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Construction Law/FIDIC sub -clause 12.4


QUESTION: Dear Mr. Peter,

The Engineer issue an EI for omission of the Work (150mm thk concrete slab 10 m2) and it has omitted.  Now the Contractor is seeking loss of profit in accordance with sub- clause 12.4 FIDIC 99 red book.

I would like to know, is there is any entitlement for loss of profit or any incurred cost?

Please could you elaborate this issue?

ANSWER: Dear Sathis,

Clause defines “Cost” means all expenditure reasonably incurred (or to be incurred) by the Contractor, whether on or off the Site, including overhead and similar charges, but does not include profit.  Clause 12.4 refers to cost so no loss of profit.  

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

QUESTION: Dear Peter,

Which mean the Contractor not entitle any loss of profit due to omission of the work in accordingly FIDIC 1999 red book?

Could you clarify the Sub - clause 12.4 with an example?

Dear Sathis,

From the FIDIC Guide

'Since Sub-Clause 13.3 concludes by referring to Variations being valued under Clause 12, and the quantity (for the purposes of Sub-Clause 12.3) of an omitted item is zero, Clause 12 concludes by entitling the Contractor to compensation for the costs reasonably incurred in the expectation of carrying out work subsequently omitted under the Variation.
The Sub-Clause refers to the word "cost" in its usual usage, rather than to "Cost".  The significance of this point is best illustrated by a typical example. If the Contractor had ordered formwork for work which was subsequently omitted by Variation, the Accepted Contract Amount would typically have included direct cost plus profit in respect of this formwork. The Contractor would then be entitled to recover cost and profit. However, if the Employer was thus required to pay for the full cost of an item, he may also be entitled to recover it as his property.'  

Further the Contractor has to show loss of profit, which is based on audited accounts for several years.  Generally loss of profit cannot be calculated until the final Contract Price is known.  

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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 . . .
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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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