Assignment - FIDIC Contract

SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
BACHELOR OF QUANTITY SURVEYING (HONOURS)
LAW63804 CONSTRUCTION LAW
AUGUST 2018 SEMESTER
GROUP ASSIGNMENT - FIDIC CONTRACT
GROUP MEMBERS:
NO. NAME STUDENT ID
1. PANG KAI YUN 0319802
2. BENJAMIN TAY WEI YE 0326132
3. ABD'ALLAH SAEI-UL-HAQQ 0324556
4. CHIA LY VIER 0320142
5. MARCO LEONG 0320026
6. NG SIEW QING 0325750
LECTURER : MR WONG CHONG WEI
SUBMISSION DATE : 21 NOVEMBER 2018

TABLE OF CONTENTS
CONTENT PAGE NUMBER
1.0 Introduction
1.1 Objective
1.2 Project Detail
1.3 Client’s Requirement
3
3
4
4
2.0 General Principles of Contract Law
2.1 Invitation to Treat
2.2 Offer
2.3 Acceptance
2.4 Intention
2.5 Consideration
2.6 Certainty
2.7 Capacity
2.8 Discharge of Contract
5
5
5
5
6
6
6
6
7
3.0 Proposal of an Appropriate FIDIC Form of Contract
3.1 Analysis of Different Types of FIDIC Contract.
3.2 Advice on the Selection of FIDIC Contract
8
9
10
4.0 Conditions Guiding the Payment
4.1 Advance Payment
4.2 Interim Payment Certificates
4.3 Delayed Payment
4.4 Payment of Retention Money
4.5 Statement at Completion
4.6 Final Payment Certificate
4.7 Currencies of Payment
4.8 Advice on Payment under FIDIC Red Book 1999
4.9 Comparison Between FIDIC Red Book 1999 and PAM
Contracts 2006 With Quantities under Payment
11
11
12
12
12
12
13
14
14
15
5.0 Conditions Governing Contractual Programme
5.1 Advice on Contractual Programme under FIDIC Red Book
1999
Contracts 2006 With Quantities under the Contractual
Programme
16
17
18
1

TABLE OF CONTENTS
CONTENT PAGE NUMBER
6.0 Conditions Guiding the Termination for the Contracting
Parties
6.1 Advice on Termination under FIDIC Red Book 1999
Contracts 2006 With Quantities under Termination (Defaults
by Contractor)
Contracts 2006 With Quantities under Termination (Defaults
by Employer)
20
21
22
24
7.0 Dispute Resolution Methods
7.1 Dispute Adjudication Board (DAB)
7.2 Amicable Settlement
7.3 Arbitration
7.4 Advice on Dispute Resolution Method under FIDIC Red
Book 1999
Contracts 2006 With Quantities under Dispute Resolution
Method
26
26
27
28
30
31
8.0 Reference 33
9.0 Bibliography 35
10.0 Appendix 36
2

1.0 Introduction
A construction project usually involves many organizations that come together for its
completion. A number of contracts are required to formalize the rights and obligations of
each organization. A contract is a legally binding agreement consist of offer by one party to
another with the intention of creating a legal agreement, certainty of intent, capacity of
organizations and performance levels, legality of objects and overall mutual agreement.
1.1 Objective
The objectives of this report are:
1. To propose an appropriate FIDIC form of contract for this project
2. The conditions guiding payment in the chosen FIDIC conditions of contract
3. The contractual standing in terms of conditions governing contractual programme
4. The conditions guiding termination for the contracting parties in the chosen FIDIC
conditions of contract
5. To explain dispute resolution methods in chosen FIDIC contract that can be used for
the project
3

1.2 Project Detail
Information Detail
Client Vice-Chancellor of the Construction Management
University
Project Scope Postgraduate Student Accommodation and Outreach Centre
Site Location Petaling Jaya
Project Aim To provide state-of-the art academic block facilities for
3,000 postgraduate students, as well as an outreach centre
which will become the focal point for the University’s
community-based teaching activities and continuous
professional development courses.
Estimated Construction Cost RM 400 million
1.3 Client’s Requirement
The client requirements for the project are as follows:
1. The Client wishes to have full control of the design and able to introduce changes
from beginning till the completion.
2. The Client wants the design to be completed before the construction work start.
3. The Client wishes to be kept fully informed and could make variations.
4. The Client wishes to complete the project in a short period of time to avoid
disturbance for the on-going classes.
5. The Client wishes to pay according to bills of quantities for approved work done.
6. The Client is familiar with the construction industry.
7. The Client has a flexible budget.
4

2.0 General Principles of Contract Law
2.1 Invitation to treat
According to Halsbury (2007), "An invitation to treat is a mere declaration of
willingness to enter into negotiations. It is not an offer, and cannot be accepted so as to form
a binding contract". MacMillan & Stone (2012) states that a tender is an invitation to treat. A
tender is sent from the client to the contractor to send the offer.
2.2 Offer
For a contract to be legally binding, there must be an offer from one party and an
acceptance from another party. An offer is completed when it is of the knowledge of the
offeree. An offer can be defined when the contractor expresses willingness to be bound by the
contract and based on the invitation sent by the client, submits the offer. This offer must be
accepted within a specified time frame.
2.3 Acceptance
The receiving party may accept the offer and the terms of acceptance will be in
agreement with the offer. In case of differences a negotiation should revise the terms and
offer, followed by acceptance of the offer. The acceptance must be made within a reasonable
time and the acceptance must be communicated to the offeror. The term “acceptance subject
to contract” are common in the construction industry. Contractors may be asked to start work
while the terms and condition are still under negotiation.
5

2.4 Intention
For one contract to be legally binding, the parties of the contract must have the
intention to create legal relation. An offer must be made with intention and becomes binding
upon acceptance.
2.5 Consideration
A contract must be supported by a consideration. An agreement without consideration
is considered void. Contract sum will be the principal consideration for a construction
contract.
2.6 Certainty
When parties enter into a contract, all parties should ensure that the terms are agreed
on and be certain. Each term should be elaborated and understood by all parties to ensure that
all parties are certain in what they are entering.
2.7 Capacity
It is to ensure parties entering into a contract are the age of majority, of sound mind
and are not disqualified from contracting by any law.
6

