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Contractor, the Contractor's claim under clause 42.

2 (Failure to give possession)


should not be hampered by the absence of these words. See also the
commentary under clause 42.1 (Possession of Site and access thereto). See the
comments under clause 42.1 for further discussion of the term "Site". ICE 6th has
added the "other places...designated" formula to the ICE 5th definition.

(g)(i) "cost" - This definition for the first time expressly excludes profit. Thus,
the only occasion on which the Contractor is allowed his profit by the contract is
under clause 69.3 (Payment on termination) where, upon the default of the
Employer, he is entitled to claim "the amount of any loss or damage". This
definition has been adopted with minor amendments by ICE 6th. However ICE
6th expressly permits profit on three occasions in the contract in relation to any
additional temporary or permanent works.

(g)(ii) "day" - This edition has adopted a policy of giving periods of time in
multiples of seven days whereas the 3rd Edition used units of 30 days for longer
periods. Compare, for example, clause 67 (Settlement of disputes) in the two
editions.

(g)(iii) "foreign currency" - It is important to note that foreign currency does not
mean a currency other than the currency in which the Contract Price is
expressed but any other currency than the local currency. Thus, the Contract
Price could itself be expressed in a foreign currency. Part II provides various
amendments to clause 60 and clause 72.2 in relation to currencies.

(g)(iv) "writing" - This definition is of particular relevance to clause 1.5 (Notices,


consents etc) which must be in writing.

CLAUSE 1.1 (Definitions)

The following definitions are new to the 1992 re-print:-

(e)(iii) "Interim Payment Certificate" means any certificate of payment issued by


the Engineer other than the Final Payment Certificate.

(iv) "Final Payment Certificate" means the certificate of payment issued by the
Engineer pursuant to Sub-Clause 60.8.

Whilst it is no doubt a good idea to have defined terms for interim and final
certificates, the definition of Interim Payment Certificate raises the question as to
which clauses other than clause 60.2 (Monthly payments) will give rise to interim
payment certificates. The definition could and, it is submitted, should simply
have referred to certificates issued under sub-clause 60.2.

Other certificates to be issued by the Engineer include the Taking-Over


Certificate under clause 48 for the whole or part of the works, a certificate of the
Contractor's default under clause 63.1 (Default of Contractor) and the Defects
Liability Certificate under clause 62.1. These all lead to payments being made

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but are not the certificates for payment themselves. Under clause 59.5
(Certification of payments to nominated Subcontractors), the Engineer certifies
payment to nominated subcontractors where the Contractor fails to supply proof
that previous sums certified in relation to nominated subcontractors' work have
been passed on. Such certificates fall within the definition of Interim Payment
Certificates. The certificate under 63.2 (Valuation at date of termination) is a
certificate of value only and not a certificate for payment. In contrast, the
certificate under sub-clause 63.3 (Payment after termination) is a certificate of
payment and falls within the definition of Interim Payment Certificate despite
being final in nature. Curiously, a certificate under Sub-Clause 63.3 could show
a balance in favour of the Employer. However, such a certificate is deemed to be
a debt and is not strictly therefore a certificate for payment.

Within clause 60 (Certificates and payment) there are certificates under sub-
clause 60.3 (Payment of retention money), sub-clause 60.5 (Statement at
completion) and under sub-clause 60.6 (Final statement) where part only of the
Contractor's draft final statement is not in dispute.

Clause 60.3(a) has always raised the question whether the release of the first
half of the Retention Money following the issue of the taking-over certificate
should be the subject of a special payment certificate or included in the next
monthly interim certificate. Practice varies but more often than not, the first
moiety of retention is released in the next interim certificate. The fact that the
certification falls within the definition of Interim Payment Certificate, does not
resolve the issue.

In one respect, Contractors are ill-served by this amendment. Where the


practice would otherwise have been to issue a special certificate for the release
of retention, the Contractor was able to argue that he was entitled to immediate
payment by the Employer. Now, such a certificate is an Interim Payment
Certificate and the Employer is given 28 days under Clause 60.10 (Time for
payment).

