FIDIC Yellow Book 2019

1. Introduction to FIDIC Yellow Book 2019

In April 2019, FIDIC published Conditions of Subcontract for Plant and Design, called “Fidic Yellow Book 2019” or “FIDIC Yellow Book for Subcontractors” for short.

FIDIC Yellow Book 2019 is the long-awaited publication that was expected by many FIDIC users worldwide and published exactly 20 years after the first introduction of Conditions of Plant and Design-Build Contract in 1999 (“FIDIC Yellow Book 1999”).

The birth of FIDIC Yellow Book 2019 also means that Parties to contracts are no longer required to draft or amend a Subcontract to use alongside FIDIC Yellow Book 2019. In other words, the introduction of the FIDIC Yellow Book 2019 by FIDIC prevents unnecessary disputes and risks.

Thus far, FIDIC Yellow Book 2019 is only the third Subcontract introduced by FIDIC to users. To be specific:

Aside from FIDIC Red Book 2011 for Subcontractors which is recommended to accompany FIDIC Red Book 1999 and FIDIC Pink Book 2010, there is also the FIDIC Colorless Book 1994 for Subcontractors, which is recommended for use together with FIDIC Red Book 1985, 5^th Edition.

FIDIC Contracts for Subcontractors published by FIDIC (as of 2019)

Besides the three aforementioned FIDIC Contract for Subcontractors, FIDIC has yet to publish any further models for Subcontract. Therefore, FIDIC users from around the world must continue their wait for other FIDIC Contracts for Subcontractors to be published by FIDIC. For example:

FIDIC Contract for Subcontractors to accompany FIDIC Silver Book 1999 – used in EPC/Turnkey Project/ Package (FIDIC Silver Book 1999”); or

FIDIC Contracts for subcontractors which are recommended to be used in conjunction with the 2017 FIDIC Suite of Contracts, 2^nd Edition – update from the FIDIC Contract 1999.

For more information on FIDIC contracts for Subcontractors, click here.

For more information on contracts published by FIDIC, click here.

To provide Clients with further information on FIDIC Yellow Book 2019, thereby supporting Parties in research and choosing the appropriate model of FIDIC Contract for Subcontractors, CNC presents the article entitled: “FIDIC Yellow Book 2019”. Please read further.

2. Terms

For simplification, and to avoid assumptions and interpretations, as well as unsynchronized translation (English – Vietnamese), the following terms are used:

• FIDIC: The International Federation of Consulting Engineers
• FIDIC’s Conditions of Construction Contract, Conditions of Construction Contract published by FIDIC, or FIDIC Conditions of Contract are terms for the conditions and clauses of the Contract for construction prepared by FIDIC to be introduced to users worldwide.
• FIDIC Red Book 1999: Conditions of Contract for the implementation of the construction designed by the Employer, first published by FIDIC in 1999.
• FIDIC Yellow Book 1999: means the Conditions of Contract for the implementation of the construction designed by the Contractor, first published by FIDIC in 1999
• FIDIC Pink Book 2010: harmonized edition of Conditions of Contract, used by the sponsors for the arrangement of funding for development projects.
• FIDIC Red Book 1987: Conditions of Contract for the implementation of construction designed by the Employer, published in 1987 by FIDIC as the fifth edition.
• FIDIC Contract 2017: 2017 FIDIC Suite of Contracts published in 2017, the second edition, an upgrade for the 1999 FIDIC Suite of Contracts.

3. FIDIC Yellow Book 2019 – Scope of application

FIDIC Yellow Book 2019 is published by FIDIC and is recommended to be used along with FIDIC Yellow Book 1999[1]

Scope of application of FIDIC Yellow Book 1999 for Subcontractors

Similar to how the FIDIC Red Book 2011 for Subcontractors – which accompanies FIDIC Red Book 1999 – is structured, FIDIC Yellow Book 2019 is published with the purpose of supplementing and supporting FIDIC Yellow Book 1999 in mind.

For that reason, the structure, the terms, and the clauses of the FIDIC Yellow Book 2019 are also demonstrated, arranged, and implemented methodically appropriate and synchronized with FIDIC Yellow Book 1999.  For instance, FIDIC Yellow Book 2019 has the same number of Clauses as FIDIC Yellow Book 1999 – 20 Clauses.

Therefore, FIDIC Yellow Book 2019, theoretically speaking, could be used alongside Main contracts with different structure and content from FIDIC Yellow Book 2019. Such usage would cause a tremendous loss of time and money while not safeguarding the result from potential disputes and risks due to incompatibilities in approaches.

In simpler terms, to apply FIDIC Yellow Book 2019 efficiently, the Main Contract between an Employer and a Contractor must follow the recommended model of FIDIC Yellow Book 1999.

