Uncertainties are always a part of complex projects. During the execution of contracts, usually the complicated ones, sometimes such situations arise which are beyond the control of any party. Then how to deal with such situations? These circumstances are also called ‘force majeure events’ in some contracts. Under the FIDIC 2017 documents, clause 18, ‘Exceptional Events’ stipulates the provisions to deal with such circumstances. Let us understand provisions under this clause in detail.

Clause 18: Exceptional Events

Sub- clause 18.1: Exceptional Events

This sub clause details the definition of exceptional event. According to this sub clause:

“Exceptional Event” means an event or circumstance which:

(i) is beyond a Party’s control;

(ii) the Party could not reasonably have provided against before entering into the Contract;

(iii) having arisen, such Party could not reasonably have avoided or overcome; and

(iv) is not substantially attributable to the other Party.

An Exceptional Event may comprise but is not limited to any of the following events or circumstances provided that conditions (i) to (iv) above are satisfied:

(a) war, hostilities (whether war be declared or not), invasion, act of foreign enemies;

(b) rebellion, terrorism, revolution, insurrection, military or usurped power, or civil war;

(c) riot, commotion or disorder by persons other than the Contractor’s Personnel and other employees of the Contractor and Subcontractors;

(d) strike or lockout not solely involving the Contractor’s Personnel and other employees of the Contractor and Subcontractors;

(e) encountering munitions of war, explosive materials, ionising radiation or contamination by radio-activity, except as may be attributable to the Contractor’s use of such munitions, explosives, radiation or radio-activity; or

(f) natural catastrophes such as earthquake, tsunami, volcanic activity, hurricane or typhoon.

Sub- clause 18.2: Notice of an Exceptional Event

This sub- clause stipulates that if a Party is prevented from performing any obligations under the contract due to the ‘Exceptional Events’, then the affected party shall give a notice to the other Party regarding this and shall specify the obligation, the performance of which is or will be prevented.

The notice shall be given within 14 days after the affected party became aware of the exceptional event and the affected party shall be excused performance of the prevented obligations.

If the notice is received after 14 days, then the affected party shall be excused performance of such obligation only form the date on which the notice is received by the other party.

The affected Party shall be excused performance of the prevented obligations for so long as such Exceptional Event prevents the affected Party from performing them.

However, the obligations of either Party to make payments due to the other Party under the Contract shall not be excused by an Exceptional Event.

Sub- Clause 18.3: Duty to Minimise Delay

This sub- clause stipulates that each Party shall make all efforts to minimize any delay in the performance of the obligation as a result of exception event and shall give further notices to other party if the Exceptional Event has a continuing effect. If the affected party does not give any notice to the other party, then the other party shall give notice to the affected party that the other party considers that the affected Party’s performance is no longer prevented by the Exceptional Event, with reasons.

Sub- Clause 18.4: Consequences of an Exceptional Event

According to this sub- clause, if the Contractor is the affected Party and suffers delay and incurs cost due to exceptional event of which he/she has given notice as per sub- clause 18.2, the Contractor shall be entitled EOT and/or payment of such cost. This EOT or payment of cost shall be subjected to sub- clause 20.2, ‘Claims For Payment and/or EOT’.

Sub- clause 18.5: Optional Termination

If the execution of substantially all the Works in progress is prevented for a continuous period of 84 days by reason of an Exceptional Event of which Notice has been given under Sub-Clause 18.2 [Notice of an Exceptional Event], or for multiple periods which total more than 140 days due to the same Exceptional Event, then either Party may give to the other Party a Notice of termination of the Contract.

After the date of termination, the Contractor shall, as soon as practicable, submit detailed supporting particulars (as reasonably required by the Engineer) of the value of the work done.

The Engineer shall then proceed under Sub-Clause 3.7 [Agreement or Determination] to agree or determine the value of work done (and, for the purpose of Sub-Clause 3.7.3 [Time limits].

The Engineer shall issue a Payment Certificate, under Sub-Clause 14.6 [Issue of IPC], for the amount so agreed or determined, without the need for the Contractor to submit a Statement.

Sub- clause 18.6: Release from Performance under the Law

As per this sub- clause, it any event arise outside the control of the Parties (including, but not limited to, an Exceptional Event) which:

(a) makes it impossible or unlawful for either Party or both Parties to fulfil their contractual obligations; or

(b) under the law governing the Contract, entitles the Parties to be released from further performance of the Contract,

then the Parties shall be discharged from further performance and the amount payable by the Employer to the Contractor shall be the same as would have been payable under Sub-Clause 18.5 [Optional Termination], and such amount shall be certified by the Engineer, as if the Contract had been terminated under that Sub-Clause.

Conclusion

This provision, which is similar to ‘Force Majeure’ in some contracts, is very useful and protects the rights of parties into the contract in case an event arise which is beyond the control of the Parties. It is not only beneficial for the affected Party but also extremely useful for the other Party, which may find an opportunity to conclude the contract with the help of this clause without any dispute. It is appropriate to say that this clause helps Parties to avoid the conflict and arbitrations etc. and saves time and effort for both the Parties into the contract.

Also read: Termination by Employer under FIDIC Red Book (Conditions of Contract for Construction) 2017

Only the brief provisions regarding sub- clauses are given in the article for the purpose of the basic understanding of the clause. For full provisions under the sub- clauses, FIDIC Red Book (Conditions of Contract for Construction) 2017 may be referred.

References:

1. FIDIC Conditions of Contract for Construction, Second Edition, 2017 (FIDIC Red Book)
2. https://fidic.org/

Disclaimer

1. The description of sub- clauses given in this article is only a part of the whole clause which is relevant to the Exceptional Events. For whole provision under the sub clauses refer to FIDIC Conditions of Contract for Construction, Second Edition, 2017.
2. The content of this article is only for education purpose and it cannot be used as a legal advice. For any legal issue a suitable professional may be consulted.