The Research On The Exemption Clauses Of Employer’s Fault On FIDIC-EPC Contract Conditions

FIDIC is the shortened form of the International Federation of Consulting Engineers,which is the most authoritative non governmental international organizations in engineering consulting industry in the world today. A series of standard forms of contracts compiled by FIDIC are based on the experience in the construction of the world’s major engineering and UK ACE standard contract forms. Some argue that "the Bible in the international engineering contracting industry,and the universal language".In 1999, International Federation of Consulting Engineers published Conditions of Contract for EPC/Turnkey Projects(Silver Book) or EPC conditions of contract for short,which has been widely used in engineering practice around the world.EPC Conditions of Contract was created in a special time. With the rapid development of international project contracting business, project number and size increase and enlarge continuously. Because of the political, legal, social, economic and other objective factors, the risk of contract also increased rapidly. In order to avoid some risks such as cost increase and construction period delay,the owners tried to explore a model with fixed price and duration,and then EPC contract appeared. In EPC contract, the contractor should be responsible for the design, procurement, construction and other package work of the engineering project. On the contrary, the owners are rarely involved in the specific work. Compared with other FIDIC contract conditions, the risk sharing mechanism in EPC contract is special. The contractor undertakes the vast majority of the risks of the project, some risks which should be borne by the owners have been transferred to the contractor. Therefore, the legal liability of the owners become less. EPC contract shows great "Pro owner". The clause of exemption from owner fault in general conditions can not but arouse our thinking:whether this kind of excessive bias in favour of the owners clauses leads to imbalance of rights and obligations or violate the rule of fairness and economics? whether this clauses can meet the standard of commercial reasonableness?So it is particularly necessary to make a critical review of the fault exemption of the owner in the EPC contract.The first part of this article:firstly, on the basis of the understanding of the concept and nature of EPC contract, this paper argues that the conditions of EPC contract are neither international practice, nor form contract, but a standard contract for the international engineering. From the structure of contract, it is composed of two parts, general conditions and special conditions. Special conditions are specific to a particular project, at the same time, it is a modification and supplement to general conditions. Based on the understanding of the characteristics of the contract,the article will discuss some circumstances that are not applicable. And then summed up the fault behaviors of the owners. According to the classification of fault behaviors and combined with the relevant liability clause, the article will sum up the legal consequences of the owner’s fault behavior. It is divided into two kinds of situations: responsibility and exemption.The second part of this article:review legitimacy of exemption clauses. Firstly, compared the exemption clause with some relevant legal principles,such as the principle of fairness, risk allocation principles,and the principle of privity of contract.Secondly,explored the exemption clauses in different countries’law system. FIDIC contract originated from ACE standard form in the United Kingdom, inevitably these contracts have the characteristics of the common law.So at the beginning,the article will analyze these exemption clauses in the common-law system represented by the United States and Britain. We all know that there is no provision of the construction contract in civil countries, the content of construction contracts can be found in the contract of hired work.So some concepts of contract for works in civil codes are not exactly same in FIDIC contract conditions. Therefore, the application in the civil codes is particularly worthy of attention. In addition, EPC contract is widely used in the Islamic law countries such as Saudi Arabia, it is necessary to analyze the application of the exemption clause in those countries. Finally, explored the suitability of the exemption clause in our country. It will start in introducing present situation of application,and then combined with the case and the "contract law" to analyze.The third part of this article:the Law and Economics Analysis on the exemption clause. Firstly,the article will introduce the concept and the construction of Law and Economics Analysis,and then use economic analysis model and method to analyze the exemption clause.Finally, the article will discuss the exemption clause in the cost-benefit analysis and efficiency analysis.The fifth part of this article:put forward some proposals to the contractor in the practice of legal risk prevention, the contractor can set specific conditions to balance the distribution of rights and obligations. In addition, the contractor should strengthen their own risk audit awareness in the bidding phase, the signing of the agreement.As one of the most widely used contracts in the field of international engineering, it is very important to review the legal problems critically,especially for the fault exemption clause. It is conducive to understand the terms of the applicable rules and do a good job of EPC project risk management and control.