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Construction Arbitration

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Netherlands

Bommel van der Bend and Kirstin Nijburg

    Legal system

  1. 1.

    Is your jurisdiction primarily a common law, civil law, customary law or theocratic law jurisdiction? Are the laws substantially derived from the laws of another jurisdiction and, if so, which? What instruments have legal force and effect? Who are the lawmaking bodies? How and where are new laws published? Can laws be passed with retrospective effect?

    1. The Netherlands is a civil law jurisdiction. Laws that have exerted an important influence on the development of Dutch law are the indigenous Dutch laws, ius commune, natural law and French law. The Dutch Civil Code was given substantive reform in 1992. The technical focus of this revision was informed by the German Civil Code.

      Dutch law recognises a number of different sources of law. In addition to the laws enacted by legislative bodies – including treaties, the constitution, statutes, and governmental regulations – other sources of law are case law, customary law and general principles of law.

      The primary law making body is the Dutch parliament in cooperation with the government. Legislative power can be delegated to lower governments or specific organs of the state, but only for a prescribed purpose. After passing through both chambers of parliament, the new law is officially published in the Staatsblad (Bulletin of Acts and Orders).

      The prohibition of retroactive laws is taken to be part of the general principle of legal certainty. There is a provision prohibiting the enactment of retrospective legislation in the area of substantive penal law in the Dutch Constitution. In other areas of law, such as tax law, exceptions are sometimes made to the rule that the passing of laws with retrospective effect is to be avoided.

    Contract formation

  2. 2.

    What are the requirements for a construction contract to be formed? When is a "letter of intent" from an employer to a contractor given contractual effect?

    1. Like any contract under Dutch law, a construction contract is formed by an offer (oral or in writing) followed by an acceptance of that offer (section 6:217 (1) Civil Code). No prescribed form is required; only a consensus between the parties is needed.

      When a ‘letter of intent’ from an employer to a contractor is given contractual effect strongly depends on the contents of such document and on the specific facts and circumstances. Giving a document the name ‘letter of intent’ is in any event by no means decisive for determining whether or not it contains any binding obligations or not. Stipulations such as ‘subject to contract’ do not necessarily guarantee that a document will not be given contractual effect. Dutch law requires the parties to exercise their rights with due observance of the principle of reasonableness and fairness, also during the pre-contractual phase. Based on this principle a party may not always break off negotiations unilaterally, particularly when the negotiations have reached a stage at which the other party has the justified expectation that an agreement will be reached or where such termination is unacceptable. To avoid any surprises, a ‘letter of intent’ must be carefully drafted. Not only should specific clauses be inserted that clearly define what the parties may expect from each other, but the parties should also explicitly reiterate their wish during the negotiation process.

    Choice of laws, seat, arbitrator and language

  3. 3.

    Are parties free to choose: (a) the governing law of their contract; (b) the law of the arbitration agreement; (c) the seat of the arbitration; (d) any arbitral rules; (e) anyone to act as arbitrator; and (f) the language of the contract and the arbitration? If not, what are the limitations on choice and what happens if the parties act contrary to them?

    1. Parties are in principle free to enter into a contract of their choice and on the terms they wish, provided that the terms agreed upon do not violate good morals or public order, and do not derogate from any mandatory statutory provision. Accordingly, parties are free to choose any of the above.

    Implied terms

  4. 4.

    How might terms be implied into construction contracts? What terms might be implied?

    1. A contract not only has the juridical effects agreed to by the parties pursuant to the specific wording of the contract, but also those which according to the nature of the contract apply by virtue of law, usage or the principle of reasonableness and fairness. On this basis, terms may be implied into construction contracts. Typical examples of such terms are the contractor’s obligation to perform the works with due care and or the contractor’s obligation to warn of faults or defects encountered.

    Certifiers

  5. 5.

    When must a certifier under a construction contract act impartially, fairly and honestly? To what extent are the parties bound by certificates (where the contract does not expressly empower a court or arbitral tribunal to open up, review and revise certificates)? Can the contractor bring proceedings directly against the certifier?

    1. Certifiers and certificates are no distinct notions under Dutch law. Consequently, Dutch law does not provide for specific rules governing the acts of a certifyer under a construction contract. The acts of a certifyer are primarily governed by the terms of the contract and the rules of contract law. Accordingly, a certifier must, like any party in a contractual relationship, act in accordance with the requirements of reasonableness and fairness. Depending on the wording of the contract, certificates may have the binding effect of an agreement between the parties and should be treated accordingly also by a court or arbitral tribunal. Dutch law provides that a party causing damage is normally liable for the resulting loss. The contractor may therefore bring proceedings directly against the certifier.

    Competing causes of delay

  6. 6.

    If an employer would cause (eg, by variation) a two-week critical delay to the completion of the works (which by itself would justify an extension of time under the construction contract) but, independently, culpable delay by the contractor (eg, defective work) would cause the same delay, is the contractor entitled to an extension?

    1. Although a hard and fast rule for every case cannot be given also because much depends on the specific circumstances, it can be said in general that the contractor will in principle not be entitled to an extension of time unless the contractor cannot be reasonably required to complete the works by the agreed time for completion due to circumstances not attributable to the contractor.

    Disruption

  7. 7.

    How does the law view "disruption" to the contractor (as distinct from delay or prolongation to the completion of the works) caused by the employer’s breaches of contract and acts of prevention? What must the contractor show for a disruption claim to succeed? If an entitlement in principle can be shown (eg, that a loss has been caused by a breach of contract) must the court or arbitral tribunal do its best to quantify that loss (even if proof of the quantum is lacking or uncertain)?

