Workshop On Risks in Contracts: Justice Academy

FIDIC Training - Online Course
Workshop on
Risks in Contracts
Justice Academy
Author-presenter: Tahseen Saleh

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Tahseen Saleh
FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

Risks in Contracts
Outline
1. Risk Management
2. Employer’s Risks
1. In FIDIC 1987 RB
2. In FIDIC 1999
3. In FIDIC 2017
3. Exceptional Events and Force Majeure
4. Risks of Design
Tahseen Saleh

Risks in Contracts
1. Risk Management
Tahseen Saleh

1- Risk Management
– What is Risk?
– What are the risk groups that may affect the
construction contract?
– How we can manage the risk?
Tahseen Saleh

1- Risk Management
• Risk is a major factor to be considered during the

management of any project. Risks shall be controlled
and contained if a project is to stand a chance of
being successful.
• Risk is defined as uncertainty of outcome (whether

positive opportunity or negative threat).
• Risk is a combination of the probability, or frequency,
of occurrence of a defined hazard and the magnitude
of the consequences of occurrence.
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Tahseen Saleh

1- Risk Management
• Businesses and people can be classed as:
– Risk Averse
– Risk Neutral
– Risk Seeking
Tahseen Saleh

1- Risk Management
• Risk management is the identification, assessment, and

prioritization of risks (defined in ISO 31000 as the effect
of uncertainty on objectives, whether positive or
negative) followed by coordinated and economical
application of resources to minimize, monitor, and
control the probability and/or impact of unfortunate
events or to maximize the realization of opportunities.
• In other words, the task of risk management is to

manage project’s exposure to risk (that is, the probability
of specific risks occurring and the potential impact if they
7 did occur).
Tahseen Saleh

1- Risk Management
• Risk Groups
– Risks can be divided into certain groups which
could affect the project:
• Strategic
• Financial
• Operational
• Commercial
• Technical
Tahseen Saleh

1- Risk Management
• Principles of Risk management

– The International Organization for Standardization
(ISO) identifies the following principles of risk
management
• create value – resources expended to mitigate risk
should be less than the consequence of inaction, or (as
in value engineering), the gain should exceed the pain
• be an integral part of organizational processes
• be part of decision making process
• explicitly address uncertainty and assumptions
• be systematic and structured
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Tahseen Saleh

1- Risk Management
• Principles of Risk management

• be based on the best available information
• take human factors into account
• be transparent and inclusive
• be dynamic, iterative and responsive to change
• be capable of continual improvement and
enhancement
• be continually or periodically re-assessed
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Tahseen Saleh

1- Risk Management
• How the risk is determined?

– In project management, risk assessment is an integral part
of the risk management plan, studying the probability, the
impact, and the effect of every known risk on the project,
as well as the corrective action to take should that risk
occur.
– This can be made by using certain checklists, using the past
knowledge and records of similar projects, awareness of
customer/ supply chain reactions, market information,
etc.
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Tahseen Saleh

1- Risk Management
Risk management process:

• For the most part, these methods and processes consist
of the following elements, performed, more or less, in
the following order.
– identify, characterize threats
– assess the vulnerability of critical assets to specific threats
– determine the risk (i.e. the expected likelihood and
consequences of specific types of attacks on specific
assets)
– identify ways to reduce those risks
– prioritize risk reduction measures based on a strategy
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Tahseen Saleh

1- Risk Management
• Risk Identification
– It is the process of identifying potential risks which are
about events that, when triggered, cause problems.
Hence, risk identification can start with the source of
problems, or with the problem itself.
• Source analysis - Risk sources may be internal or

external to the system that is the target of risk
management.
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Tahseen Saleh

1- Risk Management
• Risk Identification
• Problem analysis - Risks are related to identified threats. For
example: the threat of losing money, the threat of abuse of
confidential information or the threat of accidents and
casualties. The threats may exist with various entities, most
important with shareholders, customers and legislative
bodies such as the government
• The chosen method of identifying risks may depend on
culture, industry practice and compliance. The identification
methods are formed by templates or the development of
templates for identifying source, problem or event.
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Tahseen Saleh

1- Risk Management
• Risk Assessment
– Risks must then be assessed as to their potential severity
of impact (generally a negative impact, such as damage or
loss) and to the probability of occurrence
– These quantities can be either simple to measure, in the
case of the value of a lost building, or impossible to know
for sure in the case of the probability of an unlikely event
occurring.
– Therefore, in the assessment process it is critical to make
the best educated decisions in order to properly prioritize
the implementation of the risk management plan.
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Tahseen Saleh

1- Risk Management
• Risk Assessment
– The fundamental difficulty in risk assessment is
determining the rate of occurrence since statistical
information is not available on all kinds of past incidents
– Risk assessment should produce such information for the
management of the organization that the primary risks are
easy to understand and that the risk management
decisions may be prioritized
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Tahseen Saleh

