Quantum meruit and its scope

Quantum meruit and its scope

The basic principle under English law for claims under quantum meruit is that the employer will have a duty to pay the fair value of or, reasonable remuneration for, the work performed. ADAM WEBSTER* compares the provision with the UAE Civil Code.

Quantum meruit entitlements arise most commonly in construction cases where there is no contract but work is undertaken in circumstances where it is clearly not being done for free.

In Latin, the phrase means “what the job is worth” and in essence, it allows a person to recover the value of work done or services performed in circumstances where he has conferred a benefit on someone else which justice requires should be repaid.

A typical quantum meruit claim might arise where work starts whilst the parties are negotiating contract terms but ultimately the parties have not agreed on the applicable rate that is to be paid to the contractor or fail to agree any contract at all.

Alternatively, where the work that has been carried out by a contractor with the employer’s consent or upon his instruction is so different from the scope of work envisaged in the original contract that a new contract has effectively been formed, the contractor may be entitled to claim a quantum meruit for the additional work done.

The law will not deny the contractor an entitlement to payment, and the basic principle in English law is that the employer will have a duty to pay the fair value of or, reasonable remuneration for, the work performed. Issues will inevitably arise, however, as to the appropriate basis for valuation.

It is often thought that quantum meruit valuations are highly advantageous to contractors and that invariably they will open the door to “cost plus” entitlement, that is the net cost of labour and materials used plus a sum for overheads and profit. In truth, there is a great deal of case law on quantum meruit with a range of different approaches having been taken. As HHJ Hicks held in Serck Controls v Drake & Scull Engineering Limited (2000) 73 ConLR 100:

“A quantum meruit claim may …arise… across a spectrum which ranges at one end from an express contract to do work at an unquantified price, which expressly or by implication must be a reasonable one, to work (at the other extreme) done by an uninvited intruder which nevertheless confers on the recipient a benefit which, for some reason, such as estoppel or acquiescence, it is unjust for him to retain without making some restitution to the provider … At the first end of the spectrum … the measure should clearly be the reasonable remuneration of the claimant; at the other, it should be the value to the defendant. In between there is a borderline, the position of which may be debateable.”

Clearly, this is an area of the law where judges in English courts have some discretion and results are by no means predictable. Indeed, the recent case of ERDC Group Limited v Brunel University (2006) 109 ConLR 114 usefully highlights the inherent uncertainties and risks which abound when contractors are entitled to be paid on a quantum meruit basis.

In short, ERDC successfully tendered for the design and construction of a new sports facility at Brunel University’s Uxbridge campus, but a delay in obtaining planning permission meant that Brunel had to instruct ERDC to commence work under a letter of intent.

This letter of intent was relatively lengthy and detailed and Brunel agreed to pay for any work that was done on the basis of certain valuation rules (which were to apply to the contract when signed). The letter authorised work to proceed for a stipulated period of time within which a formal contract was to be executed. Three more letters were to follow, each one extending further this deadline. During this period, ERDC had applied for payment on the basis of its tender rates and prices and applying JCT principles. After the expiry of the last letter of intent, no formal contract was in place, but ERDC continued to work.

In this case, the judge was satisfied that all the usual requirements for a contract were present until the expiry of the last letter (that is September 1, 2002) and so, as there had been a contract until then, ERDC was entitled to be paid in accordance with rates and prices determined under the valuation rules that had been incorporated into that contract.

From September 1, 2002 onwards, however, the contract was found not to apply, and so ERDC was entitled to be paid reasonable remuneration for the benefit that the university had received.

In assessing what would be a fair and reasonable sum, the judge agreed with a comment made by Brunel’s quantum expert that “a price or rate that was reasonable before September 1, in my opinion, does not become unreasonable after September 1 simply because the authority in the letter of appointment expires”.

The fact that ERDC’s tender was shown to have been commercial and close to others supported the conclusion that continuing to use ERDC’s rates and prices, in many instances, were fair. For certain other items, however, where works had been prolonged beyond the period contemplated by the rates and additional costs had been incurred by ERDC as a result, or if it were appropriate to do so under the valuation rules, the Judge held that “cost plus” should be the appropriate valuation method.

