FIDIC Clause 19.6/18.5: 1999 vs 2017 Optional Termination Guide

1️⃣ Purpose of Clause 18.5 – Optional Termination

🎯 When an Exceptional Event (📒 2017) or Force Majeure (📘 1999) goes on for too long and no one’s to blame, this clause becomes your emergency exit strategy.

Imagine you’re halfway through a major infrastructure project, and suddenly there’s a devastating flood—or a prolonged embargo or political unrest. Work halts. Supplies can’t reach the site. Your crew is stranded. Deadlines become meaningless. Weeks turn into months. Now what?

That’s where Clause 18.5 steps in like a contractual parachute. 🪂

This clause provides a mutual right—for either the Employer or the Contractor—to terminate the Contract if performance becomes impracticable due to an exceptional, long-lasting event beyond anyone’s control.

Let’s break that down 👇

🤝 It’s all about balanced risk and contractual closure

What makes Clause 18.5 so important is that it’s not about breach or fault. There’s no “bad guy” here. No one’s suing for damages.

It recognizes:

• ✅ Sometimes, despite everyone’s best intentions, nature, geopolitics, or market forces can render performance impossible.
• ✅ Neither Party should be forced to soldier on endlessly in hopes the situation might improve someday.
• ✅ Everyone deserves a fair shake—especially when the delay is completely outside their control.

🎯 Why does this clause exist?

It addresses a very human, very real dilemma:

❓ How long should a Contractor be expected to “wait it out” when a tsunami, war, or pandemic derails the job?
❓ Should the Employer be contractually stuck, paying standby costs, even though progress is paralyzed by uncontrollable external forces?

This clause answers both with: “Not forever. You’re allowed to walk away—fairly and legally.”

So instead of having two parties endlessly locked in an expensive, helpless, and frustrating limbo, Clause 18.5 provides a clear-cut path to bring things to a dignified, balanced end when delays due to Exceptional Events become too prolonged to bear.

⚖️ Who benefits from this clause?

Both Parties. That’s key.

• Contractor’s perspective:
  • Avoids ruinous financial strain during long downtimes.
  • Provides compensation for what’s been done (partial payment, demobilization).
  • Allows the team to reallocate resources, regroup, and survive.
• Employer’s perspective:
  • Offers clean disengagement without being bound to continued standby obligations.
  • Avoids drawn-out contractual limbo or disputes about delay responsibility.
  • Provides flexibility to reassess project strategy, funding, or timing.

In a nutshell: It’s your contractual “break glass in case of emergency” clause. 💥🚪

✅ What does it not do?

• It doesn’t create a free-for-all to exit the contract at the first sign of rain. 🌧️
• It doesn’t permit termination for convenience or due to economic dissatisfaction. (That’s a different clause—see Clause 15.5 or 16.2.)
• It doesn’t apply if the event has already ended. The event must still be continuing when the termination notice is issued.

🧠 Why did FIDIC include this clause?

Because the real world is unpredictable—and contracts, no matter how well-crafted, must allow for equitable off-ramps when external events bring things to a standstill.

And FIDIC, true to its Golden Principles, wants contracts to remain:

• Fair 🧑‍⚖️
• Balanced ⚖️
• Workable, even when the unthinkable happens.

Rather than risking acrimony or litigation over delays that are no one’s fault, Clause 18.5 lets you say:

“Hey, this isn’t working anymore—and it’s okay to admit that. Let’s close things out respectfully and move on.”

2️⃣ Breakdown of Clause 18.5 – Optional Termination 🔍

Let’s roll up our sleeves and dive deep into the machinery of Clause 18.5 in both the 📒 FIDIC 2017 and 📘 1999 Yellow Books. This clause is all about a party’s right to terminate the contract—not because of breach or default—but due to prolonged disruption caused by an Exceptional Event (formerly known as Force Majeure). Think of it as a mutual safety valve when things spiral way beyond anyone’s control.

📘 FIDIC Clause 18.5 – Optional Termination: Detailed Breakdown

📒 FIDIC 2017 – Clause 18.5 in Full Color 🎨

The 2017 version frames the termination right around durational thresholds triggered by an Exceptional Event—FIDIC’s updated term for force majeure-style situations.

So, what does it say? Here's the breakdown in plain speak:

🔹 Trigger Points:
Either Party (yes, both Employer and Contractor) can terminate the contract if:

• The Contractor is prevented from executing “all or a substantial part” of the Works for a continuous period of 84 days, or
• Work has been intermittently disrupted for multiple periods that add up to 140 days due to the Exceptional Event.