    1. Dutch law does not provide for any specific rule on disruption. Whether the contractor’s claim for disruption succeeds and what compensation is granted will depend on what the court will consider to be reasonable and fair in the given circumstances. The contractor will in any event have to establish that the employer is responsible for acts of disruption that have caused loss of productivity and increased costs. The contractor also has to substantiate the loss. However, courts and arbitrators have substantial room of appreciation to assess the quantum of such loss and their reasoning in this respect is not subject to strict rules.

    Acceleration

  8. 8.

    How does the law view "constructive acceleration" (where the contractor incurs costs accelerating its works because an extension of time has not been granted that should have been)? What must the contractor show for such a claim to succeed? Does your answer differ if the employer acted unreasonably or in bad faith?

    1. Dutch law does not recognise the concept of ‘constructive acceleration’ as such. If the employer or engineer refuses to grant an appropriate extension of time and the contractor incurs additional expense in accelerative measures in order to reduce its potential liability in damages, the contractor may however be able recover some or all of the acceleration costs incurred using other legal theories (eg, breach of contract, principle of reasonableness and fairness). A contractor seeking recovery of ‘constructive acceleration’ costs will need to demonstrate that an excusable delay was encountered, that appropriate requests for extension of time were provided to the employer, that the employer should have granted such extension, and that it was necessary and reasonable to take accelerative measures. One of the factors that may be taken into consideration in assessing whether it was necessary and reasonable for the contractor to incur acceleration costs rather than to finish late is the employer’s conduct. A ‘constructive acceleration’ claim is more likely to succeed if the employer expressly or impliedly pressured the contractor to take accelerative measures, or if the employer acted unreasonably or in bad faith.

    Force majeure and hardship

  9. 9.

    What events of force majeure give rise to relief? Must they be unforeseeable and to whom? How far does the express or implied allocation of risk under the contract affect whether an event qualifies? Must the event have a permanent effect? Is impossibility in performing required or does a degree of difficulty suffice? Is relief available where only some obligations (eg, to make a single payment or carry out one aspect of the works) are affected or is a greater impact required? What relief is available and does it apply automatically? Can the rules be excluded by agreement?

    1. Although under Dutch law this is usually not put in terms of force majeure, failure to perform may be excused if performance is logically impossible or would result in unreasonable effort or expense for the debtor. Impossibility is thus not necessarily required; a degree of difficulty may suffice. The event does not need to have a permanent effect. Whether or not an event constitutes force majeure will strongly depend on the specific facts and circumstances of the case. The express or implied allocation of risk under the contract is one of the factors taken into account in this respect. It has been established in case law that a plea of force majeure will in any event not hold if the non-performance was foreseeable at the time the contract was entered into. In business to business relationships, unless parties have broadened the scope of the events that will constitute force majeure, a court or arbitral tribunal will not easily accept force majeure.

      When the non-performance can be excused by force majeure, an action for specific performance or damages is not available. The debtor does however in principle have the right to withhold performance (section 6:262 Civil Code). The debtor may also decide to dissolve the contract, but only if the performance is permanently impossible or if a reasonable time to perform was given (section 6:265 Civil Code). What is considered to be a reasonable time to perform depends on the specific circumstances of the case. Use of a contractual time limit does give greater certainty. The parties are allowed to expand or diminish the scope of the events that will constitute force majeure.

  10. 10.

    When is a contractor entitled to relief against a construction contract becoming unduly expensive or otherwise hard to perform and what relief is available? Can the rules be excluded by agreement?

    1. Section 7:753 Civil Code provides that when, after the conclusion of the construction agreement, cost-increasing circumstances arise or come to light that cannot be attributed to the contractor, the contractor can request the court to adjust the agreed price entirely or partially in proportion to the cost-increase. For that rule to apply, it must be established that, at the moment the contractor stipulated the price, it did not have to reckon with the possibility that these circumstances would occur. The contractor is entitled to adjust the price without intervention of the court if the cost-increase is a result of incorrect information provided to him by the employer, while this information is relevant for fixing the price, unless the constructor should have discovered this incorrectness before the price was fixed. The foregoing applies only if the constructor has warned the employer as soon as possible of the need of a price increase, so that the employer either can terminate the construction agreement or can make a proposal to restrict or simplify the work to be performed. It is not possible to derogate from this rule to the disadvantage of the employer.

      Dutch law furthermore contains a specific statutory provision allowing revision of a contract due to change in circumstances. Pursuant to section 6:258 Civil Code, the court may, upon request of one of the parties, modify the effects of an agreement or terminate it in part or in its entirety on the basis of unforeseen circumstances of such nature that the other party may not, according to the criteria of reasonableness and fairness, expect the agreement to be maintained in an unmodified form. The modification or termination may be given retroactive effect. The modification or termination may not be pronounced to the extent that these circumstances are to be borne by the party relying upon them, according to the nature of the agreement or commercial common opinion. Section 6:258 Civil Code cannot be excluded by agreement. This provision is, however, applied rarely in practice. The parties can exclude modification or termination for specific circumstances, by explicitly listing these circumstances in their agreement.

    Impossibility

  11. 11.

    When is a contractor entitled to relief if after the contract is concluded it transpires (but not due to external events) that it is impossible for the contractor to achieve a particular aspect of the contractual specification? What relief is available?

    1. The question then is whether the impossibility arises from unforeseen circumstances of such a nature that the employer in all reasonableness and fairness may not expect continuation of the contract in unmodified form. The contractor may in that case request the court to modify the effects of the contract or to set it aside, in whole or in part on the basis of section 6:258 Civil Code. The modification or setting aside may be given retroactive effect. The modification or the setting aside shall not be pronounced to the extent that the contractor is accountable for the changed circumstances or if this follows from the nature of the contract. Section 6:258 Civil Code cannot be excluded by agreement. This provision is, however, applied rarely in practice. The parties can exclude modification or setting aside for specific circumstances, by explicitly listing these circumstances in their agreement.

