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Construction Law/FIDIC 99 YB - Letter of Acceptance

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Question
John, hi.

My question relates to Letter of Acceptance and Contract Agreements in respect of the FIDIC Yellow Book 99 suite under civil law jurisdictions.

The following clauses apply

SC 1.1.1.2 Contract Agreement (CA)
SC 1.1.1.3 Letter of Acceptance (LOA)
SC 1.6 Contract Agreement

Neither have been amended by the Particular Conditions.

My understanding of these clauses are;

The LOA is not a CA. The LOA is the begining of a the sequence to ender in to a CA within 28 days from receipt of the LOA.

I am interested to see if the LOA is the start of legal relations and could be construced as a contract being in place. If legal relations were in place upon acceptance of the LOA would specific elements have to be stated within for it to be a contract agreement?

A contractor received a LOA however the CA was significantly delayed which impacted their programme. The Contractor claims the LOA is not a CA and I tend to agree, however is the LOA under FIDIC YB mean a contract is in place or is the contract in place when the CA has been received?

Thanks in advance

Answer
Dear Craig,

Thank you for this question.

Under the FIDIC form of contract the Letter of Acceptance creates a legally binding relationship and obligations. The letter of acceptance is usually superseded by the Contract Agreement. In the absence of an LOA, the CA is deemed the LOA. (see sub-clause 1.1.1.3)

By virtue of sub-clause 8.1 of the FIDIC form of contract the date for commencement is, in the default position, set by reference to the date on which the contractor receives the LOA. The parties are obliged to commence performance of their respective obligations under the contract following an LOA being issued.

In your situation, the contractor received an LOA and should have commenced performance thereafter unless the contract provided that there was another trigger criterion. However, it is rare for a contractor to delay commencement without valid reason, or at least what it considers as valid reason. I would be interest to hear why the contractor elected not to commence following receipt of the LOA but waited until the CA was provided at a significantly later time.


I hope that this assists you.

Kind regards,
John Dowse

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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