fidic 2016 day01-1450 managing claims under fidic, ppt adrias tan

Adrias TanMSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Senior Legal Counsel, Hyundai Engg & Construction Co Ltd

Managing Claims Under FIDIC

© 2016 Adrias Tan MSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Adrias TanMSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Senior Legal Counsel, Hyundai Engineering & Construction Co LtdFellow, Chartered Institute of ArbitratorsFellow, Singapore Institute of ArbitratorsFellow, Singapore Institute of Builders

Member, Society of Construction Law, UKMember, Society of Construction Law, SingaporeAssociate Member, Singapore Academy of Law

Associate Lecturer, Royal Melbourne Institute of Technology (SIM Singapore)Panel of Arbitrators, SIArb

• Claim and Procurement• After Contract Award: How to minimise Claims and, if the

Claims are disagreed, how to avoid contested Claims from becoming disputes?

• Pursuing Claims (if you haven’t managed to avoid them!)• Civil v Common Law comparison: different approaches to

Claim Quantification • The Requirements for Notices of Claim• Can the Conditions Precedent for notices always be enforced?• What constitutes detailed particulars of a Claim?• The Engineer’s Obligations


Managing Claims Under FIDIC ADRIAS TAN

Managing Claims Under FIDIC Claim and Procurement

• Claims Differentiated from Variations• Contractual Provisions on Variations

– Alterations and Modifications to Original Scope and Extent of Permanent Works

• Contractual Provisions on Claims– Compensation not anticipated in Original Contract

• Cost Implications from Variations– Evaluation and Remeasurement

• Cost and Time Implications from Claims– Express contractual provisions entitling submission of

claims



• Contractual Basis for Variations– Changes in quantities of any item of work included in the

Contract– Changes to quality and other characteristics of any item of

work– Changes to levels, positions and/or dimensions of any part of

work– Omission of any work unless it is to be carried out by others– Any additional work, Plant, Materials or services necessary for

Permanent Works, including any associated Tests on Completion, boreholes and other testing and exploratory work

– Changes to sequence or timing of execution of works



• Contractual Basis for Claims– Delayed drawings or instructions– Right of access– Setting out– Unforeseen physical conditions– Fossils– Testing– Extension of Time for Completion– Loss and Expense due to

Variations– Delay caused by Authorities


– Suspension of works– Evaluation and

Measurement– Omissions– Value Engineering – Interference with

tests on completion– Changes in legislation– Employer’s Risks

Managing Claims Under FIDIC Minimising and Avoiding Claims

• Commercial Risks and Monetising Profits• Complexity of Claims

– Changes in Design Intent and Employer’s Requirements– Ambiguities in Contract Documents

• Contracting Strategies– Lump Sum EPC– Reimbursable– Mixed or Hybrid Design/Bid/Build Procurement, etc

• Dispute Adjudication Board– Resolving disputes at early stages


Managing Claims Under FIDIC Pursuing Claims

• Administration and Management of Contract– Familiarity with Contract Documents, Forms of Contract– Familiarity with Contractual procedures and protocol

• Claims Management– Notices and Timelines– Substantiation of Information

• Notices and Correspondence– Timeline Condition Precedent– Notices for Actual and Potential Delay

• Contemporary Records– AG Falkland Islands v Gordon Forbes Construction


Managing Claims Under FIDIC Different Approaches to Claim

• Common Law Approach– Timescales: Directory or Mandatory Requirements– Bremer Handelgesellschaft v Vanden Avenne Izegem

• Notice precedent held binding if precise time is stipulated• Express language used on forfeiture of rights due to non

compliance with condition precedent– Multiplex Construction v Honeywell Control Systems

• Condition precedent allows Employer opportunity to withdraw instructions with time implications

– Heilbut, Symons v Buckleton• misstatement of facts, negligent misrepresentation,

fraudulent misinterpretation of contract terms



• Civil Law Approach– More Lenient – Non compliance with time bar not fatal– UAE Civil Code Article 243(2)