1- Risk Management
• Risk Assessment
– It is the determination of quantitative or qualitative
value of risk related to a concrete situation and a
recognized threat (also called hazard)
• Quantitative risk assessment requires calculations of
two components of risk (R):
– the magnitude of the potential loss (L),
– the probability (p) that the loss will occur
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Tahseen Saleh

1- Risk Management
• Risk Assessment
• Quantitative risk assessment includes many factors
such as modeling, chance and probability and other
mathematical approaches.
• Qualitative methods:
The essentially move around the formula:
Probability x consequence
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Tahseen Saleh

Risks in Contracts
2. Employer’s Risks
1. In FIDIC 1987 RB
2. In FIDIC 1999
3. In FIDIC 2017
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Tahseen Saleh

2- Employer’s Risks
• Employer’s Risks
• Employer risks are defined under Sub-Clauses:
– 20.4 of the FIDIC 4th edition Red Book form of Contract
– 17.3 of the FIDIC 1999 suite of contracts (Red, Yellow &
Silver) forms of Contract, and
– 17.2 of the FIDIC 2017 suite of contracts (Red, Yellow &
Silver) forms of Contract.
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Tahseen Saleh

2.1 Employer’s Risks – FIDIC 1987 4th edition, Red Book
• Employer’s risk as defined in the FIDIC 4th edition red book

(Sub-Clause 20.4)
– The Employer’s risks are:
(a) war, hostilities (whether the war be declared or not), invasion,
act of foreign enemies;
(b) rebellion, revolution, insurrection, or military or usurped
power, or civil war insofar as it relates to the country in which
the Works are located or countries through which plant must
be transported;
(c) ionising, radiation, or contamination by radio-activity from any
nuclear fuel, or from any nuclear waste, from the combustion
of nuclear fuel, radio-active toxic explosive or other hazardous
properties of any explosive, nuclear assembly or nuclear
component thereof;
(d) Pressure waves caused by aircrafts travelling at sonic or
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supersonic speed;
Tahseen Saleh

• Employer’s risk as defined in the FIDIC 4th edition red book (Sub-
Clause 20.4)
– The Employer’s risks are (Cont’d):
e) Riot, commotion, or disorder, unless solely restricted to
employees of the Contractor or his subcontractors and arising
from the conduct of the Works,
f) Loss or damage due to the use or occupation by the Employer
of any Section or part of the Permanent Works, except as may
be provided for in the Contract.
g) Loss or damage to the extent that is due to the design of the
Works, other than any part of the design provided by the
Contractor or for which the contractor is responsible, and
h) any operation of the forces of nature against which an
experienced Contractor could not reasonably have been
expected to take precautions.
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Tahseen Saleh

• Employer’s risk as defined in the FIDIC 4th edition red

book (Sub-Clause 20.4)
• The risk of war

– Is the Employer responsible for consequences
resulting from the risks of war only in the country
where the works are being carried out or regardless of
where the war occurs in the world?
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.
Tahseen Saleh

• Risks related to design

– The Employer’s risks as defined in paragraph (g) of sub-
clause 20.4 of the FIDIC 4th edition, is extremely wide as it
refers to loss or damage due to the design of works other
than that provided by the Contractor.
– The definition is not restricted to negligent design as it
includes events where damages occur without any fault,
defect, error or omission committed by the designer.
– The wording in the sub-clause 20.4 does not include the
word “solely” previously included in the third edition.
Accordingly, should damage occur to the Works in
circumstances where an error in design is a contributory
factor, then the Contractor is relieved of responsibility only
to the extent that the damage was caused by a design not
provided by him.
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Tahseen Saleh

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

• Sub-Clauses 65.1 & 65.2
The Contractor shall be under no liability whatsoever in consequence
of the special risks referred to in Sub-Clause 65.2, whether by way of
indemnity or otherwise for or in respect of:
(a) destruction of or damage to the Works, save to work condemned
under the provisions of Clause 39 hereof prior to the occurrence of
any of the said special risks
(b) Destruction of or damage to property, whether of the Employer or
third parties or
(c) injury or loss of life
The Works described in sub-clause 65.2 refer to sub-clause 20.4

paragraphs a, c, d, & e in addition to paragraph b which relates to
the country in which the Works are to be executed
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Tahseen Saleh


• Sub-Clauses 65.1 & 65.2
– Accordingly, the special risks mentioned in paragraph (b) of
sub-clause 20.4 are only applicable to the country where
the works are to be executed. Other risks such as war,
hostilities, invasion, etc. could be a special risk to the
works wherever they occur in the world if the could have
an impact on such works.
– It is seen that the Contractor shall be under no liability
whatsoever in case of such special risks except for his
defective and faulty works. Where is this mentioned?
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.
Tahseen Saleh


