FIDIC 2017: A Practical Legal Guide

YELLOW BOOK

CLAUSE 1

GENERAL PROVISIONS

Joanne Clarke and Kerry Higgins

Summary

Clause 1 contains a number of general provisions. These include the definitions, various 'boilerplate' provisions, and other provisions which do not easily fit into other clauses. It also includes, at sub-clause 1.15, provisions which limit or exclude a Party's liability to the other in certain circumstances and which in the Yellow Book 1999 are in sub-clause 17.6.

Sub-clause 1.1 contains several pages of definitions which in the Yellow Book 2017 are arranged alphabetically rather than by theme as in the Yellow Book 1999.

Sub-clause 1.2 gives rules for interpretation of certain listed words and phrases and other aspects such as headings.

Sub-clause 1.3 contains important provisions relating to Notices and other communications. The Yellow Book 2017 requires Notices to be given in many different circumstances and for many different reasons. If the Notice provisions in sub-clause 1.3 are not complied with, the consequences may be severe.

Sub-clause 1.4 deals with the governing law, the ruling language and the language for communications.

Sub-clause 1.5 addresses conflicts, ambiguities or discrepancies between the various documents forming the Contract and sets out how these should be resolved.

Sub-clause 1.6 addresses the Contract Agreement and the form it should take as well as various related formalities.

Sub-clause 1.7 contains a prohibition on assignment, with certain exceptions.

Sub-clause 1.8 deals with the care and supply of documents, including Contractor's Documents, and sets out the procedure to follow if a Party or the Engineer becomes aware of an error or defect in a document prepared by the Contractor.

Sub-clause 1.9 deals with errors, faults or defects in the Employer's Requirements, sets the standard against which the Contractor will be judged in finding them, and the procedure to be followed if the Contractor does find them.

Sub-clause 1.10 addresses ownership and use of the Contractor's Documents and other design documents made by or on behalf of the Contractor.

Sub-clause 1.11 addresses ownership and use of the Employer's Requirements and other documents made by or on behalf of the Employer.

Sub-clause 1.12 imposes confidentiality obligations on the Parties and the Engineer in respect of certain documents and information and requires the Contractor to disclose other confidential information as the Engineer may reasonably require.

Sub-clause 1.13 requires the Employer and the Contractor to comply with all applicable Laws, sets out specific obligations for each Party in respect of various permits and approvals, and remedies in case of failure by the other Party to comply with these specific obligations.

Sub-clause 1.14 sets out provisions which apply when the Contractor is a Joint Venture.

Sub-clause 1.15 contains exclusions to the liability of both Parties and limitations on the liability of the Contractor, subject to certain exceptions. Its predecessor was at sub-clause 17.6 of the Yellow Book 1999.

Sub-clause 1.16 provides that subject to any mandatory requirements of the governing law, termination of the Contract under any clause of the Conditions requires no action other than as stated in the sub-clause.

Origin of the Clause

Clause 1 of the Yellow Book 2017 is similar to clause 1 of the Yellow Book 1999 although there are some important changes. In the Yellow Book 2017, the definitions are ordered alphabetically (rather than by theme as in the Yellow Book 1999), many sub-clauses contain new provisions and have generally been expanded, and clause 1 contains two new sub-clauses. The first is sub-clause 1.15 [Limitation of Liability], which in the Yellow Book 1999 was at sub-clause 17.6. The second is sub-clause 1.16 [Contract Termination], which is a completely new, short provision addressing action that may be required upon termination of the Contract.

Sub-clause 1.1 - Definitions

Introduction

FIDIC has significantly expanded the Definitions. The Yellow Book 1999 contained 58 definitions; the Yellow Book 2017 has 90.

The definitions are now listed in alphabetical order rather than being arranged thematically.

1. 1.1 Definitions In the Contract the following words and expressions shall have the meanings stated except where the context requires otherwise.