The entry in the Appendix for the "minimum amount of interim payment
certificates" applies only to clause 60.2 and does not therefore restrict small
payments under other payment clauses despite the application of the definition.

As is plain from the list of the amendments contained in the 1992 re-print, and
the extracts set out later in this supplement, the definition has not been used
wherever it is applicable. The term is now used in sub-clauses 60.2, 60.4
(Correction of certificates) and 60.10 (Time for payment).

Perhaps surprisingly, the result is that three interim payment certificates could be
issued in the same month under clauses 60.2, 60.3 (Payment of Retention
Money) and 59.5 (Certification of payments to nominated Subcontractors).

Under clause 69.1 (Default of Employer), interference with the issuing of certain
certificates is a ground for the Contractor to terminate his employment. The

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relevant certificates are those for which time-limits for payment are given under
clause 60.10 (Time for payment). The effect of the definition of Interim Payment
Certificate and the application of that definition to a number of certificates other
than monthly certificates under clause 60.2 (Monthly payments) has been the
extention of the scope of the interference ground for termination. For example,
interference with a certificate under clause 59.5 (Certification of payment to
nominated Subcontractors) would not have been a ground for determination
hitherto. Whilst interference with any form of certification is plainly contrary to the
spirit of the contract, it is unlikely that the draftsman intended to enlarge the
ground for termination to such an extent.

1.2: This rule of interpretation will on occasion be signficant. For example,


clause 12.2 is entitled "Adverse physical obstructions or conditions" but the word
"adverse" does not feature in the clause. Similarly, the titles of clause 63
(Default of Contractor) and clause 69 (Default of Employer) both include the word
"default" which is not found in either clause. This may be just as well given the
fact that "default" is used as an alternative to breach of contract in clause 40.1
(Suspension of work), clause 44.1 (Extension of time for completion) and clause
51.1 (Variations). It is always questionable whether any tribunal is capable of
entirely ignoring such clear evidence of the intentions of the draftsman.

1.3: Clause 1.1(a)(iv) defines the Engineer as "the person appointed...". This
sub-clause is a reminder in relation to the Engineer that the Employer may name
a firm of Engineers as distinct from an individual. In view of the lack of any
provision for the replacement of an Engineer who dies or retires, this course may
be adopted more often.

1.4: This is a standard clause and was contained in the 3rd Edition and ICE
5th.

1.5: This clause is new and puts beyond doubt what may have been implicit
from clause 68 (Notices) that notices, consents etc must be in writing. Writing is
also required by the following clauses:-

clause 2.3 Engineer's delegation to Engineer's Representative

clause 2.5 Engineer's instructions

clause 6.1 Engineer's requests for further drawings

clause 6.2 Authorisation of persons to inspect drawings

clause 14.1 Contractor's general description of methods etc

clause 17.1 Setting out

clause 31.2 Engineer's request for facilities for other Contractors.

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clause 48.1 Undertaking to finish outstanding work

clause 54.5 Requests regarding hire of Contractor's Equipment

clause 56.1 Request for Contractor to attend

clause 59.5 Contractor's statement of cause for withholding payment from


nominated Subcontractor and notification by Contractor to nominated
Subcontractor.

clause 60.7 Contractor's discharge.

clause 63.1 Warning to Contractor.

clause 67.1 Reference of dispute to Engineer.

There are additional references to written instructions but clause 2.5 (Instructions
in writing) makes this plain.

A comparison of this clause with clause 2.6 (Engineer to act impartially), clause
67.1 (Engineer's decision), clause 67.3 (Arbitration) and clause 68 (Notices)
reveals an inconsistency in the use of terms such as notices, consents etc.
Table 6 indicates the clauses in which the various terms appear.

"Any such consent, approval, certificate or determination shall not unreasonably


be withheld or delayed." Notices are excluded from this list. Notices are given
under some 37 clauses by the Employer, the Engineer and the Contractor. Most
commonly, it is the Engineer notifying the Contractor of a determination of costs
and/or extension of time. A determination is covered by this clause and thus may
not unreasonably be withheld or delayed. Neither the notices nor the
determinations are directly covered by clause 2.6 (Engineer to act impartially) but
they are plainly actions affecting the rights of the parties and are thus covered by
clause 2.6(d). Notices by the Contractor or the Employer are normally given in
their own best interest, and if no time frame is specified, none is normally
necessary. As this part of the clause refers as much to the Employer and the
Contractor as to the Engineer, it is significant in relation to clauses such as
clause 10.1 (Performance security) as the right of the Employer to withhold his
approval is subject to the test of reasonableness.