• Consequences of special risks
– What could be the consequences of special risks in terms
of damages, progress of works, increased costs, stoppages
and termination of works, subcontractors , payments,
materials ordered or delivered to site, contractors
machinery, etc.?
– Shall the either party give notices to the other party with
respect to the special risks?
– Within how many days such notice be given?
– When the contract can be terminated? And who can
terminate it? The Contractor, the Employer or either of
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them?
Tahseen Saleh


• Consequences of special risks
• Sub-clauses 65.3 to 65.7 deals with the consequences
of the special risks
– Sub-clause 65.3 (Damage to works by special risks)
In brief the Contractor is entitled for all the costs associated with:
• Rectifying any such destruction or damaged works, and
• Replacing or rectifying such material or contractor’s equipment
• Assessment shall be made in accordance with Clause 52
• It is mentioned … “include fair market value thereof as determined
by Engineer.” How do we define the phrase (Fair market value)?
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Tahseen Saleh


– Sub-clause 65.4 (Projectiles, Missiles)
Destruction, damage, injury or loss of life caused by the
explosion or impact whenever and wherever occurring
of any mine, bomb, shell, grenade or other projectile
missile, munitions or explosive of war shall be deemed
to be a consequence of the said special risks.
Suppose that after 30 years of the end of the war, a mine

in an old mine field which is the new construction site
of the project exploded and injured two labors and one
29 life was lost? Is this a special risk case in the project?
Tahseen Saleh

2.2 Employer’s Risks – FIDIC 1999 Suite of Contracts
• Employer’s risk as defined in the FIDIC 1999 S/C 17.3

Clause 17 contents
Clause 17 gives the basis for indemnities given by the
Contractor and the Employer (Sub-Clause 17.1), the
Contractor’s care of the Works (Sub Clause 17.2), Employer’s
risks (Sub-Clause 17.3) and their consequences (Sub-Clause
17.4) and the limitation of liability (Sub-Clause 17.6 ).
Intellectual and industrial property risks covered in Sub-Clause
17.5 fall outside normal project risks and can be considered
separately.
.
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Tahseen Saleh

Clause 17 summary
Clause 17 covers a wide-range of risks and
responsibilities that lead to claims arising out of the
Project which are covered by the indemnities and
insurance.
Sub-clauses cover risk and responsibility, but also other
contractual provisions, including indemnities, limitation
of liability, and the unrelated topic of intellectual and
industrial property rights.
The clause deals first with “Indemnities” , then
“Responsibility” and returns to “Risk” and finally turns to
“Liability”. This illogical sequence has been adjusted in
31 the 2008 FIDIC DBO Contract.
Tahseen Saleh

17.3: Employer’s Risks - Key issues

Risks for which the Employer is responsible, to the extent
defined in Sub-Clause 17.4, are listed at (a)-(h).
Employer’s risks are:
war, hostilities, invasion; rebellion terrorism, revolution, civil
war, riot; munitions of war, explosive; pressure waves caused
by aircraft; use or occupation by the Employer of any part of
the Permanent Works; design by the Employer of any part;
any unforeseeable adverse operation of the forces of nature.
Disorder or rioting on the part of the Contractor which arose
from the conduct of the Works is not an Employer risk.
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Tahseen Saleh


(a) war, hostilities (whether the war be declared or not), invasion,
act of foreign enemies;
(b) rebellion, revolution, insurrection, military or usurped power, or
civil war, within the Country,
(c) riot, commotion or disorder within the Country by persons other
than the Contractor’s Personnel and other employees of the
Contractor and Subcontractors;
(d) munitions of war, explosive materials, ionizing radiation or
contamination by radio-activity, except as may be attributable to
the Contractor’s use of such munitions, explosives, radiation or
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radio-activity,
Tahseen Saleh


e) pressure waves caused by aircrafts or other aerial
devices travelling at sonic or supersonic speed;
f) use or occupation by the Employer of any part or part of
the Permanent Works, except as may be specified in the
Contract,
g) design of any part of the Works by the Employer’s
Personnel or by others for whom the Employer is
responsible,
h) any operation of the forces of nature which is
Unforeseeable or against which an experienced
contractor could not reasonably have been expected to
have taken adequate preventative precautions.
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Tahseen Saleh

17.4: Consequences of Employer’s Risks - Key issues

If the Contractor suffers loss or damage as a consequence of
any item of Employer risk, then he must give prompt notice to
the Engineer.
Engineer may require the Contractor to remedy the loss or
damage.
Although the Contractor can recover cost in all cases, he is
only entitled to reasonable profit in respect of (f) and (g) of
Sub-Clause 17.3, items which refer to Employer responsibility
and/or fault.
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Tahseen Saleh

