1️⃣ Purpose of Clause 19.6 / 18.5 – why do these clauses exist?
How FIDIC’s optional termination turns a never-ending “delay story” into a clean, no-fault exit when the project stops being viable.
Imagine a project where:
- You’ve already given proper Force Majeure / Exceptional Event notices,
- EOT and Cost are being discussed,
- But the site has been practically dead for months… no realistic re-start, no clear end in sight.
At some point, both Parties start thinking the same thing:
That’s exactly the purpose of Clause 19.6 (1999) and Clause 18.5 (2017):
They are optional “escape hatches” when an external event (Force Majeure / Exceptional Event) has prevented substantially all the Works for a long time (thresholds like 84 days continuous or 140 days in aggregate).
They allow either Party – Employer or Contractor – to say:
For the Employer, the benefit is:
- No need to manufacture a “default” termination.
- A structured way to stop funding a hopeless project.
- A clear, contract-defined way to settle with the Contractor (work done, demob, reasonable costs).
For the Contractor, the benefit is:
- Escape from endless mobilisation / demobilisation cycles.
-
Get paid for:
- Work done,
- Goods ordered,
- Break costs and demobilisation.
- Avoid being accused of abandonment or breach if they simply cannot continue.
So, big picture:
- Normal Force Majeure / Exceptional Event clauses (19.1–19.4 / 18.1–18.4) = “We’re delayed, let’s survive this.”
- Optional termination (19.6 / 18.5) = “We tried to survive. Now it’s commercially over – let’s end it fairly.”
2️⃣ Breakdown of Clause 19.6 / 18.5 – step by step, like a process map
See how optional termination under FIDIC moves from classic Force Majeure / Exceptional Events into a clean, structured exit — in five clear steps.
First, we are not yet at termination. We are in classic Force Majeure / Exceptional Event mode.
- Clause 19.1 defines Force Majeure.
- Clause 19.2 – Contractor gives Notice of Force Majeure.
- Clause 19.3 – both Parties use reasonable endeavours to minimise delay.
- Clause 19.4 – Contractor may get EOT and Cost (as a Claim under Clause 20.1).
- Clause 18.1 defines Exceptional Events.
- Clause 18.2 – Notice of the Exceptional Event.
- Clause 18.3 – duty to minimise delay and prevent effects.
- Clause 18.4 – consequences: EOT + Cost (through Clause 20.2 claim machinery).
Now we add the time dimension ⏱️.
In the 1999 book, Clause 19.6 introduces those familiar thresholds:
- If execution of substantially all the Works is prevented for a continuous period of more than 84 days; or
- For multiple periods which together exceed 140 days, then either Party may give a notice of termination.
In 2017, Clause 18.5 mirrors that logic as the Exceptional Events equivalent.
Everyone is in “let’s fight, mitigate, claim EOT” mode – we still assume the project will recover.
The conversation shifts to: “Do we genuinely believe this project can recover?” and “Who will pull the 19.6 / 18.5 trigger?”
Before 84 days → “We still believe in recovery.”
After 84 / 140 days → “We must consciously decide whether to continue at all.”
This is the most misunderstood part.
Even if you hit:
- 84 days continuous prevention, or
- 140 days cumulative prevention,
the contract does not automatically terminate.
This has two huge implications:
- Strategic choice – Employer might delay giving the notice hoping conditions improve; Contractor might wait because they fear losing future profit.
- Negotiation leverage – the threat of using 19.6 / 18.5 can force serious renegotiation of scope, resequencing, or contract re-pricing.
So it’s less a red button and more a nuclear option card lying on the table.
In practice, once you cross these thresholds, good contract managers don’t sit silently – they start structured discussions:
- “Do we continue?” or
- “Is a 19.6 / 18.5 exit sensible?”
Once a Party decides to terminate, the process looks like this:
Notice
- A written notice is sent under Clause 19.6 / 18.5.
