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Talking Point with Mark Lloyd-Williams

Judgement on the Gibraltar Airport Tunnel provides a significant case on the FIDIC form of contract.

On 16 April 2014 the Technology and Construction Court decided the case of Obrascon vs Attorney General for Gibraltar, which related to a substantial contract for infrastructure works executed under the FIDIC Yellow Book 1999 edition. This decision should be helpful in providing guidance as to the practical effect of various clauses of the FIDIC contract which had not previously been the subject of judicial consideration.

The judgment in the Gibraltar case addresses several issues relating to the provisions of the FIDIC standard form.

First, the contractor claimed an extension of time and additional costs under clause 4.12 as a result of encountering unforeseeable physical conditions, namely contaminated land. The employer maintained that the conditions encountered were

The court agreed with the employer on the basis that the contractor had been told at tender stage to allow for a substantial volume of contaminated material, but had not considered this to be a real risk. The court concluded that, as a result of the information received, the contractor should have been particularly alert to the conditions encountered. The claim was rejected.

The court also addressed the provisions for notification of claims under clause 20.1. These require the contractor to give a notice to the engineer if it considers it is entitled to an extension of time for completion and additional costs as a result of a relevant event. It must do this not later than 28 days after it became aware, or should have become aware, of the relevant event. The court considered the time from which the 28-day period would run.

“In the event, the court decided that the employer was entitled to terminate the contract”

In a key observation, the court said that, for this purpose, the “event” can mean either the incident itself (for example a variation) or (if later) the delaywhich results or would inevitably result from the incident. This may be an important finding in cases where there is a time lag between the date upon which an event occurs and the date when the delay flowing from that event is felt on site.

The employer had terminated the contractor’s employment under clause 15. This permits the employer to terminate, among other things, if the contractor without reasonable excuse fails to proceed with the works with due expedition and without delay. The court considered that this clause must relate to actual failures by the contractor which are more than insignificant. The contractor maintained that the clause must relate only to those breaches which are serious and are equivalent to a repudiatory breach of contract, that is to say a breach of a fundamental term of the contract. The court rejected this argument and decided that the clause permitted termination for significant or substantial breaches as opposed to trivial or insubstantial ones. In the event, the court decided that the employer was entitled to terminate the contract as there was a two-year delay on a two-year contract without any substantial entitlement to an extension of time.

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