As this case illustrates, under English law the position is far from being clear cut and cost plus entitlement should certainly not be assumed as a given by the contractor. By comparison, therefore, the question presents itself whether the UAE law contains, within its codified civil system, any provisions that address the notion of quantum meruit in a more straightforward manner.

Article 888 of the UAE Civil Code (“the Code”) applies where the parties have not agreed remuneration and the issue of a contractor’s entitlement to a reasonable remuneration arises. In this regard, Article 888 provides that, if the consideration for the work is not specified in a contract, the contractor is entitled to ‘fair compensation’, together with the value of the labour and materials he has provided (that is a cost plus approach).

Article 887 of the Code provides that a contractor may not demand any increase over a contractually agreed lump sum. Although the contractor assumes the risk in such a case for any cost overrun in carrying out the agreed lump sum works, it should not necessarily preclude a contractor from claiming payment on a cost plus basis for authorised works which fall outside the original scope of lump sum works.

However, Article 887 then goes on to provide that if any variation or addition is made to the scope of works with the consent of the employer, the existing agreement with the contractor must continue to be observed.

Under UAE law, therefore, an entitlement to an increase price for lump sum contracts is generally denied, subject only to variations or additions, the pricing of which should be assessed in the context of the overall work carried out. In the event that the employer instructs work that is out of scope and there are no applicable rates and prices under the contract, the contractor would be entitled to claim compensation by way of Article 888 and claim ‘fair compensation’, presumably on a cost plus basis.

By: OQSC Journal On 8:17 PM

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Assignment and novation

Assignment

Assignment involves the transfer of an interest or benefit from one person to another. However the 'burden', or obligations, under a contract cannot be transferred.
Assignment in construction contracts
As noted above only the benefits of a contract can be assigned - not the burden. In the context of a building contract:

• the employer may assign its right to have the works constructed, and its right to sue the contractor in the event that the works are defective – but not its obligation to pay for the works;
• the contractor may assign its right to payment of the contract sum - but not its obligation to construct the works in accordance with the building contract or its obligation to meet any valid claims, for example for defects.

After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings against the other contracting party to enforce its rights. The assignor still owes obligations to the other contracting party, and will remain liable to perform any part of the contract that still has to be fulfilled since the burden cannot be assigned. In practice, what usually happens is that the assignee takes over the performance of the contract with effect from assignment and the assignor will generally ask to be indemnified against any breach or failure to perform by the assignee.  The assignor will remain liable for any past liabilities incurred before the assignment.
In construction contracts, the issue of assignment often arises in looking at whether collateral warranties granted to parties outside of the main construction contract can be assigned.
Funders may require the developer to assign contractual rights against the contractor and the design team as security to the funder, as well as the benefit of performance bonds and parent company guarantees. The developer may assign such rights to the purchaser either during or after completion of the construction phase.
Contractual assignment provisions
Many contracts exclude or qualify the right to assignment, and the courts have confirmed that a clause which provides that a party to a contract may not assign the benefit of that contract without the consent of the other party is legally effective and will extend to all rights and benefits arising under the contract, including the right to any remedies. Other common qualifications on the right to assign include:

• a restriction on assignment without the consent of the other party, whether or not such consent is not to be unreasonably withheld or delayed;
• only one of the parties may assign;
• only certain rights may be assigned – for example, warranties and indemnities may be excluded;
• a limit on the number of assignments - as is almost always the case in respect of collateral warranties;
• a right to assign only to a named assignee or class of assignee.

Note that in some agreements where there is a prohibition on assignment, it is sometimes possible to find the reservation of specific rights to create a trust or establish security over the subject matter of the agreement instead.
Legal and equitable assignment
The Law of Property Act creates the ability to legally assign a debt or any other chose in action where the debtor, trustee or other relevant person is notified in writing. If the assignment complied with the formalities in the Act it is a legal assignment, otherwise it will be an equitable assignment.
Some transfers can only take effect as an equitable assignment, for example:

• an oral assignment;
• an assignment by way of charge;
• an assignment of only part of the chosen in action;
• an assignment of which notice has not been given to the debtor;
• an agreement to assign.

