14 CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009

C
lause 20.1 is a provision that is regularly
used to reject contractors claims for
additional payment and/or for extensions of
time. Since the parties may amend the contract
during its term, it remains to be seen whether
any such amendment to clause 20.1 is required
to be in writing. This will depend on the
applicable law and on the contract provisions.
If this is not contractually anticipated or is
prohibited, under German legal principles
a contract can be amended orally (BGH, BB
1981, 266). An oral agreement will only be
FIDICs clause 20.1
a civil law view
Mauro Rubino-Sammartano
Bianchi Rubino-Sammartano e Associati, Milan
One contracting party should be prevented from oppressing another contracting party.
This article offers a civil law view on one of the most delicate provisions of the FIDIC forms
of contract: clause 20.1, which deals with claims for extensions of time and/or additional
payment.
disregarded if the relevant provision in the
contract explicitly states that amendments to
that provision must be in writing.
Under general French law (article 1135,
Civil Code), industry practice and the
conduct of the parties in relation to particular
circumstances will play a dominant role.
Are claims doomed from the start?
Clause 20.1 is a provision which, if applied
literally, allows an employer to reject all
claims (and there are many that fall into
this category) that are made later than 28
days after the contractor has become, or
should have become, aware of the event or
circumstances which give rise to the claim. If
one looks at the number of days available to
the contractor (being nearly one month) one
might conclude that one month is quite a lot
of time. In real life and particularly on site,
things can appear quite different.
Once the event occurs, it takes some time
before the site agent becomes certain that
there is a claim to be made. Occasionally the
site agent does not even realise this because
he and his staff are so absorbed by the day to
day running of the site that the legal aspects
and ramications of what happens is not
their rst priority. Furthermore, the resident
engineer occasionally does his best to show
that the employer is not responsible for what
has occurred and succeeds in creating at
least some confusion. The site agent must
also try not to antagonise the engineer, who
has the authority to remove him from site. If,
in the end, some information transpires and
reaches the head ofce of the contractor, the
FEATURE ARTICLES
Clause 20.1
If the Contractor considers himself to
be entitled to any extension of the Time
for Completion and/or any additional
payment, under any Clause of these
Conditions or otherwise in connection
with the Contract, the Contractor shall
give notice to the Engineer, describing the
event or circumstance giving rise to the
claim. The notice shall be given as soon
as practicable, and not later than 28 days
after the Contractor became aware, or
should have become aware, of the event
or circumstance.
If the Contractor fails to give notice of
a claim within such period of 28 days, the
Time for Completion shall not be
extended, the Contractor shall not be
entitled to additional payment, and the
Employer shall be discharged from all
liability in connection with the claim.
Otherwise, the following provisions of
this Sub-Clause shall apply.
CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009 15
Clause 20.1 is a provision which, if applied
literally, allows an employer to reject all claims
that are made later than 28 days after the
contractor has become, or should have become, aware
of the event or circumstances which gave rise to the
claim
issue may not be dealt with immediately. By
the time the issue reaches senior
management, a lot of time has elapsed and
when in-house counsel if any or external
counsel is consulted, it may be too late. This
is how many claims, which might be well
founded on the merits, are made late and
dismissed with a wry smile by the engineer
and the employer. But is there no way out for
the contractor?
Not every claim is subject to clause
20.1
The rst step is to identify those claims which
do not fall under the potential guillotine
of clause 20.1. Its ambit being limited to
extensions of time for completion and to
additional payment, all other claims would
appear not to be subject to this 28 day
deadline. Clause 20.1 does not apply then
to any claim that the contract be rescinded,
or to claims seeking to establish any other
rights of the contractor, or to establish that the
employer and/or his engineer are in breach
of the contract. This view is shared by Robert
Knutson in FIDIC: An Analysis of International
Construction Contracts (London: Kluwer Law
International, 2005), at page 74.
The same view has been taken in German
law. Although there is no case law in France
and in most civil/administrative law countries
since FIDIC is generally less well known there
and since the very well known standard civil
law conditions of contract based on the
French CCAG are widely used, it is most
likely that the French courts would endorse
the same position. Applications for
interlocutory injunctions do not expressly
fall under the ambit of clause 20.1, but if the
right which one seeks to protect by an
interlocutory measure has been
timed out before being made, the
interlocutory measure may have to
follow suit.
The consequences of lack of timely
notice
The wording of clause 20.1 leaves no doubt as
to the consequences of lack of timely notice.
The right to an extension of time and/or to
additional payment is forfeited.
If the German courts decide that clause
20.1 is valid, the consequence of such late
notice would then be the loss of that right.
