae; for payments in
Coefficients and Indices

Value on stated date(s)*

Coefficient; Country of origin; Source of index;
scope of index currency of index Title/definition Value Date
a= 0.10 Fixed
b= labour
c= ..
d=
e= ..
* These values and dates confirm the definition of each index, but do not define Base Date indices

If Sub-Clause 13.1(c) is not to apply, additional Sub-Clause(s) should be added.

EXAMPLE SUB-CLAUSE ON EXEMPTION FROM DUTIES
Except to the extent specified otherwise, all Contractor's Equipment, Temporary Works, Plant and
Materials (hereinafter jointly referred to as "Goods") imported by the Contractor into the Country for the
purpose of or in connection with the Contract shall be exempt from customs and other import duties, if the
Employer's prior written approval is obtained for such imports. The Employer shall provide documents
for such exemption, for the Contractor to present in order to clear the Goods through Customs. If
exemption is not then granted, the customs duties payable and paid shall he reimbursed by the Employer.
All imported Goods, which are not incorporated in or expended in connection with the Works, shall he
exported on completion of the Contract; if not exported, the Goods will he assessed for duties as applicable
to the Goods involved in accordance with the current regulations in the Country.
The exemption provided for in the preceding paragraph shall not apply to:
(a) Goods which are locally produced unless they are not available in sufficient quantities or are of a
different standard to that which is necessary for the Works; and
(h) any element of duly or tax inherent in the price of goods or services procured in the Country, which
shall he deemed to be included in the Contract Price.
Port dues, quay dues and, except as set out above, any element of tax or duty inherent in the price of goods
or services shall be deemed to he included in the Contract Price.
EXAMPLE SUB-CLAUSE ON EXEMPTION FROM TAXES
Expatriate (foreign) personnel shall not he liable for income tax levied in the Country on earnings paid
in Foreign Currency, or for such tax levied on subsistence, rentals and similar services dire ctly furnished
by the Contractor to his personnel, or for allowances in lieu. If such personnel have part of their earnings
paid in Foreign Currency in the Country, there shall be no restriction on the export by them at the
conclusion of their term of service on the Works of any balance remaining of their earnings paid in Foreign
Currencies. The Employer shall seek exemption for the purposes of this Sub-Clause; if it is not granted,
the payments made shall be reimbursed by the Employer.

Sub-Clause 13.2 - Advance Payments

The total of the advances (and the number of instalments) must be specified in the Appendix to Tender, unless
no such advances are to be paid. The rate of deduction for the repayments should be checked to ensure that
repayment is achieved before completion; the typical figures in sub-paragraphs (a) and (b) of the Part I Sub-
Clause are based on the assumption that the total of the advances is less than 22% of the Contract Price. The
acceptable form(s) of guarantee should be included in the tender documents, annexed to Part II: an example
form is annexed to this document, as Annex C.

©FIDIC 1995
Sub-Clause 13.4 - Schedule of Payments
Part I contains provisions for interim payments to the Contractor, which can be based on a Schedule of Payments
or on any other basis for determining interim valuation; if a latter basis is adopted, details should be added in
Part II. If payments are to be specified in a Schedule of Payments, the "minimum amount of interim certificates"
could be omitted from the Appendix to Tender, and the Schedule of Payments could be in one of the following
forms:
(a) an amount (or percentage of the Contract Price) could be entered for each month during the Time for
Completion, which can prove unreasonable if the Contractor's progress differs significantly from the
expectation on which the Schedule was based; or
(b) the Schedule could be based on actual progress achieved in executing the Works, which necessitates
careful definition of the payment milestones; otherwise, disagreements may arise when the work
required for a payment milestone is 99.99% achieved but the balance cannot be completed until some
months later.
The figures inserted by the Tenderer in the Schedule of Payments should be compared with his tender
programme (if any), to assess whether it they are reasonably consistent with each other. If the Works consists
of few different types of operations, an alternative approach for interim valuations may be appropriate.
EXAMPLE SUB-CLAUSE FOR INTERIM VALUATION PROCEDURE
Prior to commencing construction of the Permanent Works, the Contractor shall submit a bill of principal
quantities of the Permanent Works (refurred to in this Sub-Clause as 'the BPQPW"), together with such
supporting information and calculations as the Employer's Representative may reasonably require. The
BPQPW shall include the anticipated final quantities of the principal items of Permanent Works, which
shall have been priced using all-in rates such that the total amount equals the Contract Price. The BPQPW
shall not contain priced items for design or for Temporary Works,' the value of each element of such work,
and of any other work elements not described in the BPQPW, shall each he included in the rates for
Permanent Works which are to be constructed after such element is carried out. The BPQPW shall be
subject to the approval of the Employer's Representative, which may at any time he withdrawn, and shall
be without prejudice to the final amount due under the Contract. The BPQPW shall he revised and reissued
if it appears at any time before Taking-Over that it will not fully represent the Permanent Works when
complete.
During the Time for Completion, the contract value for the purposes of sub-paragraph (a) of Sub-
Clause 13.3 shall not exceed the amount calculated from the current BPQPW, based on the quantities of
Permanent Works which have been constructed in accordance with the Contract. The Contractor's interim
statement shall he in the same form as that of the current BPQPW and shall be accompanied by the
Contractor's signed statement that the current BPQPW attached thereto (including anticipated final
quantities) and the as-constructed quantities are all correct; each such statement shall also he
accompanied by a Construction Certificate, signed by the Contractor's Representative, certifying that the
part of the Works constructed to date complies with the Contract. However, the Contractor may propose
such lesser amount as seems reasonable, supported with appropriate calculations on a similar basis to the
procedure described in this Sub-Clause.

