CLAIM PROCEDURE UNDER FIDIC 2017
During the process of Contract performance, there are various events or circumstances giving rise to a Claim such as Delayed Payment, or Delay in VO Approval by the Employer; or Delay in design approval that leads to a delay in the construction process; or delay on remedying defects by the Contractor, etc.
In the case of above events or circumstances, it is necessary for the Employer or the Contractor to understand the steps of the Claim procedure to give a valid Claim that prevents claiming Party’s rights from being voided or affected.
The following article focuses on clarifying the Claim procedure under the FIDIC 2017, prescribed in Red Book 2017 and Yellow Book 2017
Classification of Claims
Under the Sub-Clause 20.1.[Claims], there are four main categories of Claims:
- Claims for EOT;
- Claims for Payment;
- Claims for DNP;
- Claims for another entitlement or relief against the other Party.
In case of the Claims under item (4), whether the other Party or the Engineer has disagreed with the requested entitlement or relief (or does not responds within a reasonable time), the claiming Party may give a Notice refer the Claim to the Engineer as soon as practicable to apply Sub-Clause 3.7 [Agreement or Determination]
In case of remaining Claims, under Sub-Clause 20.2 [Claims for Payment and/or EOT] the following Claim Procedure shall apply.
Procedure of Claims for Payment and/or EOT
The Claim Procedure may be divided into three main phases, including:
The Phase 1: Preliminary Notice
No later than 28 days after the claiming Party became aware or should have become aware of the event or circumstance giving rise to the Claim, the claiming Party shall give a Notice of Claim, attached with the description of the event or circumstance to the Engineer, If the claiming Party fails to give a Notice of Claim, the other Party shall be discharged from any liability in connection with the event or circumstance giving rise to the Claim.
In case the claiming Party gives a Notice of Claim but later than 28 days as mentioned, the Engineer shall, within 14 days after receiving the Notice of Claim, give a Notice to the claiming Party, regarding late submission of Notice of Claim with reasons. After this period of 14 days, there are two circumstances that may happen:
- The Engineer gives a Notice regarding late submission: the Notice of Claim shall be deemed to be an invalid Notice, unless the claiming Party disagrees with the Engineer. In this circumstance, the claiming Party shall include in its Fully Detailed Claim details of such disagreement or why such late submission is justified (as the case may be).
- The Engineer does not give such a Notice: a Notice of Claim shall be deemed to be a valid Notice. If the other Party disagrees with such deemed valid Notice of Claim, the other Party shall give a Notice to the Engineer which shall be considered by the Engineer in the Phase 3.
In addition, the claiming Party shall keep “contemporary records” – records that are prepared or generated at the same time, or immediately after, the event or circumstance giving rise to the Claim.
After submitting the Notice of Claim, the claiming Party shall continue to carry out other steps in the Phase 2.
The Phase 2: Fully Detailed Claim
Within 84 days after the claiming Party become aware, or should have become aware, of the event or circumstance giving rise to the Claim, or such other period (if any) as may be proposed by the claiming Party and agreed by the Engineer, the claiming Party shall submit to the Engineer a Fully Detailed Claim.
Fully Detailed Claim includes:
- A detailed description of the event or circumstance giving rise to the Claim which shall include:
– Timeline of events;
– Description of event or circumstance owing to which, the Employer or the Contractor shall be entitled to any extension.
- A statement of the contractual and/or legal basis of the Claim;
- All contemporary records on which the claiming Party relies; and
- Detailed supporting particulars of the amount of additional payment claimed (or amount of reduction of the Contract Price in the case of the Employer as the claiming Party) and/or EOT claimed (in the case of the Contractor) or extension of the DNP claimed (in the case of the Employer).
Moreover, attached with the Fully Detailed Claim, the claiming Parting may include documents such as the construction diary, meeting minutes, instructions of the project management engineer, and correspondences between Parties related to the Claim.
Among the above contents included in the Fully Detailed Claim, the statement of the contractual and/or other legal basis of the Claim is the must-have content. If the claiming Part fails to submit this statement, the Notice of Claim shall be deemed to have lapsed.
In case the claiming Party submits the statement of the contractual and/or other legal basis of the Claim but later than 84 days as mentioned, within 14 days after receiving the Fully Detailed Claim, the Engineer shall give a Notice to the claiming Party, regarding late submission of Notice of Claim. There are two circumstances that may happen and further actions by the Parties shall be the same as the Phase 1.
The Phase 3: Agreement or Determination of the Claim
After receiving the Fully Detailed Claim in the Phase 2, the Engineer may require necessary additional particulars. In this case, the Engineer shall:
- Promptly give a Notice to the claiming Party, describing the additional particulars and the reason for requiring them; and
- Still have responsibility to give a response on the contractual or other legal basis of the Claim, by giving a Notice to the claiming Party within the period of 42 days.
After receiving the above Notice from the Engineer, the claiming Party shall submit the additional particulars as soon as practicable. The Engineer shall then proceed under Sub-Clause 3.7[Agreement or Determination] to agree or determine:
- The additional payment (if any) to which the claiming Party is entitled or the reduction of the Contract Price (in case of the Employer as the claiming Party); and/or
- The extension (if any) of the Time for Completion or the extension of DNP.
In case the claiming Party is considered to not submit Notice of Claim and/or Fully Detailed Claim within the specified period, whether the Notice of Claim is treated as a valid Notice or not will also be considered by the Engineer when the Engineer carries out agreement or determination of Claim under Sub-Clause 3.7 [Agreement or Determination] based on opinions or submissions provided by Parties as mentioned in Phase 1 and Phase 2.
Claims of continuing effect
If the event or circumstance giving rise to the Claim has a continuing effect, Fully Detailed Claimed mentioned in Phase 3 shall be considered as interim.
In this case, the Engineer shall be responsible for giving a response on the contractual and/or other legal basis of the interim Fully Detailed Claim as the Engineer does in the third phase. After submitting the first interim Fully Detailed Claim, the claiming Party shall submit further interim Fully Detailed Claims at month intervals, giving the accumulated amount of additional payment (or the reduction of the Contract Price) claimed, or extension of time claimed, or extension of DNP.
After the end of the effects resulting from the event or circumstance, within 28 days or within such other period as may be agreed by Parties, the claiming party shall submit a final Fully Detailed Claim.
Read more about FIDIC Contract 2017 here
