Termination is a hot topic right now due to the current hostilities in the Gulf region. This article examines what the FIDIC contracts say on the subject, with a focus on the 4 key clauses you need to know and understand.

Sub-Clause 15.5 (Termination for Employer’s Convenience)

Sub-Clause 15.5 (Termination for Employer’s Convenience) provides that ‘The Employer shall be entitled to terminate the Contract at any time for the Employer’s convenience’. This is not linked to any reasons, so if the Employer decides that he/she no longer wishes to continue with the project, because of circumstances arising out of the hostilities, he/she may give the required Notice and the Contract will be terminated.

Sub-Clause 15.6 (Valuation after Termination for Employer’s Convenience)

Sub-Clause 15.6 (Valuation after Termination for Employer’s Convenience) provides that the Contractor shall be paid in accordance with Sub-Clause 18.5 (Optional Termination) for:

 (a) ‘the amounts payable for any work carried out for which a price is stated in the Contract;

 (b) the Cost of Plant and Materials ordered for the Works which have been delivered to the Contractor, or of which the Contractor is liable to accept delivery. This Plant and Materials shall become the property of (and be at the risk of) the Employer when paid for by the Employer, and the Contractor shall place the same at the Employer’s disposal;

(c) any other Cost or liability which in the circumstances was reasonably incurred by the Contractor in the expectation of completing the Works;

(d) the Cost of removal of Temporary Works and Contractor’s Equipment from the Site and the return of these items to the Contractor’s place of business in the Contractor’s country (or to any other destination(s) at no greater cost); and

(e) the Cost of repatriation of the Contractor’s staff and labour employed wholly in connection with the Works at the date of termination.’

and, under sub-section (b):

‘the amount of any loss of profit or other losses and damages suffered by the Contractor as a result of this termination.’

Clause 18 (Exceptional Events)

Clause 18 (Exceptional Events) deals with events that are beyond a Party’s control and includes war, hostilities and acts of foreign enemies as being the type of events that are considered by this clause to be exceptional events.

Clause 18.5 (Optional Termination)

Clause 18.5 (Optional Termination) provides that:

‘If the execution of substantially all the Works in progress is prevented for a continuous period of 84 days by reason of an Exceptional Event of which Notice has been given under Sub-Clause 18.2 [Notice of an Exceptional Event], or for multiple periods which total more than 140 days due to the same Exceptional Event, then either Party may give to the other Party a Notice of termination of the Contract’.

Conclusion

So, if the hostilities prevent execution for the periods stated, either Party may elect to terminate by giving notice. Payment to the Contractor is the same as described above under Termination for Employer’s Convenience, with the exception that the Contractor is not entitled to payment for loss or profit or other losses and damages under this clause.

Need to understand the full FIDIC contracts? Check out our Practical Use of FIDIC 1999 or Practical Use of FIDIC 2017 e-courses.