International Construction Contract Law 2e

<p>About the Author xxiii</p>
<p>Foreword xxv<br />Svend Poulsen</p>
<p>Acknowledgments xxvii</p>
<p>Introductory Remarks xxix<br />Shuibo Zhang</p>
<p>Introductory Remarks xxxi<br />RobertWerth</p>
<p>Introductory Remarks xxxiii<br />Ilya Nikiforov</p>
<p>1 International Construction Projects 1</p>
<p>1.1 The unique nature of the construction industry 1</p>
<p>1.2 Individuality of construction projects 1</p>
<p>1.3 Roles and relationships 2</p>
<p>1.4 Contract administration:The Engineer 4</p>
<p>1.5 Further important aspects of construction projects 11</p>
<p>1.6 Typical contractual relationships 12</p>
<p>1.7 Motivation for international business 15</p>
<p>1.8 Managerial analysis 20</p>
<p>1.9 Hazards and risks 21</p>
<p>1.10 Hazard identification 21</p>
<p>1.11 Risk analysis 22</p>
<p>1.12 Anti–risk measures 22</p>
<p>1.13 Typical hazards in the international construction business 23</p>
<p>1.14 Risk allocation in contracts 35</p>
<p>1.15 Form of Business Organization 42</p>
<p>2 Civil Law and Common Law 55</p>
<p>2.1 Specifics of the governing law 55</p>
<p>2.2 Common law versus civil law:Differences and interconnections 55</p>
<p>2.3 Delay damages (liquidated damages) versus contractual penalty 59</p>
<p>2.4 Substantial completion versus performance 76</p>
<p>2.5 Binding nature of adjudication awards 78</p>
<p>2.7 Lapse of claim due to its late notification (time bars) 79</p>
<p>2.8 Allocation of unforeseeable and uncontrollable risk to the contractor 80</p>
<p>2.9 Contract administration (the Engineer s neutrality and duty to certify) 90</p>
<p>2.10 Termination in convenience 90</p>
<p>2.11 Time–related issues 93</p>
<p>2.12 Quantification of claims 94</p>
<p>2.13 Statutory defects liability 95</p>
<p>2.14 Performance responsibility: Reasonable skill and care versus fitness for purpose 95</p>
<p>2.15 Common law, civil law, and Sharia interconnections 96</p>
<p>3 Common DeliveryMethods 102</p>
<p>3.1 Common delivery methods: Main features 102</p>
<p>3.2 General contracting 104</p>
<p>3.3 Design–build 105</p>
<p>3.4 Construction management 131</p>
<p>3.5 Multiple–prime contracts 138</p>
<p>3.6 Partnering 138</p>
<p>3.7 Alliancing 140</p>
<p>3.8 Extended delivery methods (PPP, BOT, DBO) 143</p>
<p>3.9 Further aspects of delivery methods 153</p>
<p>4 Specifics of EPC and EPCM 172</p>
<p>4.1 EPC and EPCM 172</p>
<p>4.2 Engineer procure construct (EPC) 172</p>
<p>4.3 Bespoke EPC contracts 177</p>
<p>4.4 Turnkey EPC contracts 185</p>
<p>4.5 Front end engineering design 188</p>
<p>4.6 Engineer procure construction management (EPCM) 192</p>
<p>4.7 EPC versus EPCM 200</p>
<p>5 Unification and Standardization in International Construction 215</p>
<p>5.1 Unification of contracts 215</p>
<p>5.2 Unification per law, principles, and sample documents 215</p>
<p>5.3 Lenders and their influence on unification 220</p>
<p>5.4 Standard form of contract in a governing law context 222</p>
<p>5.5 Purpose of sample documents in construction projects 222</p>
<p>5.6 Standard sample forms as a source of law 224</p>
<p>5.7 Lex causae 224</p>
<p>5.8 Interpretation 225</p>
<p>5.9 Trade usage and business custom 229</p>
<p>5.10 Lex constructionis principles 232</p>
<p>5.11 The use of lex constructionis 240</p>
<p>6 Price 244</p>
<p>6.1 Contract price 244</p>
<p>6.2 Bid pricing methods 247</p>