2.8 Discharge of Contract
Discharge of contract can be defined as termination of the contractual relationship
between parties involving in the contract. Parties rights and obligation will be done for when
a contract is discharged. There are four categories of discharge which are:-
1. Discharge by performance where a party fulfil their obligation and the other party
accepts and expresses their consent
2. Discharge by mutual agreement where the parties of the contract express their
agreement
3. Discharge by frustration when there are one or more changes in the circumstances of
the project, making the contract to be legally or physically impossible to perform
4. Discharge by breach where one or more party has breached their duty or term in the
contract.
7

3.0 Proposal of an Appropriate FIDIC Form of Contract
FIDIC contract is very well known by international contractors and consultants. The
reason FIDIC contract is frequently used in the international construction projects is because
the FIDIC contract covers almost all the major issues that needs to be addressed under a
contract. It has a consistent and easy to follow structure. Besides that, the risk is distributed
fairly amongst parties. FIDIC contract is designed by a third party (Consultant) but not an
Employer. Therefore, the conditions in the contract are more objective and fair. It can be
adopted easily for many types of investment projects.
Figure 3.1: Different FIDIC Form of Contract
8

3.1 Analysis of Different Types of FIDIC Contract
Table 3.1: Analysis of Different Types of FIDIC Contracts
FIDIC Contract
Characteristics of
Project
Red
Book
Pink
Book
Yellow
Book
Silver
Book
Gold
Book
Green
Book
Straight Forward
Project
- - - - - ✔
Employers Design ✔ ✔ - - - ✔
Contractors design - - ✔ ✔ ✔ ✔
Maintenance - - - - ✔ -
Bill of Quantities
Contract
✔ ✔ - - - ✔
Lump Sum Contract ✔ ✔ ✔ ✔ ✔ ✔
Minimal Employer’s
Involvement
- - - ✔ - -
Minimal Risks on
Employer
- - - ✔ - -
Traditional Procurement
Method
✔ ✔ - - - ✔
Design and Build
Procurement Method
- - ✔ ✔ ✔ ✔
9

3.2 Advise on the Selection of FIDIC Form of Contract
The FIDIC contract best suited for this project is the Red Book. The selection is based
on the client Requirement. The client wishes to have full control of the design and able to
introduce changes from beginning till the completion. Besides that, the client wants the
design to be completed before the construction work start. This shows that the client prefers
to use traditional procurement method for this project. Moreover, the client wishes to pay
according to bills of quantities for approved work done. The client also wishes to be kept
fully informed and could make variations. This shows that the client prefers to have a bill of
quantities contract which the client is able to make changes to the design.
As shown in table 3.1, there are three types of FIDIC conditions of contract which is
the Red Book, Pink Book and Green Book that satisfy all the client requirement. However,
the Pink Book is mostly used for projects financed by banks and aim to increase the
economic and social aspects in developing nations. This project is not financed by banks.
Therefore, the Pink Book is not suitable to use for this project. Furthermore, the Green Book
is not suitable to use for this project as the contract sum for this project is RM 400 million,
which is considered a huge project. The Green Book is suitable for projects with a small
contract value, short construction time and involving simple or repetitive work.
In conclusion, the FIDIC contract chosen is the Red Book as it is the most adequate
and ideal choice of conditions of contract for this project.
10

4.0 Conditions Guiding the Payment
FIDIC Red Book 1999 explained the conditions of payment under Clause 14. If
certain conditions cannot be met, then the process of payment can be terminated.
Figure 4.1: Typical sequence of Payment Events envisaged in Clause 14 under FIDIC Red Book 1999
4.1 Advance Payment
In sub-clause 14.2 stated that the Employer shall allow advance payment to the
Contractor by having huge construction projects as an interest-free loan for mobilization. The
Contractor needs to submit a guarantee for the advance payment and the advance payment
shall be repaid through proportional deductions in interim payments. If the advance payment
has not been repaid prior to the issue of the Taking-Over Certificate for the Works or prior to
termination under Clause 15, Clause 16 or Clause 19, the whole of the balance then
outstanding shall immediately become due and payable by the Contractor to the Employer.
11

4.2 Interim Payment Certificates
The Contractor shall submit a monthly application for Interim Payment Certificate to
the Engineer under Sub-Clause 14.3. The Engineer will issue an Interim Payment Certificate
within 28 days after receiving the Contractor’s statement. Under Sub-Clause 14.6 stated that
the payment of the amount will be certified or paid when the Employer has received and
approved the Performance Security. The Employer shall pay the amount certified in the
Interim Payment Certificate to the Contractor within 56 days after the Engineer receives the
statement and supporting documents provided by the Contractor stated under Sub-Clause
14.7.
4.3 Delayed Payment
In Sub-clause 14.8, The Contractor is able to receive financing charges compound
monthly if the Contractor doesn’t receive the payment and the amount of the charges is based
on the amount unpaid during the period of delay.
4.4 Payment of Retention Money
In Sub-Clause 14.9 stated that the first half of retention money must be given to the
Contractor upon the issuance of the Taking-Over Certificate. The outstanding balance of the
Retention Money shall be certified for payment after the latest of the expiry dates of the
Defects Notification Periods.
4.5 Statement at Completion
The Contractor will submit the Statement at Completion within 84 days after the
issuance of the Taking-Over Certificate. The Engineer shall then certify in accordance with
Sub-Clause 14.6 as Interim Payment Certificate.
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4.6 Final Payment Certificate
The Contractor will submit the draft final statement include the value of the work
done approved by the Engineer after 56 days receiving the Performance Certificate. If there is
no any dispute of the application, the Contractor shall proceed and submit the Final Statement
for the agreed amount along with a written discharge stated under Sub-Clause 14.12. Within
28 days after receiving the Final Statement and written discharge, the Engineer shall issue a
Final Payment Certificate to the Employer stating the amount which is finally due. The
Employer shall pay the Contractor within 56 days after the Employer receives the Payment
Certificate.
Figure 4.2: Flow Chart of the Final Payment Certificate
13

4.7 Currencies of Payment
The currencies for the contract price paid must be following the currencies listed in
the Appendix to Tender.
4.8 Advice on Payment under FIDIC Red Book 1999
The Employer is obliged to pay the amount certified by the Engineer to the Contractor
when the Interim Payment Certificate has been issued. Delayed payment will cost the
Employer paying the Contractor financing charges compound monthly as stated in sub-clause
14.8. It is essential for the Employer that the Engineer and the Contractor carry out the
payment within the timelines stated in the contract to avoid any disputes arise during the
contract period.
For example, in the case of Construction Associates (Pty) Ltd v CS Group of
Companies (Pty) Ltd, the Employer failed to pay the amount certified in the final payment
certificate and the Contractor seek for judgement. The court held the Employer would be
bound by the acts of his agents. So, the Employer cannot dispute the validity of a payment
certificate merely because it has been given negligently or the Architect/Engineer used his
discretion wrongly.
14

