Samer,

I agree about any cases raised to court but the vast majority of international construction projects go to arbitration, not court.

One of the main reasons for this is to keep disputes out of the local court system because the courts may be biased in favour of a domestic employer.

Samer,

If the parties are not from the same country then it is quite usual that the law of the contract will be a "neutral" third country law. e.g, American contractor working in Brazil with English law as the law of the contract. There are many good reasons for this.

But in the above example, the law of the contract may be English but the law determining the formation of the contract may be Brazillian law - but that depends on where the contract was executed e.g if the parties met in Sydney airport to finally agree and sign the contracts then it’s arguable that Australian law would apply to the contract formation!!!!!

In an international construction arbitration you often have multiple laws to consider, usually six or seven but can be many more depending on the circumstances.

e.g
1. Law of country where project built
2. Law of the contract (parties choice)
3. Possibly other laws as above, (unusual but not unheard of)
4. Law of the arbitration agreement
5. Law of the seat of the arbitration (2, 4 & 5 often the same but not always)
6. Law of country Employer based in (may or may not be as 1.)
7. Law of country Contractor based in
8. Laws of countries from which witnesses are to be called (living or are currently working in, or both)
9. Law of country that the arbitration award is to be enforced in (may not be 1, 6 or 7 if parties have assets spread over the world)

And throw in a few peculiar circumstances and you may have some more countries laws to think about, e.g consider what law applies for damage that occurs to a piece of plant shipped to Brazil that was manufactured in Spain by a Chinese owned company where the law of the contract was unfortunately not stated - the damage occurred in international waters during shipment on a vessel registered in Panama but which had Romanian owners and Dutch charterers) - it happens.

Answers on a postcard please.

It can be a nightmare and the number of different laws that apply can go well into double figures.

Hi Samer

The law of the contract need not necessarily be the law of the country where the project is being built.

An implied term of a letter of intent may be that the law pertaining to the contract is that of the country where the project is being built.

The actual contract can state something quite different.

I was recently involved in assisting an Italian cladding contractor sub-contracted to a French main contractor building an office block in Siberia for an American client where the contract law was that of New York USA.

Best regards

Mike Testro

Hi Haresh

All replies assume that you are working on FIDIC but you have not confirmed this.

A binding contract can be written (or spoken) in three lines.

Offer - Acceptance - Payment terms (sometimes known as consideration)

So a letter of intent can be as simple as that.

But the intention part is that some time in the future a formal contract will be drawn up and signed.

If the intended form of contract is mentioned in the letter of intent then things are simpler because an implied term is that the named form will be binding.

Sometimes the letter will state that it is binding up to but not exceeding $?????.00 in which case if the expended sum is exceeded then there will be big problems in recovering the over expenditure.

In summary you need to read your letter of intent very carefully because it may well be legally meaningless.

Best regards

Mike Testro

Dear Haresh,

It depends on the Conditions of Contract of course. If you are using FIDIC RED book, then you can revert to Clause 8.1. It will clearly state that the Commencement Date Shall be within 42 days from the receipt of Letter of Acceptance.

Of course you have to base your letter on the Conditions of Contract.

With kind regards,

Samer