ESCL Conference August 25th

2006 Risk in Construction and

how to deal with them.
Duty for the contractor to inspect the site
and other physical conditions according to
FIDIC.
Presented by
Mikael Wahlgren
Former Senior Legal Counsel
NCC Construction Sweden AB
Mikael Wahlgren

NCC Construction Sverige AB

FIDICs old standard

forms

Conditions of Contract for Works of Civil Engineering

Construction, Fourth Edition, 1987 (reprinted in 1988 with
editorial amendments and reprinted in 1992 with further
amendments) (the old Red Book);

Conditions of Subcontract for Works of Civil Engineering,

Construction, First Edition, 1994 (to function with the old Red
Book);

Conditions of Contract for Electrical and Mechanical

Works, Third Edition, 1987 (reprinted in 1988 with editorial
amendments) (the old Yellow Book); and

Conditions of Contract for Design-Build and Turnkey, First

Edition, 1995 (the Orange Book).

Client-Consultant Model Services Agreement (3rd Ed., 1998,

) ("White Book")

Mikael Wahlgren

NCC Construction Sverige

AB

FIDICs (the International

Federation of Consulting
Engineers) new standard forms

Conditions of Contract for Construction (1999; for

building and engineering works designed by the
employer) (the new Red Book);

Conditions of Contract for Plant and Design-Build

(1999; for electrical and mechanical plant and for building
and engineering works designed by the contractor) (the
new Yellow Book);

Conditions of Contract for EPC Turnkey Projects

(1999; EPC being the abbreviation for Engineer-ProcureConstruct) (the Silver Book); and

Short Form of Contract (1999; for projects of relatively

small value) (the Green Book).

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.10 (new Red

Book & Yellow Book)
Site Data
The Employer shall have made available to

the Contractor for his information, prior to

the Base Date, all relevant data in the
Employers possession on sub-surface and
hydrological conditions at the Site, including
environmental aspects. The Employer shall
similarly make available to the Contractor
all such data which come into the
Employers possession after the Base Date.
The Contractor shall be responsible for
interpreting all such data.
Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.10 (new Red Book

& Yellow Book) Site Data
(cont.)

To the extent which was practicable (taking account of cost and time), the Contractor
shall be deemed to have obtained all necessary information as to risks,
contingencies and other circumstances which may influence or affect the Tender or
Works. To the same extent, the Contractor shall be deemed to have inspected and
examined the Site, its surroundings, the above data and other available information,
and to have been satisfied before submitting the Tender as to all relevant matters
including (without limitation):
(a) the form and nature of the Site, including sub-surface conditions,
(b) the hydrological and climatically conditions,
(c) the extent and nature of the work and Goods necessary for the execution and
completion of the Works and the remedying of any defects,

(d) the laws, procedures and labour practices of the Country (means the country in
which the Site (or most of it) is located, where the Permanent Works are to be
executed), and
(e) the Contractors requirement for access, accommodation, facilities, personnel,
power, transport, water and other services.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.10 (Silver Book)

Site Data
The last sentence of paragraph 1 have been
deleted and replaced the 2nd paragraph
with the following wording:
The Contractor shall be responsible for
verifying and interpreting all such data. The
Employer shall have no responsibility for the
accuracy, sufficiency or completeness of
such data, except as stated in Sub-Clause
5.1 [General Design Responsibilities].
Mikael Wahlgren

NCC Construction Sverige

AB

Comments to Clause
4.10 Site Data
In the new Red Book and new Yellow Book:

Constitutes a step backwards for the Contractor by

inserting the words relevant data in the Employers
possession.

Reference to relevant data limits the information to be

provided by the Employer.

Contractors are advised to amend this requirement so that

the Employer is required to supply all available data on
hydrological and sub-surface conditions.

In the new Yellow Book should be expanded to include all

information relevant to the Contractors design.

Mikael Wahlgren

NCC Construction Sverige

AB

Comments to Clause
4.10 Site Data (cont.)
In the Silver Book:

The Contractor is responsible for verifying data - particularly,

verifying and interpreting all data on subsurface and hydrological
conditions, including environmental aspects.

Carefully scrutinise the precise extent to which the exceptions offered

under Sub-Clause 5.1.

The disclaimer covers any information provided during the

performance of the Works - the Contractor cannot rely on information
provided by the Employer during the execution of the Contract.

FIDIC recognise that, the Silver Book is not suitable for use where
there is insufficient time or information for tenderers to
scrutinise and check the Employer's Requirements or for
them to carry out their designs, risk assessment studies and
estimating - FIDIC's alternative is the Yellow Book.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.12 (new Red Book &

Yellow Book) Unforeseeable
Physical Conditions
In this Sub-Clause, physical conditions means natural physical
conditions and man-made and other physical obstructions and pollutants,
which the Contractor encounters at Site when executing the Works,
including sub-surface and hydrological conditions but excluding climatic
conditions.
If the contractor encounters adverse physical conditions which he
considers to have been Unforeseeable, the Contractor shall give notice to
the Engineer as soon as possible.
This notice shall describe the physical conditions, so they can be
inspected by the Engineer, and shall set out the reasons why the
Contractor considers them to be Unforeseeable (means not reasonably
foreseeable by an experienced contractor by the date for submission of
the Tender). The Contractor shall continue executing the Works, using
such proper and reasonable measures as are appropriate for the physical
conditions, and shall comply with any instructions which the Engineer
may give. If an instruction constitutes a Variation (means any change to
the Works, which is instructed or approved as a variation), under Clause
13 [Variations and Adjustments] shall apply.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.12 (new Red Book &

