2. A standard form contract (sometimes referred
to as an adhesion or boilerplate contract) is
a contract between two parties, where the
terms and conditions of the contract are set
by one of the parties, and the other party has
little or no ability to negotiate more favorable
terms.
2
3. Insurance policies (where the insurer decides
what it will and will not insure, and the
language of the contract) and contracts with
government agencies (where certain clauses
must be included by law or regulation).
3
5. Unconscionability (Not guided by conscience)
Unequal bargaining power
Ambiguity (Contra Proferentum)
Drafter must use clear and precise words
The court perceives such contracts to be the
product of bargaining between parties in unfair or
uneven positions.
5
6. Standard form contracts are rarely read
FINE PRINT
COMPLICATED LEGAL LANGUAGE (IRRELEVANT)
TAKE IT OR LEAVE IT BASIS
• Access to the full terms may be difficult or impossible before
acceptance
• Boilerplate terms are not salient
• There may be social pressure to sign
• Standard form contracts may exploit unequal power relations
• The common law treats standard form contracts like any other
contract.
6
7. A Dispute arises when the other party disagrees
with the Claimant either on fact or quantum, and
the parties cannot reach an amicable solution.
7
8. A Claim is essentially a request from one
party (usually the Contractor) for something
which he considers is due to him under the
terms of the Contract
8
9. Contract dispute occurs when any party in a contract
has a disagreement regarding any of the contract
term or definitions.
In contract law, a contract dispute is usually
considered a breach of contract, meaning that a party
failed to perform a duty or promise that they agreed
to in the contract.
9
10. Material Breach: A material breach in a
contract occurs when a party fails to perform
a contractual duty and the breach is so crucial
and deep that it makes the agreement or
purpose of the contract irreparable.
10
11. An example of a material breach might
be in an electrical contract, where an
owner of the home has contracted to
pay an electrician to install high-grade
wires for safety purposes. Instead, the
electrician installs low-quality wires
which do not work as well and cause
damage to the walls. This would be
considered a material breach since the
intent of the contract (safety) has been
disregarded.
11
12. Minor Breach: A minor breach occurs when
there is a breach of contract by a party, but
the breach is very minor and does not disrupt
the heart of the contract.
o Delay in certification of IPC for a few days
o Delay in payment for a few days
12
13. An example of a non-material breach
might be if the home owner contracts
for black coloured wires but the
plumber installs red coloured wires,
which perform just as well and are
not visible after installation as they
are sealed behind the wall. This
would be considered a breach, but
would be non-material because the
overall outcome of the contract is the
same.
13
14. Issues with drafting and reviewing a contract
Offer and acceptance disputes
Mistakes and errors concerning the terms of the
contract
Disagreements as to the meaning or definition of
a technical term
Fraud and coercion: There is no "meeting of the
minds" if a person is forced or tricked into
signing the contract
14
15. Legal remedies: Monetary
damages award paid to the
plaintiff for their losses.
Equitable Remedy: Parties taking
certain actions to correct the
contractual dispute (requiring the
breaching party to perform their
contract duties).
15
16. Writing is important: Clear terms and
conditions
Know what you want : Clear Technical
Specification
Watch for any changes: Variation Issues
Hire a contract attorney
16
17. As compared to the provisions of the old Red
Book (apart from the introduction of the
DAB), the 1999 documents have tried to
tighten up the rules and procedures
concerning all claims and remove some of the
weaknesses and loopholes found in the
earlier documents.
17
18. In the pre-1999 documents (for example, in
Clause 67 of the old Red Book):
Fair and Impartial Engineer
Decision was binding on the parties unless and
until either party was dissatisfied with that decision
and chose to take the matter one stage further and
that was arbitration.
18
19. In the pre-1999 documents (for example, in
Clause 67 of the old Red Book):
Impartiality was questioned by Donor agencies such
as World Bank and lawyers
Totally independent Dispute Review Board (DRB)
was introduced as a pre-arbitral attempt
Dispute Adjudication Board (DAB) was introduced in
FIDIC 1999 suites
19
21. This is very similar to the Supplement to the
1987 fourth edition issued in 1996
Engineer's Decision under Clause 67 was
replaced by a DAB.
21
22. Allows Contractors their basic
right to claim additional
compensation (money or time) in
the event that they (the
Contractors) feel they have an
entitlement under the Contract to
such compensation.
Gives mechanism for handling
claims and any disputes which may
arise.