- It is usually governed by Clause 1.3 (notices) and must be clear enough that:
“We are terminating under Clause 19.6 / 18.5 due to prolonged Force Majeure / Exceptional Events.”
Effective date
- The clause typically provides that the termination takes effect on the date of the notice or shortly thereafter (check the exact wording).
- From that point, we switch from “execution of the Works” to “winding down the Contract”.
Post-termination obligations
- 1999 – Clause 16.3 describes what the Contractor must do after termination (whether for Convenience, Force Majeure, etc.): stop work, make the Site safe, deliver documents / materials that have been paid for, demobilise and remove equipment, etc.
- 2017 – Clause 16.3 performs the same “how to stop” function, explicitly covering termination under Clause 18.5 as well.
This is where 19.6 / 18.5 are not just about ending the relationship – they also define how to close the account.
Clause 19.6 Optional Termination, Payment and Release roughly says the Contractor is entitled to:
- Payment for work done and Goods supplied up to the termination date.
- Payment for Goods ordered, manufacturing costs incurred, and reasonable cancellation charges.
- Demobilisation and repatriation costs (staff, equipment, plant).
Then the account is settled and both Parties are released from further obligations, except those intended to survive (like dispute resolution).
Notice how Employer’s convenience termination under Clause 15.5 also points to this same valuation recipe – FIDIC treats a convenience termination a bit like a “voluntary 19.6”.
So 19.6 is not just “termination due to Force Majeure”; it’s also the valuation engine for no-fault exits.
In 2017, FIDIC tidies up and integrates things:
- Clause 16.3 – the shutdown actions after termination (including under 18.5).
- Clause 16.4 – when the Contractor terminates for Employer’s default, the Employer must pay using the 18.5 payment logic, and additionally pay loss of profit and other damages caused by Employer’s default.
- Clause 4.2 (Performance Security) – any amount drawn on the security must be reconciled against sums due under 18.5 and 18.6.
So in the 2017 world, 18.5 becomes a central settlement formula for:
- Optional termination due to Exceptional Events,
- Employer’s convenience,
- Contractor’s termination in some Employer-default situations.
A cleaner, more “modular” design than 1999.
3️⃣ Key interpretations & implications – the “grey zones”
This is where the arguments live: what counts as “substantially all the Works”, how 84/140-day periods are counted, and how 19.6 / 18.5 interact with release, convenience and default termination.
This phrase is deliberately vague. It’s not “all” and it’s not “any part”. So the real question becomes:
Different angles you’ll see in practice:
Maybe 70–80% of Contract Price is tied to activities blocked by the event.
Work on the critical path is totally blocked, making Time for Completion meaningless.
The blocked Works are essential for the Project’s purpose (e.g. treatment plant in a water scheme).
If you’re arguing in arbitration:
-
Contractor might say:
“We can only do scattered, non-critical works; the core of the project is dead. That’s ‘substantially all’.” -
Employer might respond:
“You can still do many items; we’re nowhere near ‘substantially all’ – just take EOT and get on with the rest.”
This is a classic dispute zone.
“For the purposes of Clause 19.6 / 18.5, ‘substantially all the Works’ shall include circumstances in which the Employer’s intended commercial operation of the Works cannot reasonably be achieved by the Time for Completion, even allowing for an extension of time under Clause 19.4 / 18.4.”
You could even add a percentage threshold if you want more rigidity.
A favourite exam question:
Example:
- 30 days: flood,
- 40 days: nationwide strike,
- 80 days: import ban on specialised materials.
Total = 150 days. But are they one “event” or many?
Two schools of thought:
The clause is about “the” event preventing the Works, so 140 days should relate to one continuing event or closely related sequence (e.g. recurring monsoon floods affecting the same work).
If the net effect is that “substantially all the Works” have been prevented by qualifying events for >140 days in total, then the optional termination is available.