Sub-Clause t3.5 - Plant and Materials for the Permanent Works

If payment is to be made for these items prior to their arrival at Site, a further Sub-Clause may be added:
EXAMPLE SUB-CLAUSE FOR PAYMENT UPON SHIPMENT
Interim Payment Certificates shall include (i) an additional amount for Plant and Materials which have
been shipped to the Site for incorporation in the Permanent Works, and (ii) a deduction when payment is
due under Sub-Clause /3.5. The Employer's Representative shall determine each addition and deduction
in accordance with the following provisions:

©FIDIC 1995
 (a) no addition shall be included in the Interim Payment Certificate unless, in the opinion of the
Employer's Representative:
(i) the Plant and Materials have been shipped to the Country, en route to the Site, in accordance
with the Contract;
(ii) the Contractor has submitted a clean shipped bill of lading or other evidence of shipment,
evidence of payment of freight and insurance, and other documents as the Employer's
Representative may reasonabty require, together with an unconditional bank guarantee in a form
and by a bank acceptable to the Employer in amounts and currencies equal to the amount due
under sub-paragraph (b) of this Sub-Clause: such guarantee shall be valid until the Plant and
Materials are properly stored on Site and protected against loss, damage or deterioration;
(iii) the Contractor's records of the requirements, orders, receipts and use of Plant and Materials are
kept in a form approved by the Employer's Representative, and such records are available for
inspection by the Employer's Representative;
(iv) the Contractor has submitted a statement of the Cost of acquiring and shipping the Plant and
Materials to the port (or other place) of entry into the Country, together with such documents
as may be required for the purpose of evidencing such Cost; and
(v) the Plant and Materials are those listed for this Sub-Clause in the Appendix to Tender;
(b) the additional amount to be certified shall be the equivalent of seventy percent of the cost of the Plant
and Materials delivered to the port (or other place) of entry into the Country, as determined by the
Employer's Representative after review of the documents mentioned in sub-paragraph (a) above,
taking account of the contract value of such Plant and Materials as determined and considered
appropriate by the Employer's Representative;
(c) the amount of the deduction for any Plant and Materials for which payment is due under Sub-
Clause 13.5 shall be equivalent to the addition previously certified by the Employer's Representative
for such Plant and Materials under sub-paragraph (b) above; and
(d) the currencies for such additions and deductions shall be determined by the Employer's
Representative as described in Sub-Clause 13.5.

Sub-Clause 13.7 - Payment

If a different period for payment is to apply, the Sub-Clause may be amended:
EXAMPLE
In sub-paragraph. . . ofSub-Clause 13.7, delete "56" and substitute.
If the country/countries of payment need to be specified, such details can be included in the Contract: in the
Employer's Requirements, in the Contractor's Proposal, or in a Schedule.

Sub-Clause 13.8 - Delayed Payment

If the discount rate of the central bank in the country of the currency of payment, plus 3%, is not a reasonable
indication of the Contractor's financing costs, a new rate may need to be defined; alternatively, the actual
financing Costs could be paid, taking account of local financing arrangements.

Sub-Clause 13.9 - Payment of Retention Money

If part of the Retention Money is to be released and substituted by an appropriate security, an additional Sub-
Clause may be added.

©Fioic 1995
 EXAMPLE SUB-CLAUSE FOR RELEASE OF RETENTION
When the Retention Money has reached three-fifths (60%) of the limit of Retention Money stated in the
Appendix to Tender, the Employer's Representative shall certify and the Employer shall pay half (50%) of
such timit of Retention Money to the Contractor upon lodgement with the Employer of an "on-demand"
hank guarantee issued by a bank acceptable to the Employer in a like amount. Such guarantee shall he
valid up to a date which is one hundred weeks after the due (or extended) date for completion of the Works,
and shall he returned to the Contractor upon the issue of the Perjbrmance Certificate. This release of
retention shall he in lieu of the release of the second half of the Retention Money under Sub-Clause 13.9.

Sub-Clause 13.15 - Calculation of Payments in Foreign Currency

Instead of the Contract Price being quoted in the currencies of payment, this Sub-Clause relates to the situation
where it is quoted in Local Currency only, but is paid, by application of percentages and exchange rates, in
various currencies (which may, but need not, include the Local Currency). If this Sub-Clause is to apply, the
name of the Local Currency must be stated in the Tender, so that the Contract Price is a sum in that currency
only, and the Appendix to Tender should include a table for insertion of the proportions and exchange rates (the
table is shown in the example Appendix). If all payments and deductions are not to be in the same currency
proportions, an additional Sub-Clause will be required; also, an additional table will be required in the Appendix
to Tender if there are Sections.
EXAMPLE SUB-CLAUSE FOR CALCULATION OF PAYMENTS BY PROPORTIONS
All payments to the Contractor by the Employer shall be made
(a) in the case of payment(s) under Sub-Clause(s) 13.2 and (insert number of any other applicable Sub-
Clause) in (insert name of currency/currencies);
(6) in the case of payments for certain provisional sum items excluded from the Appendix to Tendei; in
the currencies and proportions applicable to these items at the time is'hen the Employer's
Representative gives instructions for the work covered by these items to he carried out;
(c) in any other case, in the currencies and proportions stated in the Appendix to Tender as applicable
to such payment provided that the proportions of currencies stated in the Appendix to Tender may
from time to time upon the application of either party be s'aried as may be agreed.
All payments to the Employer by the Contractor including payments made by way of deduction or set-off
shall be made
(a) in the case of repayment(s) under Sub-Clause(s) 13.2 and (insert number of any other applicable Sub-
Clause) in (insert name of currency);
(6) in the case of liquidated damages under Sub-Clause 8.6, in (insert name of currency);
(c) in the case of reimbursement of any sum previously expended by the Emptoyer, in the currency in
which the sum was expended by the Employer;
(d) in any other case, in such currency as may he agreed.
If the part payable in a particular currency of any sum payable to the Contractor is wholly or partly
insufficient to satisfy by way of deduction or set-off a payment due to the Employer in that currency, in
accordance with the provisions of this Sub-Clause, then the Employer may make such deduction or set-off
wholly or partly from the balance of such sum payable in other currencies.

Additional Sub-Clause - Payments in Local Currency

If all payments are to be made in Local Currency, it must be named in the Tender, so that the Contract Price is
a sum in that currency only; Sub-Clause 13.15 should be deleted, and a further Sub-Clause added.