22
23. Everyone involved becomes aware that there is an event or
circumstance where extra time or payment may be due to
the Contractor
Proper records can then be kept and agreed, to avoid
future argument
Alternative measures may also be possible to reduce the
effects
Maybe the matter can be resolved at an early date
If the event or circumstance turns out to be of insignificant
effect, then it is not necessary to follow up the Notice with
a formal claim.
23
24. The first step is for the Contractor to give
Notice. He must do within 28 days of
becoming aware or should have become
aware
The Notice must also give basic details
describing the event or circumstance
The notice need not state time or amount
claimed or contractual basis of claim
24
25. For the Contractor, a strict time limit
has been introduced for notification
of his claim, so that all parties are
made aware that a claim exists and
can keep proper records and perhaps
avoid unnecessary consequences.
25
26. Notice shall comply with sub-
clause 1.3 (Communications), i.e. it
should be in writing and properly
delivered
Progress reports, sub-clause
4.21(f), must list notices given
No response required from
Engineer (Employer), but a
simple acknowledgement is
normal.
26
27. Contemporary records to be kept which may
be inspected by the Engineer
Fully detailed claim to be submitted within
42 days after the contractor became aware
(or should have become aware of the event
or circumstance) or within other agreed
period.
Importance of good record keeping cannot
be over-emphasised
27
28. Provision for ongoing claims and submittal of their
details is made in sub-clause 20.
Within 42 days of receiving the claim with details
the Engineer shall respond with approval or with
disapproval and detailed comments. He may also
request any necessary further particulars, but shall
nevertheless give his response on the principles of
the claim within such time.
28
29. Thus there is a time limit imposed on the Engineer
to reply to a claim
Each payment certificate shall include such
amounts for any claim as have been reasonably
substantiated as due under relevant provision of
the Contract.
The Engineer shall determine under Clause 3.5 any
time extension or additional payment.
29
30. The important elements of Clause 3.5 are:
"....the Engineer shall consult with each Party in
an endeavour to reach agreement. If agreement
is not achieved, the Engineer shall make a fair
determination in accordance with the Contract,
taking due regard of all relevant circumstances.”
30
31. A difficulty with claims in the
past, from the Contractor's
point of view, has been the
Engineer who sits on claims
without answering, or who
“stonewalls” claims by asking
for more and more details, and
generally delays giving a
definite answer.
31
32. When the Contractor
submits a claim, the
burden of proof lies
with the Contractor. It
is the Contractor's job
to prove his case
It is the Engineer's job
to evaluate the
evidence and decide
whether the case is
proven.
32
33. The New Books, in an entirely new Sub-Clause
2.5, prescribe a procedure which has to be
followed by the Employer if he considers himself
to be entitled to any payment under or in
connection with the Contract, or considers
himself to be entitled to an extension of the
Defects Notification Period (the new, more
correct, term for the Defects Liability Period).
33
34. Notice must be given in accordance with Sub-
Clause 2.5 as soon as practicable after the
Employer became aware.
No response required from Contractor.
The particulars may be given at any time (No
time limit is specified)
No notice is required for payments due under
Sub-clause 4.19 (Electricity, Water and Gas),
under Sub-Clause 4,20 ( Employer’s Equipment),
or for other services requested by the Contractor.
34
35. Requirement for both the Contractor and the
Employer to follow a specified procedure as
envisaged by Sub-Clause 20.1 and 2.5 respectively
of new FIDIC books, reduces some of the
difficulties being met with regard to resolution of
claims in previous FIDIC forms.
35
36. The Engineer makes a fair determination in
accordance with Sub-Clause 3.5.
Any amount so determined is deducted from
Payment Certificates
Any extension so determined is added to DNP
36
37. “Pre-arbitral decisions”, i.e., final decisions,
unless the matter is taken to arbitration, are
to be made by a Dispute Adjudication Board,
and not by the Engineer as in the Old Books.
The DAB shall be appointed (and agreed)
jointly by the Parties and set up at the
Commencement of the Contract (e.g. within 28
days after the Commencement Date).
37
38. DAB can have I or 3 members
A “standing” or “full term” DAB
is recommended for
construction projects where
much work takes place at Site
The “standing” DAB remains in
place until the end of the
project whether or not any
disputes are referred to it.
