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What Is FIDIC?

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The purpose of implied terms is often to supplement a contractual agreement in the interest of making the deal effective for the purpose of business, to achieve fairness between the parties or to relieve hardship

Terms may be implied into contract through statutes or by the courts. When implied by statute, Parliament may well make certain terms compulsory, example: Sales of Goods Act 1979. When terms are implied by courts, the general rule is that they can be excluded by express provision in any agreement. The courts have developed an apparent distinction between terms implied “in fact” and those implied “in law”. Terms implied “in fact” are said to arise when they are “strictly necessary” to give effect to the “reasonable expectations of the parties”. Terms implied “in law” are confined to particular categories of contract, particularly employment contracts or contracts between landlords and tenants, as necessary incidents of the relationship.

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FIDIC have explained that the underlying philosophy and core aim behind the update is to achieve increased clarity, transparency and certainty which should lead to fewer disputes and more successful projects. In the introductory Notes to the Second Edition of the Rainbow Suite, FIDIC state that the new contracts continue “FIDIC’s fundamental principles of balanced risk sharing while seeking to build on the substantial experience gained from its use over the past 18 years”. Unsurprisingly, the update also reflects current international best practice

This is no doubt why a key theme of the Second Edition is the increased emphasis on dispute avoidance. One way that FIDIC have chosen to address this is to make many of the contract provisions more prescriptive, setting out step-by-step what is expected from the Employer, Contractor and Engineer. This helps to explain why (again) in the introductory Notes to the Second Edition of the Rainbow Suite, FIDIC go on to explain that the contracts also provide “greater detail and clarity on the requirements for notices and other communications”. If everyone understands precisely what is expected of them, then the theory goes that this lessens the potential scope of and possibility for disputes. The changes to how the updated Rainbow Suite deals with time, primarily to be found within clause 8, provide a good example of how FIDIC have set about trying to achieve this. One of the key project management tools, whatever your contract, is the contract programme and the most obvious change to FIDIC’s approach to time within clause 8 can be found in the development or significant expansion of the programme requirements. The 1999 edition of the Rainbow Suite required that the Contractor submit a “detailed programme”. However, it left the Contractor to decide how to achieve this, assuming that the Employer did not set out in the Employer’s Requirements what the Contractor was to do. Now the Second Edition of the FIDIC form, following the approach of the 2011 Red Book subcontract, not only mandates the software to be used but also sets out that the contract programme must include all (logically linked) activities, and set out the sequence and timing of inspections and tests. In addition, all key dates must be identified, and all activities are to be logically linked, also identifying float, rest days and holidays as well as the delivery of materials. A supporting method statement is also required.

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Construction projects are characterized by a high level of risk and uncertainty, due to their complexity. Risk management is an important tool in making decisions involving the identification and reduction, avoidance or transfer risk and uncertainties consequences of events that occurs during project implementation. For this reason, the objective of the contract between the beneficiary and the contractor is the allocation of risk. The distribution of risk in contracts for the execution of construction works was and is an ongoing challenge faced by the contracting parties having a significant impact on the type of contract that will be used. On the one hand, the beneficiaries tend to transfer to the contractors as many of the project risks and uncertainties, on the other hand, contractors look to exploit any weakness contract, so as to reduce their impact on the expected profit. Projects risks can be classified on the basis of two factors: natural risks and hazards due to human factor. Natural risks may be due to exceptional adverse weather conditions, unpredictable forces of nature and unforeseeable physical conditions. Risks due to human factor causes are determined, above all, the main actors involved in the contract (employer, contractor, engineer or third parties), the social or political events, economic dynamics and regulatory changes (Sararu, C.-S., 2014). The authors analyze risks and contractual clauses 8:14 influence of FIDIC contract conditions on the financial relationship between the beneficiary and entrepreneur focusing on the effects of special conditions have on the financial management of the contractor. Continuing a series of previous work, the authors propose a practical approach to quantify risk by defining a model for analyzing the impact FIDIC contract conditions, which is applied in a case study of five transport infrastructure projects. The adoption of FIDIC contract conditions in infrastructure projects is widely accepted around the world, being recommended or required in international agreements mainly by the financing banks (Purnus, A., Bodea, C. N., 2016)

These conditions were tested more than 50 years, they are flexible, reflect the market requirements and distribute balanced the risks, rights and obligations of the parties by the terms contained therein.

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To summarize, all modern standard form contracts provide for extending the date of completion under certain defined circumstances but few contracts, if any, adequately address the questions of how the extension of time is to be determined and how to value compensation arising there from, and are entirely silent on the issue of disruption. Indeed, as far as disruption is concerned, very often reliance has to be placed on the breach of a tacit term of the contract that the employer will not do anything which interferes with, or frustrates, the contractor’s performance of its work

Significantly, the basis on which the term is implied is obscure and lends itself to considerable dispute.

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Purnus, A., Bodea, C. N. (2016). Influența condițiilor de contract FIDIC asupra managementului financiar al proiectelor de construcții, „Revista Română de Inginerie Civilă”, Vol. 7 (2016), No. 1.

Sararu, C.-S. (2014). The interpretation of administrative contracts, „Juridical Tribune – Tribuna Juridica”, Volume 4, Issue 1, June 2014, pp. 152-156.

FIDIC, 1999, Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant and for Buildings and Engineering Works Designed by the Contractor, International Federation of Consulting Engineers (FIDIC), First Edition, 1999, (Romanian version)

Georgescu D. (2011), Considerations concerning the applying of FIDIC contracts in Romania,„Bulletin of the Polytechnic Institute of Iasi - Construction & Architecture”, 61(2): 29-40.

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