©F1D1C l995
 EXAMPLE SUB-CLAUSE FOR A SINGLE-CURRENCY CONTRACT
The currency of account shall be the Local Currency and all payments made in accordance with the
Contract shall he in Local Currency. The Local Currency payments shall he fully convertible, except those
for local costs. The percentage attributed to local costs shall be as stated in the Appendix to Tender.

Project Financing Arrangements

For major contracts in some markets, there may be a need to resort to securing finance from entities such as
aid agencies, development banks or export credit agencies. If financing is to be procured from such institutions,
the Conditions of Contract may need to incorporate any special requirements which the relevant institution may
have. The exact wording will depend on the relevant institution, so reference will need to be made to them to
ascertain their requirements, and to seek approval of the draft tender documents. These requirements may
include tendering procedures which need to be adopted in order to render the eventual contract eligible for
financing, and/or special Sub-Clauses which may need to be incorporated into Part II. The following examples
indicate some of the topics which the institution's requirements may cover:
(a) prohibition from discrimination against the shipping companies of any one country;
(b) ensuring that the Contract is subject to a widely-accepted neutral international law;
(c) provision for arbitration at a recognised international forum in the event of disputes;
(d) giving the Contractor the right to suspend/terminate in the event of default under the financing
arrangements;
(e) restricting the right to reject Plant;
(f) specifying the payments due in the event of termination;
(g) specifying that the Contract does not become effective until certain conditions precedent have been
satisfied, including pre-disbursernent conditions for the financing arrangements;
(h) obliging the Employer to make payments from his own resources if, for any reason, the funds under the
financing arrangements are insufficient to meet the payments due to the Contractor, whether due to a
default under the financing arrangements or otherwise.
In addition, the financing institution/banks may wish the Contract to include references to the financing
arrangements, especially if funding from more than one source is to be arranged, to finance different elements
of supply. It is not unusual for Part II to include special provisions identifying different categories of Plant and
specifying the documents to be presented to the relevant financing institution to obtain payment. If the financing
institution's requirements are not met, it may be difficult (or even impossible) to secure suitable financing for
the project, and/or the institution may decline to provide finance for part or all of the Contract.
However, where the financing is not tied to the export of goods and services from any particular country but is
simply provided by commercial banks lending to the Employer, those banks may be concerned to ensure that
the Contractor's rights are very restricted. Such banks may wish the Contract to exclude any reference to the
financing arrangements, and/or to restrict the Contractor's right to suspend/terminate in the event of default.
EXAMPLE FORM OF SUB-CLAUSE WHICH A FINANCING INSTITUTION MAY REQUIRE
The total Contract Price of (insert amount) is made up as follows:
(breakdown into items and/or into supply/delivery/etc)
and shall be payable by the Employer to the Contractor as set Out below.
(a) . . % of the total Contract Price shall he payable by a direct payment from the Employer to the
Contractor within 28 days of the Effective Date, which shall he payable against the following
documents:
(i) commercial invoice addressed to the Employer specifying the amount of the payment now due,

OFloic 1995
 (ii) advance payment security guarantee issued by . . Bank in the form annexed,

(iii) performance security guarantee issued by . . . Bank in the form annexed, and
(iv) Employer's Representative's Interim Payment Certificate confirming the payment due and
specfying the amount.
(h) . . % of the contract price for the supply of Plant shall he payable as follows:
(i) , . % of the relevant value of the Plant supplied, by direct payment from the Employer to the

Contractor on shipment of each item, against the following documents:

(original) commercial invoice,
(original) shipping documents,
(original) certificate of origin,
(original) insurance certificate, and
(original) Employer's Representative's Interim Payment Certificate confirming the payment
due and specifying the amount.
(ii) .. % of the relevant value of the Plant supplied, by disbursement from the Loan Agreement to
the Contractor on shipment of each item, on presentation of a Qualifying CertifIcate in the form
annexed and copies of the documents listed in sub-paragraph (b)(i) above.
(c) the balance of the total Contract Price shall he payable as follows:
(i) . . % of the relevant value of the services rendered, by direct payment from the Employer to the

Contractor on execution of the relevant service, against the following documents:

(original) commercial invoice, and
(original) Employer's Representative's Interim Payment Certificate confirming the payment
due and specifying the amount.
(ii) .. % of the relevant value of the services rendered, by disbursement from the Loan Agreement
to the Contractor, on presentation of a Qualifying Certificate in the form annexed and copies of
the documents listed in sub-paragraph (c)(i) above.
(d) The direct payments by the Employer specified in this Sub-Clause shall he made by an irrevocable
letter of credit established by the Employer in favour of the Contractor and confirmed by a bank
acceptable to the Contractor.
The above arrangements (involving financing institution(s), Employer and Contractor) may be initiated by the
Employer, or by the Contractor (before submitting his tender). Altematively, the Contractor may be prepared
to initiate financing arrangements and retain responsibility for them, although he would probably be unable or
unwilling to provide finance from his own resources; his financing bank's requirements will therefore affect his
attitude in contract negotiations, They might well require the Employer to make some payment during
construction, although a large proportion of the Contract Price might be withheld until the Works are complete,
This payment arrangement can be achieved either by a high percentage rate for retention, or by a suitably
completed Schedule of Payments: the Instructions to Tenderers would set out the criteria with which the tenderer
should comply. Since the Contractor would then have to arrange his own financing to cover the shortfall
between such payments and his outgoings, he (and his financing bank) would probably require some form of
security, guaranteeing payment when due.
It may be appropriate for the Employer, when preparing the tender documents, to anticipate the latter
requirement and undertake to provide a letter of credit to cover the element of payment which the Contractor
is to receive when the Works are complete. The main issue to be addressed in drawing up the letter of credit
is the documents to be presented by the Contractor to the bank when requesting the payment due. The following
Sub-Clause may be added.

