Clause 2.5 – Employer’s Claims of FIDIC Yellow Book 1999

Purpose of Clause 2.5:

Clause 2.5, titled “Employer’s Claims,” serves as an essential provision in the FIDIC Yellow Book 1999 for delineating the Employer’s rights to make claims against the Contractor. The clause aims to balance the rights and responsibilities of both parties by providing a formal process for the Employer to claim compensation or other remedies due to events such as delays, defects, or failure to comply with the terms of the contract.

Implications of Clause 2.5:

Notice Requirement

One of the primary features of this clause is the notice requirement. The Employer is mandated to provide prompt notification upon becoming aware of an event or circumstance that gives rise to a claim. Timeliness in this context is vital, as it allows the Contractor sufficient time to address the issue or prepare a response to the claim.

Engineer’s Role

The Engineer plays a pivotal role in the claim process under Clause 2.5. Upon receiving the claim from the Employer, the Engineer has the responsibility to either agree with or determine the appropriate compensation, in accordance with Sub-Clause 3.5, titled “Determinations.”

Payment Mechanism

Once the Engineer determines the amount due, it can be deducted by the Employer from future Interim Payment Certificates, thereby streamlining the payment process.

Extension of Defects Notification Period

The clause also addresses claims stemming from Sub-Clause 11.3, which pertains to the extension of the Defects Notification Period. In such cases, the Employer may claim an extension if a defect or fault that falls under the Contractor’s responsibility prevents the Works, Section, or major item of Plant from being used for their intended purpose.

Key Considerations:

Timely Notice

The Employer should prioritize delivering the notice as soon as possible to mitigate potential disputes concerning the claim’s timeliness.

Detailed Claim

To streamline the process and avoid misunderstandings, the Employer must submit a detailed claim, specifying the clause under which the claim is made and the particular event or circumstances causing it.

Follow-up Letter

A comprehensive follow-up letter detailing the amount claimed should be dispatched to the Engineer for a thorough evaluation and determination.

Flowchart:

Here is a flowchart illustrating the process of an Employer’s Claim under Clause 2.5:

Overview

Understanding the sequence of events for an Employer’s Claim under Clause 2.5 is crucial for both Employers and Contractors. A well-defined flowchart serves as a visual guide, clarifying each step of the process. Here, we break down each stage of the flowchart to provide a comprehensive understanding of the mechanism of an Employer’s Claim as per Clause 2.5.

Steps in the Flowchart

1. Identify Event or Circumstances

The starting point of any Employer’s Claim under this clause is the identification of an event or circumstance that could potentially give rise to a claim. This may involve delays, defects, non-compliance with the contract terms, or any other specific conditions that are articulated in the contract.

2. Give Notice of Claim

Once an event or circumstance is identified, the immediate subsequent step is for the Employer to issue a notice of claim. This notification must be given “as soon as practicable,” providing the Contractor with an opportunity to either remedy the issue or prepare for the ensuing claim process.

3. Specify the Clause Under Which the Claim is Made

The Employer must make clear in the notice which clause or sub-clause of the contract forms the basis of the claim. This ensures that both parties are aligned in terms of the legal foundation for the claim and aids in narrowing down the scope for subsequent discussions and evaluations.

4. Provide Detailed Description of the Claim

Upon delivering the initial notice, the Employer should submit a comprehensive account of the claim. This entails outlining the specific event or circumstance, its consequent impact, and any supporting documentation or information that substantiates the claim.

5. Follow Up with a Letter Detailing the Amount Claimed

After laying out the details of the claim, the Employer is advised to send a follow-up letter indicating the amount claimed. The amount can be a monetary figure or could take another form of compensation that is considered appropriate according to the terms of the contract.

6. Engineer’s Determination

Once the claim and all the accompanying details are submitted, the Engineer takes on the role of evaluating the claim. The Engineer, in alignment with Sub-Clause 3.5, makes a determination regarding the claim’s validity and, if applicable, the amount due to the Employer.

7. Deduction from Interim Payment Certificates

Should the Engineer determine that the Employer is entitled to compensation, the awarded amount is then deducted from the Contractor’s subsequent Interim Payment Certificates. The Contractor will thus receive a reduced payment, which accommodates the Employer’s claim.

Conclusion

The flowchart serves as an invaluable tool in visually representing the procedural steps outlined in Clause 2.5 of the FIDIC Yellow Book 1999. By closely following each step, both the Employer and the Contractor can navigate through the often complex terrain of contract claims in an organized and transparent manner.

Flowcharts showcasing Clause 2.5’s execution and its associations with other clauses

A flowchart is an effective tool for simplifying complex processes, and it is especially useful in understanding the intricacies of an Employer’s Claim under Clause 2.5 of the FIDIC Yellow Book 1999. The following breakdown elucidates each step in the flowchart, providing a clear roadmap for navigating claims.

Steps in the Flowchart

1. Start with the Identification of a Potential Claim

The flowchart commences with the Employer identifying an event or circumstance that could lead to a claim. This initial step sets the stage for the formal claim process.

2. Notice of Claim

Once an event or circumstance is identified, the Employer must promptly issue a notice of the claim. Timely notification is imperative to allow the Contractor the opportunity to address the issue or prepare a defense.

3. Specify the Relevant Contract Clause

Clarity is crucial when making a claim. In the notice, the Employer must clearly state under which specific clause of the contract the claim is being made. This sets the legal framework for the subsequent claim proceedings.