Care should be taken when amending any definitions in order to ensure consistency across documents forming the Contract. Relevant words should be capitalised in order to conform with this list of definitions.

• 1.1.1 'Accepted Contract Amount' means the amount accepted in the Letter of Acceptance for the execution of the Works in accordance with the Contract.

The Yellow Book 1999 referred to the execution 'and completion' of the Works and the 'remedying of any defects' as part of the Accepted Contract Amount.

The Yellow Book 2017 defines the Accepted Contract Amount by reference to the 'execution of the Works in accordance with the Contract'. This is a wider and more flexible definition which reflects the increasingly complex nature of construction and contractual arrangements.

The Contractor is deemed to have satisfied itself as to the correctness and sufficiency of the Accepted Contract Amount via sub-clause 4.11.

The Accepted Contract Amount is also deemed to cover all the Contractor's obligations under the Contract and all things necessary for the proper execution of the Works in accordance with the Contract, per sub-clause 4.11.

The Accepted Contract Amount differs from the Contract Price in that it is a static sum which acts as a baseline within the Contract. For example:

• It forms the basis of the Contract Price (see sub-clause 14.1, sub-paragraph (a)).
• If the Contract Data does not include a maximum total figure for Contractor liability, the Accepted Contract Amount is deemed to act as such (sub-clause 1.15).
• The Accepted Contract Amount is also used as the basis for calculating when the Contractor may request reasonable evidence of the Employer's financial arrangements under sub-clause 2.4. When the Contractor receives a Variation instruction and the price exceeds 10% of the Accepted Contract Amount, or the accumulated total of Variations exceeds 30%, the Contractor becomes entitled upon request to 'reasonable evidence that financial arrangements have been made and are being maintained which will enable the Employer to pay the part of the Contract Price remaining to be paid at that time'.
• When Variations or adjustments result in an increase in the Contract Price by more than 20% of the Accepted Contract Amount, the Employer can request the Contractor to increase the Performance Security. If there is a decrease of more than 20%, the Contractor may decrease the Performance Security (with the Employer's consent) under sub-clause 4.2.1.
• Should the Employer wish to limit the Contractor's freedom to subcontract the Works, it is able to limit subcontracting by a percentage of the Accepted Contract Amount via sub-clause 4.4.
• When the total certified interim payments (excluding the advance payment and release of retention) exceeds 10% of the Accepted Contract Amount, repayment of the Advance Payment commences (sub-clause 14.2.3, sub-paragraph (a)).
• Where a negative Variation under sub-clause 13.3.1, sub-paragraph (c) causes the Contractor to incur cost which, had the work not been omitted, would have been covered by a sum forming part of the Accepted Contract Amount and the omission results in this sum not forming part of the Contract Price, the cost may be included in the Contractor's proposal for adjustment to the Contract Price.
• The Performance Security, Advance Payment and limit of Retention Money is usually expressed as a percentage of the Accepted Contract Amount (see the Guidance1 Contract Data pro forma).

• 1.1.2 'Advance Payment Certificate' means a Payment Certificate issued by the Engineer for advance payment under Sub-Clause 14.2.2 [Advance Payment Certificate].

This is a new definition under the Yellow Book 2017.

Under sub-clause 14.2.2, the Engineer issues an Advance Payment Certificate for the advance payment within 14 days after (a) the Employer has received the Performance Security and Advance Payment Guarantee in the form required; and (b) the Engineer has received a copy of the Contractor's application for the advance payment. Pursuant to sub-clause 14.7, once the amount has been certified, the Employer must pay within the period stated in the Contract Data. If no such period is stated, this is 21 days.

The introduction of the Advance Payment Certificate appears to have been included in the Yellow Book 2017 to ensure compliance with the various payment and guarantee obligations under the Conditions. It should act as proof of the Parties' compliance with these obligations.

• 1.1.3 'Advance Payment Guarantee' means the guarantee under Sub-Clause...