17.4: Consequences of Employer’s Risks (Continued) - Key

issues
Thus, if the Contractor suffers delay or increased cost, he may

be entitled to:
- an extension of time and to recover his costs (for a - d and g of
Sub-Clause 17.3), or
- his costs plus reasonable profit in respect of use of the Works
or design by the Employer ((e) and (f) of Sub-Clause 17.3).
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Tahseen Saleh


– The Contractor shall have no liability whatsoever, whether
by way of indemnity or otherwise, for loss or damage to
the Works, Goods or Contractor's Documents caused by
any of the following events (except to the extent that such
Works, Goods or Contractor's Documents have been
rejected by the Engineer under Sub-Clause 7.5 [Defects
and Rejection] before the occurrence of any of the
following events):
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Tahseen Saleh


a) interference, whether temporary or permanent, with any right of
way, light, air, water or other easement (other than that resulting
from the Contractor's method of construction) which is the
unavoidable result of the execution of the Works in accordance
with the Contract;
b) use or occupation by the Employer of any part of the Permanent
Works, except as may be specified in the Contract.
c) fault, error, defect or omission in any element of the design of the
Works by the Employer or which may be contained in the
Specification and Drawings (and which an experienced contractor
exercising due care would not have discovered when examining
the Site and the specification and Drawings before submitting the
Tender), other than design earned out by the Contractor in
accordance with the Contractor's obligations under the Contract;
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Tahseen Saleh


d) any operation of the forces of nature (other than those allocated
to the Contractor in the Contract Data) which is Unforeseeable or
against which an experienced contractor could not reasonably
have been expected to have taken adequate preventative
precautions;
e) any of the events or circumstances listed under sub-paragraphs (a)
to (f) of Sub-Clause 18.1 [Exceptional Events]; and/or
f) any act or default of the Employer's Personnel or the Employer's
other contractors.
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Tahseen Saleh

Subject to Sub-Clause 18.4 [Consequences of an Exceptional

Event], if any of the events described in sub-paragraphs (a) to
(f) above occurs and results in damage to the Works, Goods
or Contractor's Documents the Contractor shall promptly give
a Notice to the Engineer. Thereafter, the Contractor shall
rectify any such loss and/or damage that may arise to the
extent instructed by the Engineer. Such instruction shall be
deemed to have been given under Sub-Clause 13.3.1
[Variation by Instruction].
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Tahseen Saleh


If the loss or damage to the Works or Goods or
Contractor's Documents results from a combination of:
i. any of the events described in sub-paragraphs (a) to (f)
above, and
ii. a cause for which the Contractor is liable,
and the Contractor suffers a delay and/or incurs Cost
from rectifying the loss and/or damage, the Contractor
shall subject to Sub-Clause 20.2 [Claims for Payment
and/or EOT] be entitled to a proportion of EOT and/or
Cost Plus Profit to the extent that any of the above
events have contributed to such delays and/or Cost.
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Tahseen Saleh

Risks in Contracts
3. Exceptional Events and Force Majeure
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Tahseen Saleh

3- Exceptional Events and Force Majeure

It is evidenced that the Employer’s Risks are related to the:
1. Special Risks Clause 65 (FIDIC 4th edition 1987 Red Book),
2. Force Majeure Clause 19 of the 1999 suite of Contracts
3. Exceptional Events Clause 18 of the 2017 suite of
Contracts.
The Special Risks were discussed in previous slides. The next
slides discuss relationship Risks and Exceptional Events
including Force Majeure in the 1999 & 2017 suites of
Contracts.
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Tahseen Saleh

FIDIC 1999
Clause 19 [Force Majeure]
– 1.1.6.4 states that “Force Majeure” is defined in

Clause 19 [Force Majeure]
– Sub-Clause 19.1 provides for the definition and
conditions of Force Majeure:
– In this Clause “Force Majeure” means an exceptional event or

circumstance:
i. which is beyond a Party’s control;
ii. which such Party could not reasonably have provided against
before entering into the Contract;
iii. which having arisen, such Party could not reasonably have
avoided or overcome; and
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iv. which is not substantially attributable to the other Party.
Tahseen Saleh
FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG

© Tahseen
FIDIC 2017
Clause 18 [Exceptional Events]
– The definition under S/C 1.1.{37, 37, 33} “Exceptional

Event” means an event or circumstances as defined
in Sub-Clause 18.1[Exceptional Events]
– Under S/C 18.1: “Exceptional Event” means an event or
circumstance which:
i. is beyond a Party’s control;
ii. the Party could not reasonably have provided against before
entering into the contract;
iii. having arisen, such Party could not reasonably have avoided or
overcome; and
iv. is not substantially attributable to the other Party.
So the event or circumstance must be “exceptional” not merely
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unusual
Tahseen Saleh