4.9 Comparison Between FIDIC Red Book 1999 and PAM Contracts 2006 with
Quantities under Payment
Table 4.1: Comparison Between FIDIC Red Book 1999 and PAM Contracts 2006 With Quantities
under Payment
Features FIDIC Red Book 1999 PAM 2006 with Quantities
Certifier Engineer (Sub-clause 14.6) Architect (Clause 30.1)
Period of Certifying Interim Certificate within 28
days to the Employer after
receiving a Statement and
supporting documents
(Sub-clause 14.6)
Issue the Interim Certificate
within 21 days of receipt of the
Contractor’s application (Clause
30.1)
Interim Payment 1. The Employer shall pay the
first instalment of the advance
payment within 42 days after
issuing the Letter of Acceptance
or within 21 days after receiving
the documents in accordance
with Sub-Clause 4.2 and 14.2.
(Sub-clause 14.7(a))
2. The Employer shall pay the
amount certified in each Interim
Payment Certificate within 56
days after the Engineer receives
the Statement and supporting
documents.(Sub-clause 14.7(b))
1. The Employer shall pay the
amount certified within the
Period of Honouring Certificates
(21 days) from the date of
receipt of contractor’s
application. (Clause 30.1)
Final Certificate 1. within 56 days after the
Employer receives the Payment
Certificate. (Sub-clause 14.7(c))
1. within 21 days after Period of
Honouring Certificates for the
payment of the Penultimate
Certificate. (Clause 30.14(a))
2. within 28 days after the
Certificate of Making Good
Defects has been issued, in the
event no Penultimate Certificate
has been issued (Clause
30.14(b))
15

5.0 Conditions Governing Contractual Programme
FIDIC Red Book 1999 has outlined the conditions governing the contractual
programme under Sub-Clause 8.3. The contractor must submit a detailed time programme to
the Engineer within 28 days after receiving the notice of the Commencement Date under
Sub-Clause 8.1. A revised programme should also be submitted when a previous programme
is inconsistent with actual progress or with the Contractor’s obligations. Unless otherwise
stated in the Contract, each programme shall include:
(a) The order in which the Works are to be carried out; including the anticipated timing
of each stage of design, Contractor’s documents, procurement, manufacture of Plant,
delivery to Site, construction, erection and testing
(b) Any stages to be carried out by a nominated subcontractor;
(c) The sequence and timing of any inspections and tests;
(d) A supporting report describing the method which the Contractor intends to adopt and
details of the personnel and equipment required on site for each major stage.
The Engineer is required to review the programme. If the programme does not comply
with the Contract, the Engineer shall give notice to the Contractor stating the reason within
21 days after receiving a programme. If the Engineer does not do this, the Contractor shall
proceed in accordance with the programme which subject to his other obligations under the
Contract. The Employer’s Personnel is entitled to rely upon the programme when planning
their activities.
Besides that, the Contractor shall give notice to the Engineer of specific probable
future events or circumstances which may adversely affect the work, increase the Contract
Price or delay the execution of the Works. The Engineer may require the Contractor to submit
an estimate of the anticipated effect of the future event or circumstances, and/or a proposal
under Sub-Clause 13.3.
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Moreover, the Engineer may request the Contractor at any time to provide a revised
programme by giving notice to the Contractor when a programme fails (to the extent stated)
to comply with the Contractor to be consistent with actual progress.
Furthermore, the programme is also use to access the rate or progress under
Sub-Clause 8.6. If the rate of progress is slow, the Engineer may instruct the Contractor to
submit a revised programme and supporting report to expedite progress and complete within
the Time for Completion. The Employer may claim for additional cost incurred by the
revised methods under Sub-Clause 2.5 or Sub-Clause 8.7.
Figure 5.1: Timeframe for Submission of Time Programme
5.1 Advice on Contractual Programme under FIDIC Red Book 1999
In FIDIC Red Book 1999, it is not stated that the programme is formed as part of the
contract. Normally, the programme is not formed part of the contract because it is subject to
change. Although the programme is not formed part of the contract, the programme enables
the Employer to monitor progress and access changes to the completion date of the project.
The programme will serve as a basis to access extension of time (EOT) or any delays as well
as any losses and expenses claim by the contractors.
17

The programme must be updated from time to time to reflect the changes made to the
durations of each activity and sequence of works. Under Sub-Clause 14.3, every application
for payment must include the monthly progress report, which by Sub-Clause 4.21 must
include a detailed description of progress.
If the Contractor fails to meet the dates on the programme might be evidence that the
Contractor is not proceed the Works with due expedition and without delay under Sub-Clause
8.1. This was supported in the case law of West Faulkner Associates v London Borough of
Newham (1994) 71 BLR 1 whereby the High Court held that the obligation to proceed
regularly and diligently was essentially an obligation to proceed continuously, industriously
and efficiently with appropriate physical resources so as to progress the work steadily
towards completion substantially in accordance with the contractual requirements as to time,
sequence and quality of work.
Quantities under the Contractual Programme
Table 5.1: Comparison between FIDIC Red Book 1999 and PAM Contracts 2006 with Quantities
under the Contractual Programme
Administration Engineer Architect
Clause Sub-Clause 8.3 Clause 3.5
Time Frame Within 28 days from receipt of the
notice of Commencement of
Works (Sub-Clause 8.3)
Within 21 days after receiving the
Letter of Award
(Clause 3.5)
Documentation No specification Contractor shall provide six (6)
copies of the Work Programme
(Clause 3.5)
Document
Specification
- An order in which Contractor
intends to carry out works
(Sub-Clause 8.3)
- Any stages to be carried out by a
nominated subcontractor
(Sub-Clause 8.3)
- No particular format or content is
laid down for the Work
Programme
- However, it is required that the
Work Programme must show the
order in which Contractor
18

- The sequences and timing of
inspection and test (Sub-Clause
8.3)
- A supporting report describing
the method which the Contractor
intends to adopt and details of the
personnel and equipment required
on site for each major stage.
(Sub-Clause 8.3)
proposed to carry out the
works.(Clause 3.5)
Revised
Programme
The Contractor shall also submit a
revised programme whenever the
previous programme is
inconsistent with actual progress
or with the Contractor’s
obligations. (Sub-Clause 8.3)
If the Works or any part of the
Works is delayed for whatever
reason, the Architect may instruct
the Contractor to revise the Works
Programme. (Clause 3.5)
Programme not
part of Contract
Not stated The Work Programme shall not
constitute part of the Contract,
whether physically incorporated or
not into the Contract Documents.
(Clause 3.6)
Acceptance of
Programme
Not stated whether the Engineer
needs to approve or agree with the
programme
The acceptance by the Architect
does not relieve the Contractor
from responsibilities under the
Contract. (Clause 3.7)
19