Alternatively, the German
courts might interpret the
contractors duty to give
notice to the engineer
not as a condition for
the contractors claims
(as is suggested by the
plain wording of clause
20.1) but rather - in
accordance with general
German legal principles - as
an obligation (Obliegenheit)
of the contractor. In such
case the consequence would
be that the contractor does
not lose that right but that
he carries the burden of
proof that his claims are
valid and are not affected
by his failure to meet his
notice obligation in time.
The French courts will
to a large extent
follow the same
reasoning.
many claims, which might be well founded on the
merits, are made late and dismissed with a wry smile
by the engineer and the employer
In spite of the very clear
language, one might and
should wonder whether
the rule in clause 20.1 is
absolute. It is submitted
that there may be
situations which may
avoid this consequence.
Employers
acknowledgement
One example of such a
situation is recognition
by the employer of the
right in question, be such
recognition made prior to
the expiry of the deadline or
subsequent to it. In the former
case, this acknowledgement will
render the giving of a notice
unnecessary. In the latter case
it will waive the failure to submit
the notice in time. While the
employer will rarely make a full
acknowledgment of such a right
after the time limit for the notice
has expired, it may happen
before then. In any event,
an acknowledgement may be
inferred from the conduct of
the employer and/or of his
engineer. Under German law
the contractors right becomes
enforceable in accordance with
780 BGB if the employer (or
the engineer if empowered to do
so) recognises this right in writing.
However, in many cases also an
oral acknowledgement might be
valid and binding.
Excessive difculty
An equally challenging
argument arises when a
deadline, which makes it
excessively difficult for a
party to exercise its right,
has been set down in the
contract. In that event such a
contractual provision may be
null and void. This is the case
in several civil law jurisdictions.
Italian law
Sec. 2965, Civil Code provides that A
contractual provision which provides for a
time period after which a right is foreclosed
and which makes it excessively difcult for a
party to exercise its right, is null and void.
The criterion to be followed to determine
whether there is excessive difculty is set out
in Credito Romagnolo v Magni (Court of
Cassation, April 1, no 926 [1974] Mass. Foro
it. 230 [1974]) which provides:
the excessive difculty to exercise a right
is not to be established based on a major or
minor length of the term, assessed objectively
by an absolute and prior appreciation, but in
respect of the person who must take action
to avoid that her right be forfeited and in
particular regard is to be had to the factual
circumstances, in which that person was
operating at that time.
French law
Former article 2220 of the French Civil Code
provided that the Statute of limitation may
not be waived in advance: a time bar which has
accrued may be waived. Quite interestingly
the Cour de Cassation in a decision of 4
December 1895 permitted, in a transport case,
to reduce the statute of limitation holding
that: the principle of freedom of contract
may only be limited by a formal provision
or ordre public. In transportation matters
there is no such Act or ordre public which
forbids the carrier from shortening statutory
prescription, consequently such contractual
provision is valid.
Case law has applied this principle with
prudence due to the danger of excessive use
of it. In essence the contractual provision
which provides for a reduction of the statute
of limitation is valid if the time period is
reasonable and does not de facto prevent
all remedies (Civil Tribunal of the Seine, 26
February 1929; Civil Tribunal of Prigueux 6
July 1954). What is reasonable became then
a question of fact; the principles of good faith
and usages and the leading interpretations
have to be taken into account. Under a
recent Civil Code reform (17 June 2008), a
new provision deals with time bars in
contracts. This new article 2254 1 of the
16 CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009
FEATURE ARTICLES
CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009 17
FIDIC clause 20.1 now seems to be inconsistent with
the public order provisions of French contract law
Civil Code provides that The time period for
limitation may be reduced or lengthened by
agreement of the parties. Such period may
not be reduced to less than one year or
extended beyond ten years.
As a result of this, prima facie FIDIC clause
20.1 now seems to be inconsistent with public
order provisions of French contract law.
However the discussion to some extent is left
open because it could be argued that this
provision could not apply in international
contracts (due to the distinction between
national and international public policy). In
addition article 2254 3 contains an
exhaustive list of matters not subject to 1
and 2 of article 2254, amongst which are:
Claims for payments made yearly or by
shorter instalments. Since clause 20.1 refers
to additional payment, it might then be
argued that the new article 2254 does not
apply to this situation.
Spanish law
The principle of pacta sunt servanda, which
underscores the interpretation of contracts
in all European jurisdictions including Spain,
establishes that the contracting parties have
to comply with the obligations deriving
from the contract, even if performance
has become more onerous. This principle,
however, is not without some limitation. In
exceptional circumstances, its application may
be excluded; in particular when exceptional
circumstances have made compliance with
the contract excessively onerous for one
of the contracting parties. The court must
then determine whether the provision has
become excessively onerous or not, and if
it is considered to have become excessively
onerous, the court will inter vene (see
judgment of the Tribunal Supremo of 27
January 1992).
German law
Some German writers (such as Kus, Markus,
Steding FIDICs New Silver Book under the
German Standard Form Contracts Act, (ICLR
1999), p533, p549) take the view that clause
20.1 is null and void because it places an
excessive burden upon the contractor and
is consequently in breach of 307, German
Civil Code (BGB). The German Court of
Appeal, Dsseldorf (OLG Dusseldorf, NJW-
RR 1997, p784) has held that a contractual
term which forfeited a claim of a contractor
who did not present its time sheets within one
week, was invalid. The same reasoning might
be applied to clause 20.1. The risk that clause
20.1 be declared not enforceable has also been
expressed by Bruck/ Sherman in Roquette/
Otto, Vertragsbuch Privates Baurecht, Munich
2005, at p792 et seq. The existence or not of
excessive difculty is then to be assessed by
the courts.
Unconscionability
A further tool for the contractor to avoid
forfeiting his right to claim may come from
the concept of unconscionability. In some
civil law jurisdictions if a party has drafted a
standard contract, which includes oppressive
clauses (such as short deadlines by which to
assert a right), such provisions have to be
accepted expressly by listing them one by one
after signing the agreement, and by stating
that they have been specically accepted and
signing a second time after that statement.
Italian law
Sec. 1341 of the Civil Code provides:
Standard conditions prepared by one of the
parties are effective as to the other, if at the
time of formation of the contract the latter
knew of them or should have known of them
by using ordinary diligence.
In any case conditions are ineffective, unless
specifically approved in writing, which
establish, in favour of the party who has
prepared them in advance, limitations on
liability, the power of withdrawing from the
contract or of suspending its performance, or
which impose time limits involving forfeitures
on the other party, limitations on the power
to raise defences, restrictions on contractual
freedom in relations with third parties,
tacit extension or renewal of the contract,
arbitration clauses, or derogations from the
competence of courts. (Beltramo, Longo,
Merryman, Dobbs Ferry, 1978).
If the standard contract has been drafted
by a third party, there is a tendency towards
foregoing this requirement.
In Azzola v Norditalia Assicurazione (Court of
Cassation January 26 no. 713 [1987] Mass
Foro it. (1987) 133) the use, by a member of
an association of a standard agreement
18 CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009
the lack of a timely claim by the contractor for an
extension of time does not necessarily release the
employer from the burden of proving that the
contractor has breached its duty of care
drafted by its association with the association
to which the other contracting party belongs,
was released from that requirement on the
grounds that the two associations negotiated
it on a equal footing, without one of them
being stronger and the other one weaker.
It is suggested that this criterion does not
necessary apply to a different scenario in
which a party (the contractor) has to enter
into a standard agreement prepared by the
association of the employers or of their
consultants such as FIDIC. If one comes to
the conclusion that the drafting by FIDIC is
biased towards the interests of employers
more than those of the contractors, the
conclusion should be that it is a document
prepared by one side and that in order to be
valid oppressive clauses need to be accepted
in the specic manner detailed above.
German law
Generally speaking, clause 20.1 is valid and
enforceable if the employer provides sufcient
evidence that the wording of this clause was
subject to specific negotiation and finally
approved by the contractor. German case law
applies a strict test to the question whether the
parties have in fact negotiated the contents of
this clause. In particular, the employer must
prove that he was prepared to change and
amend this clause if the contractor had so
requested.
French law
Contrary to some other laws such as German
law, French law does not have a particular
statute or provision for adhesion to contracts
or standard contracts. The only particular
provisions are those related to contracts
between a business (B) and a consumer (C)
which are governed by a particular code: the
Consumers Code. Article L137-1 of this code
provides that, unlike article 2254 of the Civil
Code, in a B to C relationship the period for
time bar cannot be reduced or lengthened by
agreement between the parties.
Except for this particular relationship,
standard contracts are governed by general
law. In fact, article 1107 1 of the Civil Code
provides: Contracts, whether they have a
specic denomination or not, are subject to
general rules, which are the subject matter of
this Title.
Standard contracts, as with any other
contract, are governed by the principle of
freedom of contract and they must only
comply with article 6 of the Civil Code
(Statutes relating to public policy and morals
may not be derogated from by private
agreements) and article 1108 of the Civil
Code : Four requisites are essential for the
validity of an agreement: the consent of the
party which binds itself; its capacity to
contract; a denite object which forms the
subject-matter of the undertaking and a
lawful cause of the obligation.
Spanish law
Contracts are ruled by the principle of
freedom of contract, unless the agreements
are contrary to article 6.3 of the Civil Code
which states: Acts that are contrar y to
mandatory rules are null, unless these rules
provide different consequences for their
infringement. Similarly, article 1265 of the
Civil Code states: Consent will be null if it is
given through error, violence, intimidation
or fraud. Therefore, unless the agreement
between the parties is contrary to a mandatory
rule or one of the contracting parties has
signed the contract as a result of any of the
conditions referred to in article 1265, the
agreement is valid.