© Tahseen
[Exceptional Events] vs. [Force Majeure]
– the title and definition “Force Majeure” was only

used in the 1999 suite of Contracts.
– this definition is now changed to “Exceptional

Event” in the 2017 suite of Contracts.
– the phrase “Exceptional Event” can apply to the

different possibilities of such events including the
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“Force Majeure” which is only one possibility.
Tahseen Saleh

© Tahseen
[Exceptional Events] vs. [Force Majeure]
– the Exceptional Events or circumstances that could

eventuate and prevent one Party from performing
any (one, more, or all) of its obligations in items (i) to
(v) in Sub-Clause 19.1 of the 1999 edition and items
(a) to (f) in the 2017 edition.
– If the performance of one or more but not all of the

obligations is prevented as a result of the Exceptional
Event, then it is not a Force Majeure.
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– Force Majeure applies only when all the obligations
are prevented. Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.1 & 2017 S/C 18.1

[Exceptional Events]
– An Exceptional Events may comprise but not limited

to any of the following events or circumstances
provided that the Conditions (i) to (vi) above are
satisfied. (Slide # 9)
• (i) (a) war, hostilities, (whether war is declared or not), invasion, act of
foreign enemies,
• (ii) (b) rebellion, revolution, insurrection, military or usurped power, or civil
war,
• (iii) (c) riot, commotion, disorder, strike or lockout by persons other than
the Contractor’s Personnel and other employees of the Contractor and his
Subcontractors,
• (d) strike or lockout not solely involving the Contractor’s Personnel and
48 other employees of the Contractor and his Subcontractors,
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.1 & 2017 S/C 18.1

– An Exceptional Events may comprise but not limited

to any of the following events or circumstances
provided that the Conditions (i) to (vi) above are
satisfied. (Slide # 9)
• (vi) (e) encountering munitions of war, explosive materials, ionizing
radiation or contamination by radio-activity, except as may be
attributable to the Contractor’s use of such munitions, explosives,
radiation or radio-activity, and or
• (v) (f) natural catastrophes such as earthquakes, tsunami, volcanic
activity, hurricane or typhoon.
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.1 & 2017 S/C 18.1

– The Exceptional Events listed in S/C 19.1 of the 1999

edition & S/C 18.1 of the 2017 editions are similar to
those addressed in S/C 65.2 of the 1987 Red book 4th
edition,
– the item of Pressure waves caused by aircrafts
travelling at sonic or supersonic speed, is not used in
both 1999 & 2017 editions. {why?}
– The natural catastrophes is considered as an
Exceptional Event in both 1999 & 2017 editions. It
was not considered as such in the 1987 Red Book 4th
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edition.
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.1 & 2017 S/C 18.1

– “exceptionally adverse climatic conditions” is

excluded from the definition of what constitutes an
Exceptional Event.
– this means that there is no right for either Party to
suspend the Works in the case of an event of
“exceptionally adverse climatic conditions”
– if this type of event has the effect of delaying
completion and taking-over of the Works or Section,
the Contractor shall be entitled to EOT under sub-
paragraph (c) of S/C 8.5 [Extension of Time].
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.1 & 2017 S/C 18.1

• From the previous slides, to have an exceptional risk six

criteria have to be met.
1. That the event is an Exceptional Events or circumstances,
2. The four criteria (i) to (vi) above are satisfied - S/C 18.1 of
the FIDIC 2017 suite. (Slide # 9)
3. And one Party (or both) is prevented or could be prevented
from performing any (one, more, or all) of its obligations.
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.2 & 2017 S/C 18.2

[Notice of an Exceptional Events] wording of 2017 edition
– If a Party is or will be prevented from performing any obligations

under the Contract due to an Exceptional Event (the “affected
Party” in this Sub-Clause), then the affected Party shall give a
Notice to the Other Party of such an Exceptional Event,
– shall specify the obligations, the performance of which will be
prevented (the ‘prevented obligations in this Clause).
– This Notice shall be given within 14 days after the affected Party
became aware, or should have become aware, of the Exceptional
Event.
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.2 & 2017 S/C 18.2

– The affected Party shall then be excused performance the

prevented obligations from the date such performance is
prevented by the Exceptional Event.
– If the Notice is received by the other Party after the 14 days
period, the affected Party shall then be excused performance the
prevented obligations only from the date on which this Notice is
received by the other Party.
– Thereafter, the affected Party shall be excused performance the
prevented obligations for so long as such Exceptional Event
prevents him from performing them.
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.2 & 2017 S/C 18.2

– Other than performance of the prevented obligations, the

affected Party shall not be excused performance of all other
obligations under the Contract..
– The obligations of either Party to make payments due to the other
Party under the Contract shall not be excused by an Exceptional
Event .
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Tahseen Saleh

© Tahseen
FIDIC
– If the Exceptional Event has a continuing effect, the affected

Party shall give further Notices describing the effect every 28
days after giving the first Notice under Sub-Clause 18.2 [Notice of
an Exceptional Event].
• This paragraph is placed in Sub-Clause 18.3 [Duty to minimize Delay].