If the assignment is equitable rather than legal, the assignor cannot enforce the assigned property in its own name and to do so must join the assignee in any action. This is designed to protect the debtor from later proceedings brought by the assignor or another assignee from enforcing the action without notice of the earlier assignment.
Security assignments
Using assignment as a way of taking security requires special care, as follows:

• if the assignment is by way of charge, the assignor retains the right to sue for any loss it suffers caused by a breach of the other contract party;
• if there is an outright assignment coupled with an entitlement to a re-assignment back once the secured obligation has been performed, it is an assignment by way of legal mortgage.

Please see our separate Out-Law guide for more information on types of security.
Restrictions on assignment
There are restrictions on the assignment of certain types of interest on public policy grounds, as follows:

• certain personal contracts – for example, a contract for the employment of a personal servant or for the benefit of a motor insurance policy cannot be assigned;
• a bare cause of action or 'right to sue' where the assignee has no commercial interest in the subject matter of the underlying transaction cannot be assigned;
• certain rights conferred by statute – for example, a liquidator's powers to bring wrongful trading proceedings against a director – cannot be assigned;
• an assignment of a contract may not necessarily transfer the benefit of an arbitration agreement contained in the contract;
• the assignment of certain rights is regulated – for example, the assignment of company shares or copyright.

Novation
If you want to transfer the burden of a contract as well as the benefits under it, you have to novate. Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well.
In a novation the original contract is extinguished and is replaced by a new one in which a third party takes up rights and obligations which duplicate those of one of the original parties to the contract. Novation does not cancel past rights and obligations under the original contract, although the parties can agree to novate these as well.
Novation is only possible with the consent of the original contracting parties as well as the new party. Consideration (the 'price' paid, whether financial or otherwise, by the new party in return for the contract being novated to it) must be provided for this new contract unless the novation is documented in a deed signed by all three parties.
(Source - www.out-law.com) 

By: OQSC Journal On 9:11 PM

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Online CPD Certificates - Session 02

Dear Members, 

As part of continuing support and knowledge sharing within  the Sri Lankan Quantity Surveyors, we are proud to announce the launch of on line CPD certificates to attendees of Our Qs Class. By issuing CPD certificate we are completing the cycle of our CPD sessions. Now we are in a comprehensive process towards enhancing knowledge of our quantity surveyors. 

Second Session of certificates are now available here to view and download.

( After opening the Certificate you can download by File>Download in the menu opened in online)

You can search for your certificate.

If you really need you can take a print ! 

This approach is just to make sure we are in line with green concepts as a global social responsibility. 

Enjoy your studies and we wish you all the best ! 

 OQSC 

By: OQSC Journal On 8:30 PM

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Insurance in construction contracts: a few things to know

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There are many risks in any construction project. The majority of these risks are usually assumed (and priced) by the contractor during the construction phase, who typically covers this exposure by taking out various insurance policies.

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Insurance in construction contracts can be complicated and the purpose of this article is to provide an overview of some key issues to be aware of in this intricate area.
Types of Insurance
The most common forms of insurance under a construction contract in the Middle East, include:

• All risks insurance – This insures against physical damage to the works (and usually materials on site). All risks insurance typically covers the full reinstatement value of the works plus a mark up for any ancillary costs (such as consultancy and professional fees) that are incurred.

As contractors generally have “global” all risks insurance policies that cover all its projects, it is generally more cost effective for contractors to maintain this insurance. Once taken over, the risk in the works passes to the employer, who needs to ensure that the works are adequately insured.
Although defects are usually excluded from all risks insurance policies, wording can be purchased that provides cover for damage that a defect causes to other parts of the works. For this insurance to be meaningful, the different components of the works must be carefully and clearly delineated. This insurance is only generally available if the works are being undertaken in accordance with well established (rather than evolving) construction techniques.

• Professional indemnity insurance – This insures contractors with design responsibility (i.e. under design and build contracts) against liability arising out of professional negligence and will respond if, for example, designs do not comply with the requirements of the underlying construction contract (although it is not uncommon for professional indemnity insurance to exclude cover for “fitness for purpose” warranties).