Most tribunals will look carefully at:
- The exact clause wording,
- The parties’ pre-contract expectations,
- The factual sequence (is there one long crisis, or three unrelated blips?).
“The periods referred to in Clause 19.6 / 18.5 shall apply to the same Exceptional Event or to a series of related Exceptional Events arising from the same underlying cause.”
Another grey area is the border between:
- Optional termination for long-running events (19.6 / 18.5), and
- Automatic release when performance becomes impossible / unlawful (19.7 / 18.6).
Practical distinction:
- 19.6 / 18.5 = “The project is commercially destroyed by an event, but not legally impossible. We choose to end.”
- 19.7 / 18.6 = “Law has stepped in (e.g. sanctions, legal prohibition). We’re released whether we like it or not.”
Why does this matter?
- Insurers, funders and lawyers often view a legal impossibility case differently from a commercial impracticability case.
- Also, some local laws (e.g. doctrines of frustration) might override FIDIC language – so 19.6 / 18.5 are your contractual tools, whereas 19.7 / 18.6 interact more directly with local legal doctrines.
You can almost think of four “types” of endings:
- Termination for Contractor default (Employer’s rights – Clause 15).
- Termination for Employer default (Contractor’s rights – Clause 16).
- Employer’s convenience termination (Employer wants out, no default).
- Optional termination due to external events (our 19.6 / 18.5 heroes).
The clever bit in FIDIC:
- In 1999, Clause 15.5 (Employer’s convenience) feeds into 19.6 for valuation → treating convenience a bit like “we are voluntarily acting as if Force Majeure has killed the project”.
- In 2017, 18.5 acts as a core payment module that 16.4 and 15.7 tap into.
Choosing which termination path to use can hugely affect entitlement to:
- Loss of profit,
- Prolongation costs,
- Damages.
Using 19.6 / 18.5 can feel morally and politically “cleaner” than trying to terminate for default in a genuine Exceptional Event.
4️⃣ Cross-Referencing with Other Clauses 🧩
Let’s connect the contractual dots, shall we?
Sub-Clause 18.1 / 19.1: Definition of the triggering event (Exceptional Event / Force Majeure).
Sub-Clause 18.4 / 19.4: Immediate consequences of such an event (e.g., EOT, payment).
Sub-Clause 18.6 / 19.7: Legal doctrine of “frustration” or “release under law.”
Clause 14: Contractor’s entitlement to payment up to the termination date.
This clause defines what constitutes an Exceptional Event (2017) or Force Majeure (1999), laying the foundation for the rights under Clause 18.5. It includes natural disasters, wars, and other uncontrollable disruptions.
Note: If an event doesn’t meet this definition, Clause 18.5 can’t be invoked.
This clause requires the affected Party to notify the other within 14 days of becoming aware of the Exceptional Event.
Why it matters: If notice isn’t provided in time, termination under Clause 18.5 may be contested.
Even if an Exceptional Event occurs, both Parties are expected to take reasonable steps to reduce its impact. Failure to do so could undermine the validity of invoking Clause 18.5.
- Try alternative means of performance
- Keep the Employer informed
- Document mitigation efforts
Clause 18.5 allows termination, but payments must be settled through Clause 14:
- Clause 14.10 – Statement at Completion
- Clause 14.11 – Final Statement
- Clause 14.13 – Final Payment Certificate
This ensures the Contractor is fairly compensated for work done and materials delivered.
New in FIDIC 2017: Clause 18.6 covers legal impossibility (e.g., sanctions, war zone restrictions). If the law makes performance illegal, this clause provides automatic release—independent of Clause 18.5.
If there’s a dispute over whether Clause 18.5 was properly invoked, or if compensation is contested, the matter moves to:
- DAAB (Dispute Avoidance/Adjudication Board)
- Amicable Settlement discussions
- International Arbitration under Clause 21.6
This clause is the final safety net to resolve any disagreements surrounding Exceptional Events and optional termination.
