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Construction Law/Expiration of Advance Payment Guarantee


I work as a Consultant for several road construction projects in Sri Lanka.

All the Contracts are "FIDIC MDB Harmonised Edition (March 2006)" based and the Contract duration is 2 yrs.

The Contractor of one of those Contracts is performing very poorly for several months due to cash flow problems they are having.

They were informed recently to renew their  Advance Payment Guarantee to cover the remaining balance. This was informed in writing 28 days prior to the expiration. Although the Guarantee is expired now, the renewal is yet to be done. (May be due to cash flow problems.)

An Interim Payment Certificate for this Contractor's last Interim Payment Application is not forwarded to the Client for this reason.

Is it Contractually correct? Or what is the best practice for this scenario..?

Please note that the withheld IPC is just a fraction of the balance Advance Payment amount. So it is not possible to deduct the balance from this IPC alone.

Dear Amila,

Thank you for this question.

If I can refer you to sub-clause 14.6 of the governing contract you will find within the first two paragraphs the only reasons why a payment can be withheld from the Contractor. The reasons you are advancing now do not fall within those stated.

Sub-cluase 14.2, which is concerned with Advance Payments does not provide a remedy for the Employer in the event that the Advance Payment Guarantee is not renewed when required. Nonetheless this is a breach by the Contractor and the Employer is entitled to seek a remedy from the Contractor. I suggest that this remedy is limited to recovering the balance of the Advance Payment at an earlier time; however in the absence of an express right of set off the Employer can only do this by making a claim under sub-clause 2.5.

I hope that this assists you.

Kind regards,
John Dowse
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John Dowse


Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.


Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Various UK and International construction and legal publications.

LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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