Under clause 3.1 (Assignment of contract), the Employer is given an absolute


discretion to withhold his consent "notwithstanding the provisions of sub-clause
1.5".

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CLAUSE 2 : Obligations of the Engineer

This clause sets out the powers and obligations of the Engineer and his team.
The Engineer will carry out his duties and exercise the authority given to him by
the contract but is to obtain the prior approval of the Employer before exercising
his authority in relation to the list of items in Part II. The Contractor does not
have to check that the necessary approval has been given. The Engineer has no
general authority to relieve the Contractor of any of his obligations.

The Engineer may appoint and delegate duties and/or authority to the Engineer's
Representative.

Delegation to the Engineer's Representative must be in writing and must be


copied to the Employer and the Contractor before it takes effect. Instructions, etc
given by the Engineer's Representative after powers have been delegated will
have the same effect as if given by the Engineer. However, the Engineer may
reject work despite the failure of the Engineer's Representative to do so. The
Contractor may query any action of the Engineer's Representative with the
Engineer who may vary or overrule it.

The Engineer and his representative may appoint assistants and inform the
Contractor of their duties and authorities. The assistants may only give
instructions necessarily within the scope of their duties and to record their
acceptance of work, material etc. Such instructions are treated as having been
given by the Engineer's Representative.

Instructions must be in writing unless the Engineer finds it necessary to give an


instruction orally. Such an oral instruction will only be treated as an instruction if
either the Engineer confirms it in writing or the Contractor confirms it in writing
within 7 days and the Engineer does not object within a further 7 days.

The Engineer must act impartially in exercising his discretion. His decisions may
be reviewed by an arbitrator.

This clause has been substantially re-cast and reorganised. Sub-clauses 2.4 and
2.6 are wholly new to the 4th Edition.

2.1: It is a novel feature of the 4th Edition that the Employer is unable to
replace the Engineer should he die or for any other reason cease to carry out his
duties. For a discussion of this, see the commentary to clause 1.1(a)(iv).

(a) As the Engineer is not a party to the contract, this clause must impose
upon the Employer an obligation to ensure that the Engineer duly performs.
Under English law, this duty is taken to be to ensure that the Engineer certifies
where the contract requires a certificate or makes decisions where the contract
gives the Engineer a choice whether to act or not. The Employer is not held
responsible for the contents of the decision i.e. he has no obligation to ensure

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that the Engineer acts correctly. He must, however, ensure that the Engineer is
free to act fairly and correctly. Thus there will not be a breach of contract on the
part of the Employer on every occasion where an arbitrator reverses a decision
of the Engineer. For a discussion of one practical consequence of this, see the
commentary under clause 63.1 concerning the consequences if an Employer
terminates on the strength of a certificate of default by the Contractor given by
the Engineer where that certificate is found to be incorrect by an arbitrator.

The express requirement in sub-clause 2.6 that the Engineer act impartially adds
to the Employer's duty in relation to procuring proper certification. As the
Engineer is not a party to the contract, the clause must impose an obligation
upon the Engineer's employer. It is therefore submitted that the Employer is
given the additional responsibility of ensuring that the Engineer is not only free to
act impartially but that he does so. A distinction has to be drawn between
fairness or correctness and impartiality. Because so many of the Engineer's
decisions are discretionary, there is often no objectively correct decision. A
decision will ultimately be correct if it goes unchallenged or if an arbitrator does
not feel it necessary to overturn that decision. Impartiality is more concerned with
the means by which the Engineer arrives at his decision. He is obliged to
approach the matter in an even-handed way, an obligation reinforced by the
requirement for due consultation. He must weigh in his mind the interests both of
the Contractor and the Employer without regard to the fact of engagement by the
Employer and leaving out of account any pressure brought to bear either by the
Employer directly or by the potential consequences of a particular decision under
his terms of engagement. It is submitted that the Employer will be in breach of his
obligation not only if he endeavours to cause the Engineer to favour his interests
over those of the Contractor but also if the Engineer is obviously doing so and
the Employer fails to take steps to remedy the position. Technically, the
Employer would also be in breach if he failed to take steps if the Engineer was
favouring the Contractor. Such a state of affairs would be very unlikely to last
long and is equally unlikely to be the subject of complaint by the Contractor.