🔗 1. Clause 18.1 (📒 2017) / Clause 19.1 (📘 1999) – Definition of Exceptional Event / Force Majeure
👉 Before anyone can even think about triggering Clause 18.5, we need to establish that the disruptive circumstance qualifies as an Exceptional Event (or Force Majeure in the 1999 version). This is the foundation clause—it sets the tone for what kind of events can excuse non-performance or justify eventual termination.
💬 In plain terms: Did something happen that nobody could reasonably foresee, prevent, or control (e.g., natural disaster, war, embargo, pandemic lockdowns)?
If the answer is yes ➡️ we’re in Clause 18/19 territory.
If no ➡️ then Clause 18.5 doesn’t even get to the starting line.
🔗 2. Clause 18.2 / 19.2 – Notice of the Exceptional Event
📝 Here’s where the paperwork starts: The Party affected must notify the other within 14 days of becoming aware of the event. No timely notice? Then all subsequent entitlements—including termination under 18.5—could be in jeopardy.
💡 Pro tip: If you’re trying to use 18.5 later and there’s no paper trail of earlier notices under 18.2, you may be toast in a dispute. The DAAB will want that evidence.
🔗 3. Clause 18.3 / 19.3 – Duty to Minimise Delay
🎩 This one is a bit like the “mitigation clause.” Even in the face of chaos, both Parties—especially the Contractor—are expected to take reasonable steps to minimize disruption. It’s not enough to just sit back and say, “Oh well, flood happened. Guess we wait it out.”
So if a Contractor wants to terminate under 18.5, they better show:
- They've tried to mitigate,
- They couldn’t reasonably continue,
- And the event is still ongoing (important per Clause 18.5 wording).
Otherwise, the Employer could argue, “You gave up too easily.”
🔗 4. Clause 18.4 / 19.4 – Consequences of an Exceptional Event
Now this clause lays out what happens financially in the short term:
- Contractor gets EOT (Extension of Time),
- May get payment of Cost, but only if the event falls under specific categories (e.g., war, riots, specific Employer-related events).
📒 In 2017, Clause 18.4 includes a list of events entitling the Contractor to Cost, while others only entitle EOT.
💬 Why does this matter for Clause 18.5? Because before parties go for full termination, they often rely on Clause 18.4 remedies first. It’s like the buffer zone: use 18.4 to recover what you can, then consider walking away under 18.5 if the situation drags on too long.
🔗 5. Clause 14 – Contract Price and Payment
💰 Once Clause 18.5 is triggered, someone’s writing a check. The Contractor is entitled to:
- Work done,
- Goods delivered (but not yet incorporated),
- Reasonable demobilization costs.
Here’s the cross-functional catch: All of this has to be properly processed through Clause 14, which governs:
- Valuation,
- Payment certification,
- Final statements.
👉 In 📒 2017, the payment framework post-termination under 18.5 is smoother and links back neatly to:
- Clause 14.10 – Statement at Completion,
- Clause 14.11 – Final Statement,
- Clause 14.13 – Issue of Final Payment Certificate.
🧮 Essentially, 18.5 gives the right to terminate, but Clause 14 determines how much the Contractor walks away with.
🔗 6. Clause 18.6 (📒 2017 only) – Release from Performance under the Law
This is a brand-new clause in FIDIC 2017 and a pretty important legal safety net. What if something legally impossible or illegal (like sanctions or war zone restrictions) makes performance completely void under national law?
💬 Then Clause 18.6 provides an automatic release of obligations. It's a fallback clause that could supersede Clause 18.5.
💡 So here’s the interplay:
- Clause 18.5 = optional, contractual termination.
- Clause 18.6 = legal frustration or impossibility = mandatory relief.
It’s a great backup to ensure the contract doesn’t require anyone to do the impossible.
