! "!

FIDIC Claims and procedures – a holistic approach for a better claim management

Dr. Götz-Sebastian Hök1

I. Introduction

FIDIC Sub-Clause 20.1 provides that a Contractor who believes to be entitled to extension of
Time for Completion and/or any additional payment shall give prompt notice thereof but not
later than 28 days after he became aware of or should have become aware of the event or
circumstance giving rise to the claim. If the Contractor fails to do so, Time for Completion
shall not be extended, the Contractor shall not be entitled to additional payment and the
Employer shall be discharged from all liablity in connection with the claim. At the end of this
Sub-Clause it is added that the requirements of this Sub-Clause2 are in addition to those of
any other Sub-Clause3 which apply to a claim and that any failure to comply with this or
another Sub-Clause in relation to any claim, any extension of time and/or additional payment
shall take in account of the extent to which the failure has prevented or prejudiced proper
investigation of the claim. Such claims usually arise from events or circumstances4. The
Conditions of Contract attempt to anticipate such events and circumstances in one or other of
their clauses and it is one (or more) of these that needs to be quoted in support of any claim5.
Where no such provision covers the event or circumstances in question then one must seek
some principle of [common] law which covers the matter6. What particulars are to be stated
depends on the cause of action on which the claimant relies. As a rule, under a FIDIC
Contract a claim situation arises if and when FIDIC has identified that there is a need for
either compensation or indemnification. Compensation is appropriate if performance becomes
too onerous or burdensome because particular risk eventuates. Indemnification or damages
are the consequence of failure to comply with the Contract. However, even though the
Contract might have provided for a remedy and even though all elements of the legal theory
are met the Contractor may fail to obtain something if he did not give a timely notice
describing the event and if he did not keep contemporary records7. This has given rise to
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
Sebastian Hök is a lawyer, arbitrator and FIDIC listed adjudicator
2
Reference is made to the record keeping requirement as per paragraph 4 of this Sub-Clause
3
Reference is made to Sub-Clause 8.3, 4.21 and in particular to all Sub-Clause which require the Contractor to
give notices
4
See Compagnie Interafricaine de Travaux v. South African Transport Services and Others (680/89) [1991]
ZASCA 16; 1991 (4) SA 217 (AD); (21 March 1991)
5
See Compagnie Interafricaine de Travaux v. South African Transport Services and Others (680/89) [1991]
ZASCA 16; 1991 (4) SA 217 (AD); (21 March 1991)
6
Compagnie Interafricaine de Travaux v. South African Transport Services and Others (680/89) [1991] ZASCA
16; 1991 (4) SA 217 (AD); (21 March 1991)
7
See in this sense Markanda, Arbitration and Conciliation, 213 citing Bansal Construction Co. v. Indian Oil
Corporation, 1991 (2) Arb LR 409 (Del); International Building and Furnishing Co. v. Indian Oil Corporation,
1995 (1) Arb LR 548 (DB-Del); Uttam Singh Duggal and Co. v. India Oil Corporation, 1987 (1) Arb LR 281
(Del)
! #!

criticism throughout the world which leads us to the question what is the very nature of a
claim under a FIDIC Contract and how to understand the claim management requirements?

II. Meaning of the term claim

Unfortunately most of the aforementioned criticism seems to be based on a worldwide

disseminated misunderstanding as to the meaning of the term claim under a FIDIC contract.
The vast majority of Contractors believe that under a FIDIC Contract injustice prevails
because the Contractor has to give a notice of a claim and failing to do so within 28 days after
having become aware of any event or circumstance which gives rise to a claim the claim
becomes lost even though the Employer and/or the Engineer may already be fully aware of
the relevant claim and supporting circumstances and events. Thus Contractors believe that the
claim notice requirement is simply a burden having been imposed on Contractors in order to
foreclose them from entitlements which would have led into a balanced situation. They may
rely on supporting authorities who believe that Sub-Clause 20.1 should be ignored as it
unreasonably shortens any relevant limitation or prescription period under the relevant laws8.
However, according to the authorities in this field a claim is nothing else than the assertion of
a right9. It becomes a right subject to a claim notice, keeping contemporary records and giving
particulars thus enabling the Engineer whom the Employer has appointed in order to
determine any such entitlement with due regard to all relevant circumstances and in
accordance with the Contract10.