This design is pretty elegant, actually. It captures both total paralysis (84 days straight) and recurring chaos (140 days over time). Both can be equally damaging, and FIDIC acknowledges that.

🔸 But there’s a catch:
The Exceptional Event must still be ongoing at the time the termination notice is issued. This keeps things fair and prevents abuse of the clause once conditions have normalized.

🔹 Mechanism of Termination
Once the threshold is crossed and the event hasn’t resolved, either Party can give a Notice of Termination. The wording is precise: it must be a written Notice that clearly states the basis for invoking Clause 18.5.

🔹 What happens next? The contract dissolves—but not in chaos.

The Employer shall pay the Contractor for:

• 🌱 Work done up to the termination date
• 🏗️ Goods (Plant and Materials) already delivered, or ready for shipment
• 🧳 Reasonable costs of demobilization and return of personnel and equipment

No punitive damages. No blame. Just a clean commercial break with fair compensation for what’s already been done. 💸

📎 Cross-link Alert: This clause relies on Sub-Clause 18.4 for the calculation of consequences and ties into 18.6 (Release from Performance under the Law) in case legal doctrines like frustration apply.

📘 FIDIC 1999 – Clause 19.6 (its predecessor) 🕰️

Back in 1999, the FIDIC Yellow Book handled this concept under Clause 19.6, with very similar mechanics but slightly different packaging.

📌 The trigger events are practically identical:

• If Force Majeure prevents performance of all or a substantial part of the Works for:
  • A continuous period of 84 days, or
  • Multiple periods totaling 140 days

Then, again, either Party may issue a Notice of Termination.

🚨 Note: The 1999 version doesn’t explicitly require the Force Majeure to still be ongoing at the time of notice. This was a gray area—and a reason FIDIC improved clarity in 2017. The new edition fixed the loophole by saying “provided the Exceptional Event is continuing.”

📋 The consequences of termination are mostly the same:

• Payment for work done
• Value of Goods ordered and delivered or ready for shipment
• Reasonable demobilization costs

And then, the cherry on top: both Parties are released from further obligations (except for those surviving beyond termination, like dispute resolution or IP rights).

🧠 Key Takeaways from the Comparison:

3️⃣ Key Interpretations and Implications – Breaking Down the Big Stuff 🎯

❓What exactly is this clause saying?

Imagine this: you're on site, contracts in hand, crews mobilized... and then something massive and totally beyond anyone’s control hits. Think: a natural disaster, a war outbreak, a government embargo—something that cripples project execution.

Now here's the kicker: what if this situation doesn’t go away?

That’s where Clause 18.5 (📒 2017) and its older cousin Clause 19.6 (📘 1999) step in. These clauses are your contractual off-ramp when you're stuck in a no-win scenario created by what FIDIC calls an Exceptional Event (or Force Majeure in the 1999 edition).

So what are the exact triggers? 🤔

⏳ The Two Big Time-Based Triggers

In both the 1999 and 2017 versions, either Party may initiate termination if:

1. 😩 The Contractor has been unable to carry out all (or a substantial part) of the Works for a continuous period of 84 days, because of the Exceptional Event; OR
2. ⏱️ There have been multiple periods of suspension due to the event, and those add up to more than 140 days total.

It’s basically saying: “Look, we’ve tried. We’ve waited. It’s just not happening. Let’s end this thing fairly.”

🚧 What’s a “substantial part” of the Works?

Ah, here's the gray area... 🕵️‍♂️

FIDIC doesn’t give us a formula or percentage. It leaves “substantial” undefined, which means this can (and does) become a point of contention. Is it:

• 60% of the value of the Works?
• A critical-path system or package?
• A non-replaceable input?

That’s why Particular Conditions often define this term or clarify it using measurable indicators (e.g., “any work package valued at more than 20% of the Accepted Contract Amount”).

Without clarification, it’s up to the Engineer or ultimately the DAAB/arbitrator to decide if the delay qualifies. Risky terrain, right?

🧠 Why does this matter?

Think about the alternative: you're contractually stuck in a loop of non-performance, costs are stacking up, frustration builds—and worst of all, no one's at fault. This clause protects both sides from that kind of legal and financial limbo.

But here’s the nuance: this is optional, not automatic. Either party can initiate termination once these time thresholds are crossed, but they don’t have to. It's about commercial judgment—sometimes it’s worth waiting, sometimes it’s not.

And let’s not forget: at the moment you exercise the right, the Exceptional Event must still be ongoing. You can’t wait for things to get better, then retroactively terminate.

💰 So what’s the Contractor entitled to upon termination?