🔗 7. Clause 21 (Disputes and Arbitration)
📚 If the Employer and Contractor don’t see eye-to-eye on whether:
- An event qualifies under 18.1,
- Notice was given properly under 18.2,
- The termination was valid under 18.5,
- Or payment amounts under Clause 14...
Then buckle up! 🚧 We’re going to the Dispute Avoidance/Adjudication Board (DAAB) under Clause 21.
💬 Terminations under 18.5 are ripe for disputes—particularly over "substantial part of the Works", or whether the event was still ongoing at the time of notice. That’s why all related clauses must be carefully linked and evidenced.
🎯 Summary Table – Clause 18.5 Interlinkages
| Clause | Relationship to 18.5 | Why It Matters |
|---|---|---|
| 18.1 / 19.1 | Triggers force majeure protections | Must meet criteria first |
| 18.2 / 19.2 | Notice of Event | Mandatory for rights under 18.5 |
| 18.3 / 19.3 | Mitigation Duty | Prevents abuse of termination |
| 18.4 / 19.4 | Short-term Remedies | EOT & limited Cost before termination |
| 14.X | Payment processing | Ensures fair compensation post-termination |
| 18.6 (2017 only) | Legal impossibility | Overrides when continuation becomes illegal |
| 21.X | Dispute Resolution | Clarifies path for disagreements on termination rights |
5️⃣ “What if…?” scenarios – how this plays out on real projects
Let’s put some flesh on all this with more story-like examples, and see how Clauses 19.6 / 18.5 behave when war, blocked bridges, and pandemics hit real contracts.
Project: power plant.
Event: armed conflict erupts; area becomes a no-go zone.
Outcome:
- Site access banned by authorities,
- Insurances go into war-risk arguments,
- No staff can enter safely.
Timeline
Contractor issues 18.2 (or 19.2) notice; everyone is still saying “Let’s wait and see.”
No realistic improvement.
Contractor keeps a small skeleton team dealing with security and preservation.
EOT and Cost claims go in under 18.4 / 19.4, but cash flow is a mess.
Both Parties know 18.5 / 19.6 is now available. Employer’s funder starts asking:
“Why is this project still on the books if we can’t even enter the site?”
Also asks:
“Why are we tied to this for the next 3 years, when we can end under 18.5?”
If the Employer exercises optional termination:
- Contractor:
- Stops work under 16.3,
- Prepares a final account based on 18.5 / 19.6:
- Work done,
- Goods ordered and not yet delivered,
- Demobilisation costs.
- Employer:
- Frees up financing capacity,
- Retains what’s already delivered (to the extent useful),
- Avoids future claims spiralling out of control.
If the Contractor exercises optional termination:
- Contractor:
- Protects its balance sheet from further exposure,
- Frees resources for other viable projects.
- Employer:
- No longer can expect the Contractor to “hang around” indefinitely.
Project: road plus bridge over a river.
Event: riverbed collapse; authorities ban all works at the bridge location.
Buildings, road sections and other structures are still accessible and constructible.
“Is this really ‘prevention of substantially all the Works’?”
Contractor’s argument:
- Without the bridge, the road has no functional continuity.
- Bridge is on the critical path.
- Even if they build other parts, Time for Completion loses its meaning.
Employer’s argument:
- Only one element is blocked.
- Contractor can still work on:
- Approaches,
- Retaining walls,
- Drainage, etc.
- Therefore, this is a partial prevention, still managed under 19.4 / 18.4.
How it might resolve:
- Parties could agree a long EOT, with a “wait and see” approach on the bridge.
- Or, after many months, both agree that continuing is futile and mutually use 19.6 / 18.5 for a clean closure.
This is where your drafting around “substantially all the Works” and critical-path language really shows its value.
Project: airport terminal.
Event 1: A pandemic collapses air travel demand. Employer’s revenues vanish.
Event 2: Travel restrictions = Exceptional Event preventing access and procurement.
The Employer thinks:
Options:
- Use Employer’s convenience termination (15.5–15.7) – pure commercial decision.
