A brief introduction to FIDIC contracts

The NBS Contracts and Law Survey indicates that one of the areas that participants found difficult in international projects was the use of unfamiliar contract forms. This article by Koko Udom, former Head of Contacts and Law at NBS, briefly introduces the FIDIC contracts which are reputed as the leading contracts in international engineering and construction projects.

FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries.

Over the years, FIDIC has become famous for its secondary activity of producing standard form contracts for the construction and engineering industry.

FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book.

It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover.

This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC’s concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.

FIDIC contract forms

Over the years FIDIC has consistently improved on its contracts. The organisation has added new forms of contract, replaced previous ones and updated important terms. The table below gives a brief overview of FIDIC contracts to date:

Other contracts in the FIDIC family include the FIDIC sub-contract, The Blue Book, which is concerned with dredging and reclamation works, and The White Book, which is for the engagement of consultants by Employers.

General features of FIDIC contracts

Although the FIDIC family covers a wide range of contracts, there are some common features:

Presentation

FIDIC is usually divided in two parts: Part I consisting of the general conditions and Part II concerning the conditions of particular application (including guidelines for the preparation of Part II clauses). Part I contains the general terms of the contract, such issues as rights and obligations of each party, procedure for payment, variation, certification and dispute resolution.

Part II of the contract is the conditions of particular application and is to be used to introduce project specific clauses, such as language of the contract, choice of law, the name of the person or firm appointed to act as Engineer or Employers representative for the project among other terms. The Appendix usually contains sample of documents to be used for the procurement process.

In most FIDIC forms there is a default hierarchy for the documents forming the contract. The order of priority is as stated below and in the event of inconsistency the first on the list takes precedence:

1. The Contract Agreement
2. The Letter of Acceptance (this is the formal acceptance of the contractor's tender and marks the formation of the contract)
3. The Letter of Tender
4. Part II – the conditions of particular application
5. Part I – general conditions of contract
6. The Specification and Drawings (Red Book), The Employer’s Requirements (Yellow Book), the Schedules (Red and Yellow Books)
7. Further documents (if any), listed in the Contract Agreement or in the Letter of Acceptance.

The parties are allowed to rearrange the priority of documents or stipulate that no priority or order of hierarchy will apply to the contract. This can be done in Part II of the contract.

Dispute resolution

FIDIC contracts adopt a multi-tier dispute resolution process. The emphasis in recent years has been on the amicable settlement of disputes. The process usually provides as a first step, for disputes to be submitted for adjudication before an Engineer or a Dispute Board. If one (or both) of the parties is dissatisfied, a period is allowed for amicable settlement. If the parties are not able to settle the dispute during the ‘amicable settlement’ period, the final stage is to proceed to arbitration. FIDIC contracts provide as a default position that the arbitration rules of the International Chambers of Commerce should apply in the arbitration of disputes arising from the contract.

Bias for English law

The first sets of FIDIC contracts were based on English law principles. This bias was so strong, that in commenting on the FIDIC Red Book, first edition, Ian Duncan Wallace QC put it lightly thus:

Since 1957, future FIDIC contracts have successfully incorporated the principles of other legal systems especially the civil law system. However, the basic framework of English law principles has survived. For instance, provisions relating to liquidated damages have been maintained.
 

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