• The Notice to be given @ 28 days intervals, while the interim claims are to
be submitted on monthly basis under Sub-Clause 20.2.6 [Claims of
continuing effect], paragraph (c).
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.3 & 2017 S/C 18.3

[Duty to Minimize Delay] wording of 2017 edition
– Each Party shall at all Times use reasonable endeavors to

minimize and delay in the performance of the Contract.
– The affected Party shall immediately give a Notice to the other
Party when he ceases to be affected by the Exceptional Event.
– If the affected Party fails to do so, the other Party may give a
Notice to the affected Party stating that the other Party considers
that the affected Party’s performance is no longer prevented by
the Exceptional Event, with reasons.
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.4 & 2017 S/C 18.4

[Consequences of an Exceptional Events] wording of
2017 edition
– If the Contractor is the affected Party and suffers delay and / or

incurs Cost by reason of the Exceptional Event of which he/she
gave a Notice under the relevant Sub-Clause 18.2 [Notice of an
Exceptional Event], the Contractor shall be entitled subject to
Sub-Clause 20.2 [Claims for Payment and/or EOT] to:
• (a) EOT, and/or
• (b) if the Exceptional Event is of the kind described in sub-
paragraphs (a) to (e) of Sub-Clause 18.1 [Exceptional Events] and,
in the case of sub-paragraphs (b) to (e) of that Sub-Clause, occurs
in the Country of payment of such Cost. (slides…..)
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Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.4 & 2017 S/C 18.4

2017 edition
– Accordingly, the Contractor to be entitled for an EOT and/or

additional payment under Clause 18 [Exceptional Events]:
• A Notice under the relevant Sub-Clause 18.2 [Notice of an
Exceptional Event] shall be given, and
• Being subject to Sub-Clause 20.2 [Claims for Payment and/or EOT],
another Notice under Sub-Clause 20.2.1 [Notice of Claim] shall be
also given.
• The Exceptional Events other than war, hostilities, (whether war
is declared or not), invasion, act of foreign enemies shall be in
the Country of payment to be a basis Claim.
59
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.4 & 2017 S/C 18.4

2017 edition
– What if the Exceptional Event in the case of

sub-paragraphs (b) to (e) of Sub-Clause 18.1
[Exceptional Event] occur in the Country of
carrying out the Works? Or the Country of
manufacturing certain plant and/or materials
for the Works?
60
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.5 & 2017 S/C 18.5

[Optional Termination] wording of 2017 edition
– If the execution of substantially all the Works in progress is

prevented for:
• a continuous period of 84 days by reason of an Exceptional
Event of which a Notice has been given under Sub-Clause
18.2 [Notice of an Exceptional Event], or
• for multiple periods which total more than 140 days due
to the same Exceptional Event,
then either Party may give to the other Party a Notice of
Termination of the Contract.
61
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.5 & 2017 S/C 18.5

– The Termination date shall be the date 7 days after the Notice is
received by the other Party.
– The Contractor shall proceed in accordance with Sub-Clause
16.3 [Contractor’s Obligations After Termination].
– The Contractor shall submit detailed supporting particulars of the
value of the work done
– The Engineer shall proceed in accordance with Sub-Clause 3.7
[Agreement or Determination] to agree or determine the value of
done …
– The Engineer shall issue a Payment Certificate in accordance
with Sub-Clause 14.6 [Issue of IPC], for the amount so agreed or
determined without the need for the Contractor to submit a
62 Statement.
Tahseen Saleh

© Tahseen
FIDIC 1999 S/C 19.5 & 2017 S/C 18.5

Compensation
– Manmade Exceptional Events, entitles the Contractor
for Time and Cost compensations, while Exceptional
Events resulting from the forces of nature entitles the
Contractor for extension of time only should he/she had
suffered the same.
63
Tahseen Saleh

© Tahseen
Risks in Contracts
4. Risks of Design
64
Tahseen Saleh

4- Risks of Design

It is evidenced in Employer’s Risks Sub-Clause :
1. S/C 20. 4 of (FIDIC 4th edition 1987 Red Book),
2. S/C 17.3 of of the 1999 suite of Contracts
3. S/C 17.2 of the 2017 suite of Contracts.
that the interference with the design is treated as Employer’s
Risks. The allocation of design responsibility is related to the
proper selection of the Contract Type (Construction, Plant,
Design & Build or EPC/ Turnkey). The next slides discuss
proper selection of Contract in relation with the allocation of
design responsibility the 1999 & 2017 suites of Contracts.
65
Tahseen Saleh

