Allocation of risks between the parties to a contract in Fidic red Assignment

Allocation of risks between the parties to a contract in Fidic red book - Assignment Example FIDIC is regularly publishing standard construction contracts forms, which are just more than traditional construction contract’s forms. One of the salient features of FIDIC contract is that it facilitates the allocation of risk between the contractor and the employer. Red Book of FIDIC states that it has been drafted with sharing of risks between the parties in a construction contract evenly. Risks in a construction contract include unanticipated or poor ground scenarios, performance and operational needs, minimal ownership involvement and design responsibility. Risk can be defined as the probability of peril, loss, injury or damage. In a construction project, risks include loss of the property, injury to the employees, loss of materials, opportunity, finances and personal safety and impact on both corporate repute and personal safety2. In construction contracts, a contractor assumes more risks that may have a direct impact on contract’s completion date or final price. Further, the risks include unanticipated or poor ground situations, minimum performance or operational needs, design accuracy and minimum owner’s involvement in the contract. ... Analysis How Red Book of FIDIC allocates the risk between the parties in a Construction Contract The FIDIC contract recognises the risks in a construction contract and allocates many such risks to the contractor. The main aim is to enable the employer an enhanced certainty of the final project price. Further, Red book also offers more opportunities and time to the contractor to receive and evaluate information pertaining to the risks’ factors in the project. This will enable the contractor to conceive these risks and to offer his price to the project accordingly. Contractors employing the FIDIC Red Book will find is useful to comprehend how the FIDIC documents allocate and classify the various perils so as to forbid the cost overruns and losses that may be sustained on the problematic provinces of the project. Here, the contractor has to consider the risks associate to the capability of the contractor, physical risks, time-associated risks, economic risks, construction and eng ineering risks and other risks3. In Fidic red book, Contractor’s risks are detailed in clause 17.003. The Contractor will be held accountable for the following risks. Any loss or personal injury to employees or property due to Contractor’s wilful act, negligence or breach of contract or personal injury caused due to faulty design by the contractor. Loss caused due to Employer’s privilege to occupy any land or to have work executed. Risk in a construction Contract can be explained through the following chart– Chart 14 In Fidic red book, employer’s risks are detailed in clause 17.4 and also under Force Majeure Clause 19. Under the employer’s risks category, the Contractor is entitled to claim both extension of time and also to recover additional costs from the employer. The