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Construction Law/Penalties according to Appendix to Tender

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Question
Hi Alina!

Referring to Yellow or Red 1999 FIDIC are the penalties provided in Appendix to Tender subject to Engineer's Determination?

The amount of the penalties is provided in Appendix to Tender and the cases which the Employer may apply penalties is provided in the Contract.
Is the Engineer obliged to proceed in accordance to Sub-Clause 3.5 in this case?

Thank you in advance

Ionut

Answer
Hi, Ionut!
The Sub-clause 2.5. [Employer’s Claims] says:
"If the Employer considers himself to be entitled to any payment under any Clause of these Conditions or otherwise in connection with the Contract..., the Employer or the Engineer shall give notice and particulars to the Contractor...
The notice shall be given as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim...
The particulars shall specify the Clause or other basis of the claim, and shall include substantiation of the amount and/or extension to which the Employer considers himself to be entitled in connection with the Contract. The Engineer shall then proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) the amount (if any) which the Employer is entitled to be paid by the Contractor..."

Also, the penalty clause of the Contract, 8.7 [Delay Damages] says:
"If the Contractor fails to comply with Sub-Clause 8.2 [Time for Completion], the Contractor shall subject to Sub-Clause 2.5 [Employer's Claims] pay delay damages to the Employer for this default. These delay damages shall be the sum stated in the Appendix to Tender, which shall be paid for every day which shall elapse between the relevant Time for Completion and the date stated in the Taking-Over Certificate. However, the total amount due under this Sub-Clause shall not exceed the maximum amount of delay damages (if any) stated in the Appendix to Tender".

As it can be seen, for 8.7 it is mandatory to go through 2.5, and 2.5 says that after 2.5 the Engineer is to make a determination according to 3.5.

The same should be applied in case of any other penalties included in Particular Conditions, if the clause 2.5 was not changed through the Particular Conditions(2.5 says: "If the Employer considers himself to be entitled to any payment under any Clause of these Conditions or otherwise in connection with the Contract..., the Employer or the Engineer shall give notice and particulars to the Contractor... The Engineer shall then proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (if any) which the Employer is entitled to be paid by the Contractor...").

In other words, every payment that the Employer requests from the Contractor shall be asked through 2.5 and 3.5.

Hope it helps.

Best regards,

Alina  

Construction Law

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Alina Valentina Oprea

Expertise

I can answer to questions regarding FIDIC 1999 contracts, including practical use of these conditions of contract, as well as to questions regarding dispute boards, both from theoretical and practical point of view. I cannot answer to questions related to other kind of contracts or to procurement process, except to some (limited) extent.

Experience

Implementation of works contracts (FIDIC 1999) financed by different financial institutions, including European Union; claims and disputes; dispute boards See more on www.alinaoprea.com

Organizations
Dispute Resolution Board Foundation

Publications
see http://alinaoprea.com/publications/ ; DRBF Forum Newsletter; Drumuri si Poduri; Revista Constructiilor; SIDiR Newsletter

Education/Credentials
Graduated the University of Civil Engineering Bucharest, Faculty of Railways, Roads and Bridges (1985-1990); Trained under Mr. Gwyn Owen’s pupilage program for arbitrators/adjudicators under FIDIC mentoring program (2006 – 2007)

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