4- Risks of Design
FIDIC Short Form

• The Green Book
• Short Form of Contract
• 1st Edition 1999
• Short sentences; simple straight forward
language.
• 15 Clauses in 10 pages
• The complexities of other forms is not present
• Suitable when work is not complicated.
• For building or engineering works of relative
small capital value and/or short construction
period. (Projects up to US $ 500,000 and
duration not more than 6 months)
66
Tahseen Saleh

4- Risks of Design
• FIDIC Short Form

• May also be suitable for contracts of greater value, if
relatively simple or repetitive work.
• Can be suitable for certain larger construction projects
and for longer construction period.
• Regularly used in some suitable cases for contracts with
value up to US$10,000,000.
• The upper sum me be ignored in simple repetitive work.
• Limiting the duration of the construction period to that
time when the contract sum can remain fixed, i.e.
without allowance for escalation and other changes in
costs (usually contractors agree to keep their prices firm
for up to 12months, or sometimes more than that).
67
Tahseen Saleh

4- Risks of Design
• FIDIC Short Form

• Under the usual arrangements of this type of contract:
– The Employer Provides the finance.
– Works comprise construction but may include, or wholly
comprise electrical, mechanical or other works.
– Design can be provided by the Employer, the Employer
Representative (if any) or by the Contractor.
– Employer may wish to order variations to the Works.
– Employer may wish to appoint an individual or a firm, as
his Representative, to carry out certain duties.
– Employer has choices for evaluation and payment.
68
Tahseen Saleh

4- Risks of Design
FIDIC Construction Contract

The Red Book
• Conditions of Contract for Construction for
Building and Engineering Works Designed by the
Employer.
• 1st Edition 1999
• For building or engineering works of larger and
more complex than minor projects.
• The design is made by the Employer (in house if
he has the capabilities and authorized to do so)
or on behalf of the Employer by design
consulting engineer.
• Often includes some elements of Contractor-
designed civil, mechanical, electrical and/or
construction works.
69
Tahseen Saleh

4- Risks of Design
The Red Book

• The procurement of construction works takes place
according to a standard pattern of pre-feasibility &
feasibility studies, conceptual design, final design.
• Then the consultant prepares the tender documents
• The Employer or the consultant (on behalf of the
Employer) announces for the tenders and either invites a
specific list of contractors (short list), a specific category
or grade of contractors or qualify (pre-qualification or
post qualification) the contractors to participate if the
project and the works are of special nature, higher
requirements or more complicated.
• The award is made to the most suitable bid (normally
the lowest if the contractors have already been
70
qualified).
Tahseen Saleh

4- Risks of Design
The Red Book

• Payment to the contractor is made by measurement of the
completed works at the end of each month.
• Under the usual arrangements for this type of Contract the
Employer:
– Provides finance
– Appoints a consulting engineer to carry out the design work and
prepare the tender documents.
– Appoints the Engineer to supervise the works and monitor the
construction, administer the contract, certify payments, make
determinations on issues raised by the parties, etc.
• The Engineer may initiate variations.
• The Employer wishes to be fully informed
• Payments to the Contractor will be according to a Bill of Quantities
or lump sum for the approved works.
• The Employer seeks to ensure a fair sharing of the construction
risks.
71
Tahseen Saleh

4- Risks of Design
FIDIC Plant and Design Build

The Yellow Book
• Conditions of Contract for Plant and Design Build
for electrical and mechanical plant and for
building works, designed by the Contractor.
• 1st Edition in 1999
• For projects of larger and more complex than
minor works projects.
• The Contractor designs and provides in
accordance with the Employer’s Requirements,
plant and or other works; which may include any
combination of civil, mechanical, electrical and
or construction works.
• The Employer may carry out some designs.
72
Tahseen Saleh

4- Risks of Design
• The Yellow Book

a) Electrical and mechanical Plant designed by the
Contractor
– Traditional plant projects involve design,
manufacturer, delivery, erection, testing, etc. of
plant by a contractor to an outline, certain
requirements and performance prepared by the
Employer.
– The Procurement of the supply and installation of

plant and equipment closely follow the same
procedure of the Construction works.
73
Tahseen Saleh

4- Risks of Design
The Yellow Book

Some of the differences are:
– Detailed design of the plant is the Contractor’s
responsibility;
– Most of the plant is manufactured off-site;
– Contractor is associated with the a plant manufacturer or
supplier or with civil works contractor.
– Payment is mainly made on a schedule of payments or
based on the achieved progress of work of predefined
milestones;
– testing and commissioning are comprehensive and
stringent;
– Procurement process may be in two stages of tendering
which allows contractors / suppliers more chance to offer
their own solutions to the Employer’s Requirements
74
Tahseen Saleh

