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Monday, February 20 2023

BENEFITS AND CHALLENGES OF FIDIC CONTRACTS

Monday, February 20 2023

FIDIC contracts, or Federation Internationale des Ingénieurs-Conseils, are agreements used in the construction industry to govern the relationship between contractors and developers. While widely accepted, there are benefits and drawbacks to the agreement, as noted below:

The FIDIC suite of contract documents are also widely accepted and understood by the major contractors in Vietnam

They offer numerous advantages that benefit both parties:

  • Clearly defined roles and responsibilities. Each party’s respective roles, from beginning to end, is outlined within the contract. This eliminates any confusion on who should be doing what during a project and limits potential disputes.
  • Risk allocation is specified and agreed upon by both parties. This ensures that liabilities are understood to provide peace of mind for both developers and contractors.
  • Dispute resolution mechanisms are provided in advance. The FIDIC contract provides different methods such as arbitration or court action that can be used in case of disputes between the contractor and developer.
  • Payment conditions are clear so there won’t be any misunderstandings on when payments need to be made throughout the duration of the project.

Risks of FIDIC Contracts for Developers and Contractors:

  • Lack of flexibility. Once the contract is signed, the terms cannot be changed in response to unexpected obstacles or changing circumstances. Any amendments usually require an additional agreement from both parties. This can lead to delays in the project timeline as well as additional costs.
  • Legal language and complexity. FIDIC contracts can be complex and difficult to read due to legal jargon and terminology. Both developers and contractors must thoroughly understand their rights and obligations outlined within the agreement before signing it in order to avoid any misunderstandings or disputes later on.
  • Insurance requirements may be too high for certain projects, making them unfeasible for smaller scale developments.
  • While FIDIC contracts offer numerous benefits, they also come with their own set of risks that both developers and contractors must carefully consider before agreeing to them. By working together closely while interpreting the contract’s terms, they can ensure a successful project while minimizing potential issues along the way.

Overall, the use of a FIDIC agreement is beneficial for both developers and contractors because it helps facilitate collaboration between the parties throughout various stages of a development project while protecting their mutual interests. By laying out expectations clearly, setting up risk management strategies, providing dispute resolution guidelines, and specifying payment conditions, it creates a win-win situation for all parties involved in the project. The FIDIC suite of contract documents are also widely accepted and understood by the major contractors in Vietnam, so the implementation of the agreement is a more streamlined process.

Read more: https://devcom.vn/expertise/