6.0 Conditions Guiding the Termination for the Contracting Parties
In FIDIC Red Book 1999, the termination conditions can be categorised to two
reasons, which are defaults by Contractor (Clause 15) and defaults by Employer (Clause 16).
According to Sub-Clause 15.2, the Employer can terminate the contract if the
Contractor:
(a) fails to comply with Sub-Clause 4.2 (Performance Security) or Sub-Clause 15.1
(Notice to Correct).
(b) has abandon or demonstrates no intention to continue the Works,
(c) Works not in accordance with Clause 8 or not complying with the notice issued
according to Sub-Clause 7.5 (Rejection) and 7.6 (Remedial Work) within 28 days
after receiving,
(d) subcontracts the Contract or Works without required agreement,
(e) becomes bankrupt,
(f) accepts any form of bribery.
According to Sub-Clause 16.2, the Contractor can terminate his own employment if
the Employer:
(a) fails to comply with Sub-Clause 2.4 (Employer’s Financial Arrangements) and give
reasonable evidence within 42 days after receipt of notice complying with
Sub-Clause 16.1 (Contractor’s Entitlement to Suspend Work),
(b) fails to serve Payment Certificate to the Contractor within 56 days since receipt of
supporting documents,
(c) fails to pay the Contractor under Interim Payment Certificate within 42 days after
expiry of time stated in Sub-Clause 14.7 (Payment),
(d) fails to perform his obligation under the Contract, fails to comply with Contract
Agreement (Sub-Clause 1.6) or Assignment (Sub-Clause 1.7),
(e) suspends and affects the Works as described in Sub-Clause 8.11 (Prolonged
Suspension),
(f) becomes insolvent.
20

However, under special circumstances stated in Sub-Clause 15.2 (e) and (f), and
Sub-Clause 16.2 (f) and (g), the claimant can issue the notice to terminate the contract
immediately.
6.1 Advice on Termination under FIDIC Red Book 1999
The Employer must consider thoroughly before terminating the Contractor’s
employment. The Contract can be terminated by either party when the reason for termination
is clearly established and failure to follow the Contract Conditions or other legal binding
documents. The grounds which claimant relies on for termination, such as the evidence to
show failure of performance, must be stated clearly in the notice. It is essential to follow the
provisions of termination because it is the condition precedent considered by the courts.
For example, in the case of Obrascon Huarte Lain SA v Her Majesty’s Attorney
General for Gibraltar, the court held that the Contractor (OHL) had failed to comply with
Sub-Clause 15.1 which is to rectify the default according to the notice given by the Engineer
within reasonable time and supporting documents provided, where the effort to prevent delay
by Employer can be proven.
Besides, the court held that the Contractor fulfilled the condition stated in Sub-Clause
15.2 (b) and (c) which he had failed to comply with Clause 8 of the Contract Conditions
throughout the project and demonstrate no intention to continue the Works. The Contractor
did not proceed the work according to the time programme which results in doubling up the
Contract period. Hence, the Employer was granted the entitlement to terminate the contract.
21

Quantities under Termination (Defaults by Contractor)
under Termination (Defaults by Contractor)
Feature FIDIC Red Book 1999 PAM 2006 with Quantities
Terminology Termination Determination
Conditions Sub-Clause 15.2 Clause 25.1
If Contractor:-
- Abandon the Works.
- Without reasonable reason, fails to proceed works diligently, complying
with AI and suspend the Works.
- Becomes insolvent.
- Subcontract the whole of Works without required agreement (Clause 17
in PAM)
- Fails to carry out Works in
accordance with Sub-Clause 4.2
(Performance Security) and
Sub-Clause 15.1 (Notice to
Correct).
- Accepts any form of bribery.
Procedure Sub-Clause 15.2 Clause 25.2
1. Deliver written notice by Employer or Architect on behalf to Contractor
specifying the default.
2. Contractor has 14 Days to rectify the default.
3. Employer may terminate Contract
immediately in the case of Clause
15.2(e) or (f).
3. If the default continues,
Employer may within 10 Days
deliver further written notice of
determination to the Contractor.
Duties of
Contractor
Sub-Clause 15.2 Clause 25.4
- Vacate and return site possession.
- Assign the benefit of hiring on site construction plants, and assign his
agreement made with any subcontractor or supplier without extra charges,
within 21 Days of date of determination to the Employer (For PAM 2006,
time not stated in FIDIC), if required.
22

- Remove any temporary Works and belongings.
- Pay all cost incurred to the Employer.
Rights of
Employer
- Complete the Works or assign
other parties do so.
- Entitled to all Goods and
Documents relating to the project.
- Release Contractor’s Equipment
and Temporary Works for
Contractor’s collection.
- Entitled to sell the items if
Contractor failed to make a payment
due to the Employer to recover his
payment.
- Employ other Person to carry out
the Works.
- Not bound to make further
payment to the Contractor until
completion of Works.
Payment
After
Termination
Employer may
- Follow Sub-Clause 2.5
(Employer’s Claims).
- Withhold further payment until all
cost incurred by the Employer have
been established.
- Recover losses, damages or extra
charges incurred by the Employer
by allowing for any sum due to the
Contractor under Sub-Clause 15.3.
- Final account shall be finalised
within six Months on completion of
the Works, subjected to the
agreement between Contractor and
Employer.
- It shall deemed to be conclusive if
no dispute arises within three
Months from the date of receipt of
final account.
- Any amount exceeds the original
contract amount shall be charged to
the Contractor, by deducting from
Performance Bond.
23

