Claims Under the FIDIC Conditions of Contract

Turning now to the notion of a "claim": the term is used extensively throughout the FIDIC conditions of contract, yet the conditions themselves contain no definition of it. The legal literature defines it as "a specific demand of one of the contracting parties which may be notified to the Engineer on the basis of a circumstance identified in the contract or otherwise in connection with the contract, and for the assertion of which the contract prescribes a particular procedure, compliance with which conditions the successful pursuit of the demand".2

In Czech practice, claims under the FIDIC conditions are referred to by RSD (the Road and Motorway Directorate) as contractual compensation entitlements, described as the parties' entitlements to compensation. Such entitlements arise principally from a failure to perform contractual duties or from events beyond the parties' control, and are asserted in the course of the works in accordance with the conditions of contract.

A claim may therefore be characterised, in the context of the FIDIC conditions, as a specific contractual compensation instrument sui generis by which the affected party, usually by notifying its demand, responds either to a breach or non-performance of the other party's obligations or to situations arising from events (risks) which the parties can neither prevent nor control. The enforceability of a claim then depends first on satisfying the conditions laid down in advance by the contract, and subsequently on the stage of its administration.3

A claim thus constitutes the means by which the party concerned may respond, in the manner contemplated by the contract, to a circumstance that the parties did not foresee in advance (and often could not have foreseen) and which represents a risk for the other party. 4

Under the FIDIC conditions of contract, claims are commonly divided into two principal categories:

Claims on subjective grounds: these arise from a breach of contractual duties by one of the parties. Examples include the late issue or non-issue of drawings and instructions, delayed handover of the site, or a late instruction from the Engineer.

Claims on objective grounds: these arise from events beyond the control of both parties. Examples include unforeseeable physical conditions, the discovery of archaeological or other objects on the site, and events of force majeure. 5 This categorisation is generally recognised in FIDIC practice and forms part of the standard conditions of
contract.

A further division of claims is possible according to the claiming party, the "determining criterion being the affected party's belief as to its entitlement arising out of a particular event".6 By reference to the claiming party, a distinction may be drawn between Contractor's claims - for instance claims arising from Variations, from delays caused by the Employer (Employer's Delay), from Unforeseeable Physical Conditions on the site, or from Force Majeure - and Employer's claims, for instance for failure to meet the times for completion (Delay Damages), for defective execution of the works, or for the Contractor's failure to comply with its contractual obligations.

Both Employer's and Contractor's claims may in turn be divided according to the particular performance or entitlement which one party demands of the other. Depending on what is demanded upon the occurrence of a particular event, claims are classified as claims for time, claims for money, and claims for time and money. 7 Claims may be raised by the Employer and by the Contractor alike.

The difference between a claim raised by the Contractor and one raised by the Employer lies in the fact that the Contractor must give notice of its claim as soon as practicable, and in any event within 28 days of the date on which it became aware, or should have become aware, of the event or circumstance in question (Red Book). The Employer, or rather the Engineer, by contrast has no fixed time limit for giving notice of a claim. Neither the Employer nor the Engineer is therefore bound by any period for submitting a notice of claim, nor is it specified what is to happen should such a period not be observed. Conversely, if the Contractor fails to notify its claim to the Engineer within 28 days, the time for completion of the works cannot be extended and the Contractor is likewise not entitled to any additional payment. Where the Contractor does not submit its claim within that period, the Employer is discharged from all liability. 8

Taking the wording of the conditions of contract at face value, one may conclude that failure to assert a claim within the prescribed period results in the extinction of the right by lapse of time. Under the Civil Code, "where a right has not been exercised within the prescribed period, it is extinguished only in the cases expressly laid down by statute". 9 The commentary literature makes clear, however, that it does not follow from that rule that the parties are automatically precluded from agreeing grounds of extinction going beyond those provided by statute.

The question has also come before the courts. In proceedings before the Vrchni soud v Praze (High Court in Prague) under Case No. 4 Cmo 33/2021, the court considered a situation governed by the previous Civil Code and concluded that the entitlement to additional payment had not been extinguished by reason of non-compliance with the period, because the conditions of contract conflicted with the mandatory provisions of the Civil Code, under which a right is extinguished only in the cases expressly laid down by statute. According to that decision the period stipulated in the contract is one of extinction by lapse of time, yet it conflicts with the statutory provision and was therefore agreed invalidly. In its subsequent decision on the appeal on a point of law against the High Court's ruling, the Nejvyssi soud (Supreme Court) did not address the question directly, but indicated that it shared the High Court's view that the period under the conditions of contract is one of extinction by lapse of time. 10