©FIDIC 995
 EXAMPLE SUB-CLAUSE FOR CONTRACTOR FINANCE
The Employer shall, within . . . days of the Effective Date, deliver to the Contractor irrevocable letters of
credit, confirmed by a bank acceptable to the Contractor, in the total sum of. . per cent ( . . %) of the
Contract Price, payable in the proportions of currencies in which the Contract Price is due to be paid.
One letter of credit shall be issued for each currency, payable by a bank in the country of such currency.
The amounts payable under the letters of credit will he part payment of the amounts due under the Contract
upon completion of the Works. Each letter of credit shall state that it is payable when the Contractor is
entitled, under the Contract, to receive the Taking-Over Certificate for the Works, as evidenced by:
(a) such Taking-Over Certificate signed by the Employer's Representative and endorsed on heha if of the
Employer, or
(h) the sworn affidavit signed by all members of the panel of experts (insert appropriate reference) duly
authenticated by a notary public.
It may be appropriate to anticipate the possible delay to the procurement of these letters of credit:
EXAMPLE DEFINITION
Delete Sub-Clause 1.1.3.3 and substitute:
"Commencement Date" means the latest of the following dates:
(i) the date 28 days after the Effective Date;
(ii) the date on which the Contractor receives the notice to commence issued by the Employer's
Representative under Sub-Clause 8.1;
(iii) the date on which the Contractor receives the letters of credit under Sub-Clause

Clause 14 - Variations
Variations can be initiated by any of three ways:
(a) the Employer's Representative may instruct the variation under Sub-Clause 14.1, without prior agreement
as to feasibility or price;
(b) the Contractor may initiate his own proposals under Sub-Clause 14.2, to the benefit of both parties; or
(c) the Employer's Representative may request a proposal under Sub-Clause 14.3, seeking prior agreement so
as to minimise dispute.

Sub-Clause 14.5 - Provisional Sums

Although generally inappropriate for this type of contract, a Provisional Sum may be required for parts of the
Works which are not required to be priced at the risk of the Contractor: for example, to cover goods which the
Employer wants to select, or to deal with a major uncertainty regarding sub-surface conditions. It is essential
to define the scope of each Provisional Sum (in a Schedule, probably), since such scope will then be excluded
from the other elements of the Contract Price.
If a Provisional Sum is likely to be valued under Sub-Clause 14.5(b), the percentage should be quoted by
tenderers in the Appendix to Tender, If Provisional Sums relate to radically different types of work, it may be
appropriate to permit tenderers to quote a different percentage for each Provisional Sum.

©F1LI1C 1995
Clause 15 - Default of Contractor
Sub-Clause 15.2 - Termination
Before inviting tenders, the Employer should verify that the wording of this Sub-Clause, and any anticipated
termination, is not in conflict with the applicable law.

Clause 16 - Default of Employer

Sub-Clause 16.2 - Termination
Before inviting tenders, the Employer should verify that the wording of this Sub-Clause is not in conflict with
the applicable law; the Contractor should verify that any anticipated termination is not in conflict with such
law.

Clause 17 - Risk and Responsibility

Sub-Clause 17.3 - Employer's Risks
If certain risks are to be confined to the country in which the Site is located, the Sub-Clause may be amended:
EXAMPLE
At the end of each of sub-paragraphs of Sub-Clause 17.3, insert "in the Country,"

Additional Sub-Clause - Use of Employer's Accommodation/Facilities

If the Contractor is to occupy the Employer's facilities temporarily, an additional sub-clause may be added:
EXAMPLE SUB-CLAUSE
The Contractor shall take full responsibility for the care of the items detailed below, from the respective
dates of use or occupation for the purposes of the Contract to the respective dates of hand-over or cessation
of such occupation (although such hand-over or cessation of such occupation may take place after the date
stated in the Taking-Os'er Cert(fi cate for the Works):
(insert details)
If any loss or damage happens to any of the above items while the Contractor is responsible for their care,
arising from any cause whatsoever other than the Employer's risks listed in Sub-Clause 17.3, the
Contractor shall, at his own cost, rect(fr such loss or damage so that the items conform with the prosisions
of the Contract to the satisfaction of the Employer's Representative.

Clause 18 - Insurance
The wording in Part I is based on the Contractor procuring insurances consistent with the general terms agreed
with the Employer. The tnstructions to Tenderers may therefore require tenderers to include the terms in their
Proposals.
In certain circumstances, the Employer may decide not to insist on insurance for design under Sub-Clause 18.1,
and/or to arrange insurance in respect of the Works and Third Party liability himself. The tender documents
should include details of the insurances to be provided by the Employer, as an annex to Part tt, so that tenderers

©FEDIC 1995
can estimate what other insurances they wish to have for their own protection. Such details should include the
conditions, limits, exceptions and deductibles, preferably in the form of a copy of each policy.
EXAMPLE SUB-CLAUSE FOR WORKS INSURANCE BY THE EMPLOYER
Delete Sub-Clause 18.2 and substitute:
The Employer shall insure the Construction Documents, Plant, Materials and Works in the joint names of
the Employer, the Contractor and Subcontractors, against all loss or damage arising from any insurable
cause other than the Employer's risks listed in Sub-Clause 17.3. Such insurance shall be for a limit of not
less than the full replacement cost (including profit) and shall also cover the costs of demolition and
removal of debris. Such insurance shall be in such a manner that the Employer and the Contractor are
covered from the date by which the evidence of such insurance is to be submitted under Sub-Clause 18.5,
until the date of issue of the Taking-Over Certificate for the Works. The Employer shall extend such
insurance to provide cover until the date of issue of the Performance Certificate, for loss or damage for
which the Contractor is liable arising from a cause occurring prior to the issue of the Taking-Over
Certificate, and for loss or damage occasioned by the Contractor or Subcontractors in the course of any
other operations (including those under Clauses 11 and 12).
The Contractor shall insure the Contractor's Equipment in the joint names of the Employer, the Contractor
and Subcontractors, against all loss or damage arising from any insurable cause other than the Employer's
risks listed in Sub-Clause 17.3. Such insurance shall be for a limit of not less than the full replacement
value (including delivery to Site). Such insurance shall be in such a manner that each item of equipment
is insured while it is being transported to the Site and throughout the period it is on or near the Site.
EXAMPLE SUB-CLAUSE FOR THIRD PARTY INSURANCE BY EMPLOYER
Delete Sub-Clause 18.3 and substitute:
The Employer shall insure against liability to third parties, in the joint names of the Employer, the
Contractor and Subcontractors, for any loss, damage, death or bodily injury which may occur to any
physical property (except things insured under Sub-Clause 18.2) or to any person (except persons insured
under Sub-Clause 18.4), which may arise out of the performance of the Contract and occurring before the
issue of the Performance Certificate.
EXAMPLE GENERAL REQUIREMENTS FOR USE WITH ABOVE EXAMPLES
Delete Sub-Clause 18.5 and substitute:
Each insurance policy shall be consistent with the general terms agreed in writing prior to the Effective
Date, and such agreement shall take precedence over the provisions of this Clause.
The Contractor shall, within the period stated in the Appendix to Tender (calculated from the
Commencement Date), submit to the Employer appropriate evidence that the insurances for which the
Contractor is responsible have been effected. When each premium has been paid, the Contractor shall
submit copy receipts to the Employer. The Contractor shall effect all insurances for which the Contractor
is responsible with insurers and in terms approved by the Employer. Each policy insuring against loss or
damage shall provide for payments to be made in the currencies required to rectify such loss or damage.
Payments received from insurers shall be used for the rectification of the loss or damage. The Contractor
(and, if appropriate, the Employer) shall comply with the conditions stipulated in each of the insurance
policies.
The Employer shall, within 14 days after receiving the performance security described in Sub-Clause 4.2,
submit to the Contractor evidence that the insurances for which the Employer is responsible have been
effected, and copies of the relevant policies of insurance. When each premium has been paid, the Employer
shall submit copy receipts to the Contractor.
The Employer shall effect all insurances for which the Employer is responsible with insurers, and in the
terms, approved solely by the Employer. All such insurances shall be in accordance with the details of
insurance annexed, unless otherwise agreed with the Contractor. The Contractor shall be deemed to have
fully understood such details, and to have satisfied himself before submitting his Tender as to the extent of
the cover provided under such insurances (taking account of the conditions, limits, exceptions and