4. Provide a Detailed Description

To avoid ambiguities, the Employer should furnish a comprehensive description of the claim. This should include detailing the specific event, its consequences, and any other relevant information that can substantiate the claim.

5. Follow Up with Amount Claimed

After providing the particulars, the Employer should specify the amount being claimed. Whether it’s a monetary figure or another form of compensation, this step is essential for facilitating the Engineer’s determination.

6. Engineer’s Determination

Once the claim has been fully laid out, the Engineer steps in to evaluate its validity and determine the amount due, if any. This determination is aligned with Sub-Clause 3.5 of the contract.

7. Deduction from Interim Payment Certificates

If the Engineer concludes that the Employer is entitled to compensation, the amount is then deducted from the Contractor’s forthcoming Interim Payment Certificates.

8. Potential Dispute Adjudication

The claim process doesn’t always resolve amicably. If there is disagreement over the Engineer’s determination or any other aspect of the claim, parties may resort to dispute adjudication.

9. Arbitration

Should the dispute adjudication fail to bring about a resolution, the final recourse is arbitration, as set forth in Clause 20.8 of the FIDIC Yellow Book 1999.

Conclusion

This flowchart serves as a valuable guide to all stakeholders, outlining each step in the process of an Employer’s Claim under Clause 2.5. By following this structured approach, parties can better navigate the complexities of contractual claims, fostering transparency and reducing the likelihood of disputes.

Sample Letters:

Crafting Effective Letters for Claims Under Clause 2.5 of the FIDIC Yellow Book 1999

Well-constructed letters play a vital role in setting the stage and legitimizing claims under Clause 2.5 in the FIDIC Yellow Book 1999. Below are rephrased examples of letters suited for various situations, aimed to guide you through the professional steps necessary to kick-start a claim process.

Example 1: Initial Claim Notification

[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
[Date]

[Contractor’s Name]
[Contractor’s Address]
[City, State, Zip Code]

Subject: Alert on Claim Pursuant to Clause 2.5

Hello [Contractor’s Name],

As dictated by Clause 2.5 in our signed agreement, this letter serves as our formal alert to you about our impending claim arising from [give details regarding the situation or event]. We are convinced that this claim is relevant to Sub-Clause [mention the specific clause].

Expect a thorough outline of our claim, including the sum involved, as a follow-up.

Appreciate your immediate attention.

Best regards,
[Your Name]

Example 2: Expression of Intent to Claim

[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
[Date]

[Contractor’s Name]
[Contractor’s Address]
[City, State, Zip Code]

Subject: Declaration of Intended Claim under Clause 2.5

Hello [Contractor’s Name],

This letter is to officially inform you about our upcoming claim, according to Clause 2.5 of our current agreement. The reason for this claim is [provide details of the incident or situation], and we understand it to be in line with Sub-Clause [mention the particular clause].

A comprehensive account of our claim, including the financials, will be provided shortly.

Warm regards,
[Your Name]

Example 3: Official Claim Alert

[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
[Date]

[Contractor’s Name]
[Contractor’s Address]
[City, State, Zip Code]

Subject: Formal Claim Notice Under Clause 2.5

Hello [Contractor’s Name],

We’re officially alerting you about our intent to lodge a claim per Clause 2.5 of our contract. This claim is grounded in [describe the situation or event] and is classified under Sub-Clause [cite the specific clause].

We’ll be touching base with you soon with a complete rundown of our claim, including the financial particulars.

Respectfully,
[Your Name]

Example 4: Formal Statement of Claim Intention

[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Phone Number]
[Date]

[Contractor’s Name]
[Contractor’s Address]
[City, State, Zip Code]

Subject: Official Intention to Claim under Clause 2.5

Hello [Contractor’s Name],

We are formally announcing our plan to submit a claim in accordance with Clause 2.5 of our mutual contract. The basis for this claim is [describe the situation or event] and is linked to Sub-Clause [mention the specific clause].

A detailed breakdown, including the financial aspects, will be part of our subsequent communications.

With kind regards,
[Your Name]

Example 5: Engineer’s Claim Notification

To:
The Engineer

Date: [Insert Date]

Dear Sir,

Claim Alert

In alignment with Clause 2.5’s obligations, this letter notifies you of our plan to seek additional remunerations as per Clause [Specify Clause]. The triggering event, described as [Elaborate on the Event], took place on [Specify Date]. We are currently compiling up-to-date records to back our claim.

Sincerely,
[Your Name]
Contractor Ltd

These redrafted samples serve as a reliable guide for effectively steering through the claim process under Clause 2.5. Tailored to be both clear and professional, they align with the best practices for contractual claims under FIDIC.

Checklists:

Here’s a checklist for an Employer making a claim under Clause 2.5:

Task	Done
Identify the event or circumstances giving rise to the claim	[ ]
Give notice of the claim as soon as practicable	[ ]
Specify the clause under which the claim is being made	[ ]
Provide a detailed description of the claim	[ ]
Follow up with a letter detailing the amount claimed	[ ]

Checklist for Employer’s Claim under Clause 2.5:

Task	Description	Done (✓/✗)
1.	Identify potential claim event or circumstance.
2.	Give notice of the claim to the Engineer.
3.	Specify the relevant clause under which the claim is made in the notice.
4.	Provide a detailed description of the claim.
5.	Specify the amount being claimed.
6.	Await the Engineer’s determination on the claim.
7.	If valid, check for deductions in the Interim Payment Certificates.
8.	If there’s a disagreement, prepare for potential dispute adjudication.
9.	If unresolved, consider arbitration as per Clause 20.8.