Impact of late notice on employers
claim for liquidated damages
It is suggested that the lack of a timely claim by
the contractor for an extension of time does
not necessarily release the employer from
the burden of proving in order to collect
liquidated damages that the contractor has
breached its duty of care. In some civil law
jurisdictions, in fact, liquidated damages are
due not just because of late deliveries, but
require lack of care by the contractor.
Italian law
In FBR v Ansaldo (Corte di Cassazione, August
2 no. 4603 [1984] Giust.civ.Mass. 1984, 8) the
Court of Cassation has held that a liquidated
damages agreement implies the existence
of non-performance and of default. If the
parties agree that the liquidated damages
are due even in case of force majeure or in
FEATURE ARTICLES
CONSTRUCTION LAW INTERNATIONAL Volume 4 No 1 March 2009 19
any event in the absence of a breach, that
provision gives rise to a different agreement
which is not subject to the statutory provisions
on liquidated damages and which amounts to
an assumption of risk. See also Galgano and
Visintini, Effetti del contratto Rappresentanza
Contratto per persona da nominare,(Roma:
Zanichelli, 1993).
German law
Pursuant to 254 BGB, any claim for damages
does not include those damages which have
been caused by the person suffering the
damage or loss and if so the claim has de
facto to be reduced accordingly. If the delay
has been caused by the engineer, one has to
establish whether he had legal or de facto
authority to act for the employer and if not
whether his act or omission has been approved
by the latter. In this event, the damage caused
by the engineer will have to be deducted from
the damages claimed by the employer, while in
the relationships between the employer and
the engineer, the former may have recourse
against the engineer. The engineer is then, in
principle, personally liable for his own act or
omission which has caused or has contributed
to the delay.
French law
Under article 1147 of the Civil Code which
states: A debtor shall be ordered to pay
damages, as the case may be either by reason
of his non-performance of the obligation, or
by reason of delay in performing, whenever
he does not prove that the non-performance
is due to an external fact which may not be
ascribed to him, and there is no bad faith on
his part, the judge distinguishes between
two types of obligations, called obligation
de moyens and obligation de rsultat
which inuence the burden of proof and its
substance.
In case of non-performance of an
obligation de moyens, the creditor of this
obligation must show non-performance (ie,
late delivery) and also a lack of care by the
contractor. The way for the contractor to
avoid his responsibility is to prove force
majeure or fait du tiers (act of a third party)
and that he has not committed any wrongful
act. In case of non performance of an
obligation de rsultat, the creditor of this
obligation has to prove that the result has not
been obtained. The contractor cannot avoid
his liability by proving that he has not
Mauro Rubino-Sammartano is a construction
lawyer and as such acts also as an arbitrator and
appears in construction disputes. He is a Chair
Emeritus of the International Construction Projects
Committee (which he chaired from 1984 to 1987)
and is a Chartered Arbitrator. The author gratefully
acknowledges the assistance of Karsten Faulhaber,
Orrick Hlters Elsing, Dsseldorf, as to German law,
of Marc Frilet, Frilet Socit davocats, Paris, as to
French law, and of Rodrigo Corts Calvo, B
Cremades y Asociados, Madrid, as to Spanish law.
committed any wrongful act, only force
majeure or the fait du tiers being admitted.
Spanish law
Clauses which provide for liquidated damages
are being used more and more frequently
in contracts. These clauses are governed by
the Civil Code; specically by articles 1152 to
1155. As a supplementary obligation, their
aim is to ensure compliance with the principal
duty so that, if the debtor does not comply
with it, the supplementary obligation enters
into force, generally consisting of payment
of a certain amount of money. Due to such
supplementary nature, article 1155 Civil Code
states that the nullity of a liquidated damages
clause does not cause the nullity of the main
obligation. On the other hand, the nullity of
the main obligation does cause the nullity of
the liquidated damages clause.
On this basis, the courts stress that
liquidated damages clauses must be
interpreted restrictively. Restrictive
interpretation will apply, particularly, to cases
in which a party not only intends to enforce
the agreed ruling but also to be awarded
compensation for damages, afrming that
this combined result cannot be allowed,
unless this has been expressly agreed by the
parties. Furthermore, in a situation of only
partial non-compliance, the court may
reduce the amount of the liquidated
damages under equitable principles (sec.
1154 Civil Code).
As mentioned above, Spanish courts tend
to construe liquidated damages clauses
restrictively. Therefore, in Spain, a late notice
does not necessarily have an automatic
application and each case will have to be
decided on its merits to see if that clause may
be applied or not.