Detailed discussion on General Provisions Clause 1.1.3

Clause 1.1.3.1: “Base Date”

Basic Concept:

The “Base Date” is a pivotal date set 28 days prior to the final date for tender submission. This date serves as a cornerstone, establishing a reference point for various elements within the FIDIC contract.

Significance and Application:

1. Reference for Standards (Sub-Clause 5.4):
   • The Base Date determines the edition of published standards referred to in the contract. Should there be any changes in these standards post the Base Date, the Contractor is obliged to notify the contract administrator.
2. Reference for Laws:
   • It serves as the baseline for the Laws of the Country. Changes in laws affecting the Contractor’s performance after the Base Date might entitle the Contractor to relief under the contract.
3. Reference for Cost Indices and Prices (Sub-Clause 13.8):
   • The Base Date is used to establish base cost indices and reference prices, crucial for operating the adjustment mechanisms for changes in costs.
4. Reference for Contract Price (Gold Book):
   • In the Gold Book, the Contract Price is directly based on the Contractor’s price as of the Base Date, subject to subsequent adjustments as laid out in the contract.

Implications for Parties:

• For the Contractor: Awareness of the Base Date is crucial for understanding the scope of responsibilities, from compliance with laws to cost adjustments.
• For the Employer: The Base Date helps in assessing the Contractor’s compliance and any adjustments to the contract terms.

Clause 1.1.3.2: “Commencement Date”

Basic Concept:

The “Commencement Date” is specified under Sub-Clause 8.1 and marks the official start of the works under the contract.

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Significance and Application:

1. Start of Contractual Obligations:
   • The clock starts ticking for the Contractor to mobilize resources and begin the execution of the works as per the contract.
2. Timeline for Submissions (Red and MDB Books):
   • The Contractor is required to submit a proposed breakdown of each lump sum price in the Schedules to the Engineer within 28 days after the Commencement Date.
3. Basis for Payment Certificates:
   • This date serves as a reference for issuing Payment Certificates. The breakdown submitted by the Contractor post the Commencement Date can be taken into account by the Engineer.
4. Start of Risk Transfer:
   • From the Commencement Date, the risk and responsibility for the care of the works transfers from the Employer to the Contractor, until the Employer takes over the works.

Implications for Parties:

• For the Contractor: The Commencement Date is vital for planning and executing the project, understanding when risks are transferred, and when various submissions are due.
• For the Employer: The Commencement Date serves as a starting point for tracking the Contractor’s performance and understanding when the Contractor assumes various risks and responsibilities.

Clause 1.1.3.3: “Time for Completion”

Basic Concept:

The “Time for Completion” is a critical contractual term that specifies the duration within which the Contractor must complete the Works or a Section. The duration is stated in the Contract Data and commences from the Commencement Date. Any extensions allowed under Sub-Clause 8.4 are also taken into account.

Significance and Application:

1. Implications for Contractor and Employer:
   • For the Contractor, the Time for Completion is not merely a deadline. Failure to complete the works within this time frame can result in delay damages.
   • For the Employer, timely completion is crucial to avoid additional costs and to start utilizing the constructed facility.
2. Extension Mechanisms (Sub-Clause 8.4):
   • The Time for Completion can be extended due to certain circumstances like force majeure events or variations ordered by the Employer.
   • The process usually involves the Contractor notifying the Employer or the Engineer and providing evidence to support the extension request.
3. FIDIC Red Book Provisions:
   • In the Red Book, the Contractor can apply for an extension if delayed by any listed causes. The Engineer then must proceed according to Sub-Clause 3.5 to determine the extension.
4. FIDIC Silver Book Provisions:
   • In turnkey projects under the Silver Book, the risk of delay primarily falls on the Contractor. However, there is still a mechanism for extension under certain circumstances.

Implications for Parties:

• For the Contractor: Understanding the Time for Completion is essential for planning and risk management.
• For the Employer: This clause is crucial for budgeting and scheduling, as it establishes when the facility will be ready for use.

Clause 1.1.3.4: “Tests on Completion”

Basic Concept:

The “Tests on Completion” are a set of tests that are either specified in the Contract, agreed upon by both Parties, or instructed as a Variation. These tests are carried out under Clause 9 to validate that the Works or a Section are ready to be taken over by the Employer.

