Purpose:
The primary aim of Clause 17.3 is to identify and allocate specific risks to the Employer. These are situations or events for which the Employer will be responsible, and they generally fall outside the Contractor’s control.
Implications:
Liability Shift: The clause explicitly places the responsibility on the Employer for certain risks, irrespective of the Contractor’s involvement. This means that, should any of these events occur, the Employer bears the cost or consequences, and the Contractor is not held liable.
Financial Impact: If any of these events occur and cause damage or delay to the works, the Employer may be liable for additional payments or extensions of time to the Contractor.
Primary Aspects:
War and Hostilities: Any form of conflict, declared or not, is under the Employer’s risks. This is especially crucial in regions where political instability is prevalent. For instance, defense contracts in volatile regions of the U.S. or overseas might have implications under this clause.
Civil Disturbances: Risks like rebellion, terrorism, and civil war are significant, especially in areas with ongoing civil unrest.
Natural Disasters: The clause emphasizes the unpredictability of nature. The U.S., being prone to natural disasters like hurricanes in Florida or earthquakes in California, must factor these risks, especially in large infrastructure projects.
Design Flaws: If the Employer’s personnel or its agents design a part of the work and this design is flawed, the Employer bears the responsibility.
U.S. Specifics:
In the U.S., building codes such as the International Building Code (IBC) or local state codes account for many risks, including natural disasters. For instance, buildings in San Francisco are designed considering seismic activities, while Miami’s codes focus on hurricane resistance.
Environmental laws, like the National Environmental Policy Act (NEPA), also play a role. For instance, if the Employer mandates a specific construction method that violates NEPA, and this leads to delays, the Employer would bear the associated risks.
Expert Opinion:
Legal and construction experts opine that Clause 17.3 is crucial in defining the boundary of risk allocation. It is a protective shield for Contractors, ensuring they aren’t unfairly burdened with unforeseen or uncontrollable events. However, understanding the specifics of each risk and ensuring clear documentation is paramount.
Clause 17.3 Employer's Risks Interactions:
With Sub-Clause 17.4:
- As mentioned in Clause 17.3, the risks listed are referred to in Sub-Clause 17.4. This means that any consequences arising from these risks will be dealt with as per the provisions of Sub-Clause 17.4, which typically relates to consequences of Employer’s Risks and might deal with issues like insurance, compensation, and other related matters.
With Clause 4.6 Co-operation:
- Clause 17.3 mentions civil commotion or disorder caused by anyone other than the Contractor’s Personnel. This interacts with Clause 4.6, which emphasizes the importance of co-operation between the Contractor and Employer’s personnel. If there’s any disruption caused by the Contractor’s personnel, it would not fall under Employer’s risks.
With Clause 4.18 Protection of the Environment:
- If any environmental damage is caused due to reasons listed under Clause 17.3, such as natural disasters, the Employer bears the risk. However, Clause 4.18 mandates that the Contractor must take all reasonable steps to protect the environment. If the Contractor’s negligence in environmental protection exacerbates damage from a natural disaster, the interaction between these clauses will determine liability.
With Clause 15.2 Termination by Employer:
- Clause 17.3 shields the Contractor from certain risks. If the Employer tries to terminate the contract based on delays or damages arising from these risks, Clause 15.2 comes into play. The Contractor can reference Clause 17.3 to argue against unfair termination.
With Clause 2.5 Employer’s Claims:
- If damages or delays occur due to reasons listed under Clause 17.3, and the Employer tries to make a claim against the Contractor, Clause 2.5 would be the mechanism for making such a claim. However, Clause 17.3 would serve as a defense for the Contractor against such claims.
With Clause 13 Variations and Adjustments:
- If the Employer’s risks materialize, leading to a need for variations in the work, then Clause 13 comes into play. It provides the procedure for handling variations, including cost adjustments. The Contractor can cite Clause 17.3 to argue for compensation for any additional work or costs arising from these risks.
Flowchart
Detailed Explanation:
Start: Consequences of Employer’s Risks – This is the beginning of the process, where the potential consequences of the risks listed in Clause 17.3 are considered.
Has any risk from Clause 17.3 resulted in loss/damage? – This decision point determines if any of the risks specified in Clause 17.3 have caused loss or damage to the Works, Goods, or Contractor’s Documents.
