In a contract we are using FIDIC 3 , pursuant to Clause 47.1 the Maximum penalties as stipulated in the Appendix to tender is 10% of the Contract Value . How to apply this percentage in case that the omission works is more than 10% , say in our case 40% , if we apply the ten percent on the Contract Value it may not be logic as the contractor profit is become less due to the omissions , and now we will double his losses if this clause is applicable , i.e. if we apply 10% from the Contract Value. Take now the other case if the additional works more than 10% and the penalties percentage is applied on the Contract Value , the Client will be in loss , kindly advise contractually the solution for such issue .
Thank you for this question.
I do not have a copy of FIDIC 3 available to hand, so I will refer to FIDIC 4, 1987, which I think is the same in this respect.
It is usual to state the limit of LDs by reference to the Contract Price, which is defined and certain term. I note that you have referred to Contract Value, which is not a defined term under the General Conditions of Contract. Was the term defined within the Particular Conditions? If not, I suggest that the LD's clause is uncertain and therefore potentially unenforceable. Your narrative identifies the difficulties in ascertaining the Contract Value and, therefore, the difficulty in applying the LDs provision if the term is not defined.
I hope that this assists you.
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