Professional indemnity insurance is made on “a claims made basis” (rather than when the breach of professional duty actually occurs). This means that professional indemnity insurance is generally required to remain in place until any limitation period ends (which, in the UAE, is 10 years). The amount of professional indemnity insurance cover the contractor is required to have in place is generally determined on a case by case basis, depending on the extent and the complexity of the design works in question.
Professional indemnity insurance is also the most important insurance policy that design consultants (such as architects and engineers) are required to have in place.

• Public liability insurance – This provides cover for liability arising out of death or personal injury to third parties (but not the contractor’s employees, who should be covered by worker’s compensation insurance) or damage to property belonging to third parties (but not the works, which is covered by the all risks insurance) prior to the works being taken over.
• Workers’ compensation insurance - This insures the contractor against liability for the death or personal injury to its employees (usually on site) when performing the works.

If an employee of a contractor causes the death of a third party, the Sharia law applied in many Middle Eastern countries allow diyah or “blood money” to be claimed by the victim’s heirs from the individual who caused the fatality. The level of compensation in the UAE, for example, is currently set at AED 200,000 per make. Contractors sometimes purchase additional insurance against this liability.

• Decennial liability insurance – Under Articles 880 to 883 of the UAE Civil Code the contractor (and supervising architect) are jointly liable to the employer for a period of 10 years (from the date the works are taken over) for any defect that threatens the safety or stability of the building or if the building suffers a total or partial collapse. Decennial liability cannot be contractually excluded and contractors often take out insurance against this liability. Similar decennial liability regimes apply in most other Middle Eastern jurisdictions.
• Delay in start-up insurance (DSU) - Unless the contractor is entitled to relief under the contract, contractors are customarily required to pay liquidated damages to the employer if the works are not taken over by the date for completion or, depending on the nature of the works, fail to satisfy specified output criteria.

However, liquidated damages are customarily capped at 10% of the contract price. Caps of this nature may mean that the employer is not fully compensated for any loss suffered and even though caps on delay damages can sometimes be set aside (and damages reassessed so that they correspond with the actual loss suffered), this can be a slow, uncertain and expensive process.
For this reason, employers sometimes (especially if the works are project financed) take out DSU insurance which provides compensation for losses (including loss of revenue and other consequential losses) arising out of late completion as well as other forms of delay (such as force majeure).
Key provisions
Apart from the basic requirement to take out and maintain insurance policies, other important ancillary issues regarding insurance include:

• Joint names - Certain insurance policies (especially public liability insurance) are generally taken out in the joint names of the employer and the contractor (as well as a funder) so that, for instance, the employer is insured against any liability (vicariously) incurred by reason of a breach by the contractor. As a matter of good order, co-insured parties should obtain copies of the policy that they are insured under so they know exactly what they are covered for.

Generally speaking, a party named under an insurance policy can make claims under that policy and it is also common for insurers to be required to waive their rights of subrogation against co-insured parties. This means that the insurer agrees not to seek to recover against a co-insured party (i.e. the employer) even if the insurer paid out on account of the actions of the employer.
It is important that, if two or more parties are insured under the same policy, the policy provides that no act or omission of a co-insured party (i.e. misrepresentation, non disclosure or failure to notify) will vitiate the policy or otherwise prejudice the cover of the other co-insured (and non-breaching) parties under the policy.

• Cross liability – It is usual for contracts that are in joint names to contain a cross liability clause. A cross liability clause essentially means that each party is insured in its own right as if a separate policy had been issued and, as such, the policy will respond to liability incurred by one co-insured party to another co-insured party.
• Interest noted on a policy - It is important to distinguish between insurance being taken out in joint names and a party’s interest being simply noted on a policy. Although a party whose name is noted on a policy has the right to share in insurance proceeds, party does not have any direct right to claim under the policy. Furthermore the insurer generally will not waive its rights of subrogation against a party whose interest is noted on the policy.

Per occurrence or in the aggregate - It is important to check if insurance cover is provided on a per occurrence or on an aggregate basis. For the employer, cover on a per occurrence basis is obviously advantageous as, if insurance is provided on an aggregate basis, a previous claim could severely impact on (and even completely exhaust) the amount of available insurance. This point is made all the more relevant if the insurance is not project specific, as a claim from one project could mean that no cover is available for any other projects.