Significance and Application:

1. Types of Tests:
   • Under the Yellow and Silver Books, the Tests on Completion include pre-commissioning tests, commissioning tests, trial operation (which also encompasses reliability tests), and performance tests. These are designed to affirm that the Works conform to the Employer’s Requirements and/or the Schedule of Guarantees.
2. Notification and Timing:
   • The Contractor must provide a 21-day notice to the contract administrator before conducting these tests. Once notified, the tests should be carried out within a further 14 days, as per the instructions of the contract administrator.
3. Ownership Rights:
   • Any product generated during trial operation generally belongs to the Employer, unless stated otherwise in the Particular Conditions. This requires the Employer to make prior arrangements for the sale, storage, or disposal of the output.

Implications for Parties:

• For the Contractor: The Tests on Completion are a critical milestone that confirms the readiness of the Works for handover. Failure to pass could have contractual repercussions.
• For the Employer: These tests serve as a quality assurance mechanism, ensuring that the Contractor has fulfilled its obligations to the standard specified in the Contract.

Clause 1.1.3.5: “Taking-Over Certificate”

Basic Concept:

The “Taking-Over Certificate” is a pivotal document issued under Clause 10 [Employer’s Taking Over]. It marks a critical milestone where the Employer officially takes over the Works from the Contractor.

Significance and Application:

1. Transfer of Responsibility:
   • Upon issuance, the Taking-Over Certificate shifts the responsibility for the care of the Works from the Contractor to the Employer. This also transfers the risk of loss or damage.
2. Start of Defects Notification Period:
   • The certificate marks the beginning of the Defects Notification Period. During this time, the Contractor is required to fix any defects or faults that become apparent.
3. Payment Triggers:
   • Issuance triggers the Employer’s obligation to pay for the completed Works. The Contractor is entitled to the balance of the contract price, less any eligible deductions.
4. Release of Retention Money:
   • Depending on the contract terms, issuing the certificate may also release part of the retention money held by the Employer.
5. Access Rights:
   • Post-issuance, the Contractor retains the right of access to the Works for obligations like defect rectification during the Defects Notification Period.
6. Clearance of Site:
   • Upon receiving the Performance Certificate, the Contractor must clear the Site of all remaining equipment and materials within 28 days. If not, the Employer has the right to dispose of them.

Implications for Parties:

• For the Contractor: While the issuance relieves them of some responsibilities, they still have obligations during the Defects Notification Period.
• For the Employer: This certificate is crucial for transitioning responsibilities and triggering payment and other contractual mechanisms.

Clause 1.1.3.6: “Tests after Completion”

Basic Concept:

The term “Tests after Completion” refers to specific tests carried out under Clause 12, post the Employer taking over the Works or a Section. These tests are often pivotal in industries like process and power contracts.

Key Aspects:

1. Nature of Tests:
   • These tests, often linked to ‘availability’ or ‘reliability’ damages, provide an assessment of whether the Works meet the Employer’s requirements. They may extend over a long duration.
2. Who Conducts the Tests:
   • In the Yellow Book, the Employer conducts these tests, whereas in the Silver Book, the Contractor is responsible for them. The Gold Book does not contemplate any Tests after Completion.
3. Timing of Tests:
   • These tests should be carried out as soon as is reasonably practicable after taking over as specified in Sub-Clause 12.1.
4. Employer’s Prior Use:
   • The final sentence of Sub-Clause 12.1 requires ‘appropriate account’ to be taken of the effect of the Employer’s prior use of the Works.
5. Failure to Pass Tests:
   • If the Works or a Section fail these tests, Sub-Clause 12.3 applies. The Contractor must rectify the Works, and either Party can demand the failed Tests after Completion to be repeated.
6. Non-Performance Damages:
   • If the Works or a Section fail to pass any or all of the Tests after Completion, and the Contractor pays the relevant non-performance damages, then the Works or Section are deemed to have passed these Tests after Completion as per Sub-Clause 12.4.

