Q1: What is Clause 16.4 Payment on Termination?

Answer : Clause 16.4 Payment on Termination is a provision in the FIDIC Yellow Book 1999 that outlines the financial obligations of the Employer in the event of contract termination. This includes the return of Performance Security, payment in accordance with Sub-Clause 19.6, and compensation for loss of profit or other damages to the Contractor.

Q2: When does Clause 16.4 come into effect?

Answer : Clause 16.4 comes into effect after a notice of termination under Sub-Clause 16.2 has been issued and taken effect.

Q3: What is Performance Security?

Answer : Performance Security is a financial guarantee provided by the Contractor to ensure the fulfillment of the contract. It is returned to the Contractor upon termination as per Clause 16.4 .

Q4: What is Sub-Clause 19.6?

Answer : Sub-Clause 19.6 Optional Termination, Payment and Release outlines the terms for payment between the Employer and Contractor. Payments in the event of termination are made in accordance with this sub-clause.

Q5: Who is responsible for ensuring compliance with Clause 16.4?

Answer : The Employer is primarily responsible for compliance, but the CFO, COO, and Legal Advisor often play key roles in ensuring that the financial, operational, and legal aspects are handled correctly.

Q1: Is the Employer only required to return the Performance Security?

Answer : No, the Employer has multiple responsibilities, including payment in accordance with Sub-Clause 19.6 and compensation for loss of profit or other damages to the Contractor.

Q2: Can the Employer delay the payments or return of Performance Security?

Answer : The term "promptly" in Clause 16.4 implies that these actions should be taken without undue delay. Failure to do so could result in legal consequences.

Q3: Is the Contractor automatically entitled to loss of profit or other damages?

Answer : While Clause 16.4 stipulates that the Contractor should be compensated for loss of profit or other damages, the specifics may vary and should be clearly outlined in the contract.

Q4: Does Clause 16.4 override other payment clauses in the contract?

Answer : No, Clause 16.4 is specific to the conditions under which a contract is terminated and does not override other payment or financial clauses in the contract.

Q5: Is legal advice necessary for Clause 16.4?

Answer : While not explicitly stated, it is highly recommended to consult legal experts to ensure full compliance with Clause 16.4 and to mitigate risks.

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