In fact this description is not only true but reasonable and equitable as there is a valuable
purpose for the aforementioned FIDIC approach. There is authority for the view that a FIDIC
Contract is designed to avoid prolonged disputes11. It establishes a system of mutual trust for
the benefit of both parties12. In fact the Engineer´s raison d´être is to consider the asserted
entitlement as soon as practicable and without undue delay (see Sub-Clause 1.3) at the time
the claim arises, and with the strong likelihood that plant, manpower, experts and witnesses
are still on the Site13. He shall do so in accordance with the Contract and in a fair and
unbiased manner. It has therefore been said that the Engineer is the guardian of reasonabless
of all rates and prices14. However, he is more than that. He is also the guardian of an accurate
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
8
See Nassar, Claims, Disputes and Arbitration according to FIDIC Conditions of Contract for Civil, Mechanical,
Electrical, Construction, Design/Build & Turnkey, EPC & Short Form of Contract, Cairo (Regional Center for
international Commercial Arbitration, 130 referring to an unpublished arbitration case where the arbitral panel
decided that failure to give the notice in time could be ignored because of the fact that the situation would not
have changed in case the Contractor would have given the notice earlier.
9
Bunni, FIDIC forms of contract, 293 et seq.; Pappu v. Damodaran AIR 1966 All 476 (India); Qur´an: Yasin: 57
10
See Indian Overseas Bank v. N.A. Seshamuthu AIR 1982 Mad 89, 92 (India)
11
Attorney General v. Gordon Forbes BLR 280 [2003] at 283; see Hök IBR 2006, 1107
12
Glavinis, Le contrat international de construction, n° 253
13
Attorney General v. Gordon Forbes BLR 280 [2003] at 283; see Hök IBR 2006, 1107; see also Glavinis, Le
contrat international de construction, n° 253
14
Jones, The International Civil Engineering Contract, 1979, 194
! $!

claim determination whose role has been exemplified and defined in the English benchmark
case Sutcliffe v. Thackrah15.

Thus, the whole contractual system is aimed at the early resolution of any queries. It can be
added that the system shall avoid suspension of works and unnecessary delay. It is critical that
Contractors may rely on a reliable claim procedure which makes them sure that the Engineer
will determine what is due under the Contract will prevent the Contractor from suspending the
Works during the period of uncertainty which inevitably lasts until the Engineer will have
determined the claim. However, such a system presupposes an effective and clearly structured
procedure with clearly allocated responsibilities which ensures that evidence for all relevant
facts will be established, collected and produced.

Therefore a claim under a FIDIC Contract should not become confused with what Section 194
German Civil Code defines as being a claim. According to Section 194 German Civil Code [a
claim is] the right to demand that another person shall do or refrain from doing something (a
claim) is subject to limitation. This type of claim is the enforceable right to demand either
payment or extension of Time for Completion which is in itself subject to the limitation
provisions of the Code. Also in French law the term claim has no proper equivalent16.
However a FIDIC claim constitutes not yet an enforceable right. Rather it is nucleus of such
right. Thus it can be said that a FIDIC claim is something which is not yet clear and
transparent, thus not ready for determination. Rather it is a belief subject to further assessment
requiring a certain amount of evidence and particulars for that it may become such
enforceable right. On the other hand as per FIDIC Contract a claim subsists even though it
had been rejected by the Engineer because any Engineer´s determination is only binding until
and unless revised by the Dispute Adjudication Board (see Sub-Clause 3.5).

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
15
Sutcliffe v. Thackrath [1974] AC 727, a judgment which is recognised and discussed throughout the world,
see Markanda, Building and Engineering Contracts, 2nd edition, 308, 309 (for India); Northbuild Constructions
Pty Ltd v. Discovery Beach Project Pty Ltd [2008] QCA 160 (20 June 2008); Martinek Holdings Pty Ltd v. Reed
Construction (Qld) Pty Ltd [2009] QSC 328 (8 October 2009) (both for Queensland, Australia); Sport Maska
Inc. v. Zittrer, [1988] 1 S.C.R. 564 (for Canada); compare Van Immerzeel & Pohl and Another v. Samancor
Ltd (543/98) [2000] ZASCA 79; 2001 (2) SA 90 (SCA); [2001] 2 All SA 235 (A) (30 November 2000) (for
South Africa)
16
Glavinis, Le contrat international de construction, n° 249
! %!

!"#$%&'()*%+,%-K!&2+.:-!6*',0/8*0!

&'()*+,)'*!,':62.0-!=.)<!6*0E,'()*+,)8+2!/8).0-!+-!60*!H81E&2+8-0!%I"J!

&'()*+,)'*! @*'3*+::.(3!;! D'()<2F! G').,0!3.4.(3!

,':62.0-!=.)<! 9+*2F!=+*(.(3-! *06'*)-!
30(0*+2!/8).0-!

&'()*+,)'*!
,'(-./0*-!)'!10!
0().)20/!

&'()*+,)'*!3.40-!
(').,0!
ABCB&!

&'()*+,)'*!5006-! &2+.:!
*0,'*/-7!506)! D+(+30E
*0,'*/-! :0()!

&'()*+,)'*!
-81-)+().+)0-!

9(3.(00*!:+50-! &'()*+,)'*!.-! &'()*+,)'*!3'0-!)'! ?.:.)+).'(!

/0)0*:.(+).'(! 0().)20/!;!+! ,'8*)! @0*.'/!
/.-68)0!+*.-0-!

&'()*+,)'*!<+-!)'!
-81-)+().+)0!.)-!
,2+.:!
ABCB&!C.-68)0!
&'()*+,)'*!-<'=-!
D+(+30:0()!
04./0(,0!

>8/3:0()!

III. Contractor´s objections

! L!

However Contractors will quite often contend that compliance with Sub-Clause 20.1 would
have been “a useless act” where allegedly previous communication with the Engineer was
sufficient to comply substantially with the notice requirement under the Contract17.

As to the interpretation of Sub-Clause 20.1 there are in fact at least three options: One is to
argue that the Engineer´s power to determine a claim is exhausted once the time barrier had
been hit. The second is to say that this is too bad for the contractor, in particular if the notice
does not serve any purpose which is the case if the Engineer is already aware of the relevant
event. In this case it seems that the Contractor´s carelessness in not observing the conditions
of Sub-Clause 20.1 does not cause any detriment or damage. A third one has been proposed
by Glavinis who suggests that a late notice should not automatically be rejected for failure to
comply with the delay. Rather he suggests that it should be considered if the Contractor kept
contemporary records because in this case according to Glavinis the claim is self justifying.
The rationale of its reasoning lays in the principle according to which failure to comply with
formalities having no substantial commercial effect should not prevail in absolute terms18.
However, in various cases the courts have rejected the argument concluding that the mere fact
that previous communications between the parties were related, in whole or part, to a claim
does not provide an exception to the contract's notice provisions19. By doing so, they have
given effect to the plain and unambiguous wording of the Contract20. Similarly, the principle
under Articles 171 and 172 of the Civil Code Qatar states that it is the agreed terms of a
contract which the parties should adhere to. The plain language of the Contract provides that
the Contractor is bound to the Employer to give a claim notice as soon as practicable but not
later than 28 days after having become aware of the relevant event or circumstance21. Also
partisans of this strict approach may rely on what Cole J said in Turner: “If the Builder having
a right to claim an extension of time fails to do so, it cannot claim that the act of prevention
which would have entitled it to an extension of the time for Practical Completion resulted in
its inability to complete by that time. A party to a contract cannot rely upon preventing
conduct of the other party where it failed to exercise a contractual right which would have
negated the effect of that preventing conduct22.” In fact, even though the Engineer may be
aware of the claim event or circumstance he not yet knows whether the Contractor believes
that he is entitled to something. Only then the Engineer shall start to make its proper
observations, to keep its own records and to monitor Contractor´s contemporary records. In

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
17
See Gaymark Investments v. Walter Construction Group [1999] NTSC 143 (20 December 1999)
18
Glavinis, Le contrat international de construction, n° 262
19
Pyca Industries Inc Pyca v. Harrison County Waste Water Management District, 177 F3d 351 (5th Cir. 1999);
Multiplex Constructions (UK) Ltd v. Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC) (06
March 2007); Turner Corporation Limited v. Austotel Pty Limited [1994] 13 BCL 378
20
See Multiplex Constructions (UK) Ltd v. Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC)
(06 March 2007)
21
American National Electric Corp. v. Poythress Commercial Contractors, INC. and Brown & Jones Architets,
Inc. 604 S.E.2d 315 (N.C. App. 2004)
22
Turner Corporation Limited v. Austotel Pty Limited [1994] 13 BCL 378 per Cole J at 384-385
! M!

other words, it is up to the Contractor to make its mind and to give a notice in order to inform
the Engineer not only about the claim event or circumstance but also in order to make him
aware of the fact that he intends to initiate a claim assessment procedure which in itself
creates various Engineer´s duties.

IV. The validity test

It is suggested that the claim notice requirement is a condition precedent of an enforceable

entitlement23. Whether it is a valid condition depends on the position of the governing law as
per Sub-Clause 1.4 FIDIC.

The German Supreme Court had several times the opportunity to consider claim notice
clauses. Thus there is German authority for the view that in any case such clauses should
leave the claiming or aggrieved party a sufficient or reasonable period for identification and
analysis of the situation and consideration of whether it wants to rely on the entitlement and
then to proceed accordingly24. Time limits in contractual provisions which foreclose one of
the parties from prosecuting a claim are in principle valid if they do not contradict with
general principles of limitation law and the requirements of good faith meaning that they
should not be unreasonably short25. Finally Section 651f German Civil Code imposes a short
period of one month on any traveler for giving a notice of a claim with regard to the traveling
contract26.

In England there is authority for the view that „Contractual terms requiring a contractor to
give prompt notice of delay serve a valuable purpose. Such notice enables matters to be
investigated while they are still current. Furthermore such notice sometimes gives the
employer the opportunity to withdraw the instructions when the financial consequences
become apparent“27. By holding so, English courts have finally rejected a different approach
which had been adopted by an Australian court in the Gaymark case28.

Despite the fact that throughout the world the well known principle applies29 that a condition
to comply with a trivial, insignificant or minor formality would be a 'pointless formality' in

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
23
Thomas, Construction Contract Claims, 2nd edition, 120; See Hudson´s Building and Engineering Contracts,
14th edition, n° 4-132
24
BGH, 8.7.1998 - VIII ZR 1/98, DB 98, 2054 = NJW 98, 3119 = WM 98, 1887 = MDR 98, 1208
25
Bundesarbeitsgericht, 25.05.2005 – 5 AZR 572/04
26
See BGH, 9.6.2009 - Xa ZR 99/06
27
Multiplex Constructions (UK) Ltd v. Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447 (TCC) (06
March 2007); confirmed in Steria Ltd v. Sigma Wireless Communications Ltd [2008] CILL 2544, [2008] 118
Con LR 177 TCC by adding the argument of “commercial absurdity” which “would result in the contractor
being better off by deliberately failing to comply with the notice condition than complying with it" and stating
that a decision that would allow the contractor to benefit from its own breach "would be the converse of the
prevention principle and hence might be said to be equally objectionable.
28
See Gaymark Investments v. Walter Construction Group [1999] NTSC 143 (20 December 1999)
29
See Glavinis, Le contrat international de construction, n° 262, 260 (for France); Palandt/Grüneberg, BGB, §
242 n°. 53 ; Daniel E. Terreri & Sons, Inc. v. Mahoning County Bd. of Comm’rs, 786 N.E.2d 921, 935-37 (Ohio
! N!