Quantities under Termination (Defaults by Employer)
under Termination (Defaults by Employer)
Feature FIDIC Red Book 1999 PAM 2006 with Quantities
Terminology Termination Determination
Conditions Sub-Clause 16.2 Clause 26.1
- Contractor not receiving
reasonable evidence within 42
days after giving notice under
Sub-Clause 16.1 (Suspension
of works) in accordance with
Sub-Clause 2.4 (Employer’s
financial arrangement).
- Engineer fails to issue
days after receiving all
supporting documents.
- Contractor not receiving
amount due under Interim
days after expiry time stated in
Sub-Clause 14.7.
- Employer substantially fails
to perform his obligations
under the Contract and fails to
comply with Sub-Clause 1.6
or 1.7.
- Prolonged suspension
affecting the Works described
in Sub-Clause 8.11.
- Employer becomes insolvent.
If employer
- Fails to pay within Honouring
Certificate Period.
- Interferes with certification process.
- Fails to nominate succeeding Consultant
in accordance with Articles 3,4,5,6.
- Suspends the Works for a continuous
period exceeding Period of Delay stated
in Appendix due to:-
- AI issued under Clause 1.4, 21.1,
21.4.
- Contractor not received in due time
the necessary AI for which he has
applied with sufficient time given in
writing form.
-Delay due to workers engaged by
Employer.
- Opening up for inspection of works
for testing in accordance with Clause
6.3 unless the works are not in
accordance with the Contract.
- Becomes insolvent.
Procedure Sub-Clause 16.2 Clause 26.2
- Contractor may give 14 days
notice to the Employer for
termination.
1. Written notice should be delivered by
Contractor to Employer specifying the
default.
2. Employer has 14 Days to rectify the
24

- Employer may terminate
Contract immediately in the
case of Clause 16.2(f) or (g).
default.
3. If the default continues, Contractor
may within 10 Days from the expiry of
previous 14 Days, deliver further written
notice of determination to the Employer.
Rights of
Contractor
- End all works, except works
instructed by Engineer for
property protection or safety
purpose.
- Hand over all Documents,
Plants, Materials which has
been paid by Employer.
- Remove all Goods from Site,
except those for safety
purpose.
- Leave the Site.
- Remove all belongings and shall give
facilities for his NSC to do the same.
Duties of
Employer
- Return Performance Security.
- Pay according to Sub-Clause
19.6.
- Pay any loss of profit or
damage sustained by the
Contractor due to termination.
- Pay the total value of work properly
executed, goods and materials supplied.
- Pay any loss or expense suffered by
Contractor due to determination.
Payment
After
Termination
Not stated Clause 26.6
- Final account shall be finalised by
Contractor within six Months after
determination subjected to the agreement
between both parties.
- It shall deemed to be conclusive if no
dispute arises within three Months from
the date of receipt of final account.
- Any amount exceeds the sum previously
paid to the Contractor shall be charged to
the Employer.
25

7.0 Dispute Resolution Methods
Dispute always happen in construction projects between the contracting parties, both
the Employer and Contractor. FIDIC Red Book 1999 described the dispute resolution
methods which are the Dispute Adjudication Board under sub-clause 20.2, Amicable
Settlement under sub-clause 20.5 and Arbitration under sub-clause 20.6.
Figure 7.1: Typical sequence of Dispute Event envisaged in Clause 20 under FIDIC Red Book 1999
7.1 Dispute Adjudication Board (DAB)
If there are any disputes between parties, the parties can refer the dispute to the
Dispute Adjudication Board (DAB), which is appointed jointly by the employer and the
contractor. The DAB comprise of either one or three adequately qualified members as stated
in sub-clause 20.2. Each party shall appoint one member and the other parties shall accept his
appointment if the parties decide on a three-member panel. Then, the parties will be jointly
appoint a third member to act as a chairman of the Dispute Adjudication Board in
consultation with the first two members.
26

Under clause 20.4, the board generally has 84 days to rule on a dispute, but it may
propose a different deadline for the parties’ approval. The DAB decision is usually binding
unless it has been challenged by arbitration or litigation. The parties are required to comply
with it promptly, unless it is modified through a conciliation procedure or by an arbitration
award. If the DAB has not given his decision within 84 days or the parties dissatisfied with
the DAB decision, either party can issue a notice of dissatisfaction (NOD) to another party
within 28 days. Moreover, the sub-clause 20.7 refer the dispute to the Arbitration Tribunal if
any failure to comply with DAB’s decision where neither party has not served a valid NOD.
This sub-clause seeks to obtain an arbitral award that may be enforced internationally.
7.2 Amicable Settlement
After either party serve NOD within the said 28 days which has been stated under
sub-clause 20.4, the parties shall attempt to resolve the issue amicably. Where NOD with
DAB's decision has been given, the Parties must attempt amicable settlement prior to the
matter being referred to arbitration. If settlement not reached by 56 days, then the dispute
may be referred by either party to arbitration. Under clause 20.8, if there is no DAB in place
for any reason, then the dispute may be referred directly to arbitration and attempt to go
through amicable settlement is no longer required. By referring to the case law,
Hutama-RSEA joint Operations, Inc. v. Citra Metro Manila Tollways Corporation (2009),
whereby the parties failed to appoint a DAB. Following disputes involving payment of
outstanding balance, the Claimant sought to commence arbitration as according to clause
20.8.
27

7.3 Arbitration
Arbitration is conducted under the Rules of Arbitration of the International Chamber
of Commerce by a panel of three arbitrators, in the language determined by the parties. Under
clause 20.6, the dispute should then be resolved by arbitration if DAB fails to give the
decision within a given time period or either party is dissatisfied with the DAB decision, then
either party should serve NOD to another party. Then either party can refer the dispute to
arbitration. Furthermore, the arbitration can only commence when either parties have
attempted to settle the dispute amicably or exceeds the 56 days after the day on which NOD
has served to another party.
Any dispute which has not final and binding shall be settled by arbitration under the
rules of Arbitration of the International Chamber of Commerce (ICC) as according to the sub
clause. Besides, the commencement of the arbitration may be before or after the completion
of the works. Although FIDIC does not actually specify any time frame to refer a dispute to
arbitration, but it should be without undue delay.
28

Figure 7.2: Overview on the Dispute Resolution under FIDIC Red Book 1999
29

7.4 Advice on Dispute Resolution Method under FIDIC Red Book 1999
Adjudication is generally suitable for the claims regarding interim payments,
extension of time for completion of works, delay and destruction of works and the Final
Account sum. The standing DAB are appointed at the beginning of the project where DAB is
familiar with the project and the parties. They are responsible to advise the parties and
facilitate agreement to avoid the disputes from arising in the first place. Adjudication process
is beneficial whereby it is cheaper as compared to court proceedings. Secondly, DAB make a
decision as what the contract do, provide that both parties shall promptly give effect on it.
Besides, adjudication process will be taking shorter period as compared to court proceedings
since DAB is obliged to provide a decision within 84 days if a dispute does occur. In
addition, the whole concept of DAB is that the disputes are settled quickly by the industry
expert to ensure that the cash flow is maintained during the process. The disputes shall be
noted between the parties before the adjudication can be commenced since the downside to
the adjudicator’s power may be limited.
30

