Canada: FIDIC Yellow Book Update – What's New?

The International Federation of Consulting Engineers ("FIDIC") is an international standards organization for consulting, engineering and construction, which publishes standard form contracts between employers (owners) and contractors that are often considered to be the preferred contracts for use on international construction and engineering projects. A fundamental principle behind the FIDIC contracts is the use of general conditions of contract that are suitable in almost all cases. In 1999, FIDIC published a range of first edition contracts, including:

  • Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer: The Construction Contract (the "Red Book");
  • 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");
  • Conditions of Contract for EPC Turnkey Projects: The EPC/Turnkey Contract (the "Silver Book"); and
  • Short Form of Contract: The Short Form (the "Green Book").

FIDIC published the second edition of its standard form contracts in December 2017. The update was much anticipated and the revisions have prompted a great deal of discussion. This article addresses some of the major changes between the Yellow Book first edition ("First Edition") and the Yellow Book second edition ("Second Edition"). The Yellow Book is a lump sum contract intended for use where the work is designed by the contractor, and under which the contractor accepts the risk of quantities.

Significant Differences between the First and Second Editions of the Yellow Book

Role of the Engineer

In the Second Edition, the role of the engineer remains instrumental to the administration of the contract and the engineer is given greater responsibility and power. The engineer must now be fluent in the language of the contract, must have suitable qualifications, experience and competence, and must act like a skilled professional.

The Second Edition introduces an aspect of neutrality to the role of the engineer. Despite being appointed and remunerated by the employer, there is now a requirement in Sub-Clause 3.7 that, in making a Determination, the engineer "act neutrally" between the parties. While "neutrally" is not defined, this is a significant change from Sub-Clause 3.1 of the First Edition, which deemed the engineer to be an agent of the employer when carrying out its duties or exercising authority, except where otherwise stated in the contract. As well, under the new Sub-Clause 3.7, the engineer has a positive obligation to encourage the resolution of claims and is not required to obtain the employer's consent before making a Determination.

The engineer may now appoint an "Engineer's Representative" and may delegate its authority to the Engineer's Representative to act on its behalf. However, the Engineer's Representative must remain on site for the duration of the work.

Determining Claims

The procedure for the determination of contractor and employer claims has also undergone significant changes from the First Edition. Under the Second Edition, the engineer has a greater role in determining claims and disputes, and encouraging collaboration between the parties. For example, Sub-Clause 3.7 of the Second Edition refers to joint consultations with both parties in order to reach an agreement within 42 days. This is a departure from Sub-Clause 3.5 of the First Edition which did not specify joint meetings with both parties.

In the event that no agreement is reached between the parties, the engineer must issue a Determination within 42 days of the end of the 42 day period for agreement, which Determination must be "fair." A failure on the part of the engineer to make a Determination within the 42 day period is deemed to be a rejection of a claim. Once the engineer has made a Determination or there has been a deemed rejection, a party has 28 days to serve a Notice of Dissatisfaction (referring the dispute to the Dispute Adjudication Board), otherwise the Determination is final and binding.

Overall, the engineer's role in the administration of the work has become more prescriptive and there is a greater reliance placed on the engineer to administer claims efficiently.

Fitness for Purpose

One of the more contentious changes from the First Edition to the Second Edition was to the language of the Fitness for Purpose provision in Sub-Clause 4.1. The First Edition provides "[w]hen completed the Works shall be fit for the purposes for which the Works are defined in the Contract" while the Second Edition provides "[w]hen completed, the Works (or Section or Part or major item of Plant, if any) shall be fit for the purpose(s) for which they are intended, as defined and described in the Employer's Requirements (or, where no purpose(s) are so defined and described, fit for their ordinary purpose(s))."

This change to the language of the Second Edition will require the employer to pose the question of whether any purpose stated outside the Employer's Requirements, if any, should be disregarded when considering the Fitness for Purpose warranty.

By defining the purpose by reference to the Employer's Requirements rather than the contract as a whole, this change should narrow the scope of the contractor's warranty and provide some certainty to the contractor. However, it also obliges the contractor to perform a detailed review of the Employer's Requirements, if any, to ensure that the stated purpose(s) for which the Works are intended are clear. This is especially important, as the Second Edition now includes a corresponding indemnity in Sub-Clause 17.4 whereby the contractor indemnifies the employer "against all acts, errors or omissions by the Contractor in carrying out the Contractor's design obligations that result in the Works (or Section or Part or major item of Plant, if any), when completed, not being fit for the purpose(s) for which they are intended under Sub-Clause 4.1." Indirect and consequential losses are, however, excluded from this indemnity.

It should also be noted that the fitness for purpose obligation now does not just apply to the Works as a whole, but also to a "Section or Part or major item of Plant." This may be a future source of disagreement.

Employer's and Contractor's Claims

A number of revisions have been made in order to encourage faster resolution of claims. In the First Edition, the contractor was required to give notice of a claim to the employer within 28 days of becoming aware of the same. By contrast, Sub-Clause 2.5 of the First Edition entitled an employer to claim payment or extension of the defects notification period "as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim."

The Second Edition has removed Sub-Clause 2.5, and, with it, the distinction between employer and contractor claims. Now, both the employer and contractor are subject to the 28-day limitation period for notification of claims under Clause 20. This revision reflects international practice, but does not necessarily recognize the distinction between a contractor's claim and an employer's entitlement to apply deductions or set-off.

As well, the Second Edition now requires a formal Notice be provided in respect of any claims. The Notice must be described as a "Notice of Claim" and refer to the relevant clause of the contract. As a result, parties will no longer be entitled to rely on informal notices, such as discussion points in meeting minutes or emails. The engineer is now also required to notify the claiming party within 14 days if the engineer considers a "Notice of Claim" to have been submitted out of time.

The Second Edition provides for an 84 day limitation period for submission of a detailed claim by either the employer or the contractor. This deadline only applies to claims for payment or for reduction in the contract price and claims for extension of time, and replaces the 42 day limitation period for contractor claims in Sub-Clause 20.1 of the First Edition. The detailed claim must include:

  • a detailed description of the event or circumstance giving rise to the claim;
  • a statement of the contractual or legal basis for the claim;
  • all contemporary records on which the claiming party relies; and
  • detailed supporting particulars of the amount of additional payment (or reduction in the contract price if the employer is the claiming party), extension of time or extension of the defects notification period being claimed.

If a detailed claim is not submitted within 84 days of the date when the claiming party first became aware of the event giving rise to the claim, then the claim will lapse. Maintaining adequate records is therefore critical to establishing entitlement to money and time.

Sub-Clause 20.1 of the Second Edition also introduces an "other" claim category for claims that are for a relief or remedy other than time or money and sets out the procedure to be followed for those claims.

Conclusion

The revisions listed above are only some of the major changes introduced with the Second Edition of the Yellow Book. This article does not address other major changes introduced in the Second Edition, including revisions to the defined terms (Sub-Clause 1.1), limitation of liability provisions (Clause 17), variations procedure (Clause 13), disputes and arbitration (Clause 21) and advanced warning (Sub-Clause 8.4).

FIDIC intended the revisions discussed in this article to bring increased clarity and certainty to roles so as to encourage active contract management and put more emphasis on dispute avoidance. However, they may also increase the cost and burden of administering the contracts. Overall, there are no earth-shattering changes to the allocation of risk between the employer and contractor, and it is expected that the Second Edition contracts will remain popular on international projects.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions