By Edward Sunna

What You Need To Know and Why?
The private sector in the UAE and more recently the public sector in Abu Dhabi, have adopted FIDIC or at least a hybrid version of FIDIC for government use. This was done in part to reduce the risk of international contracting, but more importantly, to standardise terms of engagement to reduce uncertainty caused by the application and interplay of Federal Laws and the various Laws of the Emirates, in so far as they are applicable to construction contracts.

  Given the importance of the FIDIC contracts, it is surprising there has been little commentary in the local media on the FIDIC 1999 Red Book form of building contract. We hope in part two of this two part series to redress this situation by providing a practical overview of some key provisions of the 1999 Red Book, following on from part 1 of this series that dealt with the rise of FIDIC and its recent adoption in Abu Dhabi.

The concept of General Risks
The concept of forseeability as a contractual term is now definedin the 1999 Red Book Contract. Subject to an express term to the contrary, risks that are fore see able are borne by the Contractor and in contrast those that are not foreseeable are borne by the Employer. When negotiating from either a Contractor or an Employers’ perspective particular care should be taken to not extend or exclude risks of this kind. General risk provisions should be read in conjunction with any relevant insurance policy to confirm their applicability to those risks to avoid situations whereby you have agreed to an extended liability which is excluded from your insurance cover, and hence leaves a gap in your contractual protection.

Employer’s Finances
An Employer is obliged to provide information (on request) to the Contractor that it is able to meet its payment obligations and to inform the Contractor of any changes in its financialcircumstances.

 

Failure to meet its obligations will entitle the Contractor to either suspend the works or reduce the rate of work. The Employer should be prepared to provide such information on request and accordingly ensure that it is readily available before entering the contract to prevent any claim for delay by the Contractor. As this article only covers the 1999 Red Book, the right or lack thereof to suspend under UAE law, is not discussed.

Payment
The Employer now has 56 days (as opposed to 28 days) to settle payments due to the Contractor following receipt by the project Engineer of any interim invoice for payment submitted by the Contractor. The fact that the Employer now has 56 days to make payment makes the provision in respect of the Employer’s financialposition(theparagraphabove)more significantgiventheContractorworks an additional 28 days without payment of an interim invoice being due.

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