<p>6.3 Methods of contract price determination 248</p>
<p>6.4 Re–measurement 249</p>
<p>6.5 The lump sum 252</p>
<p>6.6 Cost plus 252</p>
<p>6.7 Guaranteed maximum price 253</p>
<p>6.8 Target price 253</p>
<p>6.9 Payment 254</p>
<p>6.10 Contract price under FIDIC forms 261</p>
<p>6.11 Cost overruns 263</p>
<p>6.12 Abnormally low tender (ALT) 264</p>
<p>6.13 Claims as part of contract price 273</p>
<p>6.13.1 Limitation and prescription periods for claims 273</p>
<p>6.14 Public procurement law limitations 273</p>
<p>7 Time 280</p>
<p>7.1 Time in construction 280</p>
<p>7.2 Delay 280</p>
<p>7.3 The United Kingdom society of construction law delay and disruption protocol 282</p>
<p>7.4 Time program 283</p>
<p>7.5 Ownership of floats 285</p>
<p>7.6 Time at large and extension of time (EOT) 298</p>
<p>7.7 Concurrent delay 300</p>
<p>7.8 Disruption 302</p>
<p>7.9 Time for completion under FIDIC forms 303</p>
<p>7.10 Time program under FIDIC forms 304</p>
<p>7.11 Delay and suspension under FIDIC forms 306</p>
<p>7.12 Contract termination under FIDIC forms 309</p>
<p>8 Variations 313</p>
<p>8.1 Variation clauses 313</p>
<p>8.2 Variations under FIDIC forms 315</p>
<p>8.3 Claims related to variations 319</p>
<p>8.4 Acceleration 329</p>
<p>8.5 Proving the acceleration claim 340</p>
<p>8.6 Substantial change 342</p>
<p>9 Claims 364</p>
<p>9.1 Claims 364</p>
<p>9.2 Contractor s claims under FIDIC forms 368</p>
<p>9.3 Employer s claims under FIDIC forms 369</p>
<p>9.4 Lapse of claim 377</p>
<p>9.5 Cause of the claim 378</p>
<p>9.6 Limits of the lapse of claim 379</p>
<p>10 ClaimManagement 395</p>
<p>10.1 Claim management 395</p>
<p>10.2 Claims for extension of time (EOT) 396</p>
<p>10.3 Claims for additional payment 398</p>
<p>10.4 Claims resulting from delay and/or disruption under the provisions of the contract 399</p>
<p>10.5 Claims resulting from governing law 424</p>
<p>10.6 Global claims 425</p>
<p>10.7 Contractor s claim management under FIDIC forms 429</p>
<p>10.8 Employer s claim management under FIDIC forms 431</p>
<p>10.9 Intercultural aspects 432</p>
<p>10.10 Claim management implementation 436</p>
<p>11 Construction Dispute Boards 442</p>
<p>11.1 Construction disputes 442</p>
<p>11.2 Dispute boards 444</p>
<p>11.3 Contractual adjudication: The use of DAB in FIDIC forms 454</p>
<p>11.4 Enforcement of dispute board decisions 465</p>
<p>11.5 Statutory adjudication 471</p>
<p>12 FIDIC 485</p>
<p>12.1 FIDIC expansion 485</p>
<p>12.2 FIDIC 487</p>
<p>12.3 FIDIC s influence on the construction industry 488</p>
<p>12.4 FIDIC membership 488</p>
<p>12.5 Networking activities 489</p>
<p>12.6 FIDIC forms of contract 523</p>
<p>12.7 The structure of the contract under FIDIC forms 527</p>
<p>12.8 Conditions of contract for construction (CONS) 1999 Red Book 530</p>
<p>12.9 Conditions of contract for plant and design–build (P&amp;DB) 1999 Yellow Book 536</p>
<p>12.10 Conditions of contract for EPC/Turnkey projects (EPC) 1999 Silver Book 537</p>
<p>12.11 Short form of contract Green Book 538</p>
<p>12.12 Construction subcontract 538</p>
<p>12.13 Conditions of contract for design, build, and operate (DBO) Gold Book 540</p>
<p>12.14 Other FIDIC standard forms 548</p>
<p>12.15 Risk allocation under FIDIC forms 554</p>
<p>12.16 Design responsibility under FIDIC forms 567</p>
<p>13 Other Standard Forms of Construction Contracts: NEC, ICC, ENNA, IChemE, Orgalime, AIA, VOB 580</p>
