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Advisory Letter to Employer on FIDIC Conditions of Contract 2017
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TASK 1
Introduction
FIDIC conditions of contract for plant and design building for Electrical and Mechanical
plants and Engineering works designed by the contractor 2017 form of contract is considered to
being international jurisdiction set of laws to govern construction contracts. In England, FIDIC
conditions are widely used in partnership with the country's laws to dictate construction contract
agreements. FIDIC conditions are internationally preferred to other contract governing bodies as
it allows supplementation of the already set rules with specifically agreed contract provisions. For
instance, an agreement between Seokyo JSC (contractor) and Humberstone Salitrera SRL (the
employer) involved additional clauses 22 and 23 in the FIDIC conditions of the contract. The
above-mentioned contractual agreement was based on the guidelines of FIDIC conditions 2017.
However, the contractual work is presented to have failed due to a breach of the agreement by the
contractor and the project manager. The violations noted concerning FIDIC conditions of contract
include failure of the contractor and project manager to fulfil their obligations, violation of the
agreement to provide 25 years of lifespan work by the contractor, fail the test of completion caused
by the contractor's negligence, breach of communication obligation by the project manager and
breach of assistance to the contractual obligation by the project manager. Various options that the
employer can use to reimburse for the loss and damages are also provided. They include: entitling
available remedies to external parties under expenses of the contractor, order of further tests in the
case of the failed test under contractor's expense, termination of the contract by the employer, the
intervention of Dispute Avoidance and Arbitration, making of payment claims and carrying out
further discussions between parties to avoid dispute.
FIDIC conditions of contract for plant and design building for Electrical and Mechanical
plants and Engineering works designed by the contractor 2017 form of contract one stipulates the
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roles of a contractor in a construction contract to attain the best result in the construction. The
agreement between Seokyo JSC (the contractor) and Humberstone Salitrera SRL (the employer)
concerning the FIDIC conditions of the contract requires the contractor to oversee construction
activities as stated in clause 4.1 (contractor’s general obligation) of the FIDIC yellow book.
According to clause 7 of FIDIC 2017, which governs the contractor’s testing of the construction
resources and plant, under sub-clause 7.4, the contractor should give a notice to the engineer for
further actions such as additional testing as required in clause 13 (variations and adjustments) of
FIDIC 2017. However, the contractor, Tokyo JSC, failed to notify the engineer of the shortcomings
and opaque nature of the FEED information. Moreover, the contractor could not report additional
costs and delays to the engineer. These negligent actions affected the construction of the 2 MTPA
granular potassium nitrate fertilizer plant, manifested in its commercial operation output. The
contractor should be held accountable for the loss incurred by the employer.
After stating the requirements and expectations of the contract and in the agreement of the
same from the contractor, the employer is entitled to the right to hold the contractor accountable if
the requirements are not dully fulfilled. In the contract agreed upon by Seokyo JSC and
Humberstone Salitrera SRL, one of the contractor’s obligations agreed upon was to produce
quality work capable of ensuring a service lifespan of up to 25 years without any replacement to
the amenity. This is similar to clause 4.1 in paragraph one of the FIDIC 2017, which obliges the
contractor to accomplish the work according to the contract agreement or to suit the employer's
requirements. The failure of the a2 MTPA granular potassium nitrate fertilizer plant, which was in
the construction agreement, clearly indicates a breach of the agreement. Having agreed to 25 years
of self-service provision by the plant, this period should be considered the Defects Notification
Period. It is, therefore, right for the Employer, Humberstone Salitrera SRL, to notify the contractor
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of the defects and request immediate action on the same as done on 20 May 2022 by the employer.
Tokyo JSC's refusal to act on the employer's request is a breach of article 11, sub-clause 11.1
subparagraph (b) of FIDIC 2017 conditions, which states that the contractor should perform
prerequisite work to remedy the defects noted by the employer before the Defects Notification
Period expires. Furthermore, the employer should not incur any cost during the remediation of the
defects resulting from the contractor's negligence. This is covered in sub-clause 11.2 (cost of
remedying defects) paragraph one, subparagraph (a), (b), (c), and (d). Failure to remedy the defects
entitles the employer the right to give a notice stating the exact period by which the defects should
be remedied as directed in sub-clause 11.4 paragraph 2. This sub-clause (11.4) through
subparagraph (a) allows the employer to offer the remediation of the defects to other parties, but
the entire activity is under the contractor's cost.
