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The Employer is entitled to terminate the Contract if the
Contractor:
• Fails to provide the Performance Security within the required time.
• Fails to ensure it is valid and enforceable for the period required.
• Fails to extend its validity as required.
According to FIDIC ( Fourth Edition1987; Reprinted1992 ) RED Book:
(Conditions of Contract For Works of Civil Engineering Constuction)
Clause63 - Default of Contractor
If the Contractor goes bankrupt etc, or assigns or the Engineer certifies the Contractor
(a) repudiated,
(b) failed to
(i) commence
(ii) proceed,
(c) failed to replace / rectify defective work/material
(d) failed to comply with his obligations
(e) subcontracted without consent,
then the Employer can terminate the employment of Contractor.
An employer has the right to terminate a contract for convenience at any time before completion of the works, provided that he compensates the contractor.
The employer has the right to terminate the contract for cause without paying compensation in cases where it is clear that, due to no fault of the employer's, the contractor will be unable to finish the works within the timeframe agreed by the parties. Also, if it is clearly foreseeable that - through the contractor's fault - the works will not accord with the contract, the employer can specify a deadline by which the contractor must remedy these defects.
To determine if you can rescind the contract: Review the contract for a rescission, or cancellation, clause. The clause will contain instructions for rescinding the contract and state the time in which you have to do so. If still within the time specified by the clause, follow the instructions provided in it to rescind the contract. This will involve providing some form of written notice of your rescission to the other party, such as a signed rescission form, previously provided to you, or a simple letter stating that you are rescinding the contract.If your contract does not contain a rescission clause , check your state's statutes, with an attorney or with your state's Attorney General, to see if a rescission period may apply. Some state and federal laws require that certain contracts allow for rescission within a specific period, usually3 to10 days after entering into the contract. For example, Regulation Z of the Federal Truth in Lending Act gives you the right to cancel certain transactions, in which your home is used for collateral, before midnight of the third business day after signing the contract. Federal law also allows you3 days to cancel a contract for the purchase of $25 or more in goods or services from a door-to-door sales person. If your contract does not contain a rescission clause and can not be rescinded pursuant to any state or federal law, negotiate rescission with the other party. The parties to a contract may agree at any time to rescind the contract, even if the contract itself says otherwise.
The Employer shall be entitled to terminate the Contract if the Contractor:
(a) fails to comply with Sub-clause4.2 [Performance Security] or with a notice under Subclause15.1 [Notice to Correct].” If sub-clause4.2 applies, the Employer is entitled to terminate the Contract if the Contractor: • Fails to provide the Performance Security within the required time. • Fails to ensure it is valid and enforceable for the period required. • Fails to extend its validity as required.
(b) abandons the Works or otherwise plainly demonstrates the intention not to continue performance of his obligations under the Contract.”
“(c) without reasonable excuse fails: (i) to proceed with the Works in accordance with Clause8 [Commencement, Delays and Suspension], or3 The construction & energy law specialists (ii) to comply with a notice issued under Sub-clause7.5 [Rejection] or Sub-Clause7.6 [Remedial Work], within28 days after receiving it”
“(d) subcontracts the whole of the Works or assigns the Contract without the required agreement”.
“(e) becomes bankrupt or insolvent, goes into liquidation, has a receiving or administration order made against him, compounds with his creditors, or carries on business under a receiver, trustee or manager for the benefit of his creditors, or if any act is done or event occurs which (under applicable Laws) has a similar effect to any of these acts or events”. Paragraph (e) places the Contractor’s finances under the spotlight. The Contractor’s insolvency amounts to an event of default entitling the Employer to terminate the Contract; which is something we may see more frequently in the current economic climate. The operation of this paragraph (e) will depend on the governing law and other applicable laws. If the Contractor is in breach of this sub-paragraph, the Employer is entitled to give notice to terminate immediately, rather than having to wait14 days (as set out under Procedure for termination).
“(f ) gives or offers to give (directly or indirectly) to any person any bribe, gift, gratuity, commission or other thing of value, as an inducement or reward: (i) for doing or forbearing to do any action in relation to the Contract, or (ii) for showing or forbearing to show favour or disfavour to any person in relation to the Contract, or if any of the Contractor’s Personnel, agents or Subcontractors gives or offers to give (directly or indirectly) to any person any such inducement or reward as is described in this sub-paragraph (f). However, lawful inducements and rewards to Contractor’s Personnel shall not entitle termination.”
if ifthe progress of the contractor is slow and despite repeated verbal and written instructions it does not changes. If the quality of work is poor and below specifications and not follow the Employer instructions then his contract should be terminated because time and quality are the key factors for a successful project.
Termination under the FIDIC Contract (Red and Yellow Books) Clause15 sets out the circumstances that may lead to a termination of the Contract by the Employer as a result of a default by the Contractor, and describes the procedures that must be followed and the financial arrangements that will apply. It also provides for an Employer’s termination for convenience (where there has been no default by the Contractor). This is one of the main differences between termination by Employer and termination by the Contractor: a terminating Contractor is not entitled to terminate for convenience. However, there are also other sub-clauses which give the Employer the right to terminate in certain circumstances: • Sub-clause9.4(b): failure to pass tests on completion. • Sub-clause11.4(c): failure to remedy defects. • Sub-clause19.6: optional termination payment and release (force majeure or exceptional events). • Sub-clause19.7: release from performance under the law.
You appear to understand FIDIC's provisions, as summarised at the top of page41 of the Red Book Guide: "It should be noted that ... the effect of ... [1.1(a)(iv)] is to prevent the Employer from changing the Engineer without the consent of the Contractor." In effect, provided the legal person defined as "Engineer" continues to exist, such legal person continues to be the Engineer for the purposes of the Contract, and the Employer has no power to name someone else as Engineer. By "continues to exist", we mean does not (as a natural person) die, or is not (as a company) dissolved. FIDIC cannot give specific advice in respect to the actions a party should take, and only undertakes to clarify aspects of its own provisions. You do not seem to need such clarification, but may need to obtain advice from a lawyer with expert knowledge of construction law.
There is always a possibility that some aspect of the situation (which you have not mentioned) would entitle the Employer to replace the Engineer under the law governing the Contract. For FIDIC, it seems that you should first decide whether the replacement "Engineer" is acceptable as such because, if not, you could inform the Employer accordingly and seek to resolve the matter before it escalates into a major dispute.
- See more at: http://fidic.org/node/911#sthash.vDIidvuS.dpuf
1) Failure to pass tests on completion.
2) Failure to remedy defects.
3) Optional termination payment and release (force majeure or exceptional events).
4) Release from performance under the law.
