Clause 2.3: Instructions and Determinations under Main Contract is a pivotal provision in the FIDIC Yellow Book of Conditions of Subcontract for Plant and Design-Build (2019 Edition). This clause outlines the Subcontractor’s obligations concerning instructions and determinations issued by the Engineer under the Main Contract (MC). It ensures that the Subcontractor aligns its actions with directives that impact the Subcontract Works, even if such instructions were not validly given under the MC. Clause 2.3 also delineates the protocol when the Subcontractor receives direct instructions from the Employer or the Engineer, emphasizing the necessity for these to be confirmed as a Contractor’s Instruction before compliance. By establishing clear guidelines, this clause fosters effective communication and coordination among all parties, thereby facilitating the smooth execution of the project.
Reference: FIDIC Yellow Book 2019 Conditions of Subcontract for Plant and Design-Build & FIDIC Yellow Book 1999 Conditions of Contract for Plant and Design-Build
Key Components and Definitions
Compliance with Engineer’s Instructions: The clause mandates that the Subcontractor must “comply with all instructions and determinations of the Engineer which are notified to him as a Contractor’s Instruction, irrespective of whether the instructions and determinations were validly given under the Main Contract.” This means the Subcontractor is bound to follow instructions relayed by the Contractor, even if there’s a question about their validity under the MC.
Subject to Sub-Clause 3.1 [Contractor’s Instructions]: The obligation to comply is “subject to Sub-Clause 3.1 [Contractor’s Instructions],” which specifies that the Subcontractor shall take instructions only from the Contractor’s Subcontract Representative. This underscores the chain of command and communication protocol within the contractual relationship.
The Subcontractor shall take instructions only from the Contractor’s Subcontract Representative who shall have the authority in relation to the Subcontract Works to give instructions as the Engineer has under Main Contract Clause 3.3 [Instructions of the Engineer]. The Subcontractor shall comply with all instructions, given or confirmed in writing , of the Contractor’s Subcontract Representative on any matter related to the Subcontract.
Provided that any instruction of the Contractor’s Subcontract Representative shall be effective for the purposes of the Subcontract only if it is given or confirmed in writing and it expressly states that it is an instruction given in accordance with this Sub-Clause.
Direct Instructions from Employer or Engineer: Clause 2.3: Instructions and Determinations under Main Contract
The Subcontractor shall, in relation to the Subcontract Works, comply with all instructions and determinations of the Engineer which are notified to him as a Contractor’s Instruction, irrespective of whether the instructions and determinations were validly given under the Main Contract. This obligation shall be subject to Sub-Clause 3.1 [Contractor’s Instructions]. If the Subcontractor shall receive any direct instruction from the Employer or the Engineer:
- Immediate Notification: “He shall immediately inform the Contractor’s Subcontract Representative and shall supply him with a copy of the direct instruction if given in writing.” This ensures that the Contractor is aware of any directives that may affect the Subcontract Works.
- No Obligation to Comply Until Confirmed: “He shall have no obligation to comply with any such direct instruction unless and until it has been confirmed in writing as a Contractor’s Instruction.” This protects the Subcontractor from acting on unendorsed instructions that may conflict with contractual obligations.
Subcontract Variations: If an instruction or determination constitutes a Subcontract Variation, “Clause 13 [Subcontract Variations and Adjustments]” applies. This means adjustments to the Subcontract Price or schedule may be warranted, and procedures outlined in Clause 13 must be followed.
Interaction with Clause 3.1 [Contractor’s Instructions]: Clause 2.3 is intrinsically linked to Clause 3.1, which states that “the Subcontractor shall take instructions only from the Contractor’s Subcontract Representative who shall have the like authority in relation to the Subcontract Works to give instructions as the Engineer has under MC Clause 3.3 [Instructions of the Engineer].” This establishes that the Subcontractor’s primary point of contact for instructions is the Contractor’s designated representative.
Key Definitions:
- Subcontractor: The party responsible for executing the Subcontract Works.
- Contractor’s Instruction: A directive issued by the Contractor’s Subcontract Representative that the Subcontractor is obliged to follow.
- Engineer: The individual or entity appointed under the MC to supervise and administer the Main Works.
- Subcontract Variation: A change to the Subcontract Works as defined in Clause 13 [Subcontract Variations and Adjustments].
Interactions with Other Clauses:
- Clause 13 [Subcontract Variations and Adjustments]: When an instruction leads to a Subcontract Variation, the procedures for valuation and adjustment of the Subcontract Price are governed by Clauses 13.1 to 13.3. For instance, Clause 13.2 [Valuation of Subcontract Variations] details how adjustments should be agreed upon and implemented.
- Main Contract Clause 3.3 [Instructions of the Engineer]: Referenced in Clause 3.1, it provides context on the Engineer’s authority, which the Contractor’s Subcontract Representative mirrors in relation to the Subcontract Works.
By adhering to these clauses, the Subcontractor ensures compliance with contractual obligations, maintains proper communication channels, and safeguards against unauthorized instructions that could impact the project’s scope or cost.
Challenges and Solutions
Challenges:
- Direct Instructions from Employer or Engineer: Subcontractors may inadvertently act on direct instructions from the Employer or Engineer without proper authorization, leading to contractual breaches or unapproved variations.Solution: The Subcontractor should implement a strict internal protocol to ensure that any direct instructions are immediately reported to the Contractor’s Subcontract Representative. Training staff on contractual obligations and communication procedures can mitigate this risk.
- Validity of Instructions: Determining whether an instruction is valid under the Main Contract can be complex, especially if the instruction is contested between the Contractor and the Employer.Solution: The Subcontractor should focus on the requirement to comply with instructions notified as Contractor’s Instructions, as per Clause 2.3. This shifts the responsibility of validating instructions to the Contractor, ensuring the Subcontractor operates within its contractual scope.
- Subcontract Variations and Adjustments: Unclear processes for handling variations can lead to disputes over pricing and scheduling adjustments.Solution: Adhering to the procedures in Clause 13 ensures that any variations are properly documented, valued, and agreed upon. The Subcontractor should proactively engage with the Contractor when variations arise to reach timely agreements on adjustments.
Interaction with Other Clauses:
- Clause 13.1 [Variation of Subcontract Works]: When an instruction constitutes a variation, the Subcontractor must execute the work as per the Contractor’s Instruction. However, if the Subcontractor believes the variation affects safety, suitability, or guarantees (as per points (i) to (iii) in Clause 13.1), they must “promptly give notice” to the Contractor.
- Clause 13.2 [Valuation of Subcontract Variations]: Challenges may arise in agreeing on the valuation of variations. The clause provides that if agreement isn’t reached, “the Contractor shall make a fair decision” considering all relevant circumstances.
Best Practices:
- Effective Communication: Maintain open lines of communication with the Contractor’s Subcontract Representative to clarify instructions and their implications promptly.
- Documentation: Keep meticulous records of all instructions, notices, and communications. This is crucial for resolving disputes and ensuring compliance with contractual obligations.
- Understanding Contractual Hierarchies: Recognize the importance of following the proper chain of command as stipulated in the contract to avoid unauthorized work or deviations from the agreed scope.
- Legal and Regulatory Compliance: Ensure that all actions comply not only with contractual requirements but also with applicable international standards, building codes, and environmental laws.
By proactively addressing these challenges and adhering to the stipulated clauses, the Subcontractor can navigate the complexities of instructions and determinations effectively, minimizing risks and fostering a collaborative project environment.