The liability of a certifier such as the Engineer directly to the Contractor has been
the subject of consideration by the Courts over the years. The House of Lords in
Sutcliffe v Thackrah (1974) AC 727 held that a certifying Architect did not have
the sort of immunity against a disgruntled contractor that a judge or arbitrator
would enjoy. More recently, the Court of Appeal in Pacific Associates Inc v
Baxter (1989) 3 WLR 1150 held that the Engineer under a much-amended form
of FIDIC did not owe a duty of care to the contractor. Although that decision may
have been influenced by the particular wording of the contract under
consideration, a Hong Kong court in Leon Engineering and Construction v Ka
Duk Investment Co. Ltd (1989) 47 BLR 139 came to the same conclusion on a
standard form with no unusual wording. In both cases, the court was influenced
by the existence of an arbitration procedure, the purpose of which was to enable
the contractor to obtain redress in the event that the certifier made a mistake.

Leading cases relevant to the Employer's duty in relation to the Engineer include
Perini Corporation v Commonwealth of Australia (1969) 12 BLR 82 when the

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Supreme Court of New South Wales found implied terms that the Employer must
not interfere with the proper performance by the certifier of the duties imposed
upon him by the contract and that the Employer is bound to ensure that the
certifier performs those duties. The English Court of Appeal came to similar
decisions in Croudace v Lambeth (1986) 33 BLR 20 and Lubenham Fidelities v
South Pembrokeshire District Council (1986) 33 BLR 39. In the latter case, the
Court of Appeal expressed the opinion that a certifier acting in bad faith would
probably make himself directly liable to the contractor. The Perini and Lubenham
cases are also authority for the view that the Employer does not warrant the
correctness of the certifier's decisions.

(b) It is right for the Employer to make known to the Contractor from the
outset any terms in the Engineer's terms of engagement which could impact
upon the Contractor. Thus, this clause provides for disclosure in Part II of any
prior approvals that the Engineer needs in order to act. This clause should not
however be treated as an encouragement for such obstacles to be placed in the
Engineer's way. These conditions do not encourage the requirement of prior
approval as clause 69.1 (Default of Employer) makes a refusal of such an
approval in relation to a certificate, a ground for termination by the Contractor. It
is also sensible that the Contractor is not obliged to check that necessary
approvals have been obtained for any given action by the Engineer. If the
Engineer acts without such prior approval, that will be a matter between the
Engineer and the Employer and may well amount to a breach of the Engineer's
terms of engagement.

It is an innovation of these conditions that the Engineer is obliged to consult with


the Employer and the Contractor under some 21 clauses: such consultation does
not in any way relieve the Engineer of his obligation to act impartially under
clause 2.6 (Engineer to act impartially). Part II provides an optional clause to deal
with emergency situations allowing the Engineer to instruct without obtaining the
prior approval of the Employer. This clause is not, it is submitted, necessary and
indeed runs counter to the important principle that the Contractor need not
concern himself with whether the Engineer has in fact obtained approval. In this
context, see clause 64.1 (Urgent remedial work).

A question raised by this approvals procedure is whether the absence of a


requirement for approval may be taken as evidence that the Engineer is
authorised to act as agent for the Employer in all other respects. The answer, it is
submitted, is in the negative. The purpose of the inclusion in Part II of any
restraints upon the Engineer is by way of warning to the Contractor and is
confined to limits upon "the authority specified in or necessarily to be implied
from the Contract". The lack of any general agency is emphasised by item (c) of
this sub-clause. So, for example, the Engineer would not have authority to order
acceleration by the Contractor other than in accordance with clause 46.1 (Rate of
Progress). Accordingly, the Contractor must be careful to ensure that any action
by the Engineer is either within the authority specified in or necessarily to be
implied from the contract or expressly authorised by the Employer.