38
39. “Standing DAB” appointed within 28 days of
Commencement Date
“Ad-hoc” DAB within 28 days after a Party
refers a dispute to the DAB
All DAB members shall be independent of the
Parties, and be paid 50:50
39
40. An “ad-hoc” DAB is recommended where
most of the work is done off site, e.g.
manufacture, transport of Plants etc. (in
works under Plant and DB and EPC/Turn Key
Contract)
Appropriate arrangement to be included in
Contract for types and formation of DAB
40
41. A Board of 3 members except in the simplest
of projects is recommended. The World Bank
gives certain guidelines which have to be
followed on WB funded projects. They say for
projects valued in excess of USD 50 million, a
Board consisting of three members is
mandatory, and below that value, either a 3-
person or 1-person Board is acceptable.
41
42. Standing DAB shall follow progress of the
Works, visit Site 3-4 times per year
Both Parties may jointly, but not individually,
ask DAB's opinion, often remove a potential
conflict
Appointment can only be terminated by both
Parties, not only by one
42
43. With the Board of three
members, each Party
nominates one member
who has to be approved by
the other Party, then those
members and the Parties
agree on a third member
who shall be chairman.
43
44. Unless agreed otherwise, selection of the
members means that the members and the
Parties will adopt the General Conditions of
Dispute Adjudication Agreement(DAA)
appended FIDIC Books
44
45. There are alternative ways of selecting and
agreeing members, for example, if the Contract
contains a list of potential members, the
parties can select (and agree upon) three
members from that list.
45
46. Terms of remuneration shall be agreed and
each Party is responsible for paying one half.
Replacement of any or all members of the
DAB can only be made with the agreement of
both Parties, but not by one Party acting
alone.
46
47. The appointment of the DAB shall expire when
the Discharge (Clause 14.12) has become
effective, i.e. when the Final Statement is
issued, and when it is paid, and when the
Contractor has received the Performance
Security back from the Employer.
47
48. If Parties fail to nominate a member or to agree
on DAB then the “appointing entity” named in
Appendix to Tender shall, at the request of
either or both parties, and after consulting with
them, make the necessary appointment(s).
48
49. The appointing entity should be a body with
the knowledge and experience to make
appropriate appointments, e.g., the President
of the Institution of Engineers or FIDIC
It is suggested that the chosen body is an
engineer rather than a legal body.
49
50. Clause 2: General Provision
Unless otherwise stated in the Dispute Adjudication Agreement, it
shall take effect on the latest of the following dates:
(a) The Commencement Date defined in the Contract,
(b) When the Employer, the Contractor and the Member have
each signed the Dispute Adjudication Agreement, or
(c) when the Employer, the Contractor and each of the Other
Members (if any) have respectively each signed a dispute
adjudication agreement
50
51. Clause 2: General Provision:
When the Dispute Adjudication Agreement has
taken effect, the Employer and the Contractor
shall each give notice to the Member
accordingly.
If the Member does not receive either notice
within six months after entering into the Dispute
Adjudication Agreement, it shall be void and
ineffective.
51
52. Clause 2: General Provision:
This employment of the Member is a personal
appointment. At any time, the Member may give
not less than 70 days' notice of resignation to
the Employer and to the Contractor, and the
Dispute Adjudication Agreement shall terminate
upon the expiry of this period.
52
53. Clause 2: General Provision:
No assignment or subcontracting of the
Dispute Adjudication Agreement (DAA) is
permitted without the prior written agreement
of all the parties to it and of the Other
Members (if any).
53
54. Included in Book as Appendix to General
Conditions, and includes Annex - Procedural
Rules
54
55. Form of Agreement between
the Employer, the Contractor
and the DAB Member
Member warrants that he is
impartial and independent of
the Employer, the Contractor
and the Engineer
55
56. The Member warrants and agrees that:
He/she is and shall be impartial and independent of
the Employer, the Contractor and the Engineer.
He/she shall promptly disclose, to each of them and
to the Other Members (if any), any fact or
circumstance which might appear inconsistent with
his/her warranty and agreement of impartiality and
independence.
56
57. When appointing the Member, the
Employer and the Contractor relied
upon the Member's representations
that he/she is:
(a) Experienced in the work which the
Contractor is to carry out under the
Contract,
(b) Experienced in the interpretation of
contract documentation, and
(c) Fluent in the language for
communications defined in the Contract.
57
58. Have no interest Financial or otherwise in the
Employer, the Contractor, or the Engineer
Treat the details of the contract and all the
DAB’s activities and hearings as private and
confidential
58
59. The Employer, the Contractor and their
personnel shall not seek any advice otherwise
than in the normal course of DAB’s activities
from any member of DAB unless mutually
agreed by the parties
The Employer and the Contractor shall be
responsible for compliance with this
provision, by the Employer's Personnel and
the Contractor's Personnel respectively.