• Deductibles - Employers should carefully assess the level of the deductible under an insurance policy to ensure that the deductible is reasonable and not prohibitively high. Excessive deductibles could lead to a risk being effectively uninsured.
• Exclusions – Insurance policies are normally subject to exclusions that may restrict the amount of available cover (i.e. some insurance policies exclude cover for guarantees and liability for delay damages while “fitness for purpose” warranties are also a relatively common exclusion). It is therefore important for employers and contractors to review the extent of cover to assess the suitability of a policy in light of the risks that are likely to occur under the contract.
• Lender’s interests – As part of their security package, a lender may require an assignment of the borrower’s rights under insurance policies and may also wish to be named as the loss payee of the insurance proceeds.

Additionally, lenders may prefer to use insurance proceeds to pay off the loan instead of reinstating the project if the project is destroyed or badly damaged. If lenders require this ability, care needs to be taken to ensure that this right is accommodated by the underlying insurance policy.

• Identity of insurers – Employers usually impose minimum requirements regarding the creditworthiness of insurers to reduce the risk of insurers defaulting on their payment obligations.
• Caps on liability - It is a common misconception in the construction industry that a contractor’s liability for a particular risk (especially for breach of professional duty or negligence) is implicitly capped at the amount of insurance that the contractor is required to have for that risk.

This is not the case. If, for example, the contractor is required to have professional indemnity insurance of USD 5 million per claim, the contractor’s liability, for say a defective design, is not automatically capped at USD 5 million per claim and the employer may seek to recover from the contractor’s assets (or any additional insurance policy that the contractor has in place) for any loss incurred that exceeds USD 5 million.
Express wording is required for a contractor’s liability to be limited and, even then, local laws (such as the UAE Civil Code (i.e. Article 390(2)) can be invoked upon to reassess and adjust pre-agreed caps on liability so that the injured party can only recover damages to compensate it for the actual loss sustained arising out of the breach.
Final note
The drafting of insurance clauses usually requires a contractors to “warrant” (or, in other words, guarantee) that it has satisfied all the requirements imposed by the construction contract. As such, these requirements cannot be taken lightly and may result in an inadvertent (and serious) breach of contract if they are not adhered to. It is therefore important that, prior to executing a contract, each party:

• ensures that it understands the extent of its insurance obligations;
• makes sure that the insurance requirements are reviewed by its legal advisor to ensure that they are consistent with the underlying obligations under the contract and confirm with market norms;
• confirms with its insurance advisor that the insurance requirements under the contract can be accommodated by the relevant insurance policies (and also determines any cost implications); and
• checks that any necessary amendments are made to the relevant insurance policies to ensure that the contractually agreed insurance requirements are adequately reflected
  
  

By: OQSC Journal On 12:05 AM

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Methods of Measurements - Lesson 04

How to measure excavation as per CESMM3 Excavation is measured by volume and the quantities are given in the Bill of Quantities in m3. Description features for excavation and a summary of the CESMM notes are given in Table 1. Excavation is measured the net size of the excavated void with no allowance for working space. The volume being that before the material is excavated. Excavation items do not include filling and compaction. Where the operations include filling and compaction with material excavated on the site, there must be two items one for excavation and one for filling and compaction. Some cases there will be a third item of double handling where double handling of the excavated material is expressly required. The item descriptions for excavation state what happen to the excavated material when it is excavated whether the material is "for re-use" or "for disposal" (meaning disposal off site or disposal on site), the location of the disposal must be stated. If for disposal on site there is a spreading or other deposition requirement it must be identified in the item description. If there is a filling requirement, such as spreading of the material to designed profiles, a filling and compaction item in addition to the excavation item should be measured.