• “With regard to the rights (obligations) arising out of the contract, each of the contracting parties must perform that which the contract obliges him to do”

– UAE Civil Code Article 265(1)• “If the wording of a contract is clear, it may not be

departed from by way of interpretation to ascertain the intention of the parties”

– UAE Civil Code Article 246(1)• “The contract must be performed in ... good faith”



• Civil Law Approach– UAE Civil Code Article 318

• “No person may take the property of another without lawful cause, and if he takes it he must return it”

– Doctrine of Unjust Enrichment• The Employer precluded from relying on a time bar

provision to avoid payment to the Contractor for works performed and for works from which the Employer has benefitted particularly if the only reason for withholding payment is the lateness of the Contractor’s claim


Managing Claims Under FIDIC Requirements for Notices of Claim

• Notice in Writing– Notice served under Clause 20.1– Within 28 days after he “became aware, or should have

become aware, of the event or circumstance”• When should the Contractor be aware: Imputed Knowledge

or Objective standard• Question: who is the arbiter of when the Contractor should

have become aware, the Engineer or Contractor?– Event or Circumstance Giving Rise to Claim

• Fully detailed claim, monthly updated particulars, extension of time required and/or additional payment

• Keeping of contemporary records


Managing Claims Under FIDIC Enforcing Condition Precedent

• Doctrine of Consensus ad Idem– “If the Contractor fails to give notice of a claim within

such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim”

• Rationale– Contractor notifies Employer, to enable Employer to avert

unintended consequences– potential disputes resolved early– Failure to comply with timescale – party loses right of

claim



• Multiplex Constr v Honeywell Control Systems– “Contractual terms requiring a contractor to give prompt

notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent” per Justice Jackson

– Notice triggered not only upon Contractor becoming aware of relevant event or circumstance, but also when Contractor should have become aware of it



• Non Compliance Not Fatal– “If the Contractor fails to comply with this or another Sub-

Clause in relation to any claim, any extension of time and/or additional payment shall take account of the extent (if any) to which the failure has prevented or prejudiced proper investigation of the claim …”

– Whether enforcing time bar amounts to a penalty in the face of an Employer’s Valid Delay Factor or a Valid Variation

– Onus of proof that the time bar should be imposed generally lies with the Employer



• Obrascon Huarte Lain SA v HM’s AG for Gibraltar– Technology and Construction Court (TCC) in London

adopted a relaxed interpretation of this requirement, ruled that the 28-day period for notifying a claim for EOT only begins following the onset of actual delay flowing from the event or circumstance which caused it

– Judge Akenhead J remarked that he could see no reason why Clause 20.1 should be construed strictly against Contractor: "can see reason why it should be construed reasonably broadly, given its serious effect on what could otherwise be good claims for instance of Employer’s breach "



• Obrascon Huarte Lain SA v HM’s AG for Gibraltar– notice of a claim for EOT does not have to be given

pursuant to Clause 20.1 until there actually is delay, although Contractor can give notice when it reasonably believes that it will be delayed

– Clause 8.4: entitlement to extension arises if and to the extent that the completion “is or will be delayed by” various listed events, such as variations or “unforeseeable” conditions

– Extension of time can be claimed either when it is clear that there will be delay (prospective delay) or when delay has at least started to be incurred (retrospective delay)



• Obrascon Huarte Lain SA v HM’s AG for Gibraltar– Clause 20.1: “event or circumstance” described in can

mean either the incident (variation, exceptional weather or one of the other specified grounds for extension), or the delay which results or will inevitably result from the incident in question

– Clause 8.4: Wording is “is or will be delayed by”, and not: “is or will be delayed whichever is the earliest”



• Chiemauer Membran-und Zeltbau GmbH v New Millennium Experience– English Court of Appeal held that such condition

precedent is not enforceable– Depending on commercial sense and intentions of

contracting parties, and even for some condition precedent clauses, a court or arbitral tribunal may refuse to interpret it literally


