A brief introduction to FIDIC contracts

Koko Udom, NBS

The NBS Contracts and Law Survey indicates that one of the areas that participants
found difficult in international projects was the use of unfamiliar contract forms. This
article by Koko Udom, former Head of Contacts and Law at NBS, briefly introduces the
FIDIC contracts which are reputed as the leading contracts in international engineering
and construction projects.
FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-
Conseils, which means the international federation of consulting engineers. It was started
in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the
Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership
from over 60 different countries.
Over the years, FIDIC has become famous for its secondary activity of producing
standard form contracts for the construction and engineering industry.
FIDIC published its first contract, titled The Form of contract for works of Civil
Engineering construction, in 1957. As the title indicated, this first contract was aimed at
the Civil Engineering sector and it soon became known for the colour of its cover, and thus,
The Red Book.
It has become the tradition that FIDIC contracts are known in popular parlance by the
colour of their cover.
This first contract by FIDIC was undertaken jointly with the International federation of
Building and Public works. FIDIC’s concerted effort at achieving broad consultation and
acceptance of its contract forms has seen subsequent editions of its contracts being ratified
by the International Federation of Asian and Western Pacific Contractors Association,
Associated General Contractors of America and the Inter-American Federation of the
Construction Industry, Multilateral Development Banks among others. Because of the
broad support it enjoys, FIDIC contracts are the foremost contracts in international
construction.
Over the years FIDIC has consistently improved on its contracts. The organisation has
added new forms of contract, replaced previous ones and updated important terms. The
table below gives a brief overview of FIDIC contracts to date:
The (old) First published in 1957, These contracts were aimed at the civil
Red Book the fourth and final engineering sector, as differentiated from the
edition was published in mechanical/electrical engineering sector.
1987, with a supplement
added in 1996.
The (old) First published in 1967 These contracts were aimed at the
Yellow Book with the third and last mechanical/electrical engineering sector.
edition in 1987.
The Orange The first and only edition This was the first design and build contract
Book of this contract was released by FIDIC.
released in 1995.
The (new) Released in 1999. The Red Book is suitable for contracts that the
Red Book majority of design rests with the Employer.

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The (new) Released in 1999. The Yellow Book is suitable for contracts that
Yellow Book the contractor has the majority of the design
responsibility.
The Silver Released in 1999. The Silver Book is for turnkey projects. This
Book contract places significant risks on the
contractor. The contractor is also responsible
for the majority of the design.
The Pink First published 2005 – an This is an adaptation of The Red Book created to
Book amended version was fit the purposes of Multilateral Development
published 2006, with a Banks.
further edition in June
2010.
Other contracts in the FIDIC family include the FIDIC sub-contract, The Blue Book,
which is concerned with dredging and reclamation works, and The White Book, which is for
the engagement of consultants by Employers.
Although the FIDIC family covers a wide range of contracts, there are some common
features:
Presentation
FIDIC is usually divided in two parts: Part I consisting of the general conditions and Part
II concerning the conditions of particular application (including guidelines for the
preparation of Part II clauses). Part I contains the general terms of the contract, such
issues as rights and obligations of each party, procedure for payment, variation,
certification and dispute resolution.
Part II of the contract is the conditions of particular application and is to be used to
introduce project specific clauses, such as language of the contract, choice of law, the
name of the person or firm appointed to act as Engineer or Employers representative for
the project among other terms. The Appendix usually contains sample of documents to be
used for the procurement process.
In most FIDIC forms there is a default hierarchy for the documents forming the contract.
The order of priority is as stated below and in the event of inconsistency the first on the list
takes precedence:
1. The Contract Agreement
2. The Letter of Acceptance (this is the formal acceptance of the contractor's tender and marks
the formation of the contract)
3. The Letter of Tender
4. Part II – the conditions of particular application
5. Part I – general conditions of contract
6. The Specification and Drawings (Red Book), The Employer’s Requirements (Yellow Book), the
Schedules (Red and Yellow Books)
7. Further documents (if any), listed in the Contract Agreement or in the Letter of Acceptance.

The parties are allowed to rearrange the priority of documents or stipulate that no
priority or order of hierarchy will apply to the contract. This can be done in Part II of the
contract.
Dispute resolution
FIDIC contracts adopt a multi-tier dispute resolution process. The emphasis in recent
years has been on the amicable settlement of disputes. The process usually provides as a
first step, for disputes to be submitted for adjudication before an Engineer or a Dispute
Board. If one (or both) of the parties is dissatisfied, a period is allowed for amicable

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settlement. If the parties are not able to settle the dispute during the ‘amicable settlement’
period, the final stage is to proceed to arbitration. FIDIC contracts provide as a default
position that the arbitration rules of the International Chambers of Commerce should apply
in the arbitration of disputes arising from the contract.
Bias for English law
The first sets of FIDIC contracts were based on English law principles. This bias was so
strong, that in commenting on the FIDIC Red Book, first edition, Ian Duncan Wallace QC
put it lightly thus:
“As a general comment, it is difficult to escape the conclusion that at least one primary object in
preparing the present international contract was to depart as little as humanly possible from the
English conditions.”
Since 1957, future FIDIC contracts have successfully incorporated the principles of other
legal systems especially the civil law system. However, the basic framework of English law
principles has survived. For instance, provisions relating to liquidated damages have been
maintained.

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