- Use 18.5 (or 19.6) – optional termination justified by long-running Exceptional Events.
15.5 valuation is already tied back to 19.6, so the actual numbers may be similar.
18.5 acts as a reference point for both types of “no-fault” endings – Exceptional Events and convenience-style exits.
Politically, an Employer might prefer to say:
-
“We ended because of a long-lasting Exceptional Event”
rather than
“We just decided to walk away for convenience”.
But in either case the payment logic revolves around 18.5-style heads.
6️⃣ Suggestions for clarity & improvement – how you’d tweak this in PCs
Practical, contract-drafter ideas you can plug straight into Particular Conditions to make Clause 19.6 / 18.5 clearer, calmer and easier to operate when projects are under stress.
First, tackle the fuzziness around “substantially all the Works”. Right now it’s a lawyer’s playground. You can give your team a concrete test using both value and programme.
One way is to say that “substantially all the Works” is triggered when either a large % of the Contract Price is blocked, or the critical path is broken even after EOT.
“For the purposes of Clause 19.6 / 18.5, execution of ‘substantially all the Works’ shall be considered prevented where either: (a) Works corresponding to more than 75% of the Contract Price cannot be executed due to the relevant Force Majeure / Exceptional Event; or (b) the Works which are prevented include one or more activities forming part of the critical path such that the Time for Completion cannot reasonably be achieved even after granting an extension under Clause 19.4 / 18.4.”
Next, be explicit about which days count towards the 84-day continuous and 140-day aggregate thresholds. This is where “one event vs many” debates can explode.
“The periods stated in Clause 19.6 / 18.5 shall apply to each Force Majeure / Exceptional Event or Exceptional Event separately. For the purposes of calculating the total of 140 days, only periods of prevention arising from the same or related underlying cause shall be aggregated.”
Optional termination should not be a knee-jerk, emotional letter. You can require a structured conversation before anyone presses the 19.6 / 18.5 button.
Typical PC requirement:
- Before any 19.6 / 18.5 notice is served, the Party must request a meeting with the Engineer (and, in 2017, potentially the DAAB representative or chair).
- The agenda should include:
- Current programme and EOT scenario,
- Realistic mitigation options,
- Provisional settlement outline if termination is chosen.
Optional termination after long Exceptional Events doesn’t live in a vacuum – insurers and lenders are heavily involved. Your PCs can tie these threads together.
You can, for example, make sure the PCs say something like:
- Parties must notify insurers promptly of the FM / Exceptional Event,
- Cooperate to seek recoveries (if applicable),
- Deduct any recovered sums when calculating amounts under 19.6 / 18.5.
Also consider:
- Notifying lenders / funders as part of the 19.6 / 18.5 process,
- Recognising that some lenders may require consent before termination.
Finally, reduce arguments by defining what demobilisation and break costs under 19.6 / 18.5 actually include. Otherwise, every invoice becomes a mini-arbitration.
Typical list you might recognise in the PCs:
- Site restoration and clean-up,
- Returning temporary works,
- Shipping home heavy plant and equipment,
- Staff repatriation and severance where reasonably incurred,
- Termination penalties under key subcontracts and long-lead supplier orders.
You can also clarify whether these items are paid as:
- Cost only, or
- Cost plus reasonable profit (if that matches your risk allocation).
