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LOA in Silver Book (FIDIC)

10 replies [Last post]
Mon, 2010-05-17 12:59
Sajid Balma
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Dear Contract Experts
I was wondering why LOA is not a pre-requisite to execute Contract Agreement in FIDIC Silver?

Contrary to that it is vice versa in FIDIC Yellow.

Why?????

Please enlighten me what difference it makes?
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Replies

Wed, 2013-10-09 12:11
#1
sunil pujari
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Though it is very old post I got interested in subject issue which was very valid point raised by Mr.Sajid.

I will try to ans his main query why LOA is not part of Silver book .

Fidic wants the contract to come into existense in full due to the nature of the works .

LOA may not contain all the contractual clauses and in case of any dispute between the issue of LOA and contract signing the contractor will have very limited recourse. Still FIDIC does suggest the clause 1.6 to be ammended if LOA is required to be issued if the contract signing cannot happen within short period.

Hope it clarifies Mr.Sajid query to some extent.

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Tue, 2010-05-18 07:50
#2
Samer Zawaydeh
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Dear Sajid,

Post it here and you will get comments;

http://www.linkedin.com/groups?gid=2723380&trk=myg_ugrp_ovr

"FIDIC CONTRACTS" on Linkedin

with kind regards,

Samer
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Tue, 2010-05-18 07:43
#3
Sajid Balma
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Well, let me see if I get a reply on FIDIC Forum.
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Tue, 2010-05-18 07:38
#4
Samer Zawaydeh
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Dear Sajid,

You are most welcomed anytime. The COCs is an accummulation of work over the past 90+ years. It is being reviewed every decade. So chances are that this case/ question did not rise before, or it was not brought to the attention to FIDIC to correct it.

I would also recommend that you check locally (where the project is being executed) about the definition of "Contract" in the Local Law, if you are expecting to have problems.

With kind regards,

Samer
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Tue, 2010-05-18 07:31
#5
Sajid Balma
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Dear Samer
I once again thank you for your prompt replies.

As a matter of fact, I just show an observation and not reffering a particular case.

This I realized when I was having a general discussion with my lawyer on different forms of FIDIC.

So, its kind of a debate rather a situation or if I go contractually its not an "EVENT".

Regards
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Tue, 2010-05-18 07:24
#6
Samer Zawaydeh
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Dear Sajid,

Yes you are correct, the priority of Documents is the Contract Agreement then LOA.

In order to assist you in solving the situation, I can add that you need to review the Condition of Contract that you have signed, or you have reviewed during the tender stage and you are waiting for the LOA. Comparing between two COCs is not going to assist. (I can’t see how it will assist)

Subsequently, if you have a dispute in the Contract Agreement, then you need to revert to the Dispute Resolution Methods in the COC signed.

If the Dispute Resolution Methods did not work, then you need to consult with a lawyer in the country that the project is taking place.

With kind regards,

Samer
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Tue, 2010-05-18 06:15
#7
Sajid Balma
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Dear Samer
Thanks for your reply.

I find it difficult to agree on what you said in your last post. The reasons are

1. It may not be necessary that, in cost perspective, EPC are bigger than the D&B. I can refer my own example here where we have a D&B and we decided to go with consortium because of the huge cost of the project. although, we have completed an EPC on our own.
2. Although, in Yellow book, you have an LOA but you still need to sign a Contract Agreement under sub clause 1.6.
3. In priority of document, LOA comes next to Contract Agreement.

I understand that both books may have been drafted by two different committees, but my question in the first place is still un-answered. Why no LOA in Silver Book.

Either it is "Legally" required or not, the books (Silver and Yellow), should have adopted a similar approach and not decided solely on the size of the project.

Regards
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Tue, 2010-05-18 04:38
#8
Samer Zawaydeh
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Dear Sajid,

I have few comments;

1. EPC are usually large contracts. Hence, you need a full enforced legal agreement. The LOA is good intention to start the work, but it is not as strong legally binding agreement as the Contract Agreement.

2. The two Conditions of contracts are written by different committees at different time. Hence, it is not a requirement to have an identical general conditions in the COCs.

3. These are the General Conditions for Both Contracts, so I suggest that you do not change anything in them.

4. If you want to make changes, you can add the changes you want in the specific conditions.

With kind regards,

Samer
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Tue, 2010-05-18 01:56
#9
Sajid Balma
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Dear Samer
Thanks for your reply and as requested please find below the clause 8.1

Silver (1999)
8.1
Commencement of Works
Unless otherwise stated in the Contract Agreement:

(a) the Employer shall give the Contractor not less than 7 days’ notice of the Commencement Date; and
(b) the Commencement Date shall be within 42 days after the date on which the Contract comes into full force and effect under Sub-Clause 1.6 [Contract Agreement].

The Contractor shall commence the design and execution of the Works as soon as is reasonably practicable after the Commencement Date, and shall then proceed with the Works with due expedition and without delay.

Now 1.6 reads the following
1.6
Contract Agreement
The Contract shall come into full force and effect on the date stated in the Contract Agreement. The costs of stamp duties and similar charges (if any) imposed by law in connection with entry into the Contract Agreement shall be borne by the Employer.

Yellow (1999)
8.1
Commencement of Work
The Engineer shall give the Contractor not less than 7 days’ notice of the Commencement Date. Unless otherwise stated in the Particular Conditions, the Commencement Date shall be within 42 days after the Contractor receives the Letter of Acceptance.

The Contractor shall commence the design and execution of the Works as soon as is reasonably practicable after the Commencement Date, and shan then proceed with the Works with due expedition and without delay.

1.6
Contract Agreement
The Parties shall enter into a Contract Agreement within 28 days after the Contractor receives the Letter of Acceptance, unless they agree otherwise. The Contract Agreement shall be based upon the form annexed to the Particular Conditions. The costs of stamp duties and similar charges (if any) imposed by law in connection with
entry into the Contract Agreement shall be borne by the Employer.

I hope it gives a clearer picture to comment on my thread.

Regards
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Mon, 2010-05-17 15:46
#10
Samer Zawaydeh
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Dear Sajid,

If you have the two books, can you please type Clause (8/1) so we can read it and try to explain to you the difference.

EPC and Design Build Contracts are different. Each Conditions of Contract is written by expert to be Risk Balanced. So you need to look at the total contract and then judge it.

This should be interesting to know.

With kind regards,

Samer
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