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Mastering FIDIC Yellow Book Clause 18: Exceptional Events Explained

In this video, we break down the complexities of Clause 18 of the FIDIC Yellow Book, which focuses on Exceptional Events. Understanding these provisions is vital for any contractor or employer navigating unforeseen disruptions in construction projects.

What is an Exceptional Event? An Exceptional Event is a specific circumstance that is beyond a Party’s control, could not have been reasonably provided against before entering the contract, and is not substantially attributable to the other Party. The sources list several examples, including war, rebellion, terrorism, munitions of war, and natural catastrophes such as tsunamis or hurricanes.

Notice and Performance Obligations If you are prevented from performing your contractual duties, you must provide a Notice of an Exceptional Event within 14 days of becoming aware of it. This notice is critical because it excuses the affected party from performance of the prevented obligations.

However, please note that an Exceptional Event does not excuse any obligation to make payments due to the other party under the contract.

Minimizing Delay and Continuing Notices Both parties have a duty to use all reasonable endeavors to minimize delay resulting from the event. If the event is ongoing, the affected party must provide updated Notices every 28 days describing the continuing effects. Once the event ceases, a notice must be given immediately to signal the resumption of performance.

Consequences: EOT and Cost If the Contractor suffers delay due to an Exceptional Event, they may be entitled to an Extension of Time (EOT). Recovery of Cost is also possible, but typically only for specific events—such as war, strikes, or munitions—and, for most of these, only if they occur within the Country where the project is located.

Optional Termination and Release from Performance Should the works be prevented for a continuous period of 84 days (or 140 days in total), either party may issue a notice of Optional Termination. This triggers a specific payment process covering the value of work done, costs of plant/materials, and repatriation of staff. Furthermore, Clause 18.6 addresses situations where performance becomes impossible or unlawful, providing a mechanism for the parties to be discharged from further performance.

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Disclaimer: While the term "Force Majeure" is commonly used in the construction industry to describe these scenarios, the FIDIC Yellow Book specifically uses the term "Exceptional Events." Please consult with a legal professional for specific contract advice as this information is based on the provided text.