Construction Law/Price Adjustment


Dear Peter,

I had infrastructure project under FIDIC Red book which for some particular items price adjustment is applied using the formula expressed in the Contract, one of them is asphalt work.
I face complicated situation, my country now is still facing economic turmoil since currency crash until the lowest level within last 5 years. As asphalt is kind of imported product and i shall pay the product in $ but we are paid by the owner in local currency (Rp.)therefore the price/cost of asphalt product increase significantly. No body can control this situation   

My question are:
1. Could i claim for price increase due to such economic turmoil since in my opinion it can be called as unforeseen condition?   
2. If claim for price increase is applicable, what about price adjustment (escalation) , can i claim both for same item?


Dear widyapraja,

You do not mention if you are using FIDIC 4 or FIDIC 99. As they have different treatments for claims, my comments will be generic.

1.  It is unlikely that your claim would be acceptable under FIDIC conditions of contract, but there could be justification under the Civil code in Indonesia.  I have no experience of the Civil Code in Indonesia, so I cannot help you there. If you have an inflation clause, then this clause is expected to cover, in part, any extra costs due to increased prices or fluctuating exchange rates.  
2. You can claim only for actual costs, so you cannot claim twice for the same cost.  Your claim would be for the extra costs, which were not covered by the inflation clause.  

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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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