Let’s talk dollars (and sense). 💵

Upon valid termination under this clause, the Contractor is not punished, but also doesn’t walk away with a windfall. Here's what they get:

1. ✅ Payment for work done up to the termination date (measured and valued in accordance with Clause 14).
2. 🚚 Value of Plant and Materials that are already delivered or manufactured for the Works and are intended for incorporation.
3. 🛫 Demobilization costs – basically, the cost of wrapping up responsibly: dismantling site facilities, removing staff and equipment, and dealing with final logistics.

📒 FIDIC 2017 is very intentional in avoiding “profit on works not done.” This is not a termination for convenience, where lost profit might be claimable. Instead, it reflects that no one’s at fault—it’s a “fair winding-up.”

⚖️ Wait—does this overlap with other clauses?

Absolutely—and this is where FIDIC’s cross-clause logic really shines. 🌐

• 🔗 Sub-Clause 18.1 defines what counts as an Exceptional Event—the trigger for everything that follows.
• 🔄 Sub-Clause 18.4 outlines consequences like EOT and Cost, before termination is even considered.
• 🧯 Sub-Clause 18.6 talks about legal frustration or “release from performance” under applicable law—your final safety valve if things are legally impossible.

Together, these three—18.4, 18.5, and 18.6—form a three-step exit system:

Step 1: Try to push through it (Clause 18.4)
Step 2: If it’s too long, walk away with dignity (Clause 18.5)
Step 3: If performance is literally illegal or impossible under law, be released (Clause 18.6)

📘 The 1999 version mirrors this sequence but uses older language like “Force Majeure” instead of “Exceptional Event.”

👀 Can either Party trigger it?

Yes! That’s what makes this clause so equitable. 🤝

• The Contractor can initiate termination if they’ve been unable to perform for the required period.
• The Employer can do the same—especially useful if the delay is creating financing issues, logistics breakdowns, or supply chain nightmares.

However, in real-world practice, it’s more common for the Contractor to trigger it, because they’re the ones with boots on the ground being directly impacted.

🤖 What does this say about risk?

At its heart, this clause reinforces FIDIC’s Golden Principle GP3:

“The allocation of risks should be clear and balanced.”

By letting either side walk away after long disruption, without penalty, Clause 18.5 preserves fairness and prevents either party from being dragged down by events beyond their control.

And with no profit on unperformed works, it also discourages opportunistic terminations. It’s all about keeping it clean, fair, and focused on actual performance.

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.

🔗 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

5️⃣ What If Scenarios? 🏗️💭

Scenario 1:

A regional earthquake destroys key transport infrastructure, halting material supply. The Contractor can’t proceed for 90 days.

✅ This qualifies under Clause 18.5. Either party could terminate. The Contractor gets paid for completed work, materials ready for shipment, and reasonable demobilization.

Scenario 2:

An embargo is imposed on high-tech equipment required for plant commissioning, causing intermittent but severe delays totaling 145 days.

✅ This qualifies as cumulative disruption. Again, termination is optional—both parties may evaluate commercial implications before proceeding.

Scenario 3:

A storm delays one activity for 70 days, then subsides. Work resumes, but later a separate unrelated event causes another 75-day disruption.

❓Can it be argued the clause is triggered?

➡️ Possibly not, unless the disrupted work is on the same “substantial part of the Works.” The Engineer’s judgment and claim substantiation are key.

6️⃣ Suggestions for Clarity and Improvement ✍️

• Define what constitutes “substantial part of the Works” with examples or thresholds in the Particular Conditions.
• Include procedural guidance on how termination notices must be delivered and acknowledged.
• Clarify how plant already paid for is dealt with (e.g., who owns it? delivery terms?).

These refinements would reduce disputes post-termination.

7️⃣ Final Takeaways ✅

• Clause 18.5 is a vital risk escape hatch: a graceful way out when events make further contract performance unviable.
• The 84-day/140-day test ensures it's not invoked lightly.
• FIDIC 2017 improves clarity and links the clause more explicitly with broader legal and contractual consequences.
• Use this clause in drafting Particular Conditions to define thresholds and procedures with even more precision.

Detailed Explanation of the Process Flowchart for Implementing Clause 19.6

1. Force Majeure Event Occurs: The process initiates when a Force Majeure event, such as a natural disaster or political unrest, significantly impacts the project.
2. 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.
3. 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.
4. 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.
5. Termination Takes Effect:
   • Effective Date: The contract termination becomes effective 7 days after issuing the notice, marking a significant transition in project status.
6. 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.
7. 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.
8. Issue Payment Certificate:
   • Final Settlement: A Payment Certificate is issued based on the Engineer's determination, finalizing the financial aspects of the contract termination.