Contractor gives notice to Engineer – If there’s a loss or damage due to the risks, the Contractor promptly informs the Engineer about it.
Contractor rectifies loss/damage as per Engineer’s instructions – After notifying the Engineer, the Contractor proceeds to rectify the loss or damage based on the Engineer’s guidance.
Does Contractor suffer delay or incur cost? – This decision point checks if the Contractor has experienced any delays or incurred additional costs while rectifying the loss or damage.
Contractor gives further notice to Engineer – If the Contractor has suffered delays or incurred costs, they provide another notice to the Engineer detailing these issues.
Contractor claims extension of time under 8.4 – As a result of the delays, the Contractor can claim an extension of time as per Sub-Clause 8.4.
Contractor claims payment of cost – If there are additional costs incurred, the Contractor claims payment for these costs.
Engineer proceeds with 3.5 Determination – After receiving the Contractor’s claims, the Engineer proceeds with the determination process as outlined in Sub-Clause 3.5 to agree or determine the matters related to the extension of time and payment of costs.
End – This marks the conclusion of the process related to the consequences of the Employer’s risks.
Start: Clause 17.3 Employer’s Risks: This is the commencement of the flowchart, representing the risks that are the responsibility of the Employer.
War and Hostilities: This category includes risks such as war, invasion, and acts by foreign enemies.
Internal Conflicts: This encompasses risks like rebellion, terrorism, revolution, and other similar internal disturbances.
Civil Unrest: Risks under this category involve riots, commotions, and disorders within the country.
Explosives and Radiation: This includes risks related to munitions of war, explosive materials, and radiation, except those attributable to the Contractor’s use.
Sonic Pressure Waves: This risk pertains to pressure waves caused by aircraft or other aerial devices traveling at sonic or supersonic speeds.
Use of Permanent Works: This risk arises from the use or occupation by the Employer of any part of the Permanent Works not specified in the Contract.
Design Risks: Risks related to the design of any part of the Works by the Employer’s Personnel or others for whom the Employer is responsible.
Unforeseeable Natural Forces: This category includes any operation of the forces of nature that is unforeseeable or against which an experienced contractor could not reasonably have been expected to take adequate preventative precautions.
Main Points to Keep in Mind for Clause 17.3 Employer's Risks
- Defined Risks: The clause explicitly lists the risks deemed as the Employer’s, providing a clear delineation. Risks not mentioned here might be shouldered by the Contractor unless specified otherwise elsewhere.
- Geographical Consideration: Several risks are confined to events “within the Country,” emphasizing the importance of geographical boundaries.
- Contractor’s Exclusion: Risks arising from actions or negligence of the Contractor’s Personnel and other employees are not included.
- Natural Forces: The clause covers unforeseeable natural events that an experienced contractor couldn’t have reasonably prepared for.
- Design Risks: Any risks emerging from the design of the Works by the Employer’s Personnel or those the Employer is responsible for fall under this clause.
- Employer’s Occupation: Risks arising from the Employer’s use or occupation of any part of the Permanent Works are included, except as specified in the Contract.
Real-World Instances and Case Studies
Natural Disaster in California:
- Scenario: A construction firm was contracted to build a bridge in California. Midway through the construction, a major earthquake struck, causing significant damage to the already erected parts of the bridge.
- Application: Referencing Clause 17.3, the damages due to the earthquake, an unforeseeable natural event, were deemed the Employer’s risk. The contractor was not held liable for the damages or delays resulting from the earthquake.
Riots in New York:
- Scenario: While constructing a commercial building in New York, unexpected riots and civil commotion disrupted the city, causing damages to the construction materials on-site.
- Application: Since the disturbances were by people other than the Contractor’s Personnel, the risks associated with the damages due to the riots were borne by the Employer, as per Clause 17.3.
Nuclear Power Plant in Texas:
- Scenario: A contractor was building infrastructure around a nuclear power plant. Due to an unrelated incident, there was a minor leak of ionizing radiation from the plant, affecting the construction site.
- Application: Clause 17.3 covers risks from ionizing radiation, provided it’s not due to the Contractor’s actions. In this case, the Contractor was not held responsible for delays or protective measures they had to undertake.