©FIDIC 1995
 deductibles) and as to the correctness and sufficiency of the Contract Price, which shall be deemed to
include the cost of any further insurances which the Contractor wishes to effect. The Contractor and
Subcontractors shall accept the insurances effected by the Employer, as if they had effected such
insurances; they and the Employer shall comply with the terms and conditions stipulated in each such
policy. Payments received under a policy insuring against loss or damage shall be used for the rectification
of the loss or damage.
Each party shall make no material alteration to the terms of any insurance for which he is responsible,
without the prior agreement of the other party. If an insurer makes (or purports to make) any such
alteration, the party notified by such insurer shall notify the other party immediately.
If either party fails to effect and keep in force any of the insurances which he is required to effect under
the Contract, or fails to provide satisfactory evidence, policies and receipts in accordance with this Sub
Clause, the other party may, without prejudice to any other right or remedy, effect insurance for the
coverage relevant to such default, and pay the premiums due. Such payments shall he recoverable from
the party responsible for effecting such insurance.
Nothing in this Clause limits the obligations, liabilities or responsibilities of the Contractor or the
Employer, under the other terms of the Contract or otherwise. Any amounts not insured or not recovered
from the insurers (including the cost of preparing insurance claims) shall be borne by the Contractor
and/or the Employer accordingly.

Clause 19 - Force Majeure

Before inviting tenders, the Employer should:
(a) verify that the wording of this Clause, and any anticipated action under it, is not in conflict with the
applicable law, and
(b) consider whether to amend the period of 182 days in Sub-Clause 19.6.

Clause 20 - Claims, Disputes and Arbitration

Sub-Clause 20.3 - Dispute Adjudication Board
The Contract should include provisions which, whilst not discouraging the parties from reaching agreement as
the works proceed, allows them to refer contentious matters to impartial individual(s) with suitable technical
qualifications. The provisions depend, for their success, on the parties' confidence in the agreed individual(s)
and in the individual's personal and professional qualities. Therefore, it is essential that the arrangements are
not imposed by either party on the other party, and that the nominating authority is wholly impartial: FIDIC is
prepared to perform this role, provided delegation is permissible (see the example wording in the Appendix to
Tender). It is preferable, but not essential, for the individual(s) to be agreed by the time the Tender is accepted:
the parties may be able to agree the appointment immediately after the award of the Contract, when relationships
are usually favourable.
The 'Dispute Adjudication Board" is the defined term for such individual(s), but such definition does not
preclude the use of one expert, who would thus act as a one-person Board. At an early stage, consideration
should be given as to whether a one-person or three-person Board is preferable for a particular project, taking
account of its size, duration and the fields of expertise which will be involved. For some projects, it may be
considered appropriate to appoint a one-person Dispute Adjudication Board for each major field of expertise
relevant to the Works; however, this could give rise to problems if, when a dispute arises, the parties cannot
agree to which person it is to be referred.

© stoic 995
For a one-person Board, the Employer may suggest (in a Schedule, possibly, with curriculum vitae) the names
of acceptable persons for the Dispute Adjudication Board, for tenderers to select. From the list, each tenderer
would nominate acceptable potential members, preferably with alternates in case some subsequently decline
the appointment.
For a three-person Board, the Employer may similarly propose one member, and invite tenderers to approve
and to suggest (in a Schedule, possibly, with curriculum vitae) the names of acceptable persons for another
member of the Dispute Adjudication Board, for the Employer's approval. The Employer could similarly suggest
names of acceptable persons for the third member of the Dispute Adjudication Board, for tenderers to select.
Whichever method is used by the parties to attempt agreement on the appointment of the Dispute Adjudication
Board, it may be preferable to avoid the matter becoming a major part of the pre-contract negotiations. The
example wording in the Tender therefore seeks to avoid the tenderer's suggestions becoming a condition of the
Tender, introducing a potential delay to the award of a contract.

Sub-Clause 20.5 - Amicable Settlement

The provisions of this Sub-Clause are intended to encourage the parties to settle a dispute amicably: for
example, by direct negotiation, mediation or conciliation. Amicable settlement procedures depend, for their
success, on confidentiality and on agreement of the procedure; therefore, it is preferable that such procedures
are not imposed by either party on the other party. The parties could consider initiating proposals for such
procedures upon award of the Contract, when relationships are usually favourable. Altematively, it may be
feasible to await the existence of a dispute before agreeing the procedure; if agreement is then difficult, a
successful outcome of any amicable settlement procedure would be just as difficult.