    Clauses that seek to pass risks to the contractor for matters it cannot foresee or control

  12. 12.

    How effective are contractual provisions that seek to pass risks to the contractor for matters it cannot foresee or control, for example making the contractor liable for: (a) a specified event of force majeure; (b) ground conditions that no reasonably diligent contractor could have foreseen; or (c) errors in documents provided by the employer, such as employer's requirements in design and build forms?

    1. Clauses that seek to pass risks to the contractor for matters it cannot foresee or control are in principle effective. However, under Dutch law, particularly pursuant to sections 7:753 and 6:258 of the Civil Code, an express term agreed upon between the parties may be set aside on the basis of the principle of reasonableness and fairness if it is deemed unacceptable in the given circumstances.

    Duty to warn

  13. 13.

    When must the contractor warn the employer of an error in a design provided by the employer?

    1. The contractor must warn the employer not only at the time of entering into but also during the performance of the contract – of inaccuracies in the agreed specifications to the extent that these were or should have been reasonably known to the contractor. The same applies to defects in and unsuitability of anything supplied by the employer, including the land on which the employer has works performed, as well as errors or defects in the plans, drawings, calculations, specifications or instructions for performance provided by the employer. Failure to perform this duty to warn can result in the contractor having to bear the costs associated with remedying the errors.

    Good faith

  14. 14.

    Is there a general duty of good faith? If so, how does it impact upon the following (where they are otherwise permitted under the construction contract): (a) the level of intervention in the works that is allowed by the employer; (b) a party’s discretion whether to terminate or suspend the contract; or (c) the employer’s discretion to claim pre-agreed sums under the contract, such as liquidated damages for delay?

    1. Dutch law recognises and designates an important role to the principle of good faith in contract law. Section 6:2 (1) Civil Code requires the parties to perform their obligations in accordance with the requirements of reasonableness and fairness. In determining what reasonableness and fairness require, generally accepted principles of law, current juridical views in the Netherlands and the societal and private interests involved must be taken into account (section 3:12 Civil Code). A party cannot enforce a contractual obligation or right where this would be unfair or unreasonable under the given circumstances.

      Questions (a), (b) and (c) above therefore cannot easily be answered in general terms: it all depends on the specific circumstances of the matter. Particularly the level of intervention in the works that is allowed by the employer strongly depends on the type of contract entered into. With regard to a party’s discretion whether to terminate or suspend the contract, the requirements of reasonableness and fairness imply that there must be circumstances justifying the termination or suspension. Those same standards may also require a certain notice period to be observed, or that the costs or expenses associated with the termination or suspension are compensated. Liquidated damages are considered to be penalties under Dutch law. Contractual penalties are enforceable, but a court or arbitral tribunal can mitigate the amount payable upon request of the contractor – eg, if the liquidated damages are not commercially justifiable or are not a genuine pre-estimate of the loss suffered by the employer.

    Time bars

  15. 15.

    How do contractual provisions that bar claims if they are not validly notified within a certain period operate (including limitation or prescription laws that cannot be contracted out of, interpretation rules, any good faith principles and laws on unfair contract terms)? What is the scope for bringing claims outside the written terms of the contract under provisions such as sub-clause 20.1 of the FIDIC Red Book 1999 ("otherwise in connection with the contract")? Is there any difference in approach to claims based on matters that the employer caused and matters it did not, such as weather or ground conditions? Is there any difference in approach to claims for (a) extensions of time and relief from liquidated damages for delay and (b) monetary sums?

    1. Claims will generally be barred if not validly notified within the agreed period, unless this is considered unacceptable under the principle of reasonableness and fairness. Whether the claims are based on matters that the employer caused or on matters it did not, or whether the claims concern extensions of time and relief from liquidated damages for delay or monetary sums, will not necessarily make a difference in approach. In any event, under Dutch law, a party cannot appeal to failure to perform if it has not with convenient speed complained about the failure to the other party once becoming aware of, or reasonably should have become aware of, such failure (section 6:89 Civil Code).

    Suspension

  16. 16.

    What rights does the employer have to suspend paying the contractor or performing other duties under the contract due to the contractor’s (non-)performance, or the contractor have to suspend carrying out the works (or part of the works) due to the employer’s (non-) performance?

    1. Pursuant to section 6:262 Civil Code, either party may suspend the performance of its own obligations, including any payment obligation, if the other party has failed to perform its obligations under the contract.

    Omissions and termination for convenience

  17. 17.

    May the employer exercise an express power to omit work; or terminate the contract at will or for convenience, so as to give work to another contractor or to carry out the work itself?

    1. The employer may at any time terminate the construction agreement for convenience, either entirely or partially (section 7:764 Civil Code).

    Termination

  18. 18.

    What termination rights exist? Can a construction contract be terminated in part? What are the practical and financial consequences?

    1. The employer may at any time terminate the construction agreement for convenience, either entirely or partially (section 7:764 Civil Code). In the event of such termination, the employer must pay the price agreed for the entire works, reduced by the savings resulting for the contractor from the termination. The contractor has the obligation to deliver the works already completed. If the agreed price was made dependent upon the actual costs incurred by the contractor, the price to be paid to by the employer upon termination has to be calculated on the basis of actual costs incurred, the labour performed and the profit that the contractor would have made for the entire works.

      As per section 6:265 Civil Code, the construction contract may also be dissolved in full or in part for breach of contract. A party may however not dissolve the agreement if the other party’s breach – considering its specific nature or minor importance – does not justify such dissolution. Dissolution releases the parties of the obligations affected by it. Insofar as these obligations have already been fulfilled, the legal basis for this performance remains intact, but the parties become obliged to undo any performances received. Where it is impossible or impracticable to undo certain performances, which is likely to be the case for the works already performed under construction contracts, the performance delivered may also be valued against money. The party in breach is furthermore liable to compensate any damage suffered by the other party as a result of the breach and the dissolution.