4. Structure – FIDIC Yellow Book 2019 – Subcontractors

FIDIC Yellow Book 2019 is divided into 3 main parts, specifically:

• Part 1: General Conditions of Subcontract
• Part 2: Guidance for the preparation of Particular Conditions of Subcontract
• Part 3: Forms

Structure – FIDIC Yellow Book 2019 – Subcontractors

• Part 1: General Conditions of Subcontract of FIDIC Yellow Book 2019

The General Condition of FIDIC Yellow Book 2019 is the most important part and as such stipulates the fundamentals of a construction contract.

Accordingly, there are a total of 20 clauses in the General Conditions of Subcontract of FIDIC Yellow Book 2019, including:

Clause 1:       Definitions and Interpretation

Clause 2:       The Main Contract

Clause 3:       The Contractor

Clause 4:       The Subcontractor

Clause 5:       Subcontract Design

Clause 6:       Co-operation, Staff and Labor

Clause 7:       Equipment, Temporary Work, Other Facilities, Plant, and Materials

Clause 8:       Commencement and Completion

Clause 9:       Tests on Completion

Clause 10:     Completion and Taking-over the Subcontract Works

Clause 11:     Defects Liability

Clause 12:     Subcontract Tests After Completion

Clause 13:     Subcontract Variations and Adjustments

Clause 14:     Subcontract Price and Payment

Clause 15:     Termination of the Main Contract and Termination of the Subcontract by the Contractor

Clause 16:     Suspension and Termination by the Subcontractor

Clause 17:     Risk and Indemnities

Clause 18:     Subcontract Insurance

Clause 19:     Subcontract Force Majeure

Clause 20:     Notices, Subcontractor’s Claims and Disputes

These 20 Clauses are structured in a manner which is scientific, coherent, and appropriate to the progress and implementation sequence of a Construction Contract (Review the analysis in Section 4 below)

The notable difference between FIDIC Yellow Book 2019 and FIDIC Yellow Book 1999 is that the definition of FIDIC Yellow Book 2019 is sorted alphabetically while FIDIC Yellow Book 1999 sorts the definitions under categories such as: (Entities, Contract, Duration, Price, Work, and Other Issues)

The change in the arrangement of the definitions in FIDIC Yellow Book 2019 is also the method introduced and applied in the FIDIC 2017 Suite of Contracts

• Part 2: Guidance for the preparation of Particular Conditions of Subcontract

To amend, change, or add to the General Conditions to satisfy the circumstances of each case, FIDIC provides Guidance for the preparation of Particular Conditions of Subcontractor in part 2. This in turn means that if there are no amendments, changes, or additions made in the Particular Conditions, the validity and effect of the General Conditions remains intact.

Simultaneously, to ensure that the amendments made in the Particular Conditions of Subcontract are appropriate to the Main Contract, FIDIC introduced some Appendices and Attachments. These annexes are designated Alphabetically from A to G for identification:

• Annex A:       Particulars of the Main Contract
• Annex B:       Scope of Subcontract Work and Schedule of Subcontract Documentation
• Annex C:      Incentive(s) for Early Completion, Taking-over by the Contractor
• Annex D:      Equipment, Temporary Work, Facilities, and Free-Issue Materials to be Provided by the Contractor
• Annex E:       Insurances
• Annex F:       Subcontract Programme
• Annex G:      Other items

Moreover, FIDIC has also provided some forms, pertaining to important legal issues, as a reference for users.

Obviously, FIDIC does not encourage Parties to make extraneous amendments and additions to the General Conditions. However, there are a variety of situations in which any changes made are vitally fundamental that they affect the essence of the General Conditions or FIDIC’s approach to the allocation of risk between the Parties, thereby rendering the standardized Construction contract meaningless and endangering the parties with potential conflicts.

Therefore, FIDIC has introduced the 5 Golden Principles (or GP for short) in Contract drafting:

• GP1: The duties, rights, obligations, roles, and responsibilities of all the Contract Participants must be generally as implied in the General Conditions, and appropriate to the requirements of the project
• GP2: The Particular Conditions must be drafted clearly and unambiguously
• GP3: The Particular Conditions must not change the balance of risk/reward allocation provided for in the General Conditions
• GP4: All time periods specified in the Contract for Contract Participants to perform their obligations must be of a clear and reasonable duration
• GP5: Unless there is a conflict with the governing law of the Contract, all formal disputes must be referred to a Dispute/Avoidance/Adjudication Board (or a Dispute Adjudication Board, if applicable) for a provisionally binding decision as a condition precedent to arbitration.