59
60. The Employer and the Contractor undertake to
each other and to the Member that the Member
shall not, except as otherwise agreed in writing by
the Employer, the Contractor, the Member and the
Other Members (if any):
a) be appointed as an arbitrator in any arbitration
under the Contract;
b) be called as a witness to give evidence concerning
and dispute before arbitrator(s) appointed for any
arbitration under the Contract; or
60
61. c) be liable for any claims for anything done
or omitted in the discharge or purported
discharge of the Member's functions, unless
the act or omission is shown to have been in
bad faith.
The Employer and the Contractor hereby
jointly and severally indemnify and hold the
Member harmless against and from claims
from which he is relieved
61
62. Whenever the Employer or the Contractor refers
a dispute to the DAB under Sub- Clause 20.4 of
the Conditions of Contract, which will require
the Member to make a site visit and attend a
hearing, the Employer or the Contractor shall
provide appropriate security for a sum
equivalent to the reasonable expenses to be
incurred by the Member.
62
63. The Member shall be paid as
follows, in the currency named
in the Dispute Adjudication
Agreement:
(a) A retainer fee per calendar
month, which shall be
considered as payment in full
for:
(i) being available on 28 days'
notice for all site visits and
hearings;
63
64. (ii) becoming and remaining conversant with all project
developments and maintaining relevant files;
(iii) all office and overhead expenses including secretarial
services, photocopying and office supplies incurred in
connection with his duties, and
(iv) All services performed hereunder except those referred to
in sub-paragraphs (b) and (c) of this Clause.
64
65. The retainer fee shall be paid with effect from
the last day of the calendar month in which the
Dispute Adjudication Agreement becomes
effective; until the last day of the calendar
month in which the Taking-Over Certificate is
issued for the whole of the Works.
65
66. With effect from the first day of the calendar
month following the month in which Taking-
Over Certificate is issued for the whole of the
Works, the retainer fee shall be reduced by 50%.
This reduced fee shall be paid until the first day
of the calendar month in which the Member
resigns or the Dispute Adjudication Agreement
is otherwise terminated.
66
67. b) A daily fee which shall be considered as payment in
full for:
(i) each day or part of a day up to a maximum of
two days' travel time in each direction for the
journey between the Member's home and the site,
or another location of a meeting with the Other
Members (if any)
(ii) each working day on site visits, hearings or
preparing decisions; and
(iii) each day spent reading submissions in
preparing for hearing.
67
68. c) All reasonable expenses incurred in
connection with the Member's duties, including
the cost of telephone calls, courier charges,
faxes and telexes, travel expenses, hotel and
subsistence costs: a receipt shall be required
for each item in excess of five percent of the
daily fee referred to in sub-paragraph (b) of this
Clause;
68
69. d) Any taxes properly levied in the Country on
payments made to the Member (unless a
national or permanent resident of the Country)
under this Clause 6.
69
70. At any time:
(i) The Employer and the
Contractor may jointly
terminate the Dispute
Adjudication Agreement by
giving 42 days' notice to the
Member; or
(ii) The Member may resign as
provided for in Clause 2.
70
71. If the Member fails to comply
with the Dispute Adjudication
Agreement, the Employer and
the Contractor may, without
prejudice to their other
rights, terminate it by notice
to the Member. The notice
shall take effect when
received by the Member.
71
72. Any such notice, resignation and termination
shall be final and binding on the Employer, the
Contractor and the Member. However, a notice
by the Employer or the Contractor, but not by
both, shall be of no effect.
72
73. If the Member fails to comply with any
obligation under Clause 4, he/she shall not be
entitled to any fees or expenses hereunder and
shall, without prejudice to their other rights,
reimburse each of the Employer and the
Contractor for any fees and expenses received
by the Member and the Other Members (if any),
for proceedings or decisions (if any) of the DAB
which are rendered void or ineffective.
73
74. Any dispute or claim arising out of or in
connection with this Dispute Adjudication
Agreement, or the breach, termination or
invalidity thereof, shall be finally settled under
the Rules of Arbitration of the International
Chamber of Commerce by one arbitrator
appointed in accordance with these Rules of
Arbitration.
74
75. If a dispute (of any kind whatsoever) arises
between the Parties either Party may refer the
dispute in writing to the DAB for its decision,
with copies to the other Party and the Engineer.
Such reference shall state that it is given under
this Sub-Clause.