Unless otherwise stated all excavations are deemed to be in natural material other than top soil or rock and all excavated materials are deemed to be for re-use. The excavation in an item is deemed to start at the Original Surface and finish at the Final Surface. The item descriptions "Excavation of cuttings" or "Excavation of foundations", "General excavation" without further wording, each denoted by application of the provisions above. The material to be excavated is natural material other than top soil or rock, that it is for re-use and that the excavation in the item starts at the Original Surface and finishes at the Final Surface. Works for which separate items are not required are noted in the first panel of Table 2.1 (Source: CESMM). Excavation of Cuttings Excavation of cuttings is measured by volume and is given in m3 in the Bill of Quantities. Example of item description for the excavation of the cutting is shown in cross-section in the diagram, Figure 2.1 and Table 2.2. The item description assume : i) The excavation starts at the Original Surface and finishes at the Final Surface, ii) There is no top soil at the Original Surface, iii) All material excavated are for disposal. The quantity attached to an item would be the volume of the material to be excavated. The excavation of cuttings sometimes require to be measured in stages.- It is normal for a specification to require that the bottom of 150-300mm of the excavation is left, to protect the formation, and excavated immediately prior to the laying of the base material.

Similarly, where is the top soil and it is specified to be excavated separately form other material. The excavation of the top soil is a stage of excavation for which a separate item must be given.

Figure 2.3 and Table 2.2, below shows excavation of the cuttings, in stages. The item descriptions assume :

1.     Top soil 150 mm deep,

2.     Remaining material is natural material, other than top soil or rock, and

The last 150 mm excavation is left to protect the formation and is to be excavated is separate stage.

Excavation For Walls at Sides Of Cuttings When wall are required at the sides of cuttings, the excavation to accommodate the wall and its backfilling is classified as general excavation. The depth of the excavation being taken down to the formation of the pavement abutting the face of the wall. Any excavation below the pavement level classified as excavation of foundations. This is illustrated in Figure 2.4. Additional detail could be provided by a diagram on the drawings indicating the measurement for measuring the excavation. The CESMM requires that item descriptions for "Excavation of Foundations" must state the location and limits of the excavation where is not clear.

Excavation below embankments

Where an embankment is to be constructed on steeply sloping round, the surface may be specified to be benched in steps or trenched. The steps or trenches can be classified as "Excavation of cuttings", it should be identified by the phrase "benched in steps below embankments" or "trenched below embankments.

General Excavation

The classification "General Excavation" covers to reduce over areas and for excavation to reduce a site to the formation level of a structure. Excavation of foundations is that which accommodates foundations. For both types of excavation the range of depth in which the maximum depth of the particular excavation work occurs must be specified. Both types are measured by volume and the unit of measurement is m3. Example for the excavation of foundations and to reduce the levels for the structure is shown in the Figure 2.5 and Table 2.3.

Excavation for Structure and Foundations

The volume measured for the excavation of a structure or foundation is the volume occupied by or vertically above any part of the structure or foundation. The application of three situations is illustrated in the Figure 2.6.

Dredging

The quantities of dredging measured from soundings are the net in-situ volume of the voids formed. Given in m3 and calculated for the areas of dredging and the depths obtained from soundings taken before and after dredging. An alternative method of measuring dredging is to measure the volume of dredged material from the hopper or barge in which the material is initially deposited.

EXCAVATION ANCILLARIES
Trimming of Slopes

Where surface of earthworks are specified to be sloped to a required angle of over 10 degrees to the horizontal, the surface areas of the slopes, given in square meters, are classified as "Trimming of Slopes". Excavation Ancillaries see Table 2.4.

Preparation of Surfaces Preparation of surfaces is measured superficially in square meters to the extent that earthworks are to receive Permanent Works other than earthworks. The item covers merely preparing the surface to the required profiles and configurations. It would not include any material or additional Double Handling of Excavated Material Double handling excavated material is measured only when double handling is required. Consequently, excavation and filling items are deemed to include double handling that may be necessary to carry out the earthworks. Double handling if excavated material is measure d by volume and is given in the Bill of Quantities in m3; The volume shall be that if the void formed in stockpile. When calculating the volume of double handling if excavated mate.ial for the quantities in the Bill of Quantities, an allowance will need to be made for the difference in bulk f the material in the stockpile and its bulk when used as filling. When calculating the volume of material for double handling at the site the volume of the stockpile will need to be measured both before and after the material has been removed. Dredging to remove silt Dredging to remove silt is applicable only to silt which accumulated during the maintenance period and is required to be removed. The quantities for the Bill of Quantities will require to be estimated and measured on completion.

