Construction Law/joint venture


QUESTION: hi, wa have a cambodia project where all comtractor should establish a company (branch) for a specific project.
We've been awarded a project in the form of joint venture limited and one member of joint venture has recently bankrupt.

Is there any requirement under FIDIC MDB to report
the change of the status of Contractor?

ANSWER: Dear Ro,

I suggest that clause 15.2 e is applicable.  If one member of a joint venture has become bankrupt, then the Employer's risk has increased.  You must inform the Employer, together with your proposals to continue without your bankrupt partner. Most employers would wish to continue with the incumbent contractor rather than start the bidding procedure again, but there are no guarantees.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your response.

About your referred Sub-Clause 15.2 (e), could it be still applicable
when the joint venture exists in the form of a corporation (___ joint venture Ltd.)in Cambodia and there's no resulting bankrupt to the corporation due to the one member's bankrupt as the bankrupted company
only takes 30% share of the corporation?

ANSWER: Dear Ro,

The bankruptcy of one member of the consortium affects the joint and several liability of the partners and thus the risk of the Employer.  Also, you will need to reorganise the JV to adjust the various duties and liabilities of the different members.  Then you will have to inform the Employer of the changes.  Better to do it early, and with the consent of the Employer, than later and risk the Employer terminating the Contract for bad faith.

---------- FOLLOW-UP ----------

QUESTION: Thank you for your prompt response. I find it helpful.

I have follow up question to check my understanding on your answer.

About the joint and several liability of the members of JV,
when you said the increased risk of the Employer is it because
now there's no other to chase for our failure to perform under the Contract?

1. Because the bankuprupted JV member's share only took 30%,
the Project Company(JV Ltd.) has not bankrupted (as more than
50% is fine)

2. The Bankrupted JV member does not perform any part of the Work.
We formed JV to satisfy the finantial requirement in the bid (we
are currently having work out period) With this added fact,
does it still result increased risk on the part of the Employer?

Thank you in advance.

dear ro,

I think that you should take proper legal advice and then advise the Employer of the situation.  It does not matter how I, or even you, see the risk, but what is written in the contract and how the Employer feels about the situation.  Hiding relevant facts is not a good basis for a lasting relationship.

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Peter M. Elliott


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 before submitting a question.


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)
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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
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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')

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

B Sc(Hons) in Civil Engineering

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