which case the court may dispense with the requirement of a formal, timely notice, the FIDIC
notice requirement should be upheld. Though there is case law that supports the proposition
that failure to provide written notice does not require denial of claims where the defendant
had actual knowledge of the facts supporting plaintiff’s claims30, this case law is neither
persuasive nor authoritative. Under a FIDIC Contract the claim notice requirement, as well as
the contemporary records´ requirement serve a valuable purpose. By means of the claim
notice the Contractor initiates a procedure wherein the Engineer shall ascertain whether the
Contractor is entitled to something. As the Engineer does otherwise not know what the
Contractor considers to be entitled to he may not keep the matter under control nor assess the
alleged entitlement against its factual background. Thus FIDIC requires the Contractor to
become alerted about any of its entitlements just in time and to give notice of it so that the
Engineer may himself investigate the relevant situation and keep its proper records in order to
avoid disputes on the merits of the case. Sub-Clause 20.1 clearly imposes a duty on the
Engineer to monitor the Contractor´s contemporary records, to keep its own records if
necessary and to have the issue under control. If FIDIC would not have put the Contractor
under the notice giving requirement the Engineer would not be able to do all this to the
detriment of both parties. Hence, project meetings serving to insure cooperation and efficient
progression of the work are not the appropriate place to make specific claims31.

Thus what FIDIC has done is nothing else than to disconnect site progress discussion from
claim management and to establish a procedure which shall ensure that any Contractor´s
specific and identified entitlement will be assessed quickly and that the assessment can be
done properly with regard to all relevant circumstances. This requires obviously a high level
and intensity of documentation, record keeping and collection of further evidence. Sub-Clause
20.1 ensures all this.

It is therefore not true that the notice requirement is just there in order to prevent the
Contractor from recovering “extras”. Conversely it ensures that both, Contractor and
Employer have access to a suitable and effective mechanism of claim assessment with regard
to all relevant circumstances.

The so called Engineer as referred to in Clause 3 FIDIC shall be the person having authority
to assess the claim which in fact is at the outset merely a notice describing the event which
gives rise to the claim. It becomes an entitlement if there is cause of action encompassing a
legal theory and a remedy. If the event or circumstance meets all of the elements which
constitute the cause of action the Contractor is entitled to seek for the remedy as referred to in
the relevant Sub-Clause or provision. One of these elements however is that the Contractor

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Ct. App. 2003): “The failure to follow a written notice provisions of a construction contract an be construed as
harmless if there is evidence of constructive or actual notice”.
30
See R.J. Au & Son v. N.E. Ohio Reg. Sewer Dist., 504 N.E.2d 1209 (Ohio App. 1986), cited in Biemann and
Rowell Co. v. The Donohoe Companies, Inc., 2000 NCBC 8 (N.C. Super. Ct. )(Tennille), aff'd, 147 N.C. App.
239, 556 S.E.2d 1 (2001)
31
Cf. Biemann and Rowell Co. v. The Donohoe Companies, Inc., 2000 NCBC 8 (N.C. Super. Ct. )(Tennille),
aff'd, 147 N.C. App. 239, 556 S.E.2d 1 (2001)
! O!

has given a prompt notice but not later than 28 days after he became aware or should have
become aware of the relevant event or circumstance. Secondly the Contractor should have
kept contemporary records as covered in Sub-Clause 20.1 of all substantial elements of the
legal theory. Failing to do this the Contractor will not be entitled to prosecute the legal or
contractual remedy to which he may consider to be entitled.

It should be emphasized that Sub-Clause 20.1 mainly refers to entitlements under the
Contract. By signing the Contract the parties to it accept that any entitlement to extension of
Time for Completion and/or any additional payment only arise if and when the claimant
ensures that any of its asserted entitlements may be properly assessed by the Engineer. The
procedural requirements form part of the Contract and any entitlement thereunder is subject to
compliance with the procedural requirements. Sure, FIDIC could have decided to allow for a
more easy way to entitlements. However, it did not and this for good reasons.

