Introduction:
Force Majeure is a serious concept in international construction contracts, especially in contracts governed by the International Federation of Consulting Engineers (FIDIC). Understanding the use of force majeure clauses in FIDIC contracts is important for both contractors and employers as it helps them to know about unforeseen situations that may delay the performance of their contractual obligations. In this article, we would provide an insight about the definition, purpose, and implications of force majeure under FIDIC contracts, with a focus on its legal implication, use, and the practical aspects of the parties involved.
- Understanding Force Majeure
Force majeure refers to unexpected events or circumstances that are beyond the control of the parties involved in a contract, which delay the fulfillment of contractual obligations. Such events typically include natural disasters such as earthquakes, floods, cyclones, hurricanes, war, terrorism, strikes, or Government interventions. These events must be unforeseeable, unavoidable, and out of the control of any parties. This also severely affects the performance of the contract.
In a construction project, force majeure events are particularly important because they can cause significant delays, potentially affecting the project’s timeline, budget, and overall projects completion. Force majeure clauses are designed to protect both parties by providing a legal basis for adjusting the contract during occurrence of such events.
- Force Majeure in FIDIC Contracts: An Overview
FIDIC, or the International Federation of Consulting Engineers, is a global organization that provides standard contract templates for the construction industry. These contracts are widely used in international construction projects and are designed to balance the interests of both the employer and the contractor. The FIDIC contract conditions, particularly the Red Book, Yellow Book, and Silver Book, contain provisions related to force majeure.
In FIDIC contracts, force majeure clauses are typically found in the general conditions of contract (GCC). They are used to provide relief to a party from its contractual obligations when an event occurs that is beyond its control, provided that the party cannot avoid or alleviate the event’s effects. Force majeure provisions provide for a reasonable change in the contract for the occurrence of unforeseeable disruptions.
- Key Elements of Force Majeure under FIDIC
The force majeure clause in FIDIC contracts generally includes several key elements:
- Definition of Force Majeure Events: The clause typically provides a list of events that may be considered force majeure, including natural disasters, war, civil disturbances, labour strikes, and Government actions. The specific events can vary depending on the type of the FIDIC contract being used.
- Un foreseeability: For an event to be suitable as force majeure, it must be unforeseeable at the time the contract being signed. This means that the event could not have been reasonably expected by either party to occur at the beginning of the contract.
- Impossibility of Performance: The event must make the performance of the contract either impossible or difficult to complete. The contractor must prove that the event prevents the fulfillment of contractual obligations, such as completing the construction within the agreed timeframe or under the agreed conditions.
- Notification Requirements: FIDIC contracts require the party affected by a force majeure event to notify the other party as soon as possible. This notification should include details of the event and its impact on the performance of the contract.
- Mitigation: While the event may exclude a party from fulfilling its obligations, the affected party must take reasonable steps to reduce the impact of the event. This includes efforts to avoid delays and reduce additional costs.
- Extension of Time: One of the most common consequences of force majeure in FIDIC contracts is the extension of time. If a force majeure event occurs, the contractor may be entitled to an extension of the completion date. However, the contractor is not automatically entitled to additional payments unless the contract expressly contains such conditions.
- Force Majeure Clauses in Different FIDIC Contract Types
FIDIC contracts are classified into several types, with the Red Book, Yellow Book, and Silver Book being the most used in construction projects. Each of these contracts has specific provisions related to force majeure, though they share certain similarities.
4.1 The Red Book (Conditions of Contract for Construction)
The FIDIC Red Book is the most widely used contract for traditional construction projects. In this contract, the employer is typically responsible for providing the design, while the contractor executes the work. Force majeure clause is discussed in Clause 19 of the Red Book, which provides that the contractor may be entitled to an extension of time if the completion of the work is delayed due to force majeure events. However, force majeure does not automatically result in compensation for additional costs unless it is specified beforehand in the contract.
4.2 The Yellow Book (Conditions of Contract for Plant and Design-Build)
The FIDIC Yellow Book is used for projects where the contractor is responsible for both design and construction. Force majeure provisions in the Yellow Book (Clause 19) are like those in the Red Book, however, they may involve a more integrated approach to risk sharing between the employer and the contractor, as the contractor also undertakes the responsibility for design.
4.3 The Silver Book (Conditions of Contract)
The FIDIC Silver Book is typically used for Engineering, Procurement, and Construction (EPC), where the contractor assumes full responsibility for both the design and construction of the project. The force majeure clause in the Silver Book is more rigid, often making it more difficult for the contractor to claim relief for the force majeure events. This reflects the higher level of risk sustained by the contractor. However, if the contractor is impacted by an event beyond their control, they may still be entitled to an extension of time or other forms of relief.
- Practical Considerations in Applying Force Majeure Clauses
In practice, force majeure clauses in FIDIC contracts can raise a range of issues that require careful concern by both parties. Some of the most important practical considerations include:
5.1 Notification Requirements
The affected party must notify the other party on time and in accordance with the requirements outlined in the contract. Failure to provide timely notice may result in the loss of rights to get compensation. This highlights the importance of having an effective communication plan and ensuring that the notice is detailed, clear, and sustained by relevant evidence.
5.2 Proof of Force Majeure
To successfully claim force majeure under a FIDIC contract, the affected party must provide sufficient evidence that the event is beyond their control, and it has a direct impact on their ability to perform the contract. This may include evidence such as official declarations of a natural disaster, government notices, or other relevant documentation. Failure to provide adequate proof can lead to disputes and the rejection of the claim.
5.3 Mitigation Efforts
While force majeure may provide a justification for non-performance of contract, the affected party is generally required to take all the required steps to alleviate the impact of the event. This could involve rescheduling activities, finding alternative resources, or taking other measures to reduce the delay or additional costs. If the party fails to mitigate, it may lose the right to an extension of time or other relief available.
5.4 Dispute Resolution
Disputes arising from force majeure claims are not uncommon in construction projects. FIDIC contracts typically include provisions for dispute resolution, including adjudication, arbitration, or other alternative dispute resolution mechanisms. Contractors and employers should be prepared for the possibility of such disputes and ensure that they follow the dispute resolution procedures specified in the contract.
5.5 Impact on Cost and Payment
In most cases, a force majeure event will not automatically result in the payment of additional compensation to the contractor. However, if the contract allows for such payments (for example, under a specific clause), the contractor may be entitled to claim for additional costs incurred due to the event. This can include costs for extending the project timeline or justifying the effects of the event.
Conclusion
Force majeure is a critical aspect of FIDIC contracts, providing a method for addressing unforeseen events that disrupt the performance of a contract. The clauses protect both the parties, i.e., contractor and employer, ensuring that neither party is held responsible for delays or non-performance caused by events beyond their control. However, the application of force majeure clauses is complex, and the parties have to carefully go through the contract’s terms and conditions for notification, evidence, and mitigation. By having a better knowledge of force majeure through the FIDIC contracts, both contractors and employers can use it to challenge the conditions posed by the unforeseen events, reduce the risk of disputes, and ensure the successful completion of their projects and also get extension of time as a relief for the delay in their projects which have been caused due to unforeseeable events , the force majeure events basically makes the performance of the contracts impossible due to physical impossibility or the contract in which the parties have entered that contract has failed.
