Here the court considered a claim for LDs under an amended FIDIC Yellow book. The contractor Murphy had been appointed to design, construct, test and commission an intelligent power plant at Beckton, East London, under a contract based on the FIDIC 1999 Yellow Book.
Clause 4.2 differed substantially from FIDIC clause 4.2 (which stipulates the circumstances in which the Employer may make a claim under the performance bond), in that it included additional wording requiring the employer Beckton to give notice before making a demand on the performance bond, and it deleted the reference to clause 2.5, meaning the employer could make a call on the bond if the contractor failed to pay any amount due. Ordinarily, clause 2.5 places certain notification obligations on the employer prior to making any claim for payment under the contract, which has to be agreed or determined by the engineer. The contract also incorporated various milestone dates, and provided that, if the contractor failed to meet these dates it would be liable to pay LDs. Clause 8.7 (which places an obligation on the contractor to pay delay damages when there is a failure to comply with the time for completion) had also been redrafted to remove the reference to clause 2.5.
From December 2014 onwards Beckton notified Murphy that it was not meeting various contract milestone dates. In January 2016 Beckton notified Murphy that it required payment of all accrued LDs. Murphy meanwhile claimed it had been delayed and that Beckton did not have an entitlement to LDs as alleged. In February 2016 Beckton gave advance notice that it intended to make a claim under the performance bond as a result of Murphy's failure to pay the LDs.
In part 8 proceedings (simpler proceedings used where a decision is required on a point of law which does not involve extensive factual evidence) the court was asked to decide whether Beckton was entitled to recover LDs from Murphy in the absence of an engineer's determination of Beckton's entitlement to LDs. Murphy submitted that such a determination was a pre-requisite to Beckton's entitlement. If Beckton was not entitled to LDs, Murphy sought an injunction preventing Beckton from making a call on the bond for recovery of the LDs. The court decided that Beckton was entitled to the LDs, and that the parties had expressly excluded the reference to clause 2.5 from clause 8.7, which contained an entirely independent regime not subject to clause 2.5.
The court's decision on the LDs meant it did not need to consider the call on the bond, but it did briefly do so and concluded that the call on the bond was not fraudulent because it was a true on demand bond, and there was nothing making the entitlement to LDs conditional on an engineer's determination. The trigger for making a claim therefore was Beckton's belief that it had an entitlement, not an engineer's determination. The case highlights the need, when amending standard form contracts, for understanding the interplay between the clauses in the original contract and ensuring that this is expressly dealt with in amendments
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