In particular Contractors should take in account that once the Employer objects any of its
claims and the case goes to court the courts themselves will require full disclosure of the
merits of the case and full supporting evidence for the case32. It is therefore not unreasonable
to require the same level of substantiation and evidence at an earlier stage. Record keeping
and documentation are burdens which shall ensure an effective decision making process not
only before the courts but also before the Engineer and the Dispute Adjudication Board.

Thus FIDIC Contracts do nothing else than to establish that a Contractor should not take
advantage from its own wrong by failing to assist the Engineer in its duty to assess the
relevant claim situation. The parties should have clear guidance in order to avoid prolonged
discussions which are mainly the result of insufficient record keeping and evidence.

Thus as a rule Sub-Clause 20.1 binds the Contractor to a time certain during which notice of
delay for compensation must be given. If that time was not observed by Contractor its
complaint is defeated33. In another case Mocatta J held that a notice which did not comply
with requirements of a notice proviso was invalid to found a claim, and that the courts had
jurisdiction where an inadequate notice was served to make a declaration preventing an
arbitrator form entertaining a claim34. Hence, even though the law permits the requirement of
written notice to be waived, Sub-Clause 20.1 poses a unique situation which necessitates a
strict notice rule.

V. Supporting authority

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
32
See Ennore Port Ltd. v. Skanska Cementation India Ltd, (2008) 1 MLJ 1147 (Mad); Markanda, Arbitration
and Conciliation, 7th edition, 527 citing Russell on Arbitration, 20th edition, 225, 256; Imprefed (Pty) Ltd v.
National Transport Commission (13/91) [1993] ZASCA 36

33
Cf. American National Electric Corp. v. Poythress Commercial Contractors, Inc. and Brown & Jones
Architets, Inc. 604 S.E.2d 315 (N.C. App. 2004) as to a similar wording; see also Gajrias, Law relating to
Building and Engineering Contracts in India, 631
34
Monmouth CC v. Costelloe & Kemple Ltd (1964) 63 LGR 131
! P!

Claim notice requirements and claim assessment requirements and constraints are by the way
not at all unknown or surprising features. In various standard forms of contract notice
provisions are used35 in order to invite an appointed third person having authority to
determine issues which arise under the contract36 in a fair and unbiased manner37. One main
purpose for the prompt written notice requirements found in for example changed conditions´
clauses and the change of contract price provisions is to permit the employer's early
investigation into the validity of the claim and the contractor's resulting costs so the employer
may retain control of the total contract price and weigh competing alternatives to excessive
expenditures38. Also quite often domestic legislators impose notice duties on the parties.
Article 886(1) of the UAE Federal Law No 5 of 1985 provides that:

"If a contract is made under an itemised list on the basis of unit prices, and it appears during
the course of the work that it is necessary for the execution of the plan agreed substantially to
exceed the quantities on the itemised list, the contractor must immediately notify the
employer thereof, setting out the increased price expected, and if he does not do so he shall
lose his right to recover the excess cost over and above the value of the itemised list.

Article 560 Algerian Civil Code and other Arabic Codes correspond with article 886 UAE
Civil Code39. The purpose of these clauses is to warn the employer about any considerable
increase of the contract price who may then rescind the contract. Section 634 of the Serbian
Obligations and Tort Law Act puts the Contractor under the duty to give prompt notice of any
unforeseen works which he may believe necessary to carry out without the prior consent of
the customer.

Also clauses limiting evidence as per Sub-Clause 20.1 wherein FIDIC Contracts limit
admissibility of witness evidence40 are well known instruments. Evidence agreements are
inter alia those agreements between the parties of a dispute according to which they agree to
interfere with the principle of free evaluation of evidence (for example they agree that the
court shall consider evidence in a particular manner or they agree that the court shall convey a
particular value to submitted evidence. According to Austrian and German law such contracts

