In this blog post, Steering Committee member, Andy Hewitt, answers questions related to claims submissions during COVID-19. This blog has been extracted from our fifth Construction Clinic session, which took place in April of 2020. The entire webinar may be viewed on-demand on YouTube.

Question 1

Question: Under the FIDIC contract, when the Engineer administers a contract in civil law jurisdictions, to make a determination for claims, what is the best way to deal with such rules of the common law as a time bar for Notices and prevention principles?

Answer: For those unfamiliar with either civil law or FIDIC contracts, let me give you a bit of background. The FIDIC requirements have a lot of very stringent requirements for the Contractor to submit Notices and say very clearly and unequivocally that if the Contractor doesn’t submit the Notices within the timeframe, he is not entitled to anything.

Now, if your contract was signed under a common law jurisdiction that is exactly what happens: if you don’t submit your Notice, you can’t have anything, because that’s what you’ve agreed to. In civil law, however, it’s not quite as black and white as that. It requires the parties to treat each other fairly, not take undue advantage of one another, and (in some jurisdictions) a just claim can never expire.

So, in my mind, that doesn’t really fit too comfortably with the FIDIC principle that if you don’t submit your Notice, you can’t have anything.

As a consultant, many times, I’ve been in the position of the Engineer and we’ve had to look at an issue and advise the Engineer what to do. The way I always approach this is to look at things fairly and reasonably.

So, can you time bar the Contractor? Well, I’m going to give you a bit of a lawyer’s answer and say, “It depends.”

I’ll give you a couple of quick examples:

  1. The Employer, the Engineer, instructs the Contractor to build two extra storeys on a building. The Contractor doesn’t submit a Notice. Then, the Engineer rejects his claim for an Extension of Time and additional payment, because he didn’t send a piece of paper in. It’s pretty obvious to everybody that the Contractor needs more time and money to build two additional floors on a building.
  2. On the other side of the coin, the Engineer instructs the Contractor that he wants a piece of equipment to be painted red instead of blue. The Contractor doesn’t tell the Engineer that that piece of equipment has already been manufactured and is currently on a ship. When the equipment arrives, he puts it back on a ship, returns it to the manufacturer, and has it painted red.

The project is now three months delayed because it’s a vital piece of equipment and he hands the Engineer a claim for half a million dollars for painting the piece of equipment red. By not giving Notice the Employer and Engineer are prevented from mitigating the circumstances. Had they been informed that the equipment was on a ship, it could have been repainted at site for a couple of under dollars, instead of half a million dollars.

I think the Engineer has a duty when determining claims to take into account the law which is applicable to the project. So, if you know that civil law will be applied, and you know that time bars are not going to be applicable in some circumstances, you have to take the law into account when you are preparing your claim responses.

The way to avoid all problems associated with notices is just to make sure you get your Notices submitted on time. It takes an hour to write a Notice and send it to the Engineer, the Architect, or whoever should be the recipient, but it can take many expensive hours to try and get contractors out of a problem that they have caused themselves by not taking that hour to send a Notice.

Question 2

Question: (Part 1 of 5) Does COVID-19 fulfil FIDIC Clause 19 (Force Majeure) criteria, items (a) to (d)?

Answer: Yes, it does, but it is not the kind of event listed in items (1) to (v).

Question 3

Question: (Part 2 of 5) Hence, it is possible to claim costs?

Answer: FIDIC limits some force majeure costs with the qualification that the costs have to be incurred in the country of the project. If you have parts for a project in Germany manufactured in China, you can’t claim costs, because the effects of COVID-19 which affects the plant and materials being manufactured occurred outside of Germany.

Question 4

Question: (Part 3 of 5) Once COVID patients are identified in the country where we execute our project then wouldn’t this be in the country?

Answer: Well, yes, it would, but now the effects have moved from China, where we are having things manufactured, to the country where we need to provide labour to the project. These people have been affected by the disease, or in some cases, the projects have been suspended, because there has been an outbreak discovered. In some countries, there is a lockdown. In this case, the event has happened in the country. If you can prove that COVID-19 is force majeure, there is a chance that you can claim costs.

Question 5

Question:(Part 4 of 5): Currently, our project has been suspended by the Employer, because of COVID-19. In this situation, is it correct that we quote both Clauses 8.8 (Suspension of Works) and 8.9 (Consequences of Suspension)?

Answer: If the Employer has for whatever reason suspended work on the project, your claim is not for force majeure, it’s for suspension, which is dealt with in an entirely different clause in FIDIC. You will be entitled to an extension of time and to your Costs incurred through the suspension: demobilisation, remobilisation, and any things that you can’t cancel, such as guarantees, bonds, insurances, etc. for the period of suspension.

Question 6

Question: (Part 5 of 5): Lastly, the Employer didn’t actually give an official notice of suspension; he just told the Contractor to suspend. We wrote to the Employer confirming the suspension. Did we do the right thing?

Answer: If your letter confirmed the verbal instruction to suspend the works, and said, “This is in accordance with Clause 8.8, a Notice to suspend,” you’ve removed any doubt and any chance of the Employer coming back later and saying he didn’t actually want you to suspend.

Finally, once you’ve qualified and confirmed this to the Employer, send all of the Notices that your contract requires you to submit. This is FIDIC, so make sure you send a notice that you’re suffering delay and incurring costs. Just comply with the notice requirements.

Question 7

Question: Final question; a quick one. Under FIDIC, again, if the Contractor receives an Engineer’s instruction under Sub-Clause 3.3 (The Engineer’s Representative), which allows the Engineer to give instructions to the Contractor, which he considers a variation under Clause 13 (Variations and Adjustments), is there a time limit by when he should notify the Engineer?

Answer: It is a very common problem that Engineers give instructions, issue revised drawings, give verbal instructions, or provide comments on shop drawings, etc. but don’t acknowledge that such instructions constitute a variation. They expect the Contractor to make the changes without cost implications on a lump sum project.

If under any doubt, you must send a notice under Clause 20, “Dear Mr. Engineer, we consider this instruction gives us entitlement to a delay (if it will cause a delay) and additional payment.” You must submit the notice within the 28 days to avoid time bar arguments.

The questions covered in this blog were answered by ICCP Executive Officer and Fellow, Andy Hewitt

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP’s articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

Privacy Preference Center