Bridge Design Flaw in Florida:
- Scenario: A bridge, designed by the Employer’s personnel, started showing signs of structural weaknesses during its construction phase.
- Application: Since the design flaw originated from the Employer’s side and it’s covered under Clause 17.3, the Contractor was not liable for the rectifications needed, and any costs associated with the design flaw were borne by the Employer.
Sample Letters
Given the nature of Clause 17.3 Employer’s Risks, the following scenarios could arise that would require communication:
- Notification of a Risk Event Occurrence.
- Request for a Clarification on Risk Responsibility.
- Reporting Damages from a Defined Risk.
- Demand for Remedial Action Based on Clause 17.3.
1. Notification of a Risk Event Occurrence
[Your Company Name] [Address] [City, State, Zip Code] [Date]
[Employer’s Name/Company] [Address] [City, State, Zip Code]
Subject: Notification of [Specific Risk Event] Impacting Construction Project
Dear [Employer’s Name/Title],
We are writing to formally notify you of a recent event, specifically [describe the risk event, e.g., “a major earthquake”], that has impacted the construction project located at [Project Address].
As per Clause 17.3 Employer’s Risks of our signed agreement, this event falls under the defined risks that are the responsibility of the Employer.
We are currently assessing the extent of the damage and any potential delays in the project timeline. We will keep you updated as we gather more information.
Thank you for your understanding and cooperation.
Sincerely,
[Your Name] [Your Position] [Contact Information]
2. Request for a Clarification on Risk Responsibility
[Your Company Name] [Address] [City, State, Zip Code] [Date]
[Employer’s Name/Company] [Address] [City, State, Zip Code]
Subject: Clarification on Risk Responsibility for [Specific Event/Issue]
Dear [Employer’s Name/Title],
We are seeking clarification regarding the responsibility for [specific event/issue] that has recently arisen in the [Project Name/Location].
Could you please confirm if this is covered under Clause 17.3 Employer’s Risks? We believe that this might fall under the defined risks borne by the Employer, but we want to ensure alignment and understanding between both parties.
Looking forward to your prompt response.
Best Regards,
[Your Name] [Your Position] [Contact Information]
3. Reporting Damages from a Defined Risk
[Your Company Name] [Address] [City, State, Zip Code] [Date]
[Employer’s Name/Company] [Address] [City, State, Zip Code]
Subject: Reporting Damages from [Specific Risk Event, e.g., “Riots”]
Dear [Employer’s Name/Title],
I regret to inform you that the construction site at [Project Address] has incurred damages due to [specific risk event]. Based on our initial assessment, the damages include [list out damages].
Given that this event falls under Clause 17.3 Employer’s Risks, we would appreciate your guidance on the next steps and any necessary coordination.
Thank you for your attention to this matter.
Warm Regards,
[Your Name] [Your Position] [Contact Information]
4. Demand for Remedial Action Based on Clause 17.3
[Your Company Name] [Address] [City, State, Zip Code] [Date]
[Employer’s Name/Company] [Address] [City, State, Zip Code]
Subject: Request for Remedial Action Due to [Specific Risk Event]
Dear [Employer’s Name/Title],
Following the recent [specific risk event], which, as per Clause 17.3 Employer’s Risks, is the responsibility of the Employer, we kindly request immediate remedial actions.
The damages sustained have severely impacted the project’s progress, and we believe timely intervention is crucial to get the project back on track.
Please advise on the necessary steps to address this situation and ensure the project’s smooth continuation.
Thank you for your urgent attention to this matter.