Managing Claims Under FIDIC Detailed Particulars of a Claim

• Chiemauer Membran-und Zeltbau GmbH v New Millennium Experience– Contractor to submit Fully Detailed Claim within 42 days

of “event or circumstance”– Contractor can propose for the Engineer’s approval an

extended time period to submit a detailed claim– Cause and effect of Delay, Culpable and Concurrent Delay,

reasonable measures taken to mitigate delay– Particulars include correspondence, meeting minutes,

site records, photographs, narratives, schedules, etc– Updated construction program showing planned,

impacted and actual schedule


Managing Claims Under FIDIC Engineer’s Obligations

• Engineer has 42 days to Approve or Disapprove with Detailed Comments– Engineer can propose for the Contractor’s approval an

extended time period to respond– Request “any necessary further particulars”– Engineer unreasonably delaying a response to a Claim or

requesting unnecessary further particulars– Clause 3.5: consulting with Contractor, try to reach an

agreement. If not possible to reach agreement, make a fair determination



• Engineer Failure to Respond within 42 days– No express sanctions for the Engineer’s failure to provide

a timely response– Effect is Contractor unduly relieved of his contractual

obligations; Contractor not kept aware of his contractual rights and entitlements arising from such valid claims and notifications



• Prevention Principle– Where Engineer fails to provide a timely response or fails

or refuses to grant an extension of time inspite of the Valid Delay Factor

– Employer precluded from holding Contractor to completion date, due to Employer or his authorised Representative’s act or omission preventing Contractor from completing by that date

– Completion time becomes at large; obligation to complete by specified date replaced by implied obligation to complete within a reasonable time



• Roberts v Bury Improvement Commissioners– well established principle at common law that:

“... no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself ...” per Blackburn and Mellor JJ

– Reason for that rule is that otherwise a most unreasonable burden would be imposed upon the Contractor

– Employer’s right to impose liquidated damages for delay replaced by unliquidated damages, based on new ‘reasonable time’ completion date



• Shawton Engineering Ltd v DGP International Ltd– Court of Appeal held that what is a reasonable time has

to be judged as at the time when the question arose, in the light of all the relevant circumstances:“There were variations, but no contractual mechanisms for extending time on account of the variations (or the mechanisms have failed). The effect in law of the variations was that the Contractor became obligated to complete their work within a reasonable time”



• Shawton Engineering Ltd v DGP International Ltd– The judge rejected that a reasonable time should be

ascertained by reference to the Original Contract Periods as extended only by the agreed periods for variations

– “The question of what is a reasonable time within which to complete particular work is an objective question and is not dependent upon the actual time which a person may have agreed to carry out the work. Parties may have over or under estimated what time the work would actually require. The time which has to be ascertained is the time it would reasonably take to complete the whole of the works”


Managing Claims Under FIDIC FLOW CHART – Clause 20.1 Claims




Interactive Voting System – Multiple Choice Questions The Engineer is empowered under the

prevailing express conditions to require that the Contractor submits claims for evaluation of Variations pursuant to Clause 20.1 and subject to the timeline condition precedent before he is entitled to compensation for the additional work instructed?

1) AGREE2) DISAGREE



Interactive Voting System – Multiple Choice Questions If the Engineer delays, refuses or fails

to respond to the Contractor’s Claims pursuant to Clause 20.1, the Contractor’s rights may be prejudiced as a result. The FIDIC Forms should address this lacuna.

1) AGREE2) DISAGREE

MSc | BSc(Hons) | LLB(Hons) | FCIArb | FSIArb

Adrias has more than two decades of practical working experience in the construction industry, working currently as in-house legal counsel for an MNC Company. Adrias is professionally trained in litigation, arbitration, adjudication, mediation and dispute resolution, and is an accredited arbitrator. He has handled several institutional and ad-hoc arbitral proceedings, as well as having tutored in SIArb, and conducted numerous workshops and seminars on diverse construction, contractual and legal issues including various Standard Forms of Contracts. He also lectures at the Royal Melbourne Institute of Technology, at the Singapore Institute of Management Campus teaching law subjects.email: [email protected]

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Adrias Tan