Construction Law/Contract Agreement (Ammendment)
In one of our Contract which is based on FIDIC MDB 2010 Conditions of Contract, a Variation(amendment) to the Contract Agreement was signed between the Parties during the currency of the Contract wherein simply the Accepted Contract Amount was amended(reduced) without stating any reasons or repercussions of the this Variation. We, being the Engineer, have used this revised Accepted Contract Amount in order to deduct Advance Payment from Contractor’s Payment Invoices. But the Contractor did not agree with the Engineer’s stance by stating that Accepted Contract Amount means the amount accepted in the letter of Acceptance as per Contract. But the Engineer’s is of the view that Variation (amendment) of Contract Agreement has priority over all Contract Documents, therefore this revised Accepted Contract Amount will prevail as per amendment.
Please advise in this regard.
Dear Umer Shabbir,
Thank you for this question.
There is only one definition 0f the Accepted Contract Amount; it is defined at sub-clause 188.8.131.52 of the FIDIC MDB 2010 contract by reference to the Letter of Acceptance. As such the Contractor's position is correct.
If the repayment mechanism for the Advance Payment was linked to the Accepted Contract Amount (as is the case with the standard FIDIC term) then the Contractor can expect that the adjustment follows that mechanism EVEN IF the Contract Price is reduced below the Accepted Contract Amount by Variation.
A further worrying aspect of your narrative is the comment that the Contract Price was reduced "without stating any reason". That is a recipe for disaster!
I hope that this assists you.
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