7.5 Comparison between FIDIC Red Book 1999 and PAM Contracts 2006 With
Quantities under Dispute Resolution Method
under Dispute Resolution Method
Condition Initiated in accordance to ‘General
of Dispute Adjudication
Agreement’ and ‘Procedural
Rules’
Initiated in accordance to Clause
34.3, to ‘PAM Adjudication Rules’
or any modification to such rules
Failure to agree on appointment
after 42 days, the appointing
official named in Appendix to
Tender shall be the member of
DAB (Sub-Clause 20.3)
Failure to agree after expiration of
21 days from the date of
appointment, President of PAM
shall appoint an adjudicator
(Clause 34.2)
Either party can give notice of
dissatisfaction (NOD) to the other.
If no NOD is provided within 28
days, after the day on which the
party receives the decision, DAB
shall become final and binding
If either party disputes the decision,
shall nevertheless be bound by the
adjudicators’ decision until
Practical Completion but shall give
a written notice to the other party
within a given period of 6 weeks
Distribution
Resolution
Methods
Adjudication, Amicable
Settlement, Arbitration
Adjudication, Mediation,
Arbitration
Adjudication
Administration Dispute Adjudication Board
(DAB), (one or three suitably
qualified persons)
Arbitrator
Condition Prerequisite to arbitration Condition precedent to arbitration
(Clause 34.1)
Time Frame 28 days from notice of intention to
DAB’s appointment
21 days from date of written notice
to concur on the appointment of
adjudicator (Clause 34.2)
Mediation / Amicable Settlement
Administration Judge Mediator
Condition Prerequisite to arbitration Not a condition precedent to
adjudication and arbitration
(Clause 35.2)
31

Arbitration
Time Frame Written notice to refer dispute to
arbitration within 28 days after
DAB’s decision (Sub-Clause
20.4)
Written notice to refer dispute to
arbitration within 6 weeks from
date of adjudicator’s decision
Arbitration Act
and Rules
Sub-Clause 20.6
● International arbitration
Unless agreed by both parties:
● Rules of Arbitration of
International Chamber of
Commerce
● Language for
communication in
Sub-Clause 1.4
Clause 34.3
● Arbitration Act 2005
● PAM Arbitration Rules
32

8.0 Reference
Clause 8 – Commencement Delays and Suspension. (n.d.). Retrieved November 9, 2018,
from https://corbett.co.uk/clause-8-commencement-delays-and-suspension/
Contracts: Advanced questions General Question/Answer. (n.d.). Retrieved November 12,
2018, from http://fidic.org/node/915
Corbett and Co's FIDIC Case Law Table. (2018). Retrieved from
http://corbett.co.uk/wp-content/uploads/Table-of-FIDIC-Cases.pdf
Designing Buildings Wiki Share your construction industry knowledge
www.designingbuildings.co.uk. (n.d.). Retrieved November 7, 2018, from
https://www.designingbuildings.co.uk/wiki/Regularly_and_diligently
Dispute Resolution Mechanisums in Fidic Conditions of Contracts. (n.d.). Retrieved
November 9, 2018, from
https://www.scribd.com/doc/45220781/Dispute-Resolution-Mechanisums-in-Fidic-Co
nditions-of-Contracts
Dispute resolution under FIDIC contracts. (n.d.). Retrieved November 9, 2018, from
http://www.codozasady.pl/en/dispute-resolution-under-fidic-contracts/
EXECUTION AND VALIDITY OF CONTRACTS. (n.d.). Retrieved November 7, 2018,
from http://www.shsu.edu/klett/CONTRACTS BASIC PRINCIPLES ch 10 new.htm
FIDIC, International Federation of Consulting Engineers. (1999). FIDIC conditions of
contract for construction (1st ed.). Geneva.
General principles in formation of a contract. (n.d.). Retrieved November 7, 2018, from
https://www.lawteacher.net/free-law-essays/contract-law/general-principles-in-format
ion-of-a-contract-law-contract-essay.php
How to Administer the Contractor's Programme. (2018, July 31). Retrieved November 11,
2018, from
https://www.constructionclaimsclass.com/how-to-administer-the-contractors-program
me/
Late Payment: What Can We Do When We Don't Get Paid? (2018, November 04). Retrieved
November 11, 2018, from
https://www.constructionclaimsclass.com/late-payment-can-dont-get-paid/
33

Leary, D. O. (2016, October 27). Time, Payment, Performance Bonds and Termination Under
the 1999 FIDIC Red Book. Retrieved November 10, 2018, from
https://www.lexology.com/library/detail.aspx?g=96348bda-b27f-4dbe-98dc-20758e5a
2caf
Programmes of works and construction contracts. (n.d.). Retrieved November 6, 2018, from
https://www.out-law.com/topics/projects/projects-procurement-and-contracts/program
mes-of-works-and-construction-contracts/
Standard Form Contracts: FIDIC. (n.d.). Retrieved November 12, 2018, from
https://www.out-law.com/en/topics/projects--construction/construction-standard-form
-contracts/standard-form-contracts-fidic/
Termination by the Employer under the FIDIC Form of Contract. (2018). Retrieved from
https://www.fenwickelliott.com/research-insight/newsletters/international-quarterly/1
0/termination-employer-fidic-form-contract
Udom, K. (2014, February 01). A brief introduction to FIDIC contracts. Retrieved November
14, 2018, from
https://www.thenbs.com/knowledge/a-brief-introduction-to-fidic-contracts
Which FIDIC Contract should I use? (n.d.). Retrieved November 8, 2018, from
http://fidic.org/bookshop/about-bookshop/which-fidic-contract-should-i-use
Worldwide: Some Thoughts On How The 2017 FIDIC Contract Deals With Time. (n.d.).
Retrieved November 11, 2018, from http://www.mondaq.com/uk/x/690214/Building
Construction/Some Thoughts On How The 2017 FIDIC Contract Deals With Time
34

