Construction contract FIDIC 2017 notice of claim

How Does FIDIC 2017 Affect Claims?

I guess like many of you, I have not had the opportunity to examine the 2017 editions of the FIDIC contracts in much detail, because as yet, I have not come across any projects that are using them. This situation will, however, gradually change. As it does, we will need to know what has changed and how it has changed. As such projects reach final account stage there will undoubtedly be claims to resolve and disputes to settle. I have recently been doing research for a forthcoming book, so thought it would be worthwhile to highlight the changes from a claims perspective.

Employer’s Claims

Sub-Clause 2.5 (Employer’s Claims) has been deleted in the FIDIC 2017 editions. Employer’s claims are now dealt with together with Contractor’s claims under Sub-Clauses 20.1 (Claims) and 20.2 (Claims For Payment and/or EOT).

The Employer is now obliged to give a notice of claim no later than 28 days after the event or circumstances giving rise to the claim. This has now become a condition precedent to entitlement for both Parties.

If the Engineer considers that a notice of claim was not given within the stipulated 28-days, he/she is obliged to give a notice of such within 14 days of receipt of the notice of claim. If the Engineer fails to do so, the notice will be deemed to have been given within the stipulated time. The responding Party may also give a notice to the Engineer if they consider that the notice of claim was out of time.

Claims for Payment

Sub-Clause 20.2 (Claims For Payment and/or EOT) is a little more descriptive of what is meant by “a fully detailed claim”. It requires the claimant to include ‘a detailed description of the event or circumstances giving rise to the Claim’. Also, ‘A statement of the contractual and/or legal basis of the Claim’ must be provided. These requirements are just a matter of good practice. Nevertheless, previously, many claimants did not include such basic information within their claims.

The period for submission of the fully detailed claim has been extended from 42 days to 84 days. But, failure to submit ‘A statement of the contractual and/or legal basis of the Claim’ within this time period will result in the notice of claim becoming lapsed. FIDIC is not clear on what this actually means. However, I believe that the intention is that the claim becomes time-barred.

The Engineer is obliged to consult with the Parties in an endeavour to reach agreement. If agreement is not reached, the Engineer must make a fair determination within 42 days of receiving the claim or additional particulars of the claim. If there is no agreement to extend this period, failure to issue a notice of either agreement of determination shall be deemed to be a rejection of the claim. The claimant may then refer the matter as a dispute. Previously, the Engineer only had to respond to the claim within 42 days. No time limit existed on the period for agreement or determination. Now they have to bring the matter to a resolution within 42 days. Six-weeks is not an onerous time to achieve this, provided that the Engineer takes action immediately upon receiving the claim.


Disputes & Arbitration

Clause 21 (Disputes and Arbitration) is solely concerned with disputes. It distinguishes between claims and disputes, reflecting the fact that claims only become disputes if they cannot be agreed. They should not be regarded as being related.

The clauses dealing with claims and determinations have become much wordier and much more complicated. To my mind, they are not easy to follow or to understand. This seems to be a departure of FIDIC’s intention to write contracts for engineers rather than for lawyers. Personally, I see this lack of clarity as a route to contention.

Having said this, it is apparent that FIDIC have attempted to strengthen the procedures relating to claims and responses. If we consider the amount of time-consuming and costly disputes which arise because the Parties have not complied with either their obligations or with good practice when dealing with claims, this is definitely a step in the right direction.

Will it mean more work for contractors or engineers?

I don’t think that the changes require any more work than should have been put in under the 1999 editions. However, the consequences of non-compliance are now more severe. Both contractors and engineers need to get their acts together. They must stop thinking that they can ignore their obligations to manage claims in accordance with the Contract without consequences.

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