FIDIC Contracts in Asia Pacific

A Practical Guide to Application

Donald Charrett, Donald Charrett

• Publisher: Informa Law from Routledge
• Year: 2021
• ISBN:
  9781000458039
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• 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 subject to the relevant laws.

FIDIC Contracts in Asia Pacific provides readers with detailed guidance and resources for the preparation of the Particular Conditions that will comply with the requirements of the applicable laws for a number of the jurisdictions in which FIDIC contracts are used. The laws that apply to the governing law of the contract, construction works and dispute resolution in each jurisdiction are identified. This book offers chapters on the FIDIC Conditions of Contract for Underground Works, and the perspective of a bilateral aid agency on the use of FIDIC contracts. Each jurisdiction features an outline of its construction industry and information on the impact of Covid-19 on both the execution of construction projects and the operation of construction contracts.

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

CHAPTER 1 Introduction

Dr Donald Charrett

DOI: 10.4324/9781003200901-1

1. 1 Introduction
   1. 1.1 Construction contracts
      1. 1.1.1 Overview
      2. 1.1.2 Legal systems
      3. 1.1.3 Contract law
      4. 1.1.4 Freedom of contract
      5. 1.1.5 Pacta sunt servanda
      6. 1.1.6 Proper law of the contract
      7. 1.1.7 International construction contracts
   2. 1.2 Lex constructionis
      1. 1.2.1 What is it?
      2. 1.2.2 Promotion of best practice for successful projects
      3. 1.2.3 Proposed principles of lex constructionis
      4. 1.2.4 Discussion
   3. 1.3 FIDIC contracts
      1. 1.3.1 Overview
      2. 1.3.2 MDB use of FIDIC contracts
      3. 1.3.3 FIDIC Contract documents
      4. 1.3.4 Contract Agreement
      5. 1.3.5 Particular Conditions
      6. 1.3.6 Particular Conditions Part A – Contract Data
      7. 1.3.7 Particular Conditions Part B – Special Provisions
      8. 1.3.8 General Conditions
   4. 1.4 The FIDIC Golden Principles
   5. 1.5 Applicable laws
      1. 1.5.1 Laws
      2. 1.5.2 Governing law of the contract
      3. 1.5.3 Intersection of local laws with the governing law of the contract
      4. 1.5.4 Laws with extra-territorial reach
      5. 1.5.5 Laws applicable to the execution of a construction project
      6. 1.5.6 Laws applicable to arbitration of a dispute
   6. 1.6 Covid-19
      1. 1.6.1 Government responses to Covid-19
      2. 1.6.2 The impact of Covid-19 on construction
      3. 1.6.3 Execution of construction projects impacted by Covid-19
      4. 1.6.4 Operation of construction contracts
      5. 1.6.5 Economic measures
      6. 1.6.6 Claims arising from Covid-19 under FIDIC contracts
      7. 1.6.7 Dispute resolution
   7. 1.7 Impact of the applicable laws
   8. 1.8 Country accessions to international conventions and agreements
      1. 1.8.1 New York Convention
      2. 1.8.2 WTO Agreement on Government Procurement
   9. 1.9 Aims of the book
   10. 1.10 References
       1. 1.10.1 Books on construction law
       2. 1.10.2 Books on FIDIC contracts
       3. 1.10.3 Guides on FIDIC contracts
       4. 1.10.4 Journal articles
       5. 1.10.5 Internet resources
       6. 1.10.6 Case law

1.1 Construction contracts

1.1.1 Overview

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

[a]ny 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

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

In this book, the Contract means the construction contract being referred to. 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, or because of specific terms that are incorporated in most construction contracts, or because of the nature of construction work. The unique distinguishing features of construction law can be conveniently considered under the following headings that address issues generally relevant to all construction projects.

1 Stephen Furst and the Hon Sir Vivian Ramsey, Keating on Construction Contracts (8th edn, Sweet & Maxwell 2006) 1. 2 Capitalised terms not specifically defined in this book are defined in the relevant FIDIC Conditions of Contract. The Glossary contains definitions of terms specifically defined in this book.

Scope:

• The subject matter of the contract relates to construction of a unique facility that will be affixed to the land at a specific location over a specific period of time.
• The constructed facility becomes part of the real property of the landowner when attached.
• The required design, scope, time, cost and quality requirements of the Works and the finished project are usually defined by extensive and complex technical documentation.
• The Employer (generally) has the right to increase or decrease the originally agreed scope of work by the issue of Variations, and the Contractor is obliged to carry out or omit the varied work.
• The execution of the construction work and/or the performance of the Contract may be supervised by an ‘independent’ Engineer who is not a party to the Contract.
• The Contract may be an entire contract.
• There are many different types of construction contract: eg construct only, design and construct, engineer procure and construct (EPC), engineer procure and construction management (EPCM).

Risk:

• There are many risks in a construction project – known knowns, known unknowns, and unknown unknowns.
• Ground conditions are never completely known, including geotechnical conditions, groundwater, contamination, or heritage items.
• Weather conditions can have significant impact on construction activities and delay completion.
• Freedom of contract may be constrained, eg Security of Payment legislation that mandates payment obligations and makes some provisions illegal, such as pay when paid clauses.
• Many aspects of a construction project are subject to Government laws and regulations.
• There are usually a series of independent and interrelated contracts between a number of different parties: eg Employer/designer, Employer/Engineer, Employer/Contractor/DAAB or DAB Member, Employer/Contractor, Contractor/Subcontractor, Subcontractor/sub-Subcontractor Employer/Insurer, Contractor/Insurer.
• Construction activities are potentially dangerous, eg heavy machinery, working at heights, confined spaces etc.
• Construction involves significant environmental impacts: noise, dust, smells, vibration, nuisance, water run-off, sediment and erosion.
• Construction may adversely impact adjacent property.
• Insurance of the works is usually mandatory and is a significant risk transfer mechanism.
• Insolvency of parties to interrelated contracts may impact performance.

Time:

• The time for contractual performance may extend over a number of years, including a period after completion of construction (and when the Employer is in possession of the Site) during which the Contractor is liable to rectify defects.
• There are usually significant financial consequences for late contract completion.

Cost:

• The contract sum and cashflow is typically substantial – cash flow is the lifeblood of construction.
• The Contractor is usually required to provide security for its performance.

Quality:

• A construction contract may involve the assumption of obligations that are very long term, eg maintenance or liability for defects arising many years after construction was completed.
• Construction works apparently completed in accordance with contractual requirements may contain latent defects which only manifest themselves many years after construction was completed.

Disputes:

• Disputes are common and frequently involve complex technical issues and large volumes of documents.

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.

1.1.2 Legal systems

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, Fiji, Hong Kong, India, Malaysia, Pakistan and Singapore. 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 apply it accordingly.

Civil law is a system of law in which the laws are codified in a large number of general rules and principals. 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 co...