Court of Appeal provides guidance on FIDIC provisions for "unforeseeable physical conditions"

Facts

The Government of Gibraltar contracted with Obrascon to design and construct a new dual carriageway and a tunnel.  The invitation to tender included bore hole and trial pit investigations, a desk study of the site history and contamination, and an environmental statement identifying the likely volume of excavation needed.  Obrascon discovered contamination and made an application for an extension of time and further payment on the grounds of unforeseeable physical conditions (clause 4.12, FIDIC).  The question was whether the conditions encountered were "not reasonably foreseeable by an experienced contractor."

The Government of Gibraltar countered by giving notice to terminate on the grounds of Obrascon's failure to proceed with the works with due expedition and without delay (clause 15.2).

Held

The Court of Appeal held:

1. An experienced contractor should make his own assessment of all the available data. Clauses 1.1. and 4.12 of FIDIC require the contractor to make its assessment independent of the available information and to draw upon its own expertise and experience.  That assessment should not involve simply accepting someone else's interpretation of the data.  Although the information supplied by Gibraltar was inadequate, Obrascon was not entitled to rely upon it and therefore no extension was due.
2. On the other hand Obrascon had basically done very little on the site for 6 months because of these ground condition problems and that was a serious breach of clause 8 of FIDIC giving rise to a right to determine under clause 15.2. The Employer won.

[N.B. The Court remarked that the clause 8 obligation to proceed with due expedition and without delay did not entitle an employer to sack a contractor just because the contractor was failing to do something that was in the specification.  This clause was directed to activities which were or might become critical.  In this case, the tunnel was on the critical path for the whole project.]

Comment

This case illustrates that it is not easy to succeed with an "unforeseen physical conditions" claim and is bound to worry civils contractors everywhere if in fact they are not able to rely upon the information the employer supplies at the tender stage.  It may also increase the costs of tendering.  The tenderer should consider asking the employer to warrant the information supplied so that he can rely upon it.

At the same time employers are also warned not to terminate without very good reason.  It is not every failure in progress which will entitle the employer to terminate, but only those which are obviously and seriously on the critical path.

For more information, help or advice please contact Rob Langley on 0191 211 7975 or email [email protected].