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Construction Law/FIDIC 1987 and special contracts with tenants


QUESTION: I am preparing the conditions of contract of a residential project based on FIDIC1987 with the Employer/client before proceeding with the tender stage.

The Employer asked for something specific; he wants to include in the main contract the following idea:
"within a specific time (to be determined in the main contract), the tenants of the building have the right to enter into a separate contract with the main contractor (who shall accept that) to adjust the finishing works inside their areas (within a time frame that does not conflict the timing sequence of the main contract), and using the same unit prices of the main contract and the tenant pays the contractor directly (the contract is between them)".

I am not that comfortable with this idea as it may generate undesired complications and disputes, but if I HAVE to implement this, I have several concerns:
1- Is there a major reason for this idea to be unacceptable to be implemented within a FIDIC contract?
2- What is the contractual bridge between the big contract and the small ones?
3- what are,in your opinion, the major points to include/exclude? the major concerns to address? disputes?  
4- what is the type/sample of contract between tenant and contractor?

The idea is that the Employer does not want to be involved in the variations that its tenants may require, so he wants himself away, and on the same time provide his tenants with a guarantee that the contractor will do what they want during a specific time frame, according to a specific unit rate, without being involved.

Sorry for the long query and I really appreciate the time spent by your kind self to answer my questions. Thanks a lot.

ANSWER: Dear James,

1. I see no reason for not implementing this concept within a FIDIC contract.  There are advantages to both contractor and new tenants for this type of facility. The Contractor does not have to worry about a lot of little contractors disturbing his work and the tenant can get the work done before he occupies the property.
2. Avoid any contractual bridge between the big contract and the small ones.  I would ask the Contractor to submit a list of unit prices for the small contracts as part of his main offer.  These unit prices do not need to be the same as the prices for the main contract, but rather aligned with any daywork rates.  I guess that the tenants will be asking for extra electrical fittings, partitioning, kitchens, special doors painting, ceilings or security fittings.  It all depends on the extent of the work provided under the main contract.  
3. Payment by the new owners and value for money from the Contractor.
4. Most contractors have their own bespoke contracts for this type of work, ask them to submit examples with offer.  

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

QUESTION: Thanks Sir for your helpful answer.

to clarify a bit the situation: the main contract include standard finishing works inside all tenancies. but the end-users have the right to change some of these finishing works provided that they submit the required documentation within a specific period of time. Otherwise, the standard finishing works will be applied.

The issue here is that what if the employer terminates the main contract? if there is no contractual link then the main contractor can complete the finishing works inside tenancies, no?

Also,is there any way that the contractor can use to claim for EOT because of this arrangement or any of its consequences?

Thanks alot

Dear James,

Why do you expect the Employer to terminate the Contract?  You can write a back to back clause in the tenant's contracts that, if the Employer terminates the main contract, then the contract with the tenants is terminated, with or without recompense.  Likewise, you can write a clause that defines the works for the tenants as a Contractor's risk, and thus not eligible for EoT.  

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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)
"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')

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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