      The court may also, upon request of one of the parties, terminate the construction contract in part or in its entirety on the basis of unforeseen circumstances of such nature that the other party may not, according to the criteria of reasonableness and fairness, expect the agreement to be maintained in an unmodified form (section 6:258 Civil Code). This provision is, however, applied rarely in practice.

  19. 19.

    If the construction contract provides for the circumstances in which each party may terminate the contract but does not expressly or impliedly state that those rights are exhaustive, are other rights to terminate available? If so, what are they and what are the practical and financial consequences?

    1. If the contract does not expressly or impliedly state that the contractual termination rights are exhaustive, other rights to terminate remain available. The consequences of such termination are as described in answer 18 above.

  20. 20.

    What limits apply to exercising termination rights?

    1. In exercising their termination rights, the parties should always take into account the principle of reasonable and fairness.

    Completion

  21. 21.

    Does the law of your jurisdiction deem the works to be completed (irrespective of what the contract says) if, say, the employer takes beneficial possession of the works and starts using them?

    1. Completion is, in effect, delivery by the contractors of the works carried out by it to the employer and acceptance of the works by the employer. Where the contractor has indicated that the works are ready to be delivered and the employer does not, within a reasonable period, inspect the works and accepts them (whether or not subject to a reservation), or rejects the works indicating any defects, the employer is deemed to have tacitly accepted the works. After acceptance, the works are considered to be completed (section 7:758 Civil Code).

  22. 22.

    Does approval or acceptance of work by or on behalf of the employer bar a subsequent complaint? What constitutes acceptance? Does taking over the work by the employer constitute acceptance? Does this bar subsequent complaint?

    1. The form and timing of the acceptance by or on behalf of employer may vary depending on the nature of the works and the specific circumstances. After completion, the works are at the risk of the employer. The contractor is released from liability for defects that the employer reasonably should have discovered at the time of delivery of the works (section 7:758 Civil Code). In other words, after completion, the employer is barred from bringing complaints about defects he should reasonably have discovered at the time of delivery of the works. The employer may however bring complaints about other defects.

    Liquidated damages and similar pre-agreed sums ('liquidated damages')

  23. 23.

    To what extent are liquidated damages for delay to the completion of the works treated as an exhaustive remedy for all of the employer’s losses due to (a) delay to the completion of the works by the contractual completion date; and (b) delays prior to the contractual completion date (in the absence of, say, interim milestone dates with liquidated damages for delay attaching to them)? What difference does it make if any critical delay is caused by the contractor’s fraud, wilful misconduct, recklessness or gross negligence? If so, what constitutes such behaviour and can it be excluded by agreement?

    1. The Civil Code provides that any amount due on the basis of a contractual penalty clause replaces the damages that would have been due by virtue of law (section 6:92 Civil Code). The parties may however derogate from this, for instance, by agreeing that the party claiming damages may choose between invoking the contractual penalty clause or claiming damages that would have been due by virtue of law, or by agreeing that in addition to the penalty due other damages can be claimed.

      The court may in any event, upon the request of the employer, grant a compensation for damages in addition to a contractual penalty, if this is obliviously required by standards of reasonableness and fairness. Compensation for additional damages incurred will most certainly be granted if critical delay is caused by the contractor’s fraud, wilful misconduct, recklessness or gross negligence. Clauses exempting liability for intentional misconduct or gross negligence are generally deemed to go against good morals or public order and are therefore invalid under Dutch law.

  24. 24.

    If the employer causes critical delay to the completion of the works and the construction contract does not provide for an extension of time to the contractual completion date (there being no "sweep up" provision such as that in sub-clause 8.4(c) of the FIDIC Silver Book 1999) is the employer still entitled to liquidated damages due to the late completion of works provided for under the contract?

    1. The Civil Code provides that performance of a contractual penalty clause cannot be required in the event that the non‑performance of the obligation to which that clause is linked is not attributable to the debtor. This means that the employer may not demand payment of liquidated damages where the failure to complete the works in time cannot be attributed to the contractor.

  25. 25.

    When might a court or arbitral tribunal award less than the liquidated damages specified in the contract for delay or other matters (eg, substandard work)? What factors are taken into account?

    1. The court may, upon the request of the contractor, reduce the liquidated damages specified in the contract if this is obliviously required by standards of reasonableness and fairness. The court however cannot grant the employer less than the damages which would have been due by virtue of law. The parties cannot agree otherwise. Factors that a court may take into account in determining whether mitigation is justified are the relation of the amount of liquidated damages due to the actual damage incurred (although a discrepancy in itself will not be sufficient to justify a reduction), the content and purpose of the liquidated damages clause and the circumstances in which the clause is being invoked.

  26. 26.

    When might a court or arbitral tribunal award more than the liquidated damages specified in the contract for delay or other matters (eg, work that does not achieve a specified standard)? What factors are taken into account?

    1. The court may, upon the request of the employer, grant a compensation for damages in addition to a contractual penalty, if this is obliviously required by standards of reasonableness and fairness. Factors that a court may take into account in determining whether additional damages should be granted are the relation of the amount of liquidated damages due to the actual damage incurred, the content and purpose of the liquidated damages clause and the circumstances in which the clause is being invoked.

    Assessing damages and limitations and exclusions of liability

  27. 27.

    How is monetary compensation for breach of contract assessed? For instance, if the contractor is liable for a defect in its works is the employer entitled to its lost profits? What if the lost profits are exceptionally high?