9.0 Bibliography
Contracts: Basic questions Question/Answer. (n.d.). Retrieved November 9, 2018, from
http://fidic.org/node/911
ICEG. (n.d.). Retrieved November 9, 2018, from
https://iceg.com.ua/we-create-a-legislative-foundation-for-the-using-of-fidic-contracts
Moustafa, K. O. T. B., Razik, M. I. A., & Sabry, R. A. (2017). FIDIC General
Conditions/Payments Clause FIDIC refers to (Fédération Internationale Des
Ingénieurs Conseils). Asian Business Research, 2(3), 53.
Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar. (2016, November
30). Retrieved November 17, 2018, from
http://www.fenwickelliott.com/research-insight/newsletters/dispatch/archive/obrascon
-huarte-lain-attorney-general-gibraltar
Roberts, R. (2018, March 19). INSIGHT: FIDIC's new contracts and the devil in the detail.
Retrieved November 8, 2018, from
https://www.mining-journal.com/leadership/news/1317675/insight-fidic’s-new-contra
cts-and-the-devil-in-the-detail
The top 10 things you need to know about FIDIC. (n.d.). Retrieved November 8, 2018, from
https://www.charlesrussellspeechlys.com/en/news-and-insights/insights/real-estate/20
12/the-top-10-things-you-need-to-know-about-fidic/
Why Use FIDIC Contracts? (n.d.). Retrieved November 11, 2018, from
http://fidic.org/node/7089
35

10.0 Appendix
What is FIDIC?
FIDIC is a French language acronym for Fédération Internationale Des
Ingénieurs-Conseils, which means the international federation of consulting engineers. It was
started in 1913 by the trio of France, Belgium and Switzerland. FIDIC has long been
renowned for its standard forms of contract for use between employers and contractors on
international construction projects.
Over the years FIDIC has consistently improved on its contracts. FIDIC expanded the
range of standard forms and published a suite of new Standard Forms of COntract in 1999
which are suitable for many construction and plant installation projects around the world.
This 1999 suite comprises:
1. Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer: The Construction Contract (The Red Book)
2. Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer (MDB Harmonised Edition) - for bank financed projects
only: The MDB Construction Contract (The Pink Book)
3. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical
Plant and for Building and Engineering Works Designed by the Contractor: The Plant
and Design-Build Contract (The Yellow Book)
4. Conditions of Contract for EPC/Turnkey Projects: The EPC/Turnkey Contract (The
Silver Book)
5. Short Form of Contract: The Short Form (The Green Book)
6. Dredgers Contract (based on the Short Form of Contract): Dredgers Contract (The
Blue Book)
Other FIDIC form of contract include:-
1. Conditions of Contract for Design, Build and Operate Projects (The Gold Book)
2. Conditions of Contract for Design - Build and Turnkey (The Orange Book)
3. Client/Consultant Model Services Agreement (The White Book)
36

Construction Associates (Pty) Ltd v CS Group of Companies (Pty) Ltd
Following the Employer's failure to pay the amount certified in the final payment
certificate, the Contractor sought summary judgement.
The Employer argued that:
1) Parties must refer to arbitration before referring to a court of law,
2) The Contractor has been overpaid and has overcharged the Employer in respect of
BoQs, and
3) the quality of the workmanship of the Contractor was poor.
The court held that:
1) the Architect/Engineer was the agent of the Employer when issuing the certificates
and the Employer would be bound by the acts of his agent,
2) the Employer cannot dispute the validity of a payment certificate merely because it
has been given negligently or the Architect/Engineer used his discretion wrongly,
3) there was no "dispute" between the parties, therefore parties were not obliged to refer
to arbitration prior to the court,
4) the works were inspected prior to the issue of IPCs, therefore there was no
overcharging, and
5) the defect in the workmanship was not identified.
The court referred to the FIDIC guidance on BoQ where it is stated that the object of
BoQ is to provide a basis assisting with the fixing of prices for varied or additional work. The
court also considered whether the obligation to pay the amount in the payment certificate was
a binding obligation.
37

West Faulkner Associates v London Borough of Newham (1994) 71 BLR 1
Newham had engaged West Faulkner to act as architect for refurbishment works to
several blocks of flats. Work proceeded, but only very slowly, resulting in a significant
overrun by the contractor. The contractor had been employed on the 1977 Edition of the JCT
Local Authority with Quantities contract, which included similar provisions for the
determination of the contractor's employment for a failure to proceed regularly and diligently.
The council repeatedly asked the architect to serve a determination notice on that basis.
However the architect had refused, believing that because the contractor was turning up on
site regularly and working towards a completion date, it was not in breach of its obligation.
The first point which the Court considered was whether a contractor was required to
proceed both regularly and diligently in order to comply with the term, or whether he could
comply by proceeding either regularly or diligently. In the lower Court, Judge Newey QC had
held that the words 'regularly and diligently':
"should be construed together and that in essence they mean simply that contractors
must go about their work in such a way as to achieve their contractual obligations.
This requires them to plan their work, to lead and to manage their workforce, to
provide proper and sufficient materials and to employ competent tradesman, so that
the works are fully carried out to an acceptable standard and that all time, sequence
and other provisions of the contract are fulfilled."
Lord Justice Simon Brown broadly agreed with this approach in that it linked the
requirement to proceed regularly and diligently with attainment of contractual objectives. He
then went on to set out his approach to the proper construction of the phrase.
He found that while the words 'regularly' and 'diligently' described separate
requirements of the contractor, there was a measure of overlap between the two and as such,
it was unhelpful to look at them individually. As regards the word 'regularly', this required the
contractor to attend for work on a regular daily basis with sufficient in the way of men,
materials and plant to have the physical capacity to progress the works substantially in
38

accordance with his contractual obligations. The word 'diligently' imposed the need to apply
that physical capacity industriously and efficiently. He concluded that:
"Taken together the obligation upon the contractor is essentially to proceed
continuously, industriously and efficiently with appropriate physical resources so as
to progress the works steadily towards completion substantially in accordance with
the contractual requirements as to time, sequence and quality of work. Beyond that I
think it is impossible to provide useful guidance. These are after all plain English
words and in reality the failure [to proceed regularly and diligently] is, like the
elephant, far easier to recognise than to describe"
39

Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar
This was a lengthy case relating to a tunnel under a runway at Gibraltar airport, where
Mr Justice Akenhead had to consider whether or not the employer, was entitled to terminate
the contract. The contract was the FIDIC Conditions of Contract for Plant and Design-Build
for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by
the contractor, 1st edition, 1999 (better known as the “Yellow Book”). Amongst the many
issues the Judge considered was the approach to take to sub-clause 20.1, the clause which
says that a contractor, if he wishes to make a claim must give notice in writing to the
Engineer:
“as soon as practicable, and not later than 28 days after the Contractor became aware,
or should have become aware, of the event or circumstance.”
The Judge decided that the contractor, OHL was entitled to no more than seven days
extension of time (rock and weather). However, this was subject to compliance with
sub-clause 20. It was accepted by OHL that sub-clause 20.1 imposed a condition precedent
on the contractor to give notice of any claim. The Judge held that properly construed and in
practice, the “event or circumstance giving rise to the claim” for extension must occur first
and there must have been either awareness by the contractor or the means of knowledge or
awareness of that event or circumstance before the condition precedent bites. Importantly Mr
Justice Akenhead said that he could see:
“no reason why this clause should be construed strictly against the Contractor and can
see reason why it should be construed reasonably broadly, given its serious effect on
what could otherwise be good claims for instance for breach of contract by the
Employer”.
Sub-clause 20.1 did not call for the notice to be in any particular form and it should be
construed as allowing any claim provided that it is made by notice in writing to the engineer,
that the notice describes the event or circumstance relied on and that the notice is intended to
40

notify a claim for extension (or for additional payment or both) under the contract or in
connection with it. It must be recognisable as a “claim”. The onus of proof was on the
Employer if he should want to establish that the notice was given too late.
In terms of claims for an extension of time, the Judge by reference to clause 8,
considered that the entitlement to an extension arises if and to the extent that the completion
“is or will be delayed by” the various events, such as variations or “unforeseeable”
conditions. In particular he noted that the wording in sub-clause 8.4 did not impose any
restriction such as “is or will be delayed whichever is the earliest”. This therefore suggested
that the extension of time could be claimed either when it was clear that there will be delay (a
prospective delay) or alternatively when the delay has at least started to be incurred (a
retrospective delay).
To demonstrate the position, the Judge provided his own hypothetical example:
“(a) A variation instruction is issued on 1 June to widen a part of the dual carriageway
well away from the tunnel area in this case.
(b) At the time of the instruction, that part of the carriageway is not on the critical path.
(c) Although it is foreseeable that the variation will extend the period reasonably
programmed for constructing the dual carriageway, it is not foreseeable that it will
delay the work.
(d) By the time that the dual carriageway is started in October, it is only then clear that
the Works overall will be delayed by the variation. It is only however in November that
it can be said that the Works are actually delayed.
(e) Notice does not have to be given for the purposes of Clause 20.1 until there actually
is delay (November) although the Contractor can give notice with impunity when it
reasonably believes that it will be delayed (say, October).
(f) The “event or circumstance” described in the first paragraph of Clause 20.1 in the
appropriate context can mean either the incident (variation, exceptional weather or one
41

of the other specified grounds for extension) or the delay which results or will
inevitably result from the incident in question.”
Finally, the Judge commented that he doubted that this interpretation should in
practice necessarily involve “a difficult mental exercise” on construction projects where, as
was the case here, an electronic critical path programme was being used. It should therefore
be possible to determine fairly easily when delay was actually being suffered.
However, whilst these comments tend to reflect the general approach of most DABs
to the FIDIC sub-clause 20.1 and appear to be “contractor-friendly”, they did not help OHL
here. One of OHL’s two EOT claims was rejected because the wording of the documents
relied upon, for example “The adverse weather condition (rain) have [sic] affected the works”
was not recognisable as a notice of a claim about being delayed by the weather. The already
small EOT award of seven days was reduced to one.
42

Hutama-RSEA joint Operations, Inc. v. Citra Metro Manila Tollways Corporation
(2009)
Petitioner HUTAMA-RSEA Joint Operations Incorporation (“HRJOI”) and
respondent Citra Metro Manila Tollways Corporation (“Citra”) entered into an Engineering
Procurement Construction Contract (EPCC) involving the construction of the South Metro
Manila Skyway Project (Skyway Project).
A dispute subsequent arose between HRJOI and Citra. HRJOI filed a Request for
Arbitration with the Construction Industry Arbitration Commission (CIAC). Citra opposed
the request on the ground that it was premature because a condition precedent, i.e., prior
referral by the parties of their dispute to the Dispute Adjudication Board (DAB), required by
Clause 20.4 of the EPCC, had not been complied with. The CIAC ruled that it had
jurisdiction over the case, and that the determination of whether HRJOI had compiled with
Clause 20.4 of the EPCC was a factual issue that my be resolved during the trial.
Citra challenged the CIAC’s ruling in the Court of Appeals (“CA”), which reversed
the CIAC. The CA found that the CIAC exceeded its jurisdiction in taking cognizance of
HRJOI’s Request for Arbitration despite the latter’s failure to initially refer its dispute with
respondent to the DAB, as directed by Clause e20.4 of the EPCC.
The Supreme Court disagreed with the CA and held that the mere fact that the parties
incorporate an arbitration clause in the EPCC is sufficient to vest the CIAC with jurisdiction
even if the parties did not comply with the condition precedent. The Supreme Court’s ruling
reads in relevant part:
It is true that Clause 20.4 of the EPCC states that a dispute between petitioner and
respondent as regards the EPCC shall be initially referred to the DAB for decision,
and only when the parties are dissatisfied with the decision of the DAB should
arbitration commence. This does not mean, however, that the CIAC is barred from
assuming jurisdiction over the dispute if such clause was not complied with.
43

Under Section 1, Article III of the CIAC Rules, an arbitration clause in a construction
contract shall be deemed as as agreement to submit an existing or future controversy
to CIAC jurisdiction, “notwithstanding the reference to a different arbitration
institution or arbitral body in such contract ….” Elementary is the rule that when laws
or rules are clear, it is incumbent on the court to apply them. When the law (or rule) is
unambiguous and unequivocal, application, not interpretation thereof, is imperative.
Hence, the bare fact that the parties herein incorporated an arbitration clause in the
EPCC is sufficient to vest the CIAC with jurisdiction over any construction
controversy or claim between the parties. The arbitration clause in the construction
contract ipso facto vested the CIAC with jurisdiction. This rule applies, regardless of
whether the parties specifically choose another forum or make reference to another
arbitral body. Since the jurisdiction of CIAC is conferred by law, it cannot be
subjected to any condition; nor can it be waived or diminished by the stipulation, act
or omission of the parties, as long as the parties agreed to submit their construction
contract dispute to arbitration, or if there is an arbitration clause in the construction
contract. The parties will not be precluded from electing to submit their dispute to
CIAC, because this right has been vested in each party by law.
The import of this ruling is that non-compliance with a condition precedent, at least in a
construction dispute, will not prevent the CIAC from assuming jurisdiction over the case.
44

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