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This clause has been adapted by ICE 6th which has made the list of matters
requiring approval determinative of the matters in respect of which the Engineer
must act impartially. Clause 2(8) of ICE 6th requires the Engineer to act
impartially in respect of all matters which are not so listed.

(c) As the Engineer is normally considered to have a dual function under the
contract, to act as the Employer's agent in certain respects as well as certifier,
potential problems may always arise as to the extent of the Engineer's authority
as agent. For example, if the Engineer were to ask or order the Contractor to
accelerate other than in accordance with clause 46.1 (Rate of progress), the
Contractor would be unwise to comply with such order or request without
checking with the Employer that the Engineer was duly authorised to make such
request on the Employer's behalf. Thus, in this clause, it is made clear that the
Engineer has no authority to waive any obligation of the Contractor. See also
clause 7.3 (Responsibility unaffected by approval), clause 14.4 (Contractor not
relieved of duties or responsibilities), clause 17.1 (Setting-out) and clause 54.8
(Approval of materials not implied) for other examples. See also clause 61.1
(Approval only by Defects Liability Certificate).

"Except as expressly stated in the Contract...". If the Engineer purports to waive


strict compliance with the letter of the specification, for example under clause
17.1 (Setting-out) or clause 49.2 (Completion of outstanding work and remedying
defects), the Contractor has to decide whether, by gratefully accepting the
offered short-cut, he remains exposed to a claim for breach of contract by the
Employer, due to a lack of authority in the Engineer. The question is, therefore,
whether any express right to waive is granted. Under clause 7.1 (Supplementary
Drawings and Instructions) , the Engineer is given authority to issue instructions
as necessary for the "proper and adequate execution and completion of the
Works". Whilst the use of the word "adequate" may lend some support to an
argument that an Engineer is intended to have a discretion to approve works
which do not comply strictly with the specification, it is doubtful that a Contractor
could demonstrate that any proposed short-cut was "necessary". The Contractor
would, it is submitted, require a variation to be certain that the acceptance of sub-
standard work could not be challenged later. The power to omit work is a clear
example of an express exception: the Engineer is empowered to vary the work to
set a lower standard than that set out in the specification and it is submitted that
the Contractor may generally rely on such an instruction. See under clause 51.1
(Variations), however, for comment on the ability of the Employer to challenge
variations. For further discussion on this subject, see under clause 13.1 (Work to
be in accordance with Contract). See also the clauses dealing with the
rectification of defects and damage such as clause 17.1 (Setting-out), clause
20.3 (Loss or damage due to Employer's risks) and clause 49.2 (Completion of
outstanding work and remedying defects).

Under English law, there is a distinction to be drawn between obligations and


liabilities. There comes a point in the degree of performance by the Contractor
when he has sufficiently fulfilled the requirements of the contract that the
"obligation" is replaced, in the event that 100% compliance does not occur, with a

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secondary "liability" to pay damages for the shortfall. It may therefore be argued
by a Contractor accused of breach of contract in respect of work approved by the
Engineer that, in allowing a short-cut, the Engineer was not relieving the
Contractor of any obligation. It must be recognised that this is a lawyer's point
and one that would not necessarily find favour with arbitrators, even in England.

Under all the standard forms of construction contract, it is difficult to determine at


what point the Engineer or equivalent becomes "functus officio" or redundant.
The answers may well be different for each of the Engineer's roles. As the
Employer's agent, his power to issue instructions ceases at the latest when the
Defects Liability Certificate is issued pursuant to clause 62.1 (Defect's liability
certificate). It is argued in the commentary under clause 13.1 (Work to be in
accordance with the contract) that the Engineer's power to order variations
should come to an end at substantial completion.

As certifier, the Engineer's obligations continue through to the Final Certificate


under clause 60.8 (Final certificate) which may not be issued for three months
after the Defects Liability Certificate.