Sub-Clause 20.6 - Arbitration

The Contract should include provisions for the resolution by international arbitration of any disputes which are
not resolved amicably. Intemational commercial arbitration has practical advantages over litigation and may
be more mutually acceptable to the parties.
Careful consideration should be given to ensuring that the international arbitration rules chosen are compatible
with the provisions of Clause 20 and the other elements to be set out in the Appendix to Tender. The Rules of
Arbitration of the Intemational Chamber of Commerce (the "ICC") are frequently included in international
construction contracts. In the absence of specific stipulations as to the number of arbitrators, place of arbitration
and language of arbitration, the ICC will decide on the number of arbitrators (typically three in any substantial
construction dispute) and on the place of arbitration.
If the UNCITRAL (or other non-ICC) arbitration rules arc preferred, it is necessary to designate, in the
Appendix to Tender, an institution to nominate the arbitrators or to administer the arbitration, unless such
institution is named (and their role specified) in the arbitration rules. However, it will be necessary to ensure,
before so designating it in the Appendix to Tender, that it is prepared to so nominate or administer.
For major projects tendered internationally, it is desirable that the place of arbitration be situated in a state other
than that of the Employer or Contractor or any financing institution. The situs state should have a modern and
liberal arbitration law and should have ratified a bilateral or multilateral convention (such as the 1958 New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards), or both, that would facilitate the
enforcement of an arbitral award in the states of the parties to the Contract.
It may be considered desirable in some cases for other parties to be joined into any arbitration between the
Employer and the Contractor, thereby creating a multi-party arbitration. While this may be feasible, multi-party
arbitration clauses require skilful drafting on a case-by-case basis. No satisfactory standard form of multi-party
arbitration clause for international use has yet been developed.

©FiD1C 1995
Annex A: EXAMPLE FORM OF PERFORMANCE GUARANTEE
THIS AGREEMENT is made on the _______ day of ___________________ 19
BETWEEN: (1) ____________ [name of bank surety or insurance company]
of __________________ [address] (hereinafter called 'the Guarantor"); and
(2) _________________________ _________________ [name of Employer]
of __________________ _____________ [address] (hereinafter called "the Employer").
WHEREAS:
A This Agreement is supplemental to a contract (hereinafter called "the Contract") made between (1) the
Employer and (2)[name of Contractor] of ____________ ________________ [address of Contractorl
(hereinafter called "the Contractor") whereby the Contractor agreed and undertook to design and execute
and complete and remedy any defects in the Works of ______________________ [name of Contract
and brief description of the Works I for the sum of ___________________________ [amount in Contract
currency] being the Contract Price; and
B The Guarantor has agreed to guarantee the due performance of the Contract in the manner hereinafter
appearing.
IT IS HEREBY AGREED as follows:
1. Subject to Clause 2 if the Contractor (unless relieved from the performance by any clause of the Contract
or by statute or by the decision of a tribunal of competent jurisdiction) shall in any respect fail to execute
the Contract or commit any breach of his obligations thereunder then the Guarantor will indemnify and
pay the Employer the damages sustained by him as a consequence of such failure or breach not exceeding
the aggregate sum of ______________________ lamount of guarantee] [in words],
such sums being payable in the types and proportions of currencies in which the Contract Price is payable.
2. The payment by the Guarantor will only be made if, prior to the earlier of the date of issue of the
Performance Certificate or ("the End Date"), the Guarantor has received:
(a) written notice from both the Employer and the Contractor that the amount of damages payable to the
Employer is agreed between the Employer and the Contractor; or
(b) a copy of a notice of arbitration issued by either the Employer or the Contractor under the Contract
which is subsequently followed (whether before or after the End Date) by a legally certified copy of
an award issued in arbitration proceedings carried out in conformity with the Contract that the amount
of the damages is payable to the Employer; or
(c) a legally certified copy of a decision of the Dispute Adjudication Board under the Contract in respect
of which no notice of dissatisfaction has been given by either the Employer or the Contractor within
twenty eight days of the decision under the Contract stating an amount due to the Employer.
3. The Guarantor shall not be discharged or released from his Guarantee by an arrangement between the
Contractor and the Employer, with or without the consent of the Guarantor, or by any forbearance on the
part of the Employer, whether as to payment, time, performance or otherwise, and any notice to the
Guarantor of any such arrangement, alteration or forbearance is hereby expressly waived.
4. This Guarantee shall not be assignable by the Employer and upon it ceasing to be in full force and effect
the Employer shall retum the same to the Guarantor within 14 days.
5. Words and expressions defined in the Contract shall so far as the context admits bear the same meaning
in this Guarantee.
6. This Guarantee shall be govemed by the laws of _______________________
Signed by _______ _____________ Signed by
for and on behalf of _________________________ for and on behalf of __________________________
on (date) __________________ on (date) _________________________
in the capacity of ______________ in the capacity of _______
and in the presence of _________________________ and in the presence of _________________
Seal (where applicable) Seal (where applicable)

