What Qualifies as a Force Majeure Event Under FIDIC?

  1. One of our distance learning students contacted me for some advice on a claim that she had received based on force majeure on a contract under the FIDIC Yellow Book. My advice may be summarised as follows and is also applicable to the 1999 FIDIC Red Book:
  2. To qualify as a force majeure event, the event or circumstance needs to tick allthe boxes defined in Sub-Clause 19.1 (Definition of Force Majeure), which lists the following criteria:
    • Beyond a Party’s control;
    • The Party could have not reasonably anticipated;
    • The Party could not have reasonably avoided;
    • Which is not substantially attributable to the other Party.
  3. The sub-clause then lists examples of types of exceptional event or circumstances that should be considered as force majeure. The list includes war, hostilities, rebellion, disorder and natural catastrophes and several other circumstances. The list is not definitive and provided that an event is of a similar nature, it should qualify.
  4. Sub-Clause 19.2 (Notice of Force Majeure) requires the party to give notice within 14 days.
  5. Sub-Clause 19.4 (Consequences of Force Majeure) provides that, if notice has been given, the Contractor may claim for an extension of time if the Time for Completion will be delayed and the payment of any Cost for some, but not all circumstances. This sub-clause refers back to Sub-Clause 19.1 (Definition of Force Majeure) for the types of event under which Cost may be claimed.

Evaluating Defects

In Claims Class Case Studies, we present a case study of a real situation for the reader to study and decide on the correct contractual outcome. The author’s opinion of the solution is presented underneath.

The following describes the situation for this case study.

  1. The project is an international airport terminal constructed for the exclusive use of the country’s flagship airline and also to accommodate the new Airbus A380 airliner. The form of contract is the FIDIC 1999 for Building and Engineering Works Designed by the Employer.The project was designed and procured in a very tight time-scale and this led to several major variations for additional work being instructed during the construction period. The Engineer issued extensions to the Time for Completion due to the variations, but these were significantly less than the Contractor had claimed for.
  2. The Employer, facing immovable deadlines from his operations division, insisted on completion being achieved in a very tight time frame, despite the additional work instructed through the variations and this placed significant pressure on the Contractor to carry out finishing works in a rushed manner and also allowed very little time for snagging. The result was that when the project was handed over, certain of the finishing works including, plasterwork, ceramic floor tiling to the main concourse, ceramic wall and floor tiling to the toilets and painting and decorating were not in accordance with the standards required by the Specification.
  3. The Engineer produced extensive snagging lists and when issuing the Taking Over Certificate, recorded these as being defects to be made good during the Defects Liability Period. The recorded defects were not disputed by the Contractor, who nevertheless made the point that the sub-standard workmanship was a direct result of not being allowed a reasonable time to complete the Works. On reviewing the defects list, the Employer however, advised the Engineer that the rectification of many of the items included on the snagging lists would cause an unacceptable level of disruption to the airport operations and that he would accept some of the defects without them being made good.
  4. Given the instructions of the Employer, what would be an appropriate course of action for the Engineer to take?

Claims Class Case Studies – Author’s Opinion

  1. The fact that the Contractor has not carried out some of the finishing works in accordance with the standards of workmanship included in the Specification is a breach of his obligation sunder Sub-Clause 7.1 (Manner of Execution)which provides that: ‘The Contractor shall carry out the manufacture of Plant, the production and manufacture of Materials, and all other execution of the Works: in the manner (if any) specified in the Contract, in a proper workmanlike and careful manner, in accordance with recognised good practice …’
  2. Whilst the Contractor has committed a breach of contract, he is willing to remedy the breach by making good the defects. The Employer has however denied the Contractor the opportunity to do so by deciding to accept the works without many of the defects being made good. The Employer is obtaining beneficial use from the defective finishes, so it cannot be contemplated that the Contractor should not be paid for the defective work. On the one hand therefore, the Contractor has not provided the Employer with workmanship to the specified standards, so it is inequitable that he should pay the agreed price for the sub-standard work. On the other hand, however, the Employer is gaining a benefit from the work in the condition that it was provided, so the Contractor clearly deserves to be paid for this work.
  3. Some guidance of a suitable solution can be found under Sub-Clause 9.4 (Failure to Pass Tests on Completion),which provides that: ‘If the Works, or a Section, fail to pass the Tests on Completion repeated under Sub-Clause 9.3 [Retesting], the Engineer shall be entitled to: order further repetition of Tests on Completion under Sub-Clause 9.3; if the failure deprives the Employer of substantially the whole benefit of the Works or Section, reject the Works or Section (as the case may be), in which event the Employer shall have the same remedies as are provided in sub­paragraph (c) of Sub-Clause 11.4 [Failure to Remedy Defects]; or issue a Taking-Over Certificate, if the Employer so requests.In the event of sub-paragraph (c), the Contractor shall proceed in accordance with all other obligations under the Contract, and the Contract Price shall be reduced by such amount as shall be appropriate to cover the reduced value to the Employer as a result of this failure. Unless the relevant reduction for this failure is stated (or its method of calculation is defined) in the Contract, the Employer may require the reduction to be (i) agreed by both Parties (in full satisfaction of this failure only) and paid before this Taking-Over Certificate is issued, or (ii) determined and paid under Sub-Clause 2.5 [Employer's Claims] and Sub-Clause 3.5 [Determinations].’
  4. Snagging and final inspection by the Engineer should reasonably be regarded as comprising tests on completion. The Employer has requested that the Taking Over Certificate be issued without the defective work being made good, so the provision contained in Sub-Clause 9.4 that ‘the Contract Price shall be reduced by such amount as shall be appropriate to cover the reduced value to the Employer as a result of this failure’ should be applied.
  5. Obviously, calculating a value that is ‘appropriate to cover the reduced value to the Employer’could be a challenge to the Engineer, but I would suggest that if this were based upon what it would reasonably cost the Contractor to remedy the defective work, this could be an acceptable solution to both parties.