In the light of the foregoing and of the legislation now in force, the period stipulated in the contract is one of extinction by lapse of time. Under the Civil Code as it currently stands, however, the entitlement is not extinguished where that period is missed. The reason for this conclusion lies above all in the marked imbalance between the rights and obligations of the Employer and the Contractor, which is particularly apparent when a claim is asserted. That imbalance points to the need to weigh the conditions of contract carefully and, where appropriate, to amend them so as to secure a fairer equilibrium between the two parties. It is nonetheless possible that the courts may in future take the opposite view, namely that the entitlement is extinguished in such a case. 11

Where the parties disagree as to the merits of a claim, FIDIC offers several dispute resolution mechanisms. One of them is the Dispute Adjudication Board (DAB), an independent body which examines claims and issues decisions. That mechanism serves to resolve disputes between the parties swiftly and efficiently without recourse to more elaborate legal procedures. Should one of the parties disagree with the DAB's decision, it may refer the matter to arbitration. The usual course in such a case is international arbitration under the rules of the International Chamber of Commerce (ICC), which allows the parties to obtain a decision from independent specialists in international commercial law.

By way of conclusion, the author notes that claims form an integral part of contractual relations under FIDIC and that asserting them correctly is essential to the successful management of construction projects. Contractors and Employers alike should monitor contractual time limits closely, document their entitlements rigorously and be prepared to resolve disputes effectively. Doing so minimises risk and keeps the project running smoothly, improving the prospects of completing it on time and in accordance with the contract.

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1. GRULICH, Tomáš. "FIDIC" a úskalí jejich aplikace. Právní rozhledy, 2009, č. 7, s. 233-241
2. KLEE, Lukáš a TUREK, Roman. Smluvní podmínky FIDIC: komentář k obecným podmínkám: smluvní podmínky pro výstavbu, smluvní podmínky pro dodávku technologických zařízení a projektování-výstavbu. 3. vyd. Ostrava: CACE - Česká asociace konzultačních inženýrů, 2019
3. KALENSKÝ, Tomáš. Variace dle smluvních podmínek FIDIC a jejich aplikovatelnost v českém právním řádu. Praha, 2019. Univerzita Karlova. Právnická fakulta. s. 22-26.
4. PLUCAR, Václav. Claimy dle smluvních podmínek FIDIC. Online, diplomová práce. Západočeská univerzita v Plzni, 2024. Available at: https://dspace.zcu.cz/items/abeb7268-e1d1-4f11-833d-3f17b592e7ca [accessed 2025-01-30].
5. PLUCAR, Václav. Claimy dle smluvních podmínek FIDIC. Online, diplomová práce. Západočeská univerzita v Plzni, 2024. Available at: https://dspace.zcu.cz/items/abeb7268-e1d1-4f11-833d-3f17b592e7ca [accessed 2025-01-30].
6. KALENSKÝ, Tomáš. Variace dle smluvních podmínek FIDIC a jejich aplikovatelnost v českém právním řádu. Praha, 2019. Univerzita Karlova. Právnická fakulta. s. 22-26.
7. KLEE, Lukáš a TUREK, Roman. Smluvní podmínky FIDIC: komentář k obecným podmínkám: smluvní podmínky pro výstavbu, smluvní podmínky pro dodávku technologických zařízení a projektování-výstavbu. 3. vyd. Ostrava: CACE - Česká asociace konzultačních inženýrů, 2019
8. SOMMER, JUDr. Lukáš; BROŽEK, JUDr. Ondřej; SEKANINA, Mgr. Bc. Čestmír a KURNÍK, Jan. Smluvní zánik nároku v kontextu FIDIC smluv: Analýza vztahu k § 654 občanského zákoníku. Online. Available at: https://www.epravo.cz/top/clanky/smluvni-zaniknaroku-v-kontextu-fidic-smluv-analyza-vztahu-k-654-obcanskeho-zakoniku-117569.html
9. Section 654 of Act No. 89/2012 Coll., the Civil Code
10. Resolution of the Nejvyšší soud (Supreme Court) of 11 April 2023, Case No. 23 Cdo 763/2022
11. ŠPAČKOVÁ, JUDr. Dita. Promlčení nebo prekluze claimu při pozdní notifikaci? Online. Available at: http://old.silnicezeleznice.cz/clanek/promlceni-nebo-prekluze-claimu-pri-pozdni-notifikacicz/clanek/promlceni-nebo-prekluze-claimu-pri-pozdni-notifikac