©FIDIC 1995
Annex B: EXAMPLE FORM OF SURETY BOND FOR PERFORMANCE
By this Bond _________________________________________ [name and address of Contractor] as Principal
(hereinafter called "the Contractor") and ________________________________ [name, legal title, and address
of surely, bonding company, or insurance company] as Surety (hereinafter called "the Surety"), are held and
firmly bound Unto _______________ [name and address of Employer] as Obligee (hereinafter called "the
Employer") in the amount of ________ [amount of bond] ________ __________ [in words],
for the payment of which sum well and truly to be made in the types and proportions of currencies in which
the Contract Price is payable, the Contractor and the Surety bind themselves, their heirs, executors,
administrators, successors and assigns, jointly and severally, firmly by these presents.
WHEREAS the Contractor has entered into a written Agreement with the Employer dated the _________ day
of _________ 19 for ___________________ [name of Contract] in accordance with the documents listed
therein, which are by reference made part hereof and are hereinafter referred to as the Contract.
NOW, THEREFORE, the Condition of this Obligation is such that, if the Contractor shall promptly and
faithfully perform the said Contract (including any amendments thereto) then this obligation shall be null and
void; otherwise it shall remain in full force and effect. Whenever the Contractor shall be, and declared by the
Employer to be, in default under the Contract, the Employer having performed the Employer's obligations
thereunder, the Surety may promptly remedy the default, or shall promptly:
(I) complete the Contract in accordance with its terms and conditions; or
(2) obtain a tender or tenders from qualified tenderers for submission to the Employer for completing the
Contract in accordance with its terms and conditions, and upon determination by the Employer and the
Surety of the lowest responsive tenderer, arrange for a Contract between such tenderer and Employer and
make available as work progresses (even though there should be a default or a succession of defaults under
the Contract or Contracts of completion arranged under this paragraph) sufficient funds to pay the cost of
completion less the Balance of the Contract Price; but not exceeding, including other costs and damages
for which the Surety may be liable hereunder, the amount set forth in the first paragraph hereof. The term
"Balance of the Contract Price," as used in this paragraph, shall mean the total amount payable by
Employer to Contractor under the Contract, less the amount properly paid by Employer to Contractor;
or
(3) pay the Employer the amount required by Employer to complete the Contract in accordance with its terms
and conditions up to a total not exceeding the amount of this Bond.
The Surety shall not be liable for a greater sum than the specified penalty of this Bond.
Any suit under this Bond must be instituted before the issue of the Performance Certificate.
No right of action shall accrue on this Bond to or for the use of any person or corporation other than the
Employer named herein or the heirs, executors, administrators, successors and assigns of the Employer.
In testimony whereof, the Contractor has hereunto set his hand and affixed his seal, and the Surety has caused
these presents to be sealed with his corporate seal duly attested by the signature of his legal representative,
this day of _____________

Signed by Signed by
for and on behalf of ________________________ for and on behalf of —
on (date) ___________________________________ on (date)
in the capacity of ____________________________ in the capacity of
and in the presence of __________________________ and in the presence of

Seal (where applicable) Seal (where applicable)

©FIDic 1995
Annex C: EXAMPLE FORM OF GUARANTEE FOR ADVANCE PAYMENT

To: ______________________________________ [name of Employer]

_________________________________ [address of Employer]
_____________________________ [name of Contract]

Gentlemen:
In accordance with the provisions of the Conditions of Contract, Sub-Clause 13.2 ('Advance Payments") of
the above-mentioned Contract, _______________________ [name and address of Contra ctor] (hereinafter called
"the Contractor") shall deposit with _________________ [name of Employer] a bank guarantee to guarantee
his proper and faithful performance under the said Clause of the Contract in an amount of _______________
[amount of guarantee] [in words].
We, the _________________________ [bank or financial institution], as instructed by the Contractor, agree
unconditionally and irrevocably to guarantee as primary obligor and not as Surety merely, the payment to
[Name of Employer] on his first demand without whatsoever right of objection on our
part and without his first claim to the Contractor, in the amount not exceeding
[amount of guarantee] [in words].
We further agree that no change or addition to or other modification of the terms of the Contract or of
Works to be performed thereunder or of any of the Contract documents which may be made between
_____________________ [name of Employer] and the Contractor, shall in any way release us from any liability
under this guarantee, and we hereby waive notice of any such change, addition or modification.
No claim may be made by you under this guarantee until we have received notice in writing from you specifying
the amount of each advance payment which has been paid to the Contractor pursuant to the Contract.
Our outstanding liability under this guarantee will reduce by such amounts as may be notified to us in your
authorised writing and stated to be the reduction of this guarantee required to be made in accordance with the
Contract by reason of the repayments made by the Contractor.
This guarantee shall remain valid and in full effect from the date of the first advance payment under the
Contract until _____________________ [name of Employer] receives full repayment of the same amount from the
Contractor.

Yours truly,
Signature and Seal:
Name of Bank:
Address:

Date:

©J'iDiC 1995
 .
'FEDERATION INTERNATIONALE DES INGENIEURS-CONSEILS
INTERNATIONAL FEDERATION OF CONSULTINO ENGINEERS
INTERNATIONALE VEREINIOUNG BERATENDER INGENIEURE
FEDERACION INTERNACIONAL DE INGENTEROS CONSULTORES

CONDITIONS OF CONTRACT FOR

DESIGN - BUILD AND TURNKEY

FORMS OF TENDER AND AGREEMENT

FIRST EDITION 1995

2
ISBN 2-88432 010 5
TENDER

NAME OF CONTRACT:

TO:

GENTLEMEN,

We have examined the Conditions of Contract, Employer's Requirements, Schedules, Addenda Nos __________
and the matters set Out in the Appendix hereto. We have understood and checked these documents and have
not found any errors in them. We accordingly offer to design, execute and complete the said Works and remedy
any defects, fit for purpose in conformity with these documents and the enclosed Proposal, for the fixed lump
sum of

We accept your suggestions for the appointment of the Dispute Adjudication Board, as set out in Schedule
[We have completed the Schedule by adding our suggestions for the other member of this three-person
Board, hut these suggestions are not conditions of this Tender]. *
We agree to abide by this Tender until ___________________ and it shall remain binding upon us and may be
accepted at any time before that date. We acknowledge that the Appendix forms part of our Tender.
If our Tender is accepted, we will provide the specified performance security, commence the Works as soon as
reasonably possible after receiving the Employer's Representative's notice to commence, and complete the
Works in accordance with the above-named documents within the time stated in the Appendix to Tender.
Unless and until a formal Agreement is prepared and executed this Tender, together with your written acceptance
thereof, shall constitute a binding contract between us.
We understand that you are not bound to accept the lowest or any tender you may receive.
We are, Gentlemen
Yours faithfully

Signature _______________________________________ in the capacity of __________________________

duly authorised to sign tenders for and on behalf of ______________________________________________

Address

Date _____________________________________________

* If the Tenderer does not accept, this paragraph may be deleted and replaced by:

We do not accept your suggestions for the appointment of the Dispute Adjudication Board, and
propose that we jointly agree upon the appointment after the Effective Date (unless previously agreed)
in accordance with Sub-Clause 20.3 of the Conditions of Contract. [OPTIONAL: Our Proposal
includes our suggestions for this appointment, hut these suggestions are not conditions of this Tender.]