    1. Where there is a breach of contract monetary compensation may be awarded for ensuing financial loss or material damage including suffered losses and missed profits. Missed profits are assessed by comparing the financial situation of the injured party with the potential financial situation the injured party would have been had the contract not been breached. Reasonable costs incurred for preventing or mitigating damage, for determining the nature and scope of the damage and liability, and for attempts to reach an out of court settlement, may also be claimed as financial loss. The court will assess the damage in a manner most consistent with the nature of the damage caused. Where the extent of the damage cannot be assessed exactly, it will be estimated. Compensation of damage can only be claimed to the extent it is attributable to the breach.

  28. 28.

    If the contractor’s work is technically non-compliant, is the contractor liable for remedying it if the rectification cost is disproportionate to the benefit of the remedy? Can the parties agree on a regime that is stricter for the contractor than under the law of your jurisdiction?

    1. If the rectification cost is disproportionate to the benefit of the remedy compared to financial compensation, the employer cannot demand that the contractor remedies the defect. The court may instead award damages to the employer for the loss in value of the works. The parties could in theory agree on a regime that is stricter for the contractor. Such negotiated provision may however be set aside, if it is considered to be in conflict with the principle of reasonableness and fairness.

  29. 29.

    If there is a defects notification period (DNP) during which the contractor must or may remedy any defect in its works that appears during a certain period after their completion, if the construction contract is otherwise silent, does it affect the employer’s rights to claim for any defects appearing after the DNP expires?

    1. For construction contracts, Dutch law distinguishes between defects in the works that should have reasonably been discovered by the employer at take over on the one hand, and hidden defects on the other hand. The general rule is that, after take over, the contractor is no longer liable for any defects in the works that become apparent after take over. If the employer did discover or could reasonably have discovered any defects at the time of take over, but failed to invoke the contractor’s liability thereupon, the defects are considered to be apparent and the contractor will not be liable. The situation is different for latent defects. The liability of the contractor for latent defects known to it and not disclosed by it cannot be excluded or limited, and neither can it be made subject to shorter prescription periods than those provided for by law (section 7:762 Civil Code). Expiry of the DNP therefore does not affect the employer’s rights to claim for latent defects.

  30. 30.

    What is the effect of a construction contract excluding liability for “indirect or consequential loss”?

    1. Dutch law does not distinguish between direct and indirect or consequential loss as such. These terms are nevertheless often used in contracts. The effect given to an exclusion of liability for ‘indirect or consequential loss’ will depend on how such terms are defined. The types of damages excluded from liability will not be awarded. Without these terms being defined, it is generally assumed that the exclusion for liability of indirect or consequential loss does not go any further than the statutory provision on attribution of damages. This provision stipulates that compensation can only be claimed to the extent the damage is related to the event giving rise to liability in such a fashion that the damage, also taking into account its nature and that of the liability, can be imputed to the debtor as a result of this event.

  31. 31.

    Are contractually agreed limits on – or exclusions of – liability effective and how readily do claims in tort or delict avoid them? Do they not apply if there is fraud, wilful misconduct, recklessness or gross negligence: (a) if the contract is silent as to such behaviour; or (b) if the contract states that they apply notwithstanding such behaviour? If so, what causation is required between the behaviour and the loss?

    1. A limitation or exclusion of liability in a professional relationship is, in principle, permitted under Dutch law. Limitation or exclusion of liability may however not be contrary to good morals or public order. An agreement which limits liability for damages caused by deliberate behaviour, or damages which result from gross negligence, is generally deemed unacceptable to standards of reasonableness and fairness and will be invalid (section 6:248 (2) Civil Code). This particularly applies to a limitation or exclusion of liability for managerial and executive staff; liability for deliberate behaviour or gross negligence of lower-level personnel may in principle be limited or excluded. The assessment of a limitation or exclusion of liability must in any event be made on a case-by-case basis.

    Liens

  32. 32.

    What right does a contractor have to claim a lien (or similar) in the works it has carried out? If so, what are the limits of the right if, for example, the employer has no interest in the site for the permanent works? How is the right recognised and enforced?

    1. As per section 3:285 Civil Code, the contractor retains a statutory lien over the works to secure payment under a construction contract. The contractor is furthermore granted a right of retention, allowing it to withhold the delivery of the works to the employer until the sum due has been fully paid (section 3:290 Civil Code). Actual possession of the works by the contractor is required for it to be able to exercise a right of retention. The contractor must make clear that the right of retention is being exercised, for instance, by fencing off the works and by using signs stating that the contractor is exercising the right of retention. A contractor exercising the right of retention correctly can recover the sums due with priority over all third parties against whom a right of retention can be invoked.

    Subcontractors

  33. 33.

    How do conditional payment (such as pay-when-paid) provisions operate under the law of your jurisdiction (including interpretation rules, any good faith principles and laws on unfair contract terms)?

    1. Conditional payment provisions are permitted under Dutch law. They may however be set aside on the basis of the principle of reasonableness and fairness if conditional payment is deemed unacceptable in the given circumstances.

  34. 34.

    May a subcontractor claim against the employer for sums due to the subcontractor from the contractor? How are difficulties with the merits and proof of the subcontractor’s claim addressed, including any rights the contractor has to withhold payment? What if aspects of the project suggest that the law of your jurisdiction should not apply (eg, the parties to both the main contract and the subcontract have chosen a foreign law as the governing law)?

    1. Pursuant to section 3:285 Civil Code, the subcontractor is granted a security interest over the works to secure payment of any sum due to the subcontractor from the contractor. A contractor does in principle not have direct recourse on the employer, where the contractor fails to meet its payment obligations. Under exceptional circumstances this may be different, where the subcontractor can claim payment from the employer based on tort (section 6:162 Civil Code). The employer may rely on the defences that could have been invoked in the relationship with the contractor. If the parties have chosen a foreign law as the governing law, Dutch courts will apply the law chosen.

  35. 35.