Yellow Book) Unforeseeable
Physical Conditions (cont.)
If and to the extent that the Contractor encounters physical conditions which
are Unforeseeable, gives such a notice, and suffers delay and/or incurs Cost
by the Contractor, whether on or off the Site, including overhead and similar
charges, but does not include profit) due to these conditions, the Contractor
shall be entitled subject to Sub-Clause 20.1 [Contractors Claim] to:
(a) an extension of time for any such delay, if completion is or will be
delayed, under Sub-Clause 8.4 [Extension of Time for Completion], and
(b) Payment of any such Cost, which shall be included in the Contract
Price.
After receiving such notice and inspecting and/or investigating these physical
conditions, the Engineer shall proceed in accordance with Sub-Clause 3.5
[Determination] to agree or determine (i) whether and (if so) to what extent
these physical conditions were Unforeseeable, and (ii) the matter described
in sub-paragraphs (a) and (b) above related to this extent.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.12 (new Red Book &

Yellow Book) Unforeseeable
Physical Conditions (cont.)
However, before additional Cost is finally agreed or determined
under sub-paragraph (ii), the Engineer may also review whether
other physical conditions in similar parts of the Works (if any) were
more favourable than could reasonably have been foreseen when
the Contractor submitted the Tender. If and to the extent that
these more favourable conditions were encountered, the Engineer
may proceed in accordance with Sub-Clause 3.5 [Determination]
to agree or determine the reductions in Cost which were due to
these conditions, which may be included (as deductions) in the
Contract Price and Payment Certificates. However, the net effect of
all adjustments under sub-paragraph (b) and all these reductions,
for all the physical conditions encountered in similar parts of the
Works, shall not result in a net reduction in the Contract Price.
The Engineer may take account of any evidence of the physical
conditions foreseen by the Contractor when submitting the Tender,
which may be made available by the Contractor, but shall not be
bound, by any such evidence.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.12 (Silver Book)

Unforeseeable
Difficulties
Except as otherwise stated in the Contract:
(a) the Contractor shall be deemed to have
obtained all necessary information as to risks,
contingencies and other circumstances which
may influence or affect the Works;
(b) by signing the Contract, the Contractor accepts
total responsibility for having foreseen all
difficulties and costs of successfully completing
the Works; and
(c) the Contract Price shall not be adjusted to take
account of any unforeseen difficulties or costs.

Mikael Wahlgren

NCC Construction Sverige

AB

Clause 4.12 (new Red Book &

Yellow Book) Unforeseeable
Physical Conditions

Unforeseeable is a defined term = not reasonably

foreseeable by an experienced Contractor by the date of
submission of the Tender.
Entitlement to recover additional costs will not include
profit.
Relief for cost and time due to unforeseeable natural
physical conditions and man made and other physical
obstructions or pollutants and including subsurface and
hydrological conditions.
No relief due to impediments encountered off the site.
Excludes climatic events.
Engineer may take into account whether other Physical
Conditions in similar parts of the Works (if any) were more
favourable than could reasonably have been foreseen when
the Contractor submitted its Tender.
New concept that allows for the Contractor to provide
evidence of the physical conditions foreseen in his tender
Mikael Wahlgren
NCC Construction Sverige AB
calculation.
An alternative is to agree the foreseeable conditions

Clause 4.12 (Silver Book)

Unforeseeable
Difficulties
The language is uncompromising in the extreme and

its scope and application are much more wideranging.

The consequential effects of all unforeseen difficulties

are passed to the Contractor, Except as otherwise
stated in the Contract.

The Contractor is to foresee and allow in the price for

every eventuality however unforeseeable!

It is difficult to imagine a clause which would be more

threatening to contractors - Contractors should
beware!

Mikael Wahlgren

NCC Construction Sverige

AB

Conclusion & final

notes
The main reason for the diminishing
use of the FIDIC standard forms :
need quite substantive amendments;
many law firms have produced and
promote their own bespoke contract
forms; and
the number of competing standard
forms.
Mikael Wahlgren

NCC Construction Sverige

AB

Conclusion & final

notes (cont.)
Regions where FIDIC standard forms are used:

projects in Africa and Asia.

projects financed by the World Bank.

Under US law, where the contractor has a duty to inspect, that duty
does not include taking its own soil borings. A contractor is entitled
to rely on the borings provided by the Employer.

The new Red and Yellow Book (clause 4.12) can give time and
money for unforeseen site conditions whereas Silver Book says
largely the reverse the Contract Price should not be adjusted for
unforeseen difficulties or cost.

If the Silver clauses remain unchanged, contractors may try (if the
facts justify it) to claim for:
site conditions on the basis that the Employer did not make
relevant data available (clause 4.10);
ground conditions on the basis of inability to verify (clause
5.1(d)); and
Force Majeure in extreme cases (clause 19.1).

Mikael Wahlgren

NCC Construction Sverige

AB