<p>13.1 Common standard forms of construction contracts 580</p>
<p>13.2 The NEC (New Engineering Contract) 580</p>
<p>13.3 FIDIC forms versus NEC3 594</p>
<p>13.4 ICC forms of contract 597</p>
<p>13.5 ENAA forms of contract 597</p>
<p>13.6 IChemE forms of contract 598</p>
<p>13.7 Orgalime forms of contract 599</p>
<p>13.8 AIA forms of contract: U.S. standard 600</p>
<p>13.9 VOB: German standard 608</p>
<p>14 Risk and Insurance 623</p>
<p>14.1 Insurance in construction 623</p>
<p>14.2 Commercial risk, risk of damage, and exceptional risk 624</p>
<p>14.3 Risk management in the standard forms of contract 630</p>
<p>14.4 Hazards and risks in construction projects 632</p>
<p>14.5 Insurance requirements in standard forms of contract 640</p>
<p>14.6 Practical aspects of insurance in construction projects 652</p>
<p>14.7 International insurance law and insurance standards in the construction industry 655</p>
<p>15 Risk in Underground Construction 664</p>
<p>15.1 Underground construction hazards and risks 664</p>
<p>15.2 Code of practice for risk management of tunnel works 665</p>
<p>15.3 Alternatives of unforeseeable physical conditions risk allocation 667</p>
<p>15.4 Unforeseeability 684</p>
<p>15.5 Unforeseeability according to FIDIC forms 685</p>
<p>15.6 Site data 686</p>
<p>15.7 Sufficiency of the accepted contract amount 691</p>
<p>15.8 Unforeseeable physical conditions 692</p>
<p>15.9 Unforeseeable operation of the forces of nature 697</p>
<p>15.10 Force majeure 700</p>
<p>15.11 Release from performance under law 701</p>
<p>16 Securities 703</p>
<p>16.1 Securities in construction 703</p>
<p>16.2 Bank guarantees 704</p>
<p>16.3 Functions and parameters of bank guarantees 704</p>
<p>16.4 Specifics of retention guarantee 706</p>
<p>16.5 Governing law 709</p>
<p>16.6 ICC rules related to securities 712</p>
<p>16.7 Suretyship 712</p>
<p>16.8 Stand–by letter of credit 713</p>
<p>16.9 Securities under FIDIC forms 714</p>
<p>17 Civil EngineeringWorks: Infrastructure Construction Projects 716</p>
<p>17.1 Investments in developing countries 716</p>
<p>17.2 The approach to the risk allocation in the United States 717</p>
<p>17.3 The approach to the risk allocation in the United Kingdom 719</p>
<p>17.4 The approach to the risk allocation in Central and Eastern Europe 722</p>
<p>17.5 The polish experience 731</p>
<p>17.6 The czech experience 748</p>
<p>18 Building Construction: Health Care Facilities 756</p>
<p>18.1 Health care facility construction project 756</p>
<p>18.2 Pre–design planning phase 756</p>
<p>18.3 Design phase 757</p>
<p>18.4 Basic structure of a hospital 758</p>
<p>18.5 Efficiency and cost effectiveness 758</p>
<p>18.6 Flexibility and expandability 759</p>
<p>18.7 Therapeutic environment 759</p>
<p>18.8 Cleaning and maintenance 759</p>
<p>18.9 Controlled circulation and accessibility 760</p>
<p>18.10 Aesthetics 760</p>
<p>18.11 Health and safety 761</p>
<p>18.12 Use of information technology 761</p>
<p>18.13 Relevant regulations and standards 761</p>
<p>18.14 Health care facility construction project: Suitable delivery method 762</p>
<p>Appendix A: Interactive Exercises 766</p>
<p>A.1 Interactive exercise 1: Delivery method selection 766</p>
<p>A.1.1 Task 766</p>
<p>A.2 Interactive exercise 2: Claim for delayed site handover 767</p>
<p>A.2.1 Task 767</p>