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
35
See England: ICE, MF/1, NEC3; USA: EJCDC; India: C.P.W.D Works; Germany: VOB/B
36
See ICE Conditions of Contract and Model Forms MF/1, MF/2 and MF/3; also New Engineering and
Construction Contract and the (former) Government form GC/Wks/1 Edition 3.
37
Compare Sutcliffe v. Thackrah [1974] AC 727
38
See, e.g., Johnson Const. v. Rugby Municipal Airport, 492 N.W.2d 61, 63 (N.D. 1992) (discussing change of
contract price provision); Clark-Fitzpatrick, Inc./Franki Foundation Co. v. Gill, 652 A.2d 440, 447 (R.I. 1994);
Dan Nelson Construction v. Nodland & Dickson, 2000 ND 61, 608 N.W.2d 267
39
See article 657 Civil Code Egypt and article 623 Civil Code Syria
40
Her Majesty´s Attorney General for the Falklands Islands v. Gordon Forbes Construction (Falklands) Ltd
[2003] BLR 280)
! "J!

are invalid41. However, German courts will uphold a contract by which the parties have
waived the use of particular means of evidence42.

VI. Claims

Claims arise as a consequence of the particular and specific risk allocation approach of the
Contract43. As a rule a locatio conductio operis contract (contract for works) has the very
nature of an entire contract whereunder the Contractor promises to complete the Works
against the agreed price or against measurement of the Works against the agreed BoQ rates.
Only if and when there is either breach of Contract or an event or circumstance occurs which
the Contract identifies to constitute a claim event the Contractor may recover an “extra”. Risk
identification and risk assessment is therefore a critical element of claim management because
it ensures that the aggrieved party will become compensated for overcoming any assumed risk
if it eventuates to the extent that this seems to be appropriate. FIDIC Contracts are well
known for their proper risk allocation approach ensuring that unforeseeable risk will become
compensated.

It is submitted that claim notice requirements and record keeping burdens deal also with risk.
It could be named the “Determination Risk” or “Legal Risk”. Only properly prepared and
submitted claims will enable the Engineer to assess the asserted entitlement (claim) against
the Contract wording. As the Contractor is best able to bear the assessment risk and to handle
it he is under the obligation to give notice and to keep contemporary records. Only the
Contractor has the ability to decide whether he wants to initiate a procedure wherein the
Engineer shall assess a particular claim. Also only the Contractor is able to produce and show
such evidence which he believes is fit for the assessment of his particular claim. If the event
or circumstance which has to be assessed remains unclear uncertainty with regard to the
assessment result arises. It is the purpose of the FIDIC Contract to avoid such uncertainty.
The Contract has allocated this risk of uncertainty to the Contractor who shall bear it.

Therefore throughout the whole FIDIC General Conditions of Contract notice giving and
record keeping requirements may be found (see Sub-Clauses 4.21, 6.10, 8.3, 20.1, etc.), which
shall enable the Engineer to tie extra works and efforts to specific factors or causes. The
Contractor is under the duty to establish a detailed programme and he has the ability to enter
into the required monthly reports and contemporary records the amount of additional time
worked, the class and number of each additional men needed and the type of all additional
equipment and material used as a result of each delay. If he elects not to do so, he will fail to
show evidence for a claim.

FIDIC is for example aware of the fact that a total cost claim methodology used by Contractor
to establish Cost claims does not account for any underbidding of the project; any inefficiency

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
41
Pollak, System des österreichischen Zivilprozessrechts!, p. 771f.; OGH, 7 Oct. 2003, n° 4Ob188/03f; RGZ 56,
96
42
BGHZ 109, 19, 29
43
Bunni [2009] ICLR 4, 5
! ""!

by Contractor in the performance of its work; delays caused by others or their subcontractors;
delays caused by Contractor or its subcontractors; or any design deficiencies or design
changes during the course of the project. Thus, the Contractor shall produce contemporary
records and monthly reports from which delay, disruption and excess labor attributable to
undue delay can be determined in order to avoid disputes as to the clear and unambiguous
identification and determination of claims. Thus each alleged delay must be linked to the
critical path of the construction and all Cost shall be tied to specific event or circumstances.
The Contract is designed for that the Engineer can directly correlate any excess Cost or delay
to a particular event or delay. Conversely an Engineer who accepts a less detailed programme
than required, ignores notice requirements and record keeping duties when proceeding in
accordance with Sub-Clause 3.5 will exercise arbitrariness rather than to act in accordance
with the Contract. Beware that Sub-Clause 3.5 requires from the Engineer to make a fair
determination with due regard to all relevant circumstances, which means that he shall
consider all aforementioned elements of the legal theory of each claim´s provision.

