Construction Law/Force Majeure

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Question
QUESTION: Dear Sir,
According to FIDIC Red Book 1999, Sub Clause 19.2 and 19.3, there is a provision of notification and cessation of Force Majeure by a party to the other party.My quarry is: Let us say, the Contractor gives the notice of Force Majeure to the Employer then who (Contractor or Employer)should cease the Force majeure? Either party can cease or only the party who gives the notice of force majeure should cease? The other quary is about the cost during force majeure period due to earth quake related to Sub Clause19.4b. According to 19.4b,the Contractor does not get any cost  during the force majeure period due to earthquake only gets EOT. Can you elaborate about these costs?
Regards,
Binod

ANSWER: Dear Binod,

The person who gives the original notice should be the one to give the notice of cessation of the Force Majeure, clause 19.3.  However, there are checks and balances if the notice is delayed. The Employer will refuse to reimburse the Cost or grant an EoT if the Contractor does not give the notice in time.  Likewise the Contractor will claim extra expense and EoT if the Employer delays the notice.  

Costs are defined in clause 1.1.4.3.  The Contractor has to justify his claim for Costs, which do not include Profit.  I suggest that any costs due to the earthquake would be covered by the Contractor's All Risks Insurance Policy.  

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

QUESTION: Dear Sir,
According to FIDIC, it seems that the Contractor will not get any payment during force majeure due to earthquake and the cost will be covered by CAR insurance policy. Is it no need to pay the time related cost during the force majeure period due to earthquake by the Employer? Some personnals may involve from the Contractor side as duty of minimize delay in accordance with Sub Clause 19.3.
If the validity of the  CAR insurance policy expires within the Force majeure period and becomes necessary for extension (due to EOT of the project because of force majeure due to earthquake), does the Contractor get the cost of premiums for the force majeure period?
Let us say, the CAR policy was for 30 months.  Earth quake occurred and the Contractor gave notice of Force majeure due to earthquake at the end of 24th month and ceased at the end of 36th month. The Contractor extended the CAR policy for another 12 months because of the delayed due to force majeure. Now, I want to be clear on, the cost of premium required for which duration (12months or 6months) the Employer should pay to the Contractor. Does it include profit or not?

Answer
Dear Binod,

The basis of FIDIC is that risk is allocated to those that can control it.  There are some shared risks, such as inclement weather, where both parties suffer some pain.  Depending on the cause of the event, the Employer can award the Contractor Time, Time with Costs, Time with Costs and Profit.  In the cast of Force Majeure, the Contractor gets Time in all cases.  He gets Costs in line with the excepted risks covered by the Employer (clause 17.3).  For all other risks and associated costs, he must recover his costs through his insurance policies (Clause 18.2).  Thus all costs, including that of extending the policy, should be recovered from the CAR.  Profit cannot be claimed for any claims under clause 19.  

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Peter M. Elliott

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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 www.eotprotocol.com before submitting a question.

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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')

Organizations
Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

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B Sc(Hons) in Civil Engineering

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