The International Application of FIDIC Contracts

A Practical Guide

Donald Charrett, Donald Charrett

• Publisher: Informa Law from Routledge
• Year: 2019
• ISBN:
  9780429632082
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

FIDIC contracts are the most widely used contracts for international construction around the world and are used in many different jurisdictions, both common law and civil law. For any construction project, the General Conditions of Contract published by FIDIC need to be supplemented by Particular Conditions that specify the specific requirements of that project.

The International Application of FIDIC Contracts: A Practical Guide provides readers with detailed guidance and resources for the preparation of the Particular Conditions that will comply with the requirements of the applicable laws that apply to the site where the work is carried out, and for the governing law of the contract, for a number of the jurisdictions in which FIDIC contracts are used.

This book is essential reading for construction professionals, lawyers and students of construction law.

Chapter 1
Introduction

Dr Donald Charrett

1.1 Construction contracts

1.1.1 Legal systems and construction contracts

1.1.2 Freedom of contract

1.1.3 Pacta sunt servanda

1.1.4 Proper law of the contract

1.2 FIDIC Contracts

1.2.1 FIDIC Contract documents

1.2.2 Contract Agreement

1.2.3 Particular Conditions

1.2.4 Particular Conditions Part A — Contract Data

1.2.5 Particular Conditions Part B — Special Provisions

1.2.6 General Conditions

1.3 The FIDIC Golden Principles

1.4 Applicable laws

1.4.1 Laws

1.4.2 Governing law of the contract

1.4.3 Intersection of local laws with the governing law of the contract

1.4.4 Laws with extra-territorial reach

1.4.5 The scope of applicable laws

1.5 Impact of the applicable laws

1.6 Country accessions to international conventions

1.7 Additional references

1.7.1 Books

1.7.2 Journal articles

1.7.3 Internet resources

1.7.4 Case law

1.1 Construction contracts

Construction contracts can be defined in various ways. The following definition is used for the purposes of this book:

any contract where one person [this includes a corporation] agrees for valuable consideration to carry out construction works, which may include building or engineering works, for another.¹

1 Stephen Furst and Vivian Ramsey, Keating on Construction Contracts 8th ed. (Sweet & Maxwell: London 2006) 1.

A contract for design does not involve “construction” as such and, for the purposes of this book, is not considered to be a construction contract. A design and construct contract includes design, but it also involves construction and therefore falls within the definition adopted above. Moreover, a subcontract in which a Subcontractor undertakes construction work for a Contractor is a species of construction contract and may be “back to back” with the Head Contract between the Employer and the Contractor.²

2 Capitalised terms not specifically defined in this book are defined in the 2017 FIDIC rainbow suite. The glossary contains definitions of terms specifically defined in this book.

In general terms, the Parties to a construction contract are the Employer for whom the work is done and the Contractor who carries out the work. In the case of a subcontract, the Contractor under the Head Contract functions as the Employer, and the Subcontractor functions as the Contractor.

Construction contracts have a number of specific features that give them some unique characteristics that distinguish them from other commercial contracts. The following issues arise by operation of law, because of specific terms that are incorporated in most construction contracts, or because of the nature of construction work:

• The constructed product is attached to the land and becomes part of the real property of the land owner when attached;
• The Employer (generally) has the right to increase the scope of work by the issue of Variations, and the Contractor is obliged to carry out the extra work;
• There are usually a series of independent and inter-related contracts between a number of different Parties: e.g. Employer/Designer, Employer/Engineer, Employer/Contractor/DAAB or DAB Member, Employer/Contractor, Contractor/Subcontractor, Subcontractor/Sub-Subcontractor;
• The importance and significance of insurance of the Works;
• There are many different types of construction contracts: e.g. construct only, design and construct, engineer procure and construct (EPC), engineer procure and construction management (EPCM);
• There is often an “independent” Engineer to administer the Contract;
• Complex technical documents are frequently incorporated in the Contract;
• The Contractor is usually required to provide security for its performance;
• The Contract may be an entire contract;
• A construction contract may involve the assumption of obligations that are very long term, e.g. maintenance or liability for defects arising many years after construction is completed;
• Construction work apparently completed in accordance with contractual requirements can contain latent defects which only manifest themselves many years after construction is completed.