    May an employer hold its contractor to their arbitration agreement if their dispute concerns a subcontractor (there being no arbitration agreement between the contractor and the subcontractor or no scope for joining two sets of arbitral proceedings) or can the contractor, for example, require litigation between itself, the employer and the subcontractor? Does it matter if the arbitration agreement does not have its seat in your jurisdiction?

    1. The general rule is that an arbitration agreement only binds the parties to that agreement. Although third parties are not bound by the arbitration agreement, the arbitral tribunal may permit a third party who has an interest in the outcome of the arbitral proceedings to join the proceedings, or to intervene therein. A party who claims to be indemnified by a third party may serve a notice of joinder on such a party. The joinder or intervention may however only be permitted by the arbitral tribunal, having heard the parties, if the third party accedes by agreement in writing between him and the parties to the arbitration agreement (section 1045 Code of Civil Procedure).

      Whereas the employer and the contractor may try to involve the subcontractor in their arbitration, the contractor will not be permitted to derogate from the arbitration agreement with the employer and submit the dispute to litigation. A court seized of a dispute in respect of which an arbitration agreement has been entered into will declare that it has no jurisdiction if a party invokes the existence of the said agreement before submitting a defence (section 1022 Code of Civil Procedure). An arbitration agreement however does not prevent a party from requesting a court to grant interim measures of protection or from applying to the court for a decision in summary proceedings (section 1022a Code of Civil Procedure).

    Third parties

  36. 36.

    May third parties obtain rights under construction contracts? How readily can those connected with the employer (such as future or ultimate owners) bring claims against the contractor in respect of (a) delays and (b) defects? To what extent are exclusions and limitations of liability in the construction contract relevant?

    1. Dutch law expressly allows parties to a contract to create the right for a third party to claim performance from one of the parties or to appeal otherwise against one of them, if the contract contains a stipulation to that effect (section 6:253 Civil Code). Such a third-party clause requires acceptance by the third-party beneficiary for it to be enforceable. Those connected with the employer can thus only bring claims against the contractor if this is specifically provided for in the contract. It has been established in case law that a limitation of liability clause may bind a third party.

  37. 37.

    How readily (absent fraud, wilful misconduct, recklessness or gross negligence) can those connected with the contractor (such as affiliates, directors or employees) face claims in respect of (a) delays (b) defects and (c) payment? To what extent are exclusions and limitations of liability in the construction contract relevant?

    1. Absent fraud, wilful misconduct, recklessness or gross negligence, affiliates, directors or employees of the contractor are not liable to the employer for delays, defects or payment.

    Limitation and prescription periods

  38. 38.

    What are the key limitation or prescription rules for claims for money and defects (and insofar as you have a mandatory decennial liability (or similar) regime, what is its scope)? What stops time running for the purposes of these rules (assuming the arbitral rules are silent)? Are the rules substantive or procedural law? May parties agree different limitation or prescription rules?

    1. Pursuant to section 7:761 Civil Code applying to construction contracts, any right of action for a defect in works delivered is prescribed on the expiry of two years after the employer first makes a complaint. If the employer has set a period for the contractor to remedy the defect, the prescription period shall begin only at the end of that period, or so much earlier as the contractor has indicated he will not remedy the defect. In any event, the right of action is prescribed on the expiry of twenty years from the delivery of the works. It is not possible to derogate from these rules to the disadvantage of the employer.

      A right of action to claim performance of a contractual obligation to give or to do something is prescribed on the expiry of five years from the beginning of the day following the one on which the claim became exigible (section 3:307 Civil Code). Prescription of a right of action shall be interrupted by the institution of an action or by any other act of judicial recourse instituted in the required form by the person entitled to do so. Prescription of a right of action to claim performance of an obligation shall be interrupted by a written warning or by a written communication in which the obligee unequivocally reserves his right to performance. Acknowledgment of the right that a right of action serves to protect shall interrupt the prescription of the right of action as against the person who acknowledges the right. These rules are substantive law, and the parties may agree otherwise.

    Other key laws

  39. 39.

    What laws apply which cannot be excluded or modified by agreement where the law of your jurisdiction is the governing law of a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?

    1. It is not feasible to produce an exhaustive list of the mandatory statutory provisions that may apply to construction contracts. In general, it can be said that the principle of reasonableness and fairness may result in any contractual provision or even statutory law being set aside where their enforcement would be grossly unjust in the circumstances (section 6:248 Civil Code).

  40. 40.

    What laws of your jurisdiction apply anyway where a foreign law governs a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?

    1. None.

    Enforcement of binding (but not finally binding) dispute adjudication board (DAB) decisions

  41. 41.

    For a DAB decision awarding a sum to a contractor under, say, sub-clause 20.4 of the FIDIC Red Book 1999 for which the employer has given a timely notice of dissatisfaction, in an arbitration with its seat in your jurisdiction, might the contractor obtain: a partial or interim award requiring payment of the sum awarded by the DAB pending any final award that would be enforceable in your jurisdiction (assuming the arbitral rules are silent); or interim relief from a court in your jurisdiction requiring payment of the sum awarded by the DAB pending any award?

    1. The normal requirements for injunctive payment claims apply. The fact that the DAB awarded the payment of the sum in itself is no sufficient reason for the injunctive payment claim to succeed. Injunctive payment claims will typically be successful only in clear cut cases. In this context the decision of the DAB may be helpful in showing that the requirements for injunctive payment claims have been met.

    Courts and arbitral tribunals

  42. 42.

    Does your jurisdiction have courts or judges specialising in construction and arbitration?

    1. Although civil courts may be and often are subdivided into specific divisions, such as for commercial law or family law, there are no separate courts in the Netherlands specialising in construction and arbitration. There is a Court of Arbitration for the Building Industry in the Netherlands specialising in construction matters. In addition, the Netherlands Arbitration Institute regularly deals with construction related matters.

  43. 43.

