Contracts – important issues Piotr Mazur Paulina Wawryca Paweł Bilski

The construction contract is a legally binding agreement between two parties on the details and cost of a construction project and it is a key element in the implementation process of the construction project. VOB - German Construction Contract Procedures FIDIC - International Federation of Consulting Engineers

Defining the parties Employer Contractor In FIDIC: - Engineer - Any contacts between the parties of the contract should take place only through the Engineer, which is not a part to the contract. Engineer is appointed to ensure compliance with procedures and should act impartially, regardless of employment status, in accordance with the CONTRACT concluded between the parties. An engineer is a person employed to work in conditions of the contract and must be interpreted only as it is written. The basis of the contract is cooperation and collective action of the Employer, the Contractor and the Engineer.

Finances The Employer shall submit reasonable evidence that financial arrangements have been made and are being maintained which will enable the Employer to pay the Contract Price punctually. If the Contractor does not receive payment the Contractor shall be entitled to receive financing charges compounded monthly on the amount unpaid during the period of delay. Unless otherwise stated in the Particular Conditions, these financing charges shall be calculated at the annual rate of three percentage points above the discount rate of the central bank in the country of the currency of payment, or if not available, the interbank offered rate, and shall be paid in such currency

Finances Currency The Contract Price shall be paid in the currency or currencies named in the project. If more than one currency is so named, payments shall be made as follows: a) if the Accepted Contract Amount was expressed in Local Currency only: other payments to the Employer by the Contractor shall be made in the currency in which the sum was expended by the Employer, or in such currency as may be agreed by both Parties; b) if any amount payable by the Contractor to the Employer in a particular currency exceeds the sum payable by the Employer to the Contractor in that currency, the Employer may recover the balance of this amount from the sums otherwise payable to the Contractor in other currencies c) if no rates of exchange are stated in project, they shall be those prevailing on the Base Date and determined by the central bank of the Country.

Claims and disputes Claims - If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance. Within the period of 42 days, the Engineer shall proceed to agree or determine the extension (if any) of the Time and/or the additional payment (if any) to which the Contractor is entitled under the Contract.

Dispute - shall be referred to a Dispute Board for decision. Each “Dispute Board Agreement” is an agreement between: a) the “Employer” b) the “Contractor” c) the “Member” who is defined in the Dispute Board Agreement as being: - the sole member of the "DB" - one of the three persons who are chosen by each party, each party nominates one member for the approval of the other party. The first two members should recommend and the parties shall agree upon the third member, who shall act as a chairman.  

Any dispute between the Parties of which the DB’s decision (if any) has not become final, shall be finally settled by arbitration. Arbitration shall be conducted as follows: if the contract is with foreign contractors: - international arbitration which was specified in a contract; - if the arbitration rules are not specified in the Contract Data, with proceedings administered by the International Chamber of Commerce (ICC) and conducted under the ICC Rules of Arbitration;   if the Contract is with domestic contractors, arbitration with proceedings conducted in accordance with the laws of the Employer’s country. The place of arbitration shall be the neutral location specified in the Contract Data; and the arbitration shall be conducted in the language also specified in a project.

Termination of a project Termination by an employer: The Employer shall be entitled to terminate the Contract if the Contractor: - Abandons the work - Is delayed with the work - Subcontracts the whole of the works or assigns the contract without the required agreement - Becomes bankrupt or insolvent, goes into liquidation In any of these events or circumstances, the Employer may, upon giving 14 days’ notice to the Contractor, terminate the Contract and expel the Contractor from the Site. However, in the case of bankruptcy for example, may by notice terminate the Contract immediately.

Termination of a project Termination by a contractor. The Contractor shall be entitled to terminate the Contract if: - the Contractor does not receive the payment - the Employer substantially fails to perform his obligations under the Contract in such manner as to materially and adversely affect the economic balance of the Contract and/or the ability of the Contractor to perform the Contract, - the Employer becomes bankrupt or insolvent, goes into liquidation, In any of these events or circumstances, the Contractor may, upon giving 14 days’ notice to the Employer, terminate the Contract. However, in the case of bankruptcy, insolvent or liquidation, the Contractor may by notice terminate the Contract immediately.

Employer’s risks - War, hostilities, invasion, act of foreign enemies, - rebellion, terrorism, sabotage by persons other than the Contractor’s Personnel, revolution, insurrection, military or usurped power, or civil war, within the Country, strikes - riot, commotion or disorder within the Country by persons other than the Contractor’s If the Contractor suffers delay and/or incurs Cost from rectifying this loss or damage, the Contractor shall give a further notice to the Engineer and shall be entitled to: a) an extension of time for any such delay, if completion is or will be delayed b) payment of any such Cost, which shall be included in the Contract Price

Thanks for listening! Piotr Mazur Paulina Wawryca Paweł Bilski