4- Risks of Design
The Yellow Book

b) Building and Engineering works designed by
the Contractor
– Design-Build: design is mainly carried out by the
Contractor, who is responsible for the design and
the completed works which shall fit for purpose.
– The Employer provides the Employer’s
Requirements and the Contractors designs and
builds the facility.
– The tender documents usually include drawings
showing the conceptual or preliminary design.
75 – The Procurement may be single or two stages.
Tahseen Saleh

4- Risks of Design
The Yellow Book

• Under the usual arrangements for this type of Contract (Plant
and Design Build) the Employer:
– Provides finance
– Appoints Engineer to administer Contract, monitor the design and
manufacturing, installation and erection on site and construction. Also,
certify payments, make determinations on issues raised by the parties,
etc.
• The Engineer may initiate variations.
• The Employer wishes to be fully informed.
• Payments to the Contractor will be according to achieved
milestones or as per defined schedule of payments.
• Contract is generally lump sum
• The Employer seeks to ensure an equitable sharing of the
construction risks and accepts the overruns may occur to
contract sum and possibly the completion date.
76
Tahseen Saleh

4- Risks of Design
FIDIC EPC/Turnkey Projects

The Silver Book
• Conditions of Contract for EPC/Turnkey
Projects.
• 1st Edition in 1999.
• For different sizes and complexity of
projects.
• The Contractor fully designs and provides
in accordance with the Employer’s
Requirements for the required works.
• The Employer is not interfering with the
designs.
• .
77
Tahseen Saleh

4- Risks of Design
The Silver Book

• The need for contract forms where the emphasis is on a fixed
final price and duration was the basis to publish the
EPC/Turnkey form.
• In addition, Owners (Employers) who do not have their own
technical staff capable of designing the facility or who do not
want to take the responsibility of design and / or in the
absence of the required engineering experience of that
specific field, Owners may go directly to qualified and capable
contractors to carry out all the works.
• It is believed that the overall implementation time can be less
than that of traditional approach.
• Turnkey projects range from those with minimum
requirements by the Employer to very detailed and complex
requirements.
78
Tahseen Saleh

4- Risks of Design
The Silver Book

• Under the usual arrangements for this type of
Contract the Employer:
– Provides finance.
– Does not wish to be fully informed.
– Wants the Contractor to be fully responsible for the design
and construction of the project.
– Wants high degree of certainty that the contract price and
the duration will not be exceeded.
– Is conveying the risks to the Contractor. Accordingly, he
expects and is willing to pay more.
– Payments to the Contractor will be according to achieved
milestones or as per defined schedule of payments.
– Contract is generally lump sum.
79
Tahseen Saleh

4- Risks of Design
FIDIC Design, Build and Operate Projects

The Gold Book
• Conditions of Contract for Design, Build and

Operate Projects.
• 1st Edition in 2008.
• For different sizes and complexity of projects.
• The project is long-term and it combines the
operation and maintenance into one contract
with the design and building of the facility.
• The Contractor designs and provides in
accordance with the Employer’s
Requirements, plant and or other works.
80
Tahseen Saleh

4- Risks of Design
The Gold Book

• The Contractor will usually be a joint venture
or consortium.
• The Contractor will be responsible for
providing a lasting service through good
quality and reduced maintenance and
operation costs.
• The Employer is responsible for financing the
project.
• New procedures and new terminology are
introduced in the Gold book which are not
81
found in the other FIDIC books.
Tahseen Saleh

4- Risks of Design
Which Form to Use

• .
82
Tahseen Saleh

Risks in Contracts
• THANK YOU
• Tahseen Saleh
83
Tahseen Saleh

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FIDIC Training - Online Course

Author-presenter: Tahseen Saleh

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Risk is a major factor to be considered during the

• Risk is defined as uncertainty of outcome (whether

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Businesses and people can be classed as:

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Risk management is the identification, assessment, and

• In other words, the task of risk management is to

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Principles of Risk management

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• Principles of Risk management

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• How the risk is determined?

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Risk management process:

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• Source analysis - Risk sources may be internal or

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FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Employer’s risk as defined in the FIDIC 4th edition red book

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Employer’s risk as defined in the FIDIC 4th edition red

• The risk of war

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Risks related to design

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

The Works described in sub-clause 65.2 refer to sub-clause 20.4

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Special Risks (Clause 65 of the 1987 FIDIC Red Book)

Suppose that after 30 years of the end of the war, a mine

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Employer’s risk as defined in the FIDIC 1999 S/C 17.3

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

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17.3: Employer’s Risks - Key issues

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Employer’s risk as defined in the FIDIC 1999 S/C 17.3

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

• Employer’s risk as defined in the FIDIC 1999 S/C 17.3

FIDIC – INTERNATIONAL FEDERATION OF CONSULTING ENGINEERS – WWW.FIDIC.ORG – FIDIC@FIDIC.ORG – COPYRIGHT 2019

17.4: Consequences of Employer’s Risks - Key issues

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