FIDIC White Book (FWB) and ABR18 both provide a basis for consultancy contracts in construction projects. FIDIC's contract system is often used if the construction project involves foreign players, ensuring that the parties have a common contractual frame of reference. The limitation of the consultant's liability is an important element to consider when deciding what basis of agreement to go with - but what does it mean for the consultant if the basis of agreement is FWB?
In which areas is FIDIC used?
FIDIC, short for Fédération Internationale des Ingénieurs-Conseils, has issued international standardised contracts for the construction industry since 1957. Widely used and recognised across national borders, FIDIC contracts are typically used on major construction projects where multiple international parties are working together.
That way, the parties will not generally need to concern themselves with national construction law regimes. If it is a Danish project or client, the background law will probably be Danish. If the agreement stipulates a different choice of law, the parties should consult a lawyer qualified to advise on the local interpretation of FIDIC terms and concepts.
In which areas is ABR18 used?
General Conditions for Consultancy Services for Building and Construction Works (ABR18) is the Danish counterpart to a set of standard terms and conditions used in contracts for technical consultancy services. ABR18 is well-known in Denmark and indeed in Scandinavia as a whole, with also Norway and Sweden applying similar sets of national standard terms and conditions. For international contracts for technical consultancy, however, FWB will often be the better choice.
Which provisions govern the limitations of liability?
There are separate provisions for limitations of liability in both ABR18 and FWB. ABR18 prescribes both a limitation of liability regarding daily penalties for delay and a general limitation of liability, whereas FWB prescribes a general limitation referred to simply as the "Limit of Liability".
The following discusses differences and similarities between the two sets of rules.
Under ABR18, the consultant is exempt from liability for 'any loss of business, loss of profit or other indirect loss'. FWB contains a similar limitation of liability, although it does also offer exemplifications, listing e.g. 'loss of contracts' and 'loss of use'. In terms of the range of losses for which a consultant may incur liability, there are no significant differences between the two sets of rules.
Limitation of liability in terms of amount and other restrictions
In FWB, a party's liability is limited to the amount specified in the Particular Conditions ("PC"). Unless otherwise agreed, therefore, the parties waive any and all claims in excess of the agreed maximum.
As party to an FWB agreement, thus, your organisation must decide beforehand what will be yours or your counterparty's maximum liability as consultant.
ABR18 prescribes a percentage limitation of liability for delays and a minimum rate under the general limitation of liability (see below). ABR18 also prescribes divided liability if there are one or more other parties responsible besides the consultant. This means the consultant will only be liable for a share of the client's loss proportionate to the consultant's share of the blame. This is called pro rata liability. FWB also contains a pro rata provision if the consultant is only considered partly liable, i.e. jointly liable with one or more other parties.
ABR18 also limits the consultant's period of liability to a maximum of five years. Any claims by the client against the consultant therefore must be brought within five years of handover of the defective building or construction.
In some instances, however, the consultant may have agreed to a longer period of liability.
FWB also prescribes a maximum duration of liability, stipulating that neither party – neither client nor consultant – can bring claims against the other after the earlier of:
- expiry of the agreed duration of liability, or
- termination of the contract.
The difference between ABR18 and FWB is, therefore, that FWB requires/allows the parties to specifically agree the duration of liability in the PCs, whereas ABR18 assumes a five-year liability period corresponding to the general liability period in the AB system.
Also, under ABR18, the limitation of liability may be set aside if the consultant is guilty of gross negligence or wilful misconduct. Similarly under FWB, where the limit of liability will be set aside in the event of 'deliberate manifest and reckless default, fraud, fraudulent misrepresentation or reckless misconduct'.
In contracts using FWB it is important for the parties to decide in advance what will be the background law and how to understand and interpret any terms and provisions deviating from the general rules of Danish law of obligations.
Project liability insurance or limitation of amounts under ABR18
Lastly, ABR18 contains a provision to the effect that if project liability insurance has been taken out, the consultant's liability will be limited to the coverage under such insurance. However, the overall challenge with project liability insurance at the moment is that it is very costly – if available at all. If no project liability insurance has been taken out, the consultant's liability (unless otherwise agreed) will be limited to DKK 2.5 million or twice the agreed consultancy fee, whichever is greater.
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.