Contractor´s should be aware of the fact that the process of record keeping should commence
at tender stage. It is obvious from various Sub-Clauses44 that quite often the Contractor shall
show that the relevant event or circumstance was Unforeseeable as covered by Sub-Clause
1.1.6.8. What could have been foreseen depends on whether the Contractor complied or not
complied with Sub-Clause 4.10. A Contractor must therefore be able to show the extent of
which he complied with Sub-Clause 4.10.

VII. Management of claims

A cause of action is the legal ground or claim with which a party can file a lawsuit to find
remedy or satisfaction of his claim. In other words there must be a legal relationship in
between of the appellant and the defendant creating a cause of action, which implies the right
to bring a legal action. Managing to meet the elements of any cause of action is critical under
a FIDIC Contract.

Id entify Search All Check

event for cause elements com - Proceed
of action met? plaints

FIDIC claim management means to ascertain all claims´ clauses throughout the Contract, to
establish a narrow check and evaluation system which enables the Contractor to become
aware of any relevant event or circumstance which might give rise to an entitlement under the
Contract. Also he shall then keep records of all elements of any identified claim. Any
information or data, whether constituting a mere fact (bad weather, differing site conditions)
or an act under the Contract (instruction or variation) shall be assessed against the background
of the Contract. If then the Contractor considers to be entitled to any extension of Time for
Completion or additional payment he shall give a notice to the Engineer describing the event
or circumstance in sufficient detail. Record keeping and evidence collecting should be a part
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
44
See inter alia Sub-Clauses 2.1, 4.6, 4.12
! "#!

of daily work. Programming is also a valuable means of claim management because a detailed
programme as per Sub-Clause 8.3 enables the Engineer to promptly determine any additional
workmanship, work, equipment, material, etc. compared to what had been planned for the
execution of the Works. The Engineer who tacitly accepts programmes which are
insufficiently detailed will not be able to make such an assessment. A Contractor failing to
submit a detailed programme is not only in breach of Contract. Rather he prevents himself
from showing evidence for its assumed entitlements. Hence, proper programming creates a
valuable win-win situation.

Claim management also means to keep contemporary records of all relevant events or
circumstances and in particular of all elements of the legal theory of the relevant cause of
action (the claim´s clause). A Contractor who is not aware of all elements of the relevant legal
theory will not keep properly and complete contemporary records45. By ignoring the contract
wording he will prevent himself from recovering any additional payment or extension of
Time for Completion. As contemporary records shall be kept when the event or circumstance
happens they can not be produced later when lack of records becomes relevant or apparent.

It can be summarised that failure to proceed in accordance with the Contract avoids claims for
good reasons. Neither Contractors nor Employers should blame Engineers, Dispute
Adjudication Boards or arbitral panels for its own any failure to proceed in accordance with
the Contract, in particular for failure to keep records. All of three of them shall interpret the
Contract and consider against the factual background whether any party is entitled to
something. A party who will learn the lesson too late, that record keeping is critical, will have
to suffer because of its own wrong. Things would have been much easier and disputes could
have been avoided if the parties to the contract were aware of this. Once again, a FIDIC
Contract has been designed to avoid prolonged disputes. The claim procedure as framed under
a FIDIC Contract shall ensure that the Engineer may make a determination going along with
the strong likelihood that it will not become challenged because the Engineer was in fact able
to consider all relevant events and circumstances. Though the parties may execute their
contract based on mere assumptions the Engineer shall not make any determination based
thereon. Actually he has no authority to do so (see Sub-Clause 3.5).

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
45
For example: It is insufficient to show that the Contractor encountered adverse physical conditions in order to
recover an extra. He must also submit evidence for that the encountered adverse physical conditions were
Unforeseeable (Sub-Clause 1.1.6.8) and for any Cost (Sub-Clause 1.1.4.3).