©FiDIC 1995
Appendix to Tender
[Note: with the exception of the items for which the Employer's requirements have been
inserted, the following information must be completed before the Tender is submitted]
Sub-Clause
Employer's name and address ___________ 1.1.2.1 ________________________________
& 1.8 ____________________
Contractor's name and address ____________ 1.1.2.2 ________ __________________________
& 1.8 ____________________
Name and address of 1.1.2.3 ____________________ __________

the Employer's Representative _______ & 1.8 ____________________

Time for notice to commence _____________
____________ 8.1 ______________________________ days

Time for Completion of the Works 1.1.3.4 _______________________ days

If Sub-Clause 13.15 does not apply:

Foreign Currency/Currencies 1.1.5.3 as named in the TENDER

Law of the Contract ______________________ 1.4

Ruling language 1.4

Language for communications _____________ 1.4

Electronic transmission systems 1.8

Confidential details ____________________ 1.12

Time for access to the Site ________________ 2.2 days after the Commencement Date

Amount of performance security 4.2 ________________ % of the Contract Price,

and in the proportions of currencies in
which the Contract Price is payable

Time for submission of programme 4.14 days after the Effective Date

Normal working hours ___________________ 6.5

2.55 ©FIDIC 995

Liquidated damages for the Works _________ 8.6 ________________ % of the Contract Price
per day, in the proportions of currencies
in which the Contract Price is payable

Limit of liquidated damages for delay 8.6 ________________ % of the Contract Price

If Clause 11 applies:
Liquidated damages for failing
Tests after Completion 11.4

(details of test failure) ____________ __________________________________________

(details of test failure) ____________ __________________________________________

Total amount of advance payments 13.2 ________________% of the Contract Price

Number and timing of instalments 13.2 __________________________________

Start repayment of advance payment 13.2(a) when payments are 10% of the Contract
Price

Repayment amortisation of advance payment 13.2(b) _______________________________ 25%

Percentage of retention ___________________ 13.3 _________________________________ %

Limit of Retention Money 13.3 ________________% of the Contract Price

If Sub-Clause 13.5 applies:

Plant and Materials for payment
when delivered to the Site ___________ 13.5 _______________________________ [list]

Minimum amount of Interim

Payment Certificates ______________________ 13.6 _______________ % of the Contract Price

If Sub-Clause 13.15 applies:

Payments in Local and Foreign Currencies 1.1.5.3
& 13.15

Currency Unit Percentage payable Rate of exchange: number

in such Currency of Local per unit of Foreign
Local: [name] 1.000
Foreign: [name]
[name]

OFIiJIC 1995
If there are Provisional Sums:

Percentage for adjustment

of Provisional Sums ________________ 14.5(b) ________________________________ %

Amount of insurance for design __________ 18.1 __________________________________

Amount of third party insurance __________ 18.3 __________________________________

Periods for submission of insurance: 18.5

(a) evidence of insurance ____________ days
(b) relevant policies ________________ days

Number of members of
Dispute Adjudication Board _______________ 20.3 _____________________________________

Member of Dispute Adjudication Board

(if not agreed) to be nominated by _________ 20.3 The President of FIDIC or a person
appointed by such President

Arbitration rules ________________________ 20.6 _____________________________________

Number of arbitrators ___________________ 20.6 _____________________________________

Language of arbitration _________________ 20.6 _____________________________________

Place of arbitration ______________________ 20.6 _____________________________________

If ICC rules are NOT to apply - Either:

Arbitration rules to be administered by 20.6 _____________________________________
Or: Arbitrator (if not agreed) to be nominated by

If there are Sections:

Definition of Sections

Description Value (percentage of Time for Completion Liquidated Damages

(Sub-Clause 1.1.6.9) Contract Price) * (Sub-Clause 1.1.3.4) (Sub-Clause 8.6)

* These percentages shall also be applied to the first half of the Retention Money under Sub-Clause 13.9

Initials of signatory of Tender __________________________________________________________________________

©FIDIC 1995
AGREEMENT

This Agreement made the ____________________ day of ____________________

19
Between ______________________ of______________________ (hereinafter called "the Employer") of the one part,
and ______________________ of ______________________ (hereinafter called "the Contractor") of the other part
Whereas the Employer desires that the Works known as ____________________ should be designed and
executed by the Contractor, and has accepted a Tender by the Contractor for the design, execution and
completion of such Works and the remedying of any defects therein,
The Employer and the Contractor agree as follows:
1. In this Agreement words and expressions shall have the same meanings as are respectively assigned to
them in the Conditions of Contract hereinafter referred to.
2. The following documents shall be deemed to form and be read and construed as part of this Agreement:
(a) The Letter of Acceptance dated
(b) The Employer's Requirements
(c) The Tender dated
(d) The Conditions of Contract (Parts I and II)
(e) The Addenda nos
(f) The completed Schedules, and
(g) The Contractor's Proposal.
3. In consideration of the payments to be made by the Employer to the Contractor as hereinafter mentioned,
the Contractor hereby covenants with the Employer to design, execute and complete the Works and remedy
any defects therein, fit for purpose in conformity with the provisions of the Contract.
4. The Employer hereby covenants to pay the Contractor, in consideration of the design, execution and
completion of the Works and the remedying of defects therein, the Contract Price or such other sum as
may become payable under the provisions of the Contract at the times and in the manner prescribed by
the Contract.

In Witness whereof the parties hereto have caused this Agreement to be executed the day and year first before
written in accordance with their respective laws.

.' Authorised signature of Employer ., Authorised signature of Contractor

(Seal' (Seal'
\ (if' any) ) ____________________________ \(ff any)) ____________________________
in the presence of: in the presence of:
Name _______________________ Name _______________________
Signature Signature
Address _______________________ Address _______________________

©FIDIC 995