<p>A.2.2 Time schedule (program) 768</p>
<p>A.2.3 Site handover procedure 768</p>
<p>A.2.4 Mobilization 768</p>
<p>A.2.5 Acceleration 768</p>
<p>A.2.6 Claims 768</p>
<p>A.3 Interactive exercise 3: Claim due to suspension of work 769</p>
<p>A.3.1 Task 769</p>
<p>A.3.2 Suspension 769</p>
<p>A.3.3 Mobilization 769</p>
<p>A.3.4 Claims 770</p>
<p>A.4 Interactive exercise 4: Subcontractor claim for contractor delay (lack of cooperation, inadequate on–site coordination and improper, unclear, and delayed instructions) 770</p>
<p>A.4.1 Task 770</p>
<p>A.4.2 Fact 1 Lack of cooperation 771</p>
<p>A.4.3 Fact 2 Inadequate on–site coordination 771</p>
<p>A.4.4 Fact 3 Improper, unclear, and delayed instructions 771</p>
<p>Appendix B: Sample Letters (Examples of Formal Notices) 772</p>
<p>B.1 Contractor s sample letters: Notice of probable future event 773</p>
<p>B.2 Contractor s sample letters: Notice of contractor s claims 774</p>
<p>B.3 Contractor s sample letters: Contractor s claim No.——————— submission (quantification) 776</p>
<p>B.4 Contractor s sample letters: Request for evidences of financial arrangements 777</p>
<p>B.5 Contractor s sample letters:Written confirmation of oral instruction 778</p>
<p>B.6 Contractor s sample letters: Notice of dissatisfaction with a determination of the engineer 779</p>
<p>B.7 Contractor s sample letters: Notice of contractor s entitlement to suspend work 780</p>
<p>B.8 Contractor s sample letters: Notice of contractor s claim under the sub–clause 16.1 781</p>
<p>B.9 Contractor s sample letters: Application for taking over certificate 782</p>
<p>B.10 Employer s sample letters: Notice of employer s claim 783</p>
<p>B.11 Employer s sample letters: Answer to request for evidence of financial arrangements 784</p>
<p>B.12 Engineer s sample letters: Engineer s determination 785</p>
<p>B.13 Engineer s sample letters: Engineer s instruction 787</p>
<p>B.14 Engineer s sample letters: Engineer s notice to correct 788</p>
<p>B.15 Engineer s sample letters: Engineer s instruction to remove a person employed on the site 789</p>
<p>B.16 Engineer s sample letters: Engineer s instruction lack of mobilization 790</p>
<p>Appendix C: Dictionary of Construction Terms: Chinese, Czech, English, French, German, Hungarian, Polish, Portuguese, Russian, and Spanish 791</p>
<p>C.1 Dictionary General part 792</p>
<p>C.2 Dictionary Contractor s claims 800</p>
<p>C.3 Dictionary Employer s claims 804</p>
<p>Appendix D: ClaimManagement System Under FIDIC Forms 807</p>
<p>D.1 Claim management team responsibilities 807</p>
<p>D.1.1 E1 Project manager 807</p>
<p>D.1.2 E2 Design and time schedule (program) 808</p>
<p>D.1.3 E3 Site manager 808</p>
<p>D.1.4 E4 Contract interpretation, monthly statements, invoicing, insurance, subcontractors, employer s claims, mutual Claims in a joint venture 809</p>
<p>D.1.5 E5 Administrative support 809</p>
<p>D.2 Claim management processes 810</p>
<p>D.3 Table of contractor s claims under FIDIC CONS 811</p>
<p>D.4 Table of employer s claims under FIDIC CONS 811</p>
<p>Appendix E: FIDIC Forms Risk Allocation Charts 813</p>
<p>E.1 Chart No.1: Basic risk allocation alternatives in connection with unforeseeable physical conditions 813</p>
<p>E.2 Chart No. 2: Basic comparison of risk allocation (claims options) in FIDIC CONS/1999 red book, P&amp;DB/1999 yellow book, and EPC/1999 silver book 813</p>
<p>Index 817</p>