Implications for Parties:

• For the Contractor: These tests can be a critical evaluation of the Contractor’s performance, impacting their liability for damages.
• For the Employer: These tests provide an additional layer of quality assurance, ensuring the Works meet their requirements.

Clause 1.1.3.7: “Defects Notification Period”

Basic Concept:

The term “Defects Notification Period” pertains to the time frame for notifying defects in the Works or a Section as per Sub-Clause 11.1. This period is determined by the Contract Data and can be extended under Sub-Clause 11.3. The counting starts from the date the Works or Section is deemed complete, as certified under Sub-Clause 10.1.

Key Aspects:

1. Period Duration:
   • Typically, the period is set at 365 days in the sample form of Appendix to Tender, though this is subject to agreement between the parties.
2. Contractor’s Obligations:
   • Under Sub-Clause 11.1, the Contractor is mandated not only to remedy any defects but also to complete any remaining work. This must be done “by the expiry of the relevant Defects Notification Period or as soon as practicable thereafter.”
3. Contract Administrator’s Role:
   • The contract administrator has the authority to instruct the Contractor on the “reasonable time” within which to complete outstanding work as per Sub-Clause 11.1(a).
4. No Express Time for Remedying Defects:
   • There is no specified time limit for remedying defects, but the Employer can exercise rights under Sub-Clause 11.4 if the Contractor fails to remedy within a reasonable time.
5. End of Contractor’s Obligation:
   • The obligation to rectify defects expires with the issue of the Performance Certificate, marking the end of the Defects Notification Period as extended under Sub-Clause 11.3.
6. Performance Certificate:
   • The Contractor’s obligations are not considered fulfilled until the Performance Certificate is issued, stating the completion date as per Sub-Clause 11.9.

Implications for Parties:

• For the Contractor: Failure to meet obligations within the Defects Notification Period can lead to penalties and can affect the issuance of the Performance Certificate.
• For the Employer: This period provides a safeguard for quality, enabling the Employer to demand corrections for any defects or incomplete works.

Clause 1.1.3.8: “Performance Certificate”

Basic Concept:

The “Performance Certificate” is a pivotal document issued under Sub-Clause 11.9 in FIDIC contracts. It marks a significant stage where the Employer assumes responsibility for the Works. However, the certificate is not an absolute guarantee of the Works’ compliance with the Contract.

Key Aspects:

1. Not Conclusive Evidence:
   • The issuance of the Performance Certificate does not serve as conclusive evidence that the Works wholly comply with the Contract. Latent defects may later be discovered.
2. Tests and Inspections:
   • The certificate is issued after the completion of specific tests and inspections. If the Works or a Section fail these tests, the Contractor may need to make adjustments or modifications.
3. Contractor’s Access:
   • If the Contractor intends to make adjustments to the Works, their access may be restricted until a time that is convenient for the Employer. The Contractor then has a “reasonable period” after receiving notice to make the necessary changes.
4. Legal Implications:
   • Final extinguishment of Parties’ liability is determined by the applicable Law and jurisdiction where the Works are executed. Many jurisdictions have concepts like decennial/10-year liability for latent defects.

Implications for Parties:

• For the Contractor: Issuance of the Performance Certificate does not absolve them of all liabilities, especially those concerning latent defects or required tests.
• For the Employer: The certificate marks the Employer’s assumption of responsibility for the Works but should not be considered an absolute assurance of compliance with the Contract.

Clause 1.1.3.9: “Day” and “Year”

Basic Concept:

In FIDIC contracts, the term “Day” refers to a calendar day, while “Year” is defined as 365 days. These definitions serve as standard contractual language to eliminate ambiguity around time-related clauses.

Key Aspects:

1. Calendar Day:
   • The term “Day” is defined as a calendar day. This implies that weekends and holidays are included when calculating time periods in the contract.
2. 365 Days:
   • A “Year” in this context refers to 365 days, not accounting for leap years. This is important for calculating durations and deadlines that span over multiple years.

Implications for Parties:

• For both the Contractor and the Employer, understanding these basic time definitions is essential for accurately interpreting various clauses related to timelines, durations, and deadlines.
• These standard definitions help prevent disputes arising from misunderstandings about the length of a day or year in the context of the contract.