Best,
[Your Name] [Your Position] [Contact Information]
Checklists
1. Checklist for Proficient Execution and Deployment of [CLAUSE]
| # | Task | Responsible Party | Done (✓/✗) |
|---|---|---|---|
| 1 | Review Clause 17.3 in detail | Project Manager | |
| 2 | Identify and list potential risks as per Clause 17.3 | Risk Assessment Team | |
| 3 | Coordinate with legal team for interpretations | Legal Team | |
| 4 | Update project documentation with identified risks | Documentation Team | |
| 5 | Conduct training for site personnel on identified risks | Training Team | |
| 6 | Develop a risk response plan | Risk Management Team | |
| 7 | Regularly review and update risks based on project progress | Project Manager |
2. Checklist to Assist in Applying and Overseeing [CLAUSE]
| # | Task | Responsible Party | Done (✓/✗) |
|---|---|---|---|
| 1 | Ensure Clause 17.3 is clearly communicated to all stakeholders | Communications Team | |
| 2 | Set up a mechanism to report any risk occurrence | Reporting Team | |
| 3 | Create a log to document all identified risks and their status | Documentation Team | |
| 4 | Regularly review the risk log and update as necessary | Risk Management Team | |
| 5 | Conduct monthly meetings to discuss and assess risks | Project Manager | |
| 6 | Collaborate with third-party entities to mitigate risks | External Relations Team |
3. Checklist to Guide and Monitor the Execution of [CLAUSE]
| # | Task | Responsible Party | Done (✓/✗) |
|---|---|---|---|
| 1 | Monitor the site for occurrences of Clause 17.3 specified risks | Site Supervisor | |
| 2 | Immediately report any risk occurrence to the Project Manager | Site Personnel | |
| 3 | Document the details and impact of the risk occurrence | Documentation Team | |
| 4 | Assess the financial and timeline implications of the risk | Financial Team | |
| 5 | Ensure effective communication to all stakeholders post-risk occurrence | Communications Team | |
| 6 | Review and adjust project timelines if necessary | Project Manager | |
| 7 | Conduct a post-risk analysis to identify lessons learned | Risk Management Team |
Frequently Asked Questions (FAQs) for Clause 17.3 Employer's Risks
1. What is the primary purpose of Clause 17.3?
- Clause 17.3 lists specific risks that are deemed to be the responsibility of the Employer, ensuring that these are not borne by the Contractor.
2. Does Clause 17.3 cover all potential risks on a project?
- No, it only covers specific risks as detailed within the clause. Any risk not mentioned is typically the responsibility of the Contractor unless stated otherwise elsewhere in the contract.
3. How does Clause 17.3 interact with insurance provisions?
- While the clause determines responsibility, it doesn’t specify insurance provisions. Insurance matters are usually covered in separate clauses, but it’s essential to ensure that the Employer’s insurance covers the risks mentioned in Clause 17.3.
4. If a risk event occurs that is mentioned in Clause 17.3, does it mean the Contractor is completely free of responsibility?
- Not necessarily. While the Employer assumes the primary risk, the Contractor must still adhere to the contract’s terms and take reasonable precautions.
5. Can Clause 17.3 be modified or tailored for specific projects?
- Yes, like any other clause in the FIDIC contract, parties can negotiate and modify it to suit the project’s specific requirements.
Common Misunderstandings
1. Assumption that Clause 17.3 Covers All Risks:
- Some may wrongly assume that all risks not expressly mentioned elsewhere in the contract are covered by Clause 17.3. However, it only covers specific risks listed within it.
2. Confusion with Insurance Clauses:
- There’s often confusion between risk responsibility and insurance coverage. Just because a risk is the responsibility of the Employer doesn’t automatically mean it’s insured. It’s crucial to reference the contract’s insurance clauses.
3. Overlooking “Unforeseeable” Nature of Some Risks:
- The term “Unforeseeable” in relation to natural forces can sometimes be misinterpreted. It’s essential to understand that it refers to events that an experienced contractor couldn’t reasonably have anticipated or taken precautions against.
4. Misinterpreting Delegation of Risks:
- Some parties may think that if a risk is the Employer’s responsibility, the Contractor has no duties at all. However, the Contractor still has obligations, such as notifying the Employer of the occurrence of a risk event.
5. Assuming Inclusivity of All External Risks:
- There might be an assumption that all external or force majeure events are covered under Clause 17.3. However, only those expressly mentioned in the clause are the Employer’s responsibility.
Related posts:
Understanding Clause 12.3 Retesting in FIDIC Yellow Book 1999: What You Need to Know
Understanding Clause 17.1 Indemnities in FIDIC Yellow Book
Understanding Clause 17.2 Contractor’s Care of the Works: Comprehensive Guide
Unleashing the Secrets of FIDIC Contracts: Comprehensive Guide to Clause 2.1 – Right of Access to the Site
Powered by YARPP.
