How to Terminate the Contract by the Contractor in 2017 FIDIC Red and Yellow Books

“Legal and practical consequences of termination should be considered in-depth before Notice is given.” 

Clause 16 in 2017 Editions of the Red and Yellow Books states the circumstances that entitle the Contractor to terminate the Contract, the procedures during and after the termination and the payment mechanism.

1   The Grounds for Termination 

Clause 16.2.1 [Notice] entitles the Contractor to give a notice of his intention to terminate the Contract or, in the case of sub-paragraphs (g/ii), (h), (i) or (j), a “Notice of Termination”, if [1]:

(a) the Contractor does not receive the reasonable evidence within 42 days after giving a Notice under Sub-Clause 16.1 [Suspension by Contractor] in respect of a failure to comply with Sub-Clause 2.4 [Employer’s Financial Arrangements]

(b) the Engineer fails, within 56 days after receiving a Statement and supporting documents, to issue the relevant Payment Certificate;

(c) the Contractor does not receive the amount due under any Payment Certificate within 42 days after the xpiry of the time stated in Sub-Clause 14.7 [Payment];

(d) the Employer fails to comply with: ___(i) a binding agreement, or final and binding determination under Sub-Clause 3.7 [Agreement or Determination]; or ___(ii) a decision of the DAAB under 21.4 [Obtaining DAAB’s Decision] (whether binding or final and binding) and such failure constitutes a material breach of the Employer’s obligations under the Contract;

(e) the Employer substantially fails to perform, and such failure constitutes a material breach of, the Employer’s obligations under the Contract;

(f) the Contractor does not receive a Notice of the Commencement Date under Sub-Clause 8.1 [Commencement of Works] within 84 days after receiving the Letter of Acceptance;

(g) The Employer: ___(i ) fails to comply with the Sub-Clause 1.6 [Contract Agreement], or ___(ii) assigns the Contract without the required agreement under Sub-Clause 1.7 [Assignment];

(h) a prolonged suspension affects the whole of the Works as described in sub-paragraph (b) of Sub-Clause 8.12 [Prolonged Suspension];

(i) the Employer becomes bankrupt or insolvent; goes into liquidation, administration, reorganisation, winding-up or dissolution; becomes subject to the appointment of a liquidator, receiver, administrator, manager or trustee; enters into a composition or arrangement with the Employer’s creditors; or any act is done or any event occurs which is analogous to or has a similar effect to any of these acts or events under applicable Laws; or

(j) the Employer is found, based on reasonable evidence, to have engaged in corrupt, fraudulent, collusive or coercive practice at any time in relation to the Works or to the Contract.

Suspension by the Contractor

In case that;

The Engineer not certifies in accordance with Sub-Clause 14.6 [Issue of IPC]

The Employer not provides reasonable evidence in accordance with Sub-Clause 2.4 [Employer’s Financial Arrangements]

The Employer not complies with Sub-Clause 14.7 [Payment]

The Employer not complies with: ___(i) a binding agreement or determination under Sub-Clause 3.7 [Agreement or Determination] ___(ii) a decision of the DAAB

2   The Termination Procedure

Sub-Clause 16.2.2 defines and describes the “The Termination Procedure”.

If the Employer fails to remedy the matter described in the notice within 14 days of receiving the Notice, the Contractor gives a second notice after that period that immediately terminates the Contract.

For the Sub-Paragraphs (g/ii), (h), (i) or (j), the Notice given by the Contractor immediately terminates the Contract.

3   After the Termination Procedure

Sub-Clause 16.3 defines and describes “After the Termination Procedure”. After the termination, the Contractor is to:

(a)  continue the work only which is instructed by the Engineer for the protection of life or property or safety.

(b)  hand over plant, materials and other work to the Engineer that the Contractor has received payment,

(c)  leave the Site.

4   Valuation Procedure

Sub-Clause 18.5 in 2017 Red and Yellow Books defines and describes the Valuation Procedure of the work that is subject to Payment.

The Contractor is to submit detailed supporting particulars of the value of the work done.

The Engineer is to proceed under Sub-Clause 3.7 [Agreement or Determination] to agree on the value of the work done.

5   Payment Procedure

Sub-Clause 16.4 defines and describes the “Payment Procedure”.

The Contractor is to pay in accordance with Sub-Clause 18.5 [Optional Termination]. The Contractor is to pay in accordance with Sub-Clause 18.5 [Optional Termination].

The Contractor is to pay the amount of any loss or profit in accordance with the Sub-Clause 20.2 [Claims for Payment and/or EOT].

FOOTNOTES

1. The same Sub-Paragraph letters are used as in Sub-Clause 16.2.1 of the 2017 Red and Yellow Books.

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