🔹 1. Trigger Conditions for Termination
| # | Condition | ✔️ |
|---|---|---|
| 1 | Has an Exceptional Event prevented performance of all or substantial parts of the Works? | |
| 2 | Has this disruption lasted for a continuous period of 84 days? | |
| 3 | Or do the interruptions from the same event total at least 140 days? | |
| 4 | Is the Exceptional Event still continuing at the time of intended termination? |
🔹 2. Notice and Decision Process
| # | Step | ✔️ |
|---|---|---|
| 5 | Decision made on whether to terminate or continue the Contract? | |
| 6 | Was a formal Notice of Termination issued while the event is ongoing? | |
| 7 | Was the notice delivered per Sub-Clause 1.3 (Notices & Comms)? | |
| 8 | Was a copy sent to the Engineer and the other Party as required? |
🔹 3. Post-Termination Actions
| # | Requirement | ✔️ |
|---|---|---|
| 9 | Have both Parties ceased further performance of obligations? | |
| 10 | Has the Contractor started safe demobilization activities? | |
| 11 | Submitted all records of completed work & materials on site? | |
| 12 | Site cleared of temporary works and utilities restored if needed? |
🔹 4. Payment & Financial Entitlements
| # | Payment Item | ✔️ |
|---|---|---|
| 13 | Payment made for all work executed up to termination date? | |
| 14 | Are Plant and Materials (delivered or paid for) included in payment? | |
| 15 | Demobilization and termination costs submitted and reviewed? | |
| 16 | Final amounts agreed per Sub-Clause 18.4 or Clause 14 process? |
📄 Sample Letter 1: Contractor’s Termination Notice (84+ Days of Disruption)
📄 Sample Letter 2: Employer’s Termination Notice (140+ Days of Cumulative Disruption)
📄 Sample Letter 3: Contractor’s Early Intention to Terminate (Pre-warning)
Process Flowchart for Implementing Clause 19.6
Detailed Explanation of the Process Flowchart for Implementing Clause 19.6
- Force Majeure Event Occurs: The process initiates when a Force Majeure event, such as a natural disaster or political unrest, significantly impacts the project.
- Track Duration of Force Majeure:
- Monitoring Period: It's crucial to monitor the duration of the Force Majeure event. The clause becomes applicable if the event prevents work for 84 continuous days or accumulates to more than 140 days.
- Documentation: Keeping detailed records during this period is essential for substantiating the termination claim.
- Decision Point - Meets Termination Condition?:
- Assessment: Evaluate whether the Force Majeure event meets the specified duration criteria for contract termination.
- Yes: If the criteria are met, move towards preparing a notice of termination.
- No: If not, continue with standard project management practices.
- Issue Notice of Termination:
- Formal Notice: Draft and issue a formal notice of termination, clearly stating the intention to terminate the contract due to the prolonged Force Majeure event.
- Compliance with Notice Period: Ensure the notice is issued at least 7 days before the intended termination date.
- Termination Takes Effect:
- Effective Date: The contract termination becomes effective 7 days after issuing the notice, marking a significant transition in project status.
- Proceed with Sub-Clause 16.3:
- Cessation of Work: Follow the procedures outlined in Sub-Clause 16.3 for stopping work and removing equipment and personnel from the site.
- Orderly Closure: Plan for an orderly and efficient closure or handover of the project.
- Engineer Determines Settlement:
- Financial Assessment: The Engineer assesses the work done and other related costs to determine the final settlement.
- Fair Compensation: This step ensures fair compensation for the contractor for the work completed and costs incurred.
- Issue Payment Certificate:
- Final Settlement: A Payment Certificate is issued based on the Engineer's determination, finalizing the financial aspects of the contract termination.
Sequence Diagram: Implementing Clause 19.6
Detailed Explanation:
- Event Occurrence: The sequence begins with a Force Majeure event occurring.
- Notification of Duration: The Contractor notifies the Project Manager (PM) about the duration of the Force Majeure event.
- Confirmation of Termination Conditions:
- The PM confirms whether the event meets the termination conditions specified in Clause 19.6 (84 continuous days or a total of 140 days).
- Preparation of Notice of Termination:
- If the conditions are met, the Contractor prepares a notice of termination.
- Review and Approval of Notice:
- The PM reviews and approves the notice for accuracy and completeness.
- Issuance of Notice of Termination:
- The Contractor officially issues the notice of termination to the PM.
- Request for Settlement Determination:
- The PM requests the Engineer to determine the financial settlement as per Clause 19.6.