Every construction contract is unique: the Site is a unique location in the Country, constructed by a particular Contractor for a particular Employer over a particular period of time for a specific purpose.

Contract law around the world is founded on two fundamental doctrines, operating within legal systems complying with the rule of law. The first of these, freedom of contract, sets the “ground rules” which govern the Parties’ rights to enter into the contract of their choice. The second, the principle of pacta sunt servanda, governs the performance of a contract after it has been entered into. These two universal principles of law apply to the entry into, execution, and termination of contracts, irrespective of legal jurisdiction.

1.1.1 Legal systems and construction contracts³

3 This topic is discussed in more detail in Charrett, The Application of Contracts in Engineering and Construction Projects (Informa Law from Routledge: Abingdon, UK 2018), Chapter 30: “A common law of construction contracts – or vive la différence?”

There are a number of “families” or systems of law, the most widespread being the systems considered in this book: common law and civil law. Other legal systems include Shari’a law and Socialist law.

Common law is the body of law developed by judges from around the 11th century in England and later exported to its various colonies such as Canada, the USA, Australia, Ghana, Hong Kong, Malaysia, and Sri Lanka. The basic principle is that earlier judicial decisions, usually of the higher courts, made in a similar case, should be followed in subsequent cases. The principle that precedents should be respected is known as stare decisis, and although it has never been legislated, courts regard it as binding. However superior courts can decide that a previous case was wrongly decided and modify the law accordingly. In addition to the law made by judges in decided cases, common law is also based on statutes, which judges interpret by discerning the intention of Parliament and applying it accordingly.

Pejovic describes civil law in the following terms:

Civil law has its origin in Roman law, as codified in the Corpus Iuris Civilis of Justinian. Under this influence, in the ensuing period the civil law has been developed in Continental Europe and in many other parts of the world. The main feature of civil law is that it is contained in civil codes, which are described as a “systematic, authoritative, and guiding statute of broad coverage, breathing the spirit of reform and marking a new start in the legal life of an entire nation. Most civil codes were adopted in the nineteenth and twentieth centuries: French Code Civil, 1804, Austrian Burgerliches Gesetzbuch, 1811, German Burgerliches Gesetzbuch, 1896, Japanese Minpo, 1896, Swiss Zivilgesetzbuch, 1907, Italian Codice Civile, 1942. Between these codes there are some important differences, and they are often grouped in the Romanic and the Germanic families. Even though the civil codes of different countries are not homogenous, there are certain features of all civil codes which bind them together and “sets them apart from those who practice under different systems”.

Civil law is largely classified and structured and contains a great number of general rules and principles, often lacking details. One of the basic characteristics of the civil law is that the courts main task is to apply and interpret the law contained in a code, or a statute to case facts. The assumption is that the code regulates all cases that could occur in practice, and when certain cases are not regulated by the code, the courts should apply some of the general principles used to fill the gaps.⁴

4 Caslav Pejovic, “Civil Law and Common Law: Two Different Paths Leading to the Same Goal” (2001) 32 Victoria University of Wellington Law Review 817. www.victoria.ac.nz/__data/assets/pdf_file/0008/830780/Pejovic.pdf (accessed 15 July 2018).

Notwithstanding the differences between common law and civil law systems, and the differences between jurisdictions within either of these systems, construction contracts can be executed in the knowledge that, notwithstanding local law differences, there are appropriate methods of dispute resolution, broad agreement on what constitutes a just outcome in most situations, and international norms that ensure remedies can be realised.

The differences between the common law and civil law have become much less in recent years:

• The volume of legislation in common law countries has increased substantially over recent decades. Increasingly, more of the law is explicitly stated in legislation, which either codifies or amends the previous common law or forms new “social legislation”, which achieves legislatively desirable social outcomes not addressed by the common law, e.g. the Human Rights Act 1998 (UK), which incorporates the rights and freedoms of the European Convention on Human Rights into British law, and the Housing Grants, Construction and Regener...