Dealing with Unforeseeable Physical Conditions under the FIDIC Red Book Forms of Contract

Dealing with Unforeseeable Physical Conditions under the FIDIC Red Book Forms of Contract

 Under Sub-Clause 12.2 of the old FIDIC Red Book 3rd Edition it was not unusual for disputes to arise over the interpretation of what constituted an Adverse Physical Condition and Artificial Obstruction. Contractors would attribute events in far off foreign countries as falling under artificial obstructions such as wars, strikes, government changes and the like. Their argument would be that the event which actually prevented material, equipment of specialist from being delivered to the site was an ‘artificial’ obstruction. Sub-Clause 12.2 of FIDIC Red Book 4th Not Foreseeable Physical Obstructions or Conditions eventually put an end to this interesting if rather difficult argument because it clearly refers to ‘Physical Obstructions or Physical Conditions’.  Under the FIDIC Red Book 1999 Edition, Sub-Clause 4.12 appears to open up the possibility to interpret as it now states: ‘In this Sub-Clause ‘physical conditions’ means natural physical conditions and man-made or other physical obstructions and pollutants’.  Thus the far off event in a foreign country argument has been resurrected as this could clearly be considered to be ‘a man-made physical obstruction’. The problem of course with the event occurring off site was that under the FIDIC Red Book 4th Editions the encountering of physical obstructions or conditions was limited to physical obstructions or conditions actually ‘on’ the Site.  It was difficult to argue that an event in a foreign country was a condition encountered ‘on’ the Site.  However this problem does not exist in the FIDIC Red Book 1999 Edition because the obstruction or condition merely has to be encountered at the Site and logically there is no reason why something taking place many miles away might not have an effect ‘at’ the Site, which is the wording now to be used.

At first it may appear a little strange that the concept of ‘pollutants’ has been singled out as grounds for delay although environmental contamination issues clearly are gaining more attention these days and have been the subject of growing environmental laws worldwide. The Sub-Clause wording leaves it possible for a Contractor to seek consideration for such matters as forest fires and the like. A recent example would have been the forest fires which plagued the atmosphere in Malaysia, Singapore and Indonesia.

There are other potential difficulties to be considered.  For instance consider a case where tropical rains reduce an unpaved soil access road to a condition where it is virtually rendered impassable.  If this was at the Site it could be considered to be a ‘sub-surface and hydrological condition’ and be excluded under the proviso excluding ‘climatic conditions’.

 One of the more controversial aspects of Sub-Clause 4.12 will be the provision allowing the Engineer to review whether other physical conditions in similar parts of the Works (if any) were more favourable than could reasonably have been foreseen when the Contractor submitted his tender, and to reduce the increase in costs by reference to the reduction in cost due to those more favourable conditions.  This has of course been an argument employed by Engineers and Quantity Surveyors for a very long time and is not obviously fair.  Underlying it is the notion that Contractors should not be allowed any more profit than they might have expected at the start of the works, even if the conditions are worse than expected.

MALCONLAW 2012