Further information pertaining to the Golden Principles of FIDIC, may be found here ► https://fidic.org/books/fidic-golden-principles-2019

• Part 3: Forms

Part 3 pertains to forms for documents that are relevant to the Subcontract, including:

• Subcontractor’s Offer
• Appendix to the Subcontractor’s Offer
• Contractor’s Letter of Acceptance
• Subcontract Agreement

Aside from the aforementioned content, FIDIC Yellow Book 2019 also provides users with diagrams and maps which demonstrate the sequences, procedures, and expected duration of procedures relevant to the Subcontract and events that have the potential to emerge during the implementation of the contract, thereby providing users with a better grasp of subcontract activities.

5. The structure of the General Conditions of FIDIC Yellow Book 2019

FIDIC Yellow Book 2019 has the same number of General Conditions as the FIDIC Red Book 2011 – 20 clauses arranged in a scientific and coherent manner.

These 20 clauses of the General Conditions of FIDIC Yellow Book 2019, are divided numerically into 8 categories of issues, the implementation sequence of the contract, and the arrangements for the commencement of work:

No.	Issue	Clause(s)
1	General Information	Clause 1: Definitions and Interpretation Clause 2: The Main Contract
2	Contract Participants	Clause 3: The Contractor Clause 4: The Subcontractor
3	Resources arrangements	Clause 5: Subcontract Design Clause 6: Co-operation, Staff and Labour Clause 7: Equipment, Temporary Works, Other Facilities, Plant and Materials
4	Work Sequence	Clause 8: Commencement and Completion Clause 9: Tests on Completion Clause 10: Completion and Taking-over the Subcontract Works Clause 11: Defects Liability Clause 12: Subcontract Tests after Completion
5	Finance	Clause 13: Subcontract Variations and Adjustments Clause 14: Subcontract Price and Payment
6	Contract Termination	Clause 15: Termination of the Main Contract and Termination of the Subcontract by the Contractor Clause 16: Suspension and Termination by the Subcontractor
7	Risk and Risk Management	Clause 17: Risk and Indemnities Clause 18: Subcontract Insurances Clause 19: Subcontract Force Majeure
8	Claims and Dispute Adjudication	Clause 20: Notices, Subcontractor’s Claims and Disputes

 

6. FIDIC Yellow Book 2019 – Notables features

FIDIC Yellow Book 2019 contains some noticeable and outstanding features:

Firstly, FIDIC Yellow Book 2019 clearly and unambiguously specifies the transfer of general and particular conditions from the Main contract to the Subcontract. Accordingly, Clauses 2.2 specify the following:

“The Subcontractor shall, in relation to the Subcontract Works, perform and assume all the obligations and liabilities of the Contractor under the Main Contract save where the provisions of the Subcontract otherwise require”

However, the Subcontractor should not assume all obligations and liabilities of the Contractor. In particular, Clause 2.2 also lists the type of obligations and liabilities that are not to be transferred to the Subcontractor, for instance, issues relating to Permits, Licences, or Approval, Setting Out, Rights of Way and Facilities, and overall co-ordination,..etc

Secondly, the Subcontractor could also receive the relevant rights and benefits similar to that of the Contractor. According to Clause 2.4, the Subcontractor has the same rights and benefits similar to that of the Contractor, and the Contractor is obliged to ensure those said rights and benefits. However, in order to execute these rights and benefits, the Subcontractor is required to perform notification obligations, as well as submit required documents in accordance with the General Conditions

Finally, the Contractor is only obliged to make payment for the Subcontractor upon receiving the payment from the Employer (pay-when-paid)

7. Conclusion

CNC hopes that the above information is clearly conveyed and of use to  our Clients, as well as potential clients. However, should there be any doubt or need for further information pertaining to FIDIC Yellow Book 2019, please contact us at:

 

CNC VIETNAM LAW FIRM LIMITED LIABILITY COMPANY

Address: 28 Mai Chi Tho Street, An Phu Ward, Thu Duc City, Ho Chi Minh City, Vietnam

Phone: (84) 28-6276 9900

Hotline: (84) 916-545-618

Email: contact@cnccounsel.com

Email: cnccounsel

 

Managed by:

Mr. Le The Hung | Managing Partner

Phone: (84) 916 545 618

Email: hung.le@cnccounsel.com

Or

Ms. Nguyen Thi Kim Ngan | Partner

Phone: (84) 919 639 093

Email: ngan.nguyen@cnccounsel.com

 

Disclaimers:

This article is prepared or used for the purpose of introducing or updating clients and potential clients on information pertaining to matters and/or the developments of legal perspectives in Vietnam. The information contained within this article DOES NOT constitute advice of any kind and could be subjected to change without prior notice.

 

[1] Conditions of Subcontract for Plant and Design – Build (FIDIC, 2019), Foreword