    What are the relevant levels of court for construction and arbitration matters? Are their decisions published? Is there a doctrine of binding precedent?

    1. The Dutch civil court system consists of three instances: the district court (Rechtbank), the court of appeal (Gerechtshof), and the supreme court (Hoge Raad). Decisions are widely published and also accessible online. Although there is no principle of precedent or stare decisis as known in common law countries, in practice lower courts do use the Supreme Court’s decisions as an authoritative source. A considerable number of construction disputes is resolved by arbitral tribunals under the rules of the Court of Arbitration for the Building Industry in the Netherlands. In addition, the Netherlands Arbitration Institute regularly deals with construction related matters. The decisions of the Court of Arbitration for the Building Industry are generally available online. The most relevant decisions of the Netherlands Arbitration Institute are discussed in the Arbitration Review (Tijdschrift for Arbitrage).

  44. 44.

    In your jurisdiction, if a judge or arbitrator (specialist or otherwise) has views on the issues as they see them that are not put to them by the parties, can they raise them with the parties? Is the court or arbitral tribunal permitted or expected to give preliminary indications as to how it views the merits of the dispute?

    1. Judges or arbitrators in the Netherlands are not allowed to base their judgment on facts that have not been put to them by the parties. Courts or arbitral tribunals are permitted to give preliminary indications as to how they view the merits of the dispute as to encourage an amicable settlement. They will typically do so at the request of both parties or upon obtaining the express consent of both parties, making clear that the views are only intended to be provisional.

  45. 45.

    If a contractor, say, wishes to arbitrate pursuant to an arbitration agreement, what parallel proceedings might the employer bring in your jurisdiction? Does it make any difference if the dispute has yet to pass through preconditions to arbitration (such as those in clause 20 of the FIDIC Red Book 1999) or if one of the parties shows no regard for the preconditions (such as a DAB or amicable settlement process)?

    1. Pursuant to section 1022a Code of Civil Procedure, an arbitration agreement does not prevent a party from requesting a court to grant interim measures of protection or from applying to the court for a decision in summary proceedings. Non-compliance with the contractual preconditions to arbitration may affect the arbitral tribunal’s jurisdiction or the admissibility of the claim.

  46. 46.

    If the seat of the arbitration is in your jurisdiction, might a contractor lose its right to arbitrate if it applied to a foreign court for interim or provisional relief?

    1. No. If the seat of arbitration is in the Netherlands, an arbitration agreement does not prevent a party from requesting a court to grant interim measures of protection or from applying to the court for a decision in summary proceedings. A contractor would not lose its right to arbitrate if it applied to a foreign court for interim or provisional relief.

    Expert witnesses

  47. 47.

    In your jurisdiction, are tribunal- or party-appointed experts used? To whom do party-appointed experts owe their duties?

    1. Under Dutch law, it is the parties’ responsibility to provide evidence, for instance by means of expert reports. Although tribunals are entitled to appoint one or more experts to give advice, it is not common practice for arbitral tribunals to appoint experts in addition to those appointed by the parties. Experts are required to maintain independence and impartiality, and even though this is not compulsory and only done if the tribunal deems it necessary, may be examined under oath or on affirmation.

    State entities

  48. 48.

    Summarise any specific limitations or requirements that apply when the employer is a state entity or public authority (including, for example, public procurement rules, limits on rights to suspend or terminate, excluded lien rights and arbitrating – as well as enforcing an award – against such an employer)?

    1. When the employer is a state entity or public authority, not only civil law is applicable to the construction contract but also the general principles of proper administration. This goes for both the contracting and the execution of construction contracts. The contracting by state entities and public authorities is also governed by the European public procurement law and Dutch public procurement law.

    Settlement offers

  49. 49.

    If the seat of the arbitration is in your jurisdiction, on what basis can a party make a settlement offer that may not be put before the arbitral tribunal until costs fall to be decided?

    1. Parties are free to negotiate and agree on a settlement at any time before or during the legal proceedings. The occurrence and content of any settlement discussions may not be disclosed to the arbitral tribunal without the consent of the other party.

    Privilege

  50. 50.

    Does the law of your jurisdiction recognise "without prejudice" privilege (such that "without privilege" communications are privileged from disclosure)? If not, may it be agreed that a sum is payable if communications to try to achieve a settlement are disclosed to a court or arbitral tribunal?

    1. Yes, legal privilege in the Netherlands is a general principle of law. It is the professional who holds the privilege, not the client. The client only has a derived legal privilege. Accordingly, the professional can invoke the privilege even if the client would want to waive it. The professional, having a duty of confidentiality, cannot waive the privilege without the client’s consent. Legal privilege applies to almost all attorney-client correspondence.

  51. 51.

    Is the advice of in-house counsel privileged from disclosure under the law of your jurisdiction? Is the relevant law characterised as substantive or procedural law?

    1. Yes, in-house counsel who have been admitted to the Dutch bar and who comply with requirements guaranteeing their independence may also invoke their legal privilege. This was established by the Dutch Supreme Court in a landmark case decided on 15 March 2013. Legal privilege does not apply to communications with in-house counsel not admitted to the Dutch bar.

    Guarantees

  52. 52.

    What are the requirements for a guarantee under the law of your jurisdiction? Are oral guarantees effective?

    1. Pursuant to section 3:37 Civil Code, declarations, including communications, can be made in any form. There are thus no form requirements for a guarantee under Dutch law. This means that both oral and written guarantees are effective. Although the law does not require a guarantee to be in writing, evidence of its existence and scope may have to be provided at a later stage. For practical purposes, it is therefore recommended that the given guarantee is put in writing.

