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Construction Law/FIDIC 1999 Red book clause 19.6 (b) - Dubai

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Expert: - 1/22/2012


Question
Hi Peter,

In the event of a termination [for convenience] the Contractor is entitled to payment under Clause 19.6 (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 is relatively straight forward for materials which are currently stored on site, or are on a ship being transported to site.

Who would be liable for the costs if a Contractor has placed an order for a piece of Plant such as a chiller which has a 16 week manufacture period, and the Employer issues a notice of termination [for convenience] midway through the manufacturing process of the Chiller [say 8 weeks]?
The chiller will not be ready for dispatch for a further 8 weeks, and therefore unavailable for delivery at the Site until 4 weeks (at the earliest), after the Site has been closed.

Regards

Lee

Answer
Dear Lee,

In this situation, it depends on the costs of the Contractor.  If he has to pay cancellation charges, or the manufacturer cannot sell the chiller to another customer, then the Employer is liable to pay the relevant costs.  The Employer gets ownership of a part complete chiller or materials, but might choose to pay for a complete chiller, on the basis that he can use it later or in a different project.  

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Peter M. Elliott

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First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol www.eotprotocol.com before submitting a question.

Experience

Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
"We are too poor to buy something cheap"
.Romanian Proverb 2002
A lean compromise is better than a fat lawsuit. George Herbert (English poet 1593-1633)
I said it in Hebrew, I said it in Dutch,
I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
Match your presentation to the reader!
The joy of food lasts but an hour, of sleep but a day, of a woman, but a month, but the joy of a building lasts a lifetime. Syrian proverb.
Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

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B Sc(Hons) in Civil Engineering

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