Contractor's right to suspend work and terminate Contract under FIDIC

·         By Azeez Nazar Sabri

In the construction Contracts, Contractor has lots of obligations and in case of default in fulfillment of his contractual obligations Employer has many rights including but not limited to de-scope his works, allot the offloaded works to other agency at the risk and cost of the Contractor, Impositions of Liquidated Damages and Termination of Contract etc. However, under the scheme of FIDIC based contract, Contractor also has certain rights in case of default of the Employer in fulfillment of his reciprocal contractual obligations.
Sub-Clause 60.10 of the FIDIC, 1987 ( Conditions of contract for works of Civil Engineering Construction), the amount due to Contractor under any Interim Payment Certificate issued by the Engineer shall be paid by the Employer to the Contractor within 28 days after such Interim Payment Certificate has been delivered to the Employer.  
Sub-Clause 69.1 of the FIDIC defines the defaults of the Employer as under:
a) If he fails to pay to the Contractor the amount due under any certificate of the Engineer within 28 days after the expiry of the time stated in Sub-clause 60.10 (normally time to make payment is 28 days).
b) Interfering with or obstructing or refusing any required approval to the issue of any such certificate.
c) Becoming bankrupt or, being a company, going into liquidation, other than for the purpose of a scheme of reconstruction or amalgamation.
d) Giving notice to the Contractor that for unforeseen economic reasons it is impossible for him to continue to meet his contractual obligations.
Upon occurrence of above stated events, the Contractor shall be entitled to terminate his employment after giving a prior written notice of 14 days.
Under Sub-clause 69.4 without prejudice to his right to terminate his employment, the Contractor also have one more remedy. If the Employer fails to pay the Contractor the amount under any certificate of the Engineer within 28 days after the expiry of the time stated under 60.10 (which is 28 days unless changed in the COPA) after giving 28 days prior notice to the Employer, with a copy to the Engineer, suspend or reduced the rate of the work.
Thus in case of the non-payment of the contractors due payments within stipulated period the Contractor has normally three remedies, a)  to terminate the Contract b) to suspend the work c) to reduce the rate of work.
Further if the Contractor opts to suspend the works or reduce the rate of work in accordance with the provision of Sub-Clause 69.4 and he thereby suffers delay or incur additional cost, he shall also be entitled for suitable extension of time and additional cost.
Under clause 69.4 , it is duty of the Engineer to determine the suitable extension of Time and additional cost payable to the Contractor. However, the Engineer shall consult with the Employer and the Contractor before determination of such additional cost and extension of time.     

However, Sub-clause 69.5 gives one more opportunity to the Employer to make the payment to the Contractor. If after receiving the notice from the Contractor for suspension or reduced rate of work, the Employer makes payment of due amounts to the Contractor including interest, if applicable, and if notice of termination has not been given by the Contractor under Sub-Clause 69.1, the Contractor shall resume the work as soon as possible after receipt of the payments.   

(Author can be contact at azeez_nazar@rediffmail.com)

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