75
76. For a DAB of three persons, the DAB shall be
deemed to have received such reference on the
date when it is received by the chairman of the
DAB.
76
77. Both Parties shall promptly make available to
the DAB as required.
Additional information
Further access to the Site,
Appropriate facilities
77
78. The DAB shall give its decision:
a) Within 84 days after receiving such
reference, or within such other period as
may be proposed by the DAB and approved
by both Parties
b) The Decision shall be reasoned and shall
state that it is given under this Sub-Clause.
78
79. The decision shall be binding on both Parties
The parties shall promptly give effect to it
unless and until it shall be revised in an
amicable settlement or an arbitral award
Unless the Contract has already been
abandoned, repudiated or terminated, the
Contractor shall continue to proceed with the
Works in accordance with the Contract.
79
80. If either Party is dissatisfied with
the DAB’s decision, then either
Party may, within 28 days after
receiving the decision, give notice
to the other Party of its
dissatisfaction.
80
81. In either event, this notice of dissatisfaction
(NOD) shall state that it is given under this
Sub- Clause, and shall set out the matter in
dispute and the reason(s) for dissatisfaction.
81
82. Except as stated in Sub-Clause 20.7 [Failure to
Comply with Dispute Adjudication Board’s
Decision] and Sub-Clause 20.8 [Expiry of
Dispute Adjudication Board’s Appointment],
neither Party shall be entitled to commence
arbitration of a dispute unless a notice of
dissatisfaction has been given in accordance
with this Sub-Clause.
82
83. If the DAB has given its decision as to a matter
in dispute to both Parties, and no notice of
dissatisfaction has been given by either Party
within 28 days after it received the DAB’s
decision, then the decision shall become final
and binding upon both Parties.
83
84. Where notice of dissatisfaction has been given
under Sub-Clause 20.4 above, both Parties shall
attempt to settle the dispute amicably before the
commencement of arbitration.
Unless both Parties agree otherwise, arbitration
may be commenced on or after the fifty-sixth
day after the day on which notice of
dissatisfaction was given, even if no attempt at
amicable settlement has been made.
84
85. Unless settled amicably, any dispute in respect
of which the DAB’s decision (if any) has not
become final and binding shall be finally
settled by international arbitration. Unless
otherwise agreed by both Parties
(a) The dispute shall be finally settled under the Rules
of Arbitration of the International Chamber of
Commerce
85
86. (b) The dispute shall be settled by three
arbitrators appointed in accordance with
these Rules, and
(c) The arbitration shall be conducted in the
language for communications defined in Sub-
Clause 1.4 [Law and Language].
86
87. The arbitrator(s) shall have full power to open
up, review and revise any certificate,
determination, instruction, opinion or
valuation of the Engineer, and any decision of
the DAB, relevant to the dispute.
Nothing shall disqualify the Engineer from
being called as a witness and giving evidence
before the arbitrator(s) on any matter
whatsoever relevant to the dispute.
87
88. Neither Party shall be limited in the
proceedings before the arbitrator(s) to the
evidence or arguments previously put before
the DAB to obtain its decision, or to the
reasons for dissatisfaction given in its notice of
dissatisfaction.
88
89. Any decision of the DAB shall be admissible
in evidence in the arbitration
Arbitration may be commenced prior to or
after completion of the Works
The obligations of the Parties, the Engineer
and the DAB shall not be altered by reason of
any arbitration being conducted during the
progress of the Works
89
90. In the event that:
(a) Neither Party has given notice of
dissatisfaction (NOD) within the period
in Sub-Clause 20.4 [Obtaining Dispute
Adjudication Board’s Decision],
(b) The DAB’s related decision (if any) has
become final and binding, and
90
91. (c) A Party fails to comply with this decision,
then the other Party may, without prejudice to
any other rights it may have, refer the failure
itself to arbitration under Sub-Clause 20.6
[Arbitration].
Sub-Clause 20.4 [Obtaining Dispute
Adjudication Board’s Decision] and Sub-Clause
20.5 [Amicable Settlement] shall not apply to
this reference.
91
92. If a dispute arises between the Parties in
connection with, or arising out of, the Contract
or the execution of the Works and there is no
DAB in place, whether by reason of the expiry of
the DAB’s appointment or otherwise:
a) Sub-Clause 20.4 [Obtaining Dispute Adjudication
Board’s Decision] and Sub- Clause 20.5 [Amicable
Settlement] shall not apply, and
b) the dispute may be referred directly to arbitration
under Sub-Clause 20.6 (Arbitration)
92