Fidic Contracts In Kenya: Understanding Their Scope And Application

The FIDIC (Fédération Internationale Des Ingénieurs-Conseils) contracts are internationally recognized and offer standard forms for construction agreements that provide clear guidelines on the roles and responsibilities of the parties involved. These contracts are used globally and increasingly in Kenya for construction and infrastructure projects.

This article explores the types of FIDIC contracts, how they are applied in Kenya, and addresses the questions of whether these contracts are enforceable, how parties choose the relevant contract, and their legal effect in Kenyan law.

1. FIDIC Contract Books

FIDIC offers several types of contract books, each tailored to different kinds of projects. These books define specific roles for the Developer, Contractor, and other stakeholders, providing clear guidelines and procedures for project execution.

1.1 FIDIC Red Book: Conditions of Contract for Construction

The Red Book is used primarily for projects where the design is provided by the Developer. It outlines the relationship between the Developer and Contractor and is typically used for traditional construction projects.

1.2 FIDIC Yellow Book: Conditions of Contract for Plant and Design-Build

The Yellow Book applies to design and build contracts, where the Contractor assumes responsibility for both the design and the construction of the works.

1.3 FIDIC Silver Book: Conditions of Contract for EPC/Turnkey Projects

The Silver Book is used for EPC (Engineering, Procurement, and Construction) or turnkey projects where the Contractor takes full responsibility for design, construction, and the delivery of a fully operational project.

1.4 FIDIC Green Book: Short Form of Contract

The Green Book is a simplified version of the FIDIC contracts, ideal for smaller, less complex projects with shorter durations.

1.5 FIDIC White Book: Guide to the Use of FIDIC Conditions of Contract

The White Book is a guide rather than a contract and provides detailed advice on how to interpret and implement the terms in FIDIC’s other books.

2. Choice of FIDIC Book

In practice, the choice of which FIDIC book to use for a construction project is generally made by the parties involved—the Developer and the Contractor. The selection depends on the nature of the project, the level of responsibility assigned to each party, and the complexity of the work.

· Developer’s Role: If the Developer is responsible for the design of the project, the Red Book is typically preferred.

· Contractor’s Role: If the Contractor is responsible for both design and construction, the Yellow Book may be selected.

· Turnkey Projects: For large, complex projects where the Developer desires a "turnkey" approach, the Silver Book is more appropriate.

· Smaller Projects: For less complex or smaller projects, the Green Book provides a simpler and more streamlined contract.

The parties must mutually agree upon which FIDIC book will govern their contract based on the project’s specific needs. This choice is typically negotiated and explicitly stated in the contract documents before the project commences.

3. Legal Effect and Enforcement of FIDIC Contracts in Kenya

3.1 Recognition of FIDIC Contracts in Kenya

FIDIC contracts are recognized in Kenya, particularly in large-scale infrastructure and construction projects. Kenya’s legal system, based on common law, aligns well with the principles laid out in the FIDIC books. These contracts are generally considered valid and enforceable, provided they do not contradict Kenyan law.

· Incorporation of FIDIC Clauses: In many cases, Kenyan construction projects, particularly those funded by international entities or involving foreign contractors, incorporate FIDIC contract provisions. These contracts are seen as standard practices in international construction law and are recognized by Kenyan courts and arbitral tribunals.

· International Arbitration: A key feature of FIDIC contracts is the inclusion of alternative dispute resolution mechanisms such as arbitration. These mechanisms are consistent with Kenya’s approach to resolving commercial and construction-related disputes through arbitration, which is governed by the Arbitration Act (Cap. 49 of the Laws of Kenya).

3.2 Enforcement of FIDIC Contracts in Kenya

FIDIC contracts, like any other contractual agreements, are enforceable under Kenyan law, subject to the terms agreed upon by the parties. Enforcement depends on whether the contract has been properly executed and the obligations stipulated within the contract are followed.

Court Enforcement: In Kenya, a party can enforce a FIDIC contract in court if the other party breaches its terms. However, FIDIC contracts often include clauses that mandate dispute resolution through arbitration or other alternative dispute resolution (ADR) mechanisms before resorting to the courts. This is in line with international best practices, ensuring that disputes are resolved more efficiently and outside of the judicial system.

In Hydro Water Well (K) Limited v. Nelson Henry Sechere & Others, (2021] KEHC 22 (KLR) The plaintiff, under a FIDIC-based contract, sued the defendants for breach of contract after they failed to provide critical documentation, leading to delays in the drilling and equipping of boreholes. The plaintiff sought compensation for lost profits, idle machinery, and the advance payment bond premium, totaling Kshs. 138,985,588.33. The court ruled that the delay was the defendants' fault and that the plaintiff was entitled to compensation for idle machinery, but the amount was reduced by 50% to account for lack of wear and tear, resulting in Kshs. 14,400,000. The court also highlighted that under FIDIC contracts, advance payment bonds are typically required when contractors request upfront payments for major procurement, offering protection to the client in case the contractor fails to fulfill their obligations, but did not award the full bond premium.

Arbitration and Dispute Resolution: FIDIC’s emphasis on arbitration aligns with Kenya’s preference for resolving construction disputes through arbitration. Arbitral awards made under FIDIC contracts are enforceable by Kenyan courts.

3.3 The Legal Effect of FIDIC Contracts in Kenya

FIDIC contracts are legally binding once executed by the parties. They carry the same weight and legal effect as any other contract governed by Kenyan law, provided they do not contravene any specific provisions of Kenyan legislation.

· Adherence to Kenyan Law: Although FIDIC contracts are internationally recognized, they must still comply with local laws, including labor laws, health and safety regulations, and environmental requirements. Any provision in the FIDIC contract that conflicts with Kenyan statutes may be unenforceable.

· Effect on Project Timelines and Payments: The enforceability of provisions related to payment terms, performance bonds, liquidated damages, and completion timelines is critical. Kenyan courts will enforce these provisions as long as they are in compliance with local laws and regulations.

4. Conclusion

The FIDIC contracts provide a flexible, clear framework for managing construction projects, and the choice of which book to use depends on the nature of the project and the responsibilities of the parties involved. Whether using the Red, Yellow, Silver, or Green Book, the parties involved are free to select the contract that best suits their needs.

In Kenya, FIDIC contracts are recognized and enforceable under the country's legal system, particularly in the context of large infrastructure projects. These contracts are designed to be adaptable to different jurisdictions, and their dispute resolution mechanisms, particularly arbitration, align well with Kenyan law.

The legal effect of FIDIC contracts in Kenya is generally upheld, provided the contract terms do not contradict the country's laws. With increasing adoption of FIDIC forms in Kenya’s construction industry, it is important for parties to carefully consider the appropriate contract form and ensure they are fully aware of the dispute resolution and enforcement provisions outlined in these contracts.

HOW WE CAN HELP

At CM Advocates LLP, we are dedicated to helping your company navigate the complexities of FIDIC contracts within an ever-changing legal framework. Our experienced team offers comprehensive legal advice and support, ensuring that your construction contract complies with all regulatory requirements.

In addition to our advisory services, we stay up-to-date with the latest regulatory changes, helping you avoid the risks and penalties associated with non-compliance. As your trusted partner, we ensure that your business remains compliant throughout the construction process. To learn more about our services, visit www.CMAdvocates.com, or for any clarifications, contact us at commercial@cmadvocates.com.

Contributors: Brian Thuranira & Stella Njagi