- Determination of Settlement:
- The Engineer determines the settlement, including the value of work done and other costs.
- Communication of Settlement:
- The PM communicates the settlement details to the Contractor.
- Cessation of Work:
- The Contractor proceeds with the cessation of work as outlined in Sub-Clause 16.3.
- Overseeing Removal of Equipment:
- The PM oversees the removal of the Contractor’s equipment from the site.
- Completion of Removal and Handover:
- The Contractor completes the removal of equipment and any necessary handover procedures.
- Finalization of Project Closure:
- The PM finalizes the project closure process.
- Closure Report:
- The Engineer provides a closure report, marking the end of the project and contract under Clause 19.6.
FAQs: Clause 19.6 Optional Termination, Payment, and Release (FIDIC YB 1999)
Quick answers to the most frequent questions around Clause 19.6 – when you can terminate for prolonged Force Majeure, what gets paid, and what does not happen automatically.
Clause 19.6 is FIDIC’s optional termination clause for prolonged Force Majeure. It sets out:
- When either Party (Employer or Contractor) can terminate because a Force Majeure has gone on too long,
- The procedure for giving a termination notice, and
- The rules for calculating the final financial settlement after the contract ends.
Think of it as the contract’s “no-fault escape hatch” when Force Majeure stops being a delay problem and becomes a “project no longer viable” problem.
A Party may issue a notice of termination under Clause 19.6 when both of these ideas are true:
- Execution of substantially all the Works is prevented by a notified Force Majeure; and
-
That prevention has lasted for either:
- A continuous period of more than 84 days, or
- Several periods which together exceed 140 days,
Once these time thresholds are met, either Party may give a termination notice – it does not happen automatically.
Once termination takes effect under Clause 19.6, the Contractor must follow the shutdown procedure in Sub-Clause 16.3 (Cessation of Work and Removal of Contractor’s Equipment).
This typically includes:
- Stopping work in an orderly manner,
- Making the Site safe and secure,
- Removing Contractor’s Equipment and temporary works (as required), and
- Handing over records, documents, and parts of the Works that have been completed and paid for.
After that, the Engineer determines the value of the Work and entitlements for the purpose of the final settlement owed to the Contractor.
The final settlement under Clause 19.6 is not a blank cheque; it includes specific heads of Cost determined by the Engineer. Typically this covers:
- Payment for work properly carried out up to the date of termination,
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The Cost of Plant and Materials:
- Already delivered to Site, or
- Ordered for the Works and which the Employer agrees to take over,
- Other reasonable costs incurred in expectation of completing the Works, where these become abortive due to termination,
- The Cost of removal of Temporary Works and Contractor’s Equipment, and
- Repatriation costs of the Contractor’s staff and labour.
The exact list is set out in Clause 19.6 and cross-links to the valuation logic for termination in Clause 16 and payment provisions in Clause 14.
No. Clause 19.6 does not allow immediate termination.
Termination is only available when the Force Majeure has prevented substantially all the Works for the specified prolonged duration:
- More than 84 days continuously, or
- More than 140 days in total (for the same notified event).
In the early days or weeks of a Force Majeure, the regime is about notice, mitigation, EOT and Cost – not about ending the Contract.
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“Immediate termination” myth:
A common misconception is that Parties can terminate the Contract as soon as a Force Majeure event occurs. In reality, Clause 19.6 requires the 84-day / 140-day duration conditions to be met before termination is even an option. -
“Automatic full compensation” assumption:
Some assume termination automatically gives the Contractor full compensation for all expected profit and every project cost. In fact, the financial settlement is subject to the Engineer’s determination and is limited to the heads of Cost listed in the clause. -
Confusion over the scope of settlement:
People often mix up which costs are covered. The settlement includes:- Cost directly related to work done,
- Plant and materials for the Works, and
- Other reasonable costs linked to demobilisation and abortive preparation,