As adjudicator, giving decisions under clause 67.1 (Engineer's decision), it


seems that the Engineer has a role for as long as disputes may arise under the
contract. This could mean for as long as any applicable law permits disputes to
arise to the full extent of the relevant limitation periods. Thus, for example, a
defect arising in the works 5 years after completion could cause the Employer to
seek to recover damages for breach of contract from the Contractor. The
Contractor could defend himself on the grounds that the defect arose from an
error in design and the dispute should, according to clause 67.1, be referred to
the Engineer for his decision. If the Engineer refuses to become involved, the
mechanism of clause 67 allows the dispute to go forward to arbitration by default.

It is therefore submitted that there is no one moment in time at which the


Engineer becomes functus but three or more. Each function of the Engineer
must be considered individually.

2.2: On many projects, particularly where the Employer is a government


department, it is the Engineer's Representative who is the real decision-maker
and the effective Engineer under the project although he will report to and obtain
signatures from the Engineer named in the contract, who may be a Government
official or employee. The delegation must be in writing. Apart from clause 1.1
(Definitions), the Engineer's Representative is referred to in only two other
clauses: clause 13 (Work to be in accordance with contract) whereby the
Contractor is obliged to take instructions from the Engineer's Representative and
clause 15 (Contractor's superintendance) on the same subject. These
references appear to be superfluous as the Engineer's Representative has no
power without delegated authority under clause 2.3 and power thus delegated is
not dependent upon an express mention in the relevant clause.

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It is implicit that the duty of impartiality under sub-clause 2.6 applies to the
Engineer's Representative and that the powers to open up decisions contained in
clause 67 (Disputes) apply to his decisions. These conclusions, it is submitted,
follow from the nature of delegation: the actions of the Engineer's Representative
are treated as being the actions of the Engineer. See also the right to query the
Engineer's Representative's decisions under sub-clause 2.3.

2.3: Normally, the Engineer retains powers to grant extensions of time, order
acceleration, value variations over a particular figure and issue certificates of
default. He will also retain the power to make decisions normally under clause
67.1 (Engineer's decision). Other items not usually delegated include the notice
to commence, substantial completion, the Defects Liability Certificate, clause 60
(Payment) and clause 65 (Special Risks). A Contractor may be well advised to
require a list of non-delegable powers to be included in Part II if he wishes to
know that the crucial decisions will remain with the Engineer named in the
tender. FIDIC's Guide suggests that any restriction on delegation in the
Engineer's terms of engagement should be disclosed. It is submitted that the
Contractor is not entitled to assume that authority has been delegated as notice
to the Contractor is essential before a delegation takes effect. Contractors are
therefore obliged to satisfy themselves on this point before acting on instructions
from the Engineer's Representative.

If the Engineer disagrees with a decision delegated to the Engineer's


Representative, there is no power under the contract for the Engineer to
countermand the decision unless the decision is questioned by the Contractor
under item (b) of this sub-clause or either the Employer or Contractor requests a
decision under clause 67.1 in which case the matter may be reviewed. The
Engineer may, however, disapprove work etc which his representative did not
disapprove. The draftsman is at pains not to use the term "approve" in clause
2.3(a) and thereby raises the question of whether an approval or expression of
satisfaction by the Employer's Representative would disentitle the Engineer from
instructing the Contractor to rectify work.

In item (b), it is not clear to whom the word "he" refers i.e. whether it is the
Contractor or the Engineer's Representative who has the power to refer a
decision of the Engineer's Representative to the Engineer for reconsideration.
This is unfortunate as it is only this sub-clause and clause 67 (Settlement of
disputes) which allow decisions to be altered, other perhaps than by variations or
with the agreement of the Contractor. The Engineer is obliged to respond but no
time limit is given nor is such confirmation etc within the terms of clause 1.5
(Notices, Consents etc) which prohibit unreasonable delay. As discussed in
clause 2.4 below, this could cause delay to the project for which there is no
obvious category of extension of time under clause 44.1 (Extension of time for
completion). Reference to the Engineer under this sub-clause will not amount to
a request for a decision under clause 67.1 (Engineer's Decision) because a party
requiring such a decision must make express reference to clause 67.1.

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