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OQSC - Panel of Mentors

By: OQSC Journal On 7:13 PM

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Procurement & Tendering - Lesson 04

Advantages of Design & Build Contracts

·         Single point contract, one stop – shop approach

·         Design risks passed to the contractor

·         Speedy execution

·         Contractor’s specialist knowledge – more efficiency (design and experience together)

·         Specialist scopes

·         Minimum variations

·         More cost certainty

·         Minimum supervision cost  

·         Opportunity for innovation

·         Minimum risk of claims

·         Minimum administration for Client  

 Disadvantages of Design & Build Contracts

·         Designed by contractor, Employer has no control on the quality of the design

·         If variations occur, cost will be high

·         Difficulties in evaluating different designs  

·         Danger of design-build become build-design !

·         Limited pool of qualified design – builders

·         Lack of design brief may create more risks

·         Quality Assurance and Quality Control in contractor’s hands

·         Procurement of D&B Contract is more costly  

By: OQSC Journal On 7:20 PM

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FIDIC Conditions Explained - Lesson 03

Engineer’s Role – 1987 v 1999 Red Book

FIDIC 1987-Fourth Edition-Clause 2.1-Engineer’s Duties and Authority

(a)  The Engineer shall carry out the duties specified in the Contract.

(b) The Engineer may exercise the authority specified in or necessarily to be implied from the Contract, provided however that if the Engineer is required, under the terms of his appointment by the Employer, to obtain the specific approval of the Employer before exercising any such authority, particulars of such requirements shall be set out in part II of these Conditions. Provided further that any requisite approval shall be deemed to have been given by the Employer for any such authority exercised by the Engineer.

(c)  Except as expressly stated in the Contract, the Engineer shall have no authority to relieve the Contractor of any of his obligation under the Contract.

FIDIC 1987-Fourth Edition-Clause 2.6-Engineer to Act Impartially

Wherever, under the Contract, the Engineer is required to exercise his discretion by:

(a)  giving his decision, opinion or consent

(b) expressing his satisfaction or approval

(c)  determining value, or

(d) otherwise taking action which may affect the rights and obligations of the Employer or the Contractor

he shall exercise such discretion impartially within the terms of the Contract and having regard to all the circumstances. Any such decision, opinion, consent, expression of satisfaction, or approval, determination of value or action may be opened up, reviewed or revised as provided in Clause 67.    

FIDIC 1999-First Edition-Clause 3.1-Engineer’s Duties and Authority

The Employer shall appoint the Engineer who shall carry out the duties assigned to him in the Contract. The Engineer’s staff shall include suitably qualified engineers and other professionals who are competent to carry out these duties.

The Engineer shall have no authority to amend the Contract.

The Engineer may exercise the authority attributable to the Engineer as specified in or necessarily to be implied from the Contract. If the Engineer is required to obtain the approval of the Employer before exercising a specified authority, the requirements shall be as stated in the Particular Conditions. The Employer undertakes not to impose further constraints on the Engineer’s authority, except as agreed with the Contractor.

However, whenever the Engineer exercises a specified authority for which the Employer’s approval is required, then (for the purposes of the Contract) the Employer shall be deemed to have given approval.

Except as otherwise stated in these Conditions:

(a)  Whenever carrying out duties or exercising authority, specified in or implied by the Contract, the Engineer shall be deemed to act for the Employer;

(b) the Engineer has no authority to relieve either Party of any duties, obligations or responsibilities under the Contract; and

(c)  any approval, check, certificate, consent, examination, inspection, instruction, notice, proposal, request, test, or similar act by the Engineer (including absence of disapproval ) shall not relieve the Contractor from any responsibility he has under the Contract, including responsibility for errors, omissions, discrepancies  and non-compliances.

What is the major difference between 1987 and 1999 red book regarding this clause?

According to 1987 Red Book, Engineer has to cat impartially. But according to the FIDIC Red Book 1999 Engineer shall be deemed to act for the Employer. According to 1987 Red Book Engineer may review his determinations as provided in clause 67 (settlement of disputes). Then who will take over such duties towards settlement of disputes as per 1999 Red Book? Read clause 20 which states regarding Dispute Adjudication Board (DAB). We will discuss this in future sessions.

By: OQSC Journal On 6:47 PM

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