Climatic Conditions

We recently had a request on social media to discuss when climatic conditions may provide grounds to a claim.

There may very well be times when a project is affected by climatic conditions such as heavy rainfall, extreme temperatures, snow or high winds, but the test as to whether such conditions provide grounds for a claim is generally not whether they affected the project or not, but whether the conditions were exceptional. If the climatic conditions are not exceptionally adverse, then the contractor is deemed to have been able to have reasonably anticipated such conditions and to have allowed for them within his price and programme.

FIDIC uses the term ‘exceptionally adverse climatic conditions’ and the JCT contracts refer to ‘exceptionally adverse weather conditions’ as giving grounds for extensions of time. The key word here of course is ‘exceptionally’. The NEC contract provides that ‘adverse weather’ may be a claimable event, but goes a step further and removes subjective speculation as to what may be considered as exceptional by including a provisions that this may only be applied if a weather measurement which is shown to occur on average less frequently than once in 10 years, is recorded within a calendar month.

If you wish to bring about a successful claim therefore, it will be necessary to prove that the conditions were in fact exceptional. Local metrological records are a good way of proving that the conditions actually occurred and may possibly also be used to demonstrate that they were exceptional. An Internet search may also reveal historical data for the site location so that the records for the conditions in question may be compared with the average, or even better, with historical extreme conditions. If you do not prove, firstly that the conditions delayed or otherwise affected the project and secondly that the conditions really were exceptional, then the claim will most likely fail.

This paper has been reproduced with permission from the author and included in the Knowledge Zone of the ICCP Knowledge Center to support and encourage the learning and professional development of ICCP members.

The ICCP seeks to ensure that all content, information and downloadable articles published on the ICCP website is current and accurate, but such information does not in any way constitute legal advice. The ICCP cannot be held liable for any losses incurred as a result of any communication from the ICCP, or from information found on the ICCP website or in the Member’s Area.

Top Tips Contract Documents

More often than not, the contract documents will form the basis of any claim. If something has changed, the extent of the change may only be measured and evaluated by reference to the drawings and specification upon which the Contract is based. The claimant’s entitlement will usually be spelled out in the conditions of contract as will the procedure to be followed in the case of a claim. If there is a disagreement between the parties as to design, quality, responsibility, scope of works or procedures, the contract is the place to look for guidance and resolution.

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Badly Presented Claims

Our training partners, Claims Class, teach the following four key points in claim and response writing:

  • Key Point 1 - Make the reader's job as easy and as pleasant as possible;
  • Key Point 2 - Ensure that the submission is a stand-alone document;
  • Key Point 3 - Assume that the reviewer has no prior knowledge of the project or circumstances;
  • Key Point 4 - Irrelevant information should not be included in the document.

I have recently dealt with a claim which did not adopt this approach and I would like to share the results with you to emphasise the importance of complying with these principles.

I was appointed by the Employer to review the Contractor’s claim and produce a recommendation for issue by the Engineer. The claim was for an extension of time based on the fact that missing design information prevented the Contractor from ordering electrical equipment and that this delayed the project.

I should say at the outset that the claim was a fair one and the contract entitled the Contractor to an extension of time under these circumstances. The point I am trying to make however, is that the Contractor did not make life easy for me, or ultimately, for himself.

When I first read through the claim narrative, I noticed that the Contractor had repeated the same things many different times throughout the claim unnecessarily. So, having to read the same thing several times is just annoying and it is certainly not making my job pleasant (Key Point 1).

The narrative then skipped around randomly and did not deal with things in a logical way. For example, demonstration of entitlement would be mixed up with a discussion of the cause of the delay. This is just confusing to a reader. A good narrative tells a story that takes the reader on a journey, which will eventually lead to a logical conclusion.

The narrative contained a number of abbreviations without any explanation. Maybe an electrical engineer would have understood the meanings of ‘DB’, ‘MDB’ or ‘SMDB’, but I had to ask someone in the engineer’s office to explain that these meant ‘electrical distribution board’, ‘main distribution board’ and ‘submain distribution board’. I did know what a bus bar was though! This is annoying and inconvenient and is a good example of incorrectly assuming that the reviewer has prior knowledge of the project or circumstances.

The claim did not contain substantiation of many statements made within the claim. For example, the Contractor stated that he had submitted notices within the time frames stipulated in the Contract. The claim did not include documentary substantiation of this, so it did not comprise a stand-alone document. I was therefore obliged to check the records to verify this assertion, which was a further annoyance. In the event, I found that the Contractor has not, in fact, submitted the notices within the time frames as he had stated in the claim. This led me to the conclusion that the Contractor was attempting to hide the truth, which made me look at everything else very critically.

You may think that my comments are somewhat petty but let me go on the explain that based on the information submitted within the claim and additional information that I was obliged to find myself, I recommended an extension of time award which was significantly less than the Contractor had claimed. When the claim assessment was issued to the Contractor, he immediately responded to say that I had not taken several things into account. I asked the Contractor to show me where these things were included in his claim...

They weren’t.

The Contractor subsequently submitted additional particulars and I revised the assessment. This did not end the matter though, because the Contractor then remembered some other information that he had not included. The claim assessment went through three revisions before the matter was concluded, which wasted both my time and the Contractor’s and prevented the matter from being resolved for several months.

Had the Contractor been aware and taken account of the four key points when compiling the claim, it could have been finalised both easily and quickly and with much less expense and effort.

Interested in learning more about claims and getting recognized for your effort? Check out our training partnership with Claims Class courses and routes to ICCP membership.