International Construction Law Review
THE NEW FORMS OF SECURITY IN FIDIC’S 1999 CONDITIONS OF CONTRACT
ROELAND BERTRAMS
Solicitor, Clifford Chance, Amsterdam *
1. INTRODUCTION
In September 1999 FIDIC published its four new books for Conditions of Contract:
- 1. the Conditions of Contract for EPC Turnkey Projects (Silver or EPC Book;
- 2. the Conditions of Contract for Plant and Design-Build for electrical and mechanical plant, and for building and engineering works, designed by the contractor (New Yellow or Plant & D-B Book);
- 3. the Conditions of Contract for Construction for building and engineering works designed by the employer (New Red or Construction Book); and
- 4. the Short Form of Contract (Green Book).
The three first-mentioned books contain example forms of security. They are a parent company guarantee (Annex A), a tender guarantee (Annex B), a performance guarantee (Annex C), a performance surety bond (Annex D), an advance payment guarantee (Annex E) and a retention money guarantee (Annex F), which are all in favour of the employer. Annex G is a payment guarantee by the employer in favour of the contractor. The form of security as contained in Annexes B, C, E, F and G is in the nature of what, nowadays, is called a “demand” or “independent” guarantee, while Annexes A and D follow the traditional pattern of a surety bond. Both types and their differences will be examined in detail below. The Short Form of Contract does not contain example forms of security, but parties are of course at liberty, and probably well advised, to use the same models.
Security is and should be important during the process of the negotiations among the parties towards the final conclusion of the contract. The absence of proper security or an ill-drafted form of security may well turn a contract, which would otherwise have been advantageous, into a disaster. As the complexity of many works continues to grow and the circumstances under which they have to be carried out often become more and more difficult, misfortunes or even plain defaults by the counterparty cannot always be
[2000
The International Construction Law Review
370