Tests of completion are the specified tests agreed in the contract, which are run before the
employer takes over the work defined by the agreement. Tests on completion are mandatory for
contractual work to assure the employer that the job is satisfactory and efficient and can be taken
over for commercial purposes, as stated in clause 10. According to sub-clause 9.1 of FIDIC
conditions of the contract of 2017, the contractor must provide documentation of the general work
and its maintenance and operational guides per sub-clause 4.1(d) requirements. The failure of the
a2 MTPA granular potassium nitrate fertilizer plant under construction by contractor Seokyo JSC
was caused by issues related to the plant's output. This suggests that its failure is a result of a fault
in construction caused by the contractor. The employer has the right, through the engineer, to order
an additional test concerning clause 9.3 of FIDIC. If the retest requires added cost, sub-clause 2.5,
which needs the contractor to reimburse the costs to the employer, should be revisited. Other ways
to handle the failure of the test of completion are by terminating the contract and rejecting the
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work. This is if the failure significantly costs the employer. This law is defined in sub-clause 9.4
(b) of the FIDIC conditions of contract 2017. This method has been noted to be popularly used in
England.
Communication is an essential aspect of prioritizing construction contracts. It forms the
basis of cooperation (a requirement in contracts under sub-clause 4.6) between parties in the
agreement. These parties need to communicate efficiently to run the operations smoothly. Poor
communication may result in poor outcomes at the end of the work. The contract between Seokyo
JSC and Humberstone Slitrera SRL featured a requirement by the employer bounding the project
manager, PMC Inc., to provide any advisory and Front End Engineering and Design (FEED)
communications during the construction. The agreement stated; that the project manager shall
provide FEED for the process plant and use judgment, skill, care, and supervision to ensure good
quality of the construction in the contract. However, the contractor complained due to a lack of
response from the project concerning unclear information in FEED. This was significant jeopardy
to the plant's construction, as the contractor in the letter dated 13 July 2022 states. In this case, the
project manager breached FIDIC guides under sub-clause 1.3 and the contract agreement. Subclause 1.3 (notices and other communications) through paragraph 1 governs clarity in
communication and notifications. Response, advisory stand, decisions, and requests are some
highlighted forms of communication in the contract conditions. The project manager should
therefore be held responsible for not fulfilling his duty per the agreement. It is clear that the project
manager withheld and delayed the information. This is against sub-clause 1.3 (3).
The project manager in the Seokyo - Humberstone agreement is a type of assistance in the
construction contract. The project manager henceforth, as agreed in the contract, was to offer
service to the contractor concerning the construction plant. Under sub-clause 2.2 (assistance), the
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employer is allowed to hold accountable and take legal actions or termination decisions to any the
aid of the contractor who fails to perform his duties as it is his (the employer) responsibility to
ensure the contractor gets whatsoever needed support. Nonresponses to the contractor's requests
indicate that the project manager failed to perform his assistance duties, affecting the entire
construction.
The employer, Humberstone Salitrera SRL, has suffered loss and dissatisfaction in his
work due to the negligence of the project manager and the contractor hired to construct the fertilizer
plant. He should take legal action. The employer should seek the intervention of the Dispute
Avoidance and Adjudication Board. The board reputes any dispute arising between parties to a
contract. Having a new clause inserted in the agreement as clause 24, which bounds every party to
irrevocably submit to the jurisdiction of the court of England and Wales for any dispute arising,
the parties have no option other than to present themselves for a hearing regarding the ruling of
England and Wales laws. The contractor has no right to defy the claim posted by the employer on
6 July 2022. Suppose the DAAB rules favour the contractor, and the employer has the right under
sub-clause 21.6 (arbitration) to involve international arbitration agencies. However, the arbitrator's
ruling will be made in language and law defined in the contract as directed in sub-clause 21.6 (c).
In this case, it will be done following the laws of England and Wales.
The employer may also give a notice to Senora Emilia Shackleton, the engineer claiming
payment from the contractor and the project manager for being key contributors to the failure of
the plant under construction. This is directed in sub-clause 20.2 (claims for payment and EOT) and
20.2.1 (notice of a claim). The employer also is entitled to an extension of the Defects Notification
Period following the improper working of the plant. The entitlement is per clause 11.3 (extension
of defects notification period). Extension of DNP delays the issuance of a certificate of comple...