The new Fidic Green book short form of contract explained

• liquidated damages for the Employer’s loss arising from a termination for cause by the Employer – set at 20% of the value of those parts of the Works not executed at the date of the termination (Sub-Clause 10.4.1(b)).

These liquidated damages provisions – which are not in the Red and Yellow Books – are aimed at avoiding the time and cost involved in substantiating loss of profit and other losses associated with termination, in light of the relatively low value and short duration of the projects for which the Green Book is intended to be used.

Are there other notable features or changes?

• The new Green Book provides for an Engineer to administer the contract and includes a claims procedure, adding new layers of complexity to the contract’s administration.
• The claims procedure largely reflects the mechanism adopted in the 2017 FIDIC standard forms. However, unlike the 2017 Red and Yellow Books – which provide that in case of failure to timely notify a claim, the claiming party forfeits its right to any relief – the new Green Book merely provides that any entitlement or relief should “take account of the extent (if any) to which the failure [to provide notice] has prevented or prejudiced proper investigation of the claim, and/or mitigation of the effects of the claim event or circumstance” (Sub-Clause 13.2.2).

What kind of dispute resolution mechanism does the Green Book have?

• Disputes can be referred to a single adjudicator – similar to the institution of the Dispute Avoidance/Adjudication Board (DAAB) under other FIDIC contracts. The adjudicator can also provide informal assistance to facilitate the resolution of issues or disagreements between the parties (Sub-Clause 14.1.2), reflecting similar additions to the Red and Yellow Books in 2017.
• The adjudicator’s decision is immediately binding on the parties (Sub-Clause 14.1.5), and a party can seek an order in arbitration for the enforcement of the adjudicator’s decision
• liquidated damages for the Contractor’s loss of profit in the event of termination for cause by the Contractor or a termination for convenience by the Employer – like the previous edition, the new Green Book fixes these liquidated damages at 10% of the value of those parts of the Works not yet executed at the date of termination (Sub-Clause 10.4.1(c));(Sub-Clause 14.1.6-7).
• Disputes can be escalated to arbitration for final settlement. In line with its intended use for relatively low-value construction projects, the new Green Book provides for a sole arbitrator and for proceedings to be conducted under the ICC expedited procedure rules (Sub-Clause 14.2.2).

Is the new Green Book well-suited to smaller projects?

The new Green Book is far more detailed than the first edition and introduces several features from the other FIDIC standard contracts, which add a layer of complexity to the contract’s administration, such as the appointment of an Engineer and a claims procedure.

However, while it may now look more like the other FIDIC standard form contracts, it remains substantially shorter and the added length is in many cases aimed at improving clarity, rather than adding complexity or administrative burden.

The new Green Book remains well-suited to smaller projects, with the added advantage of allowing the parties to tailor provisions to the needs of a wider spectrum of projects. The introduction of certain features, such as the liquidated Prolongation Cost mechanism, may give rise to additional issues of validity and enforceability of provisions under the applicable law; additional care should be taken when tailoring the Green Book to a specific project and applicable law to ensure its provisions are valid and enforceable.