      Guarantees under Dutch law are to be clearly distinguished from the suretyship, which is a species of the genus guarantee (section 7:850 Civil Code). An essential difference with suretyship is that a guarantee, eg, a bank guarantee, is detached from the underlying juridical relationship. There is, however, no suretyship without a principal obligation. Suretyship is an agreement on the basis of which one party, the surety, obliges itself towards another party, the obligee, to perform an obligation to which a third person, the principal obligor, is or will be bound towards the obligee. The surety is not obliged to perform until such time as the principal debtor has failed in the performance of his obligation. Although the validity of the suretyship itself does not need to be in writing, the suretyship can only be proven against the surety by a document signed by it.

  53. 53.

    Under the law of your jurisdiction, will the guarantor’s liability be limited to that of the party to the underlying construction contract, if the guarantee is silent? Can the guarantee’s wording affect the position?

    1. If the guarantee is silent, the guarantor’s liability will not necessarily be limited to that of the party to the underlying construction contract. The guarantee’s wording can affect the position. When drafting a guarantee, it should therefore be clearly established which obligations the guarantee relates to. The wording of the guarantee particularly determines whether the guarantee takes the form of a on-demand guarantee and whether or not the guarantor is entitled to rely on defences that the contractor may have.

  54. 54.

    Under the law of your jurisdiction, in what circumstances will a guarantor be released from liability under a guarantee, if the guarantee is silent? Can the guarantee’s wording affect the position?

    1. A guarantor will generally be released from liability as stipulated in the guarantee and in any event once all underlying obligations have been fulfilled.

    On-demand bonds

  55. 55.

    If an on-demand bond is governed by the law of your jurisdiction on what basis might a call be challenged in your courts as a matter of jurisdiction as well as substantive law? Assume the underlying contract is silent on when calls may be made.

    1. Whether or not an on-demand bond can be challenged will have to be determined on a case-by-case basis, taking into consideration what meaning the parties in the given circumstances could reasonably attached to the wording chosen and what they could reasonably expect from each other in that respect. Business-to-business contracts are generally given a more objective interpretation. The level of objectiveness will, amongst others, depend on the professionalism of the parties. The use of standardised terms such as ‘on first demand’ will also be taken into account.

  56. 56.

    If an on-demand bond is governed by the law of your jurisdiction and the underlying contract restrains calls except for amounts which the employer is entitled to (like sub-clause 4.2 of the FIDIC Red Book 1999), when would a court or arbitral tribunal applying your jurisdiction’s law restrain a call if the contractor contended that: (i) the employer does not have an entitlement in principle; or (ii) the employer has an entitlement in principle but not for the amount of the call?

    1. This will have to be determined on a case-by-case basis. See the answer 55 above.

    Further considerations

  57. 57.

    Are there any other material aspects of the law of your jurisdiction concerning construction projects not covered above?

    1. No.

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Related content


GAR know-how provides reliable cross-jurisdictional insight to help cement the building blocks of international practice. In this section, select experienced practitioners answer commonly asked questions for key jurisdictions so allowing readers to be better-placed to solve the challenges of their working days.

Questions

    Legal system

  1. 1.

    Is your jurisdiction primarily a common law, civil law, customary law or theocratic law jurisdiction? Are the laws substantially derived from the laws of another jurisdiction and, if so, which? What instruments have legal force and effect? Who are the lawmaking bodies? How and where are new laws published? Can laws be passed with retrospective effect?


  2. Contract formation

  3. 2.

    What are the requirements for a construction contract to be formed? When is a "letter of intent" from an employer to a contractor given contractual effect?


  4. Choice of laws, seat, arbitrator and language

  5. 3.

    Are parties free to choose: (a) the governing law of their contract; (b) the law of the arbitration agreement; (c) the seat of the arbitration; (d) any arbitral rules; (e) anyone to act as arbitrator; and (f) the language of the contract and the arbitration? If not, what are the limitations on choice and what happens if the parties act contrary to them?


  6. Implied terms

  7. 4.

    How might terms be implied into construction contracts? What terms might be implied?


  8. Certifiers

  9. 5.

    When must a certifier under a construction contract act impartially, fairly and honestly? To what extent are the parties bound by certificates (where the contract does not expressly empower a court or arbitral tribunal to open up, review and revise certificates)? Can the contractor bring proceedings directly against the certifier?


  10. Competing causes of delay

  11. 6.

    If an employer would cause (eg, by variation) a two-week critical delay to the completion of the works (which by itself would justify an extension of time under the construction contract) but, independently, culpable delay by the contractor (eg, defective work) would cause the same delay, is the contractor entitled to an extension?


  12. Disruption

  13. 7.

    How does the law view "disruption" to the contractor (as distinct from delay or prolongation to the completion of the works) caused by the employer’s breaches of contract and acts of prevention? What must the contractor show for a disruption claim to succeed? If an entitlement in principle can be shown (eg, that a loss has been caused by a breach of contract) must the court or arbitral tribunal do its best to quantify that loss (even if proof of the quantum is lacking or uncertain)?


  14. Acceleration

  15. 8.

    How does the law view "constructive acceleration" (where the contractor incurs costs accelerating its works because an extension of time has not been granted that should have been)? What must the contractor show for such a claim to succeed? Does your answer differ if the employer acted unreasonably or in bad faith?


  16. Force majeure and hardship

  17. 9.

    What events of force majeure give rise to relief? Must they be unforeseeable and to whom? How far does the express or implied allocation of risk under the contract affect whether an event qualifies? Must the event have a permanent effect? Is impossibility in performing required or does a degree of difficulty suffice? Is relief available where only some obligations (eg, to make a single payment or carry out one aspect of the works) are affected or is a greater impact required? What relief is available and does it apply automatically? Can the rules be excluded by agreement?


  18. 10.

    When is a contractor entitled to relief against a construction contract becoming unduly expensive or otherwise hard to perform and what relief is available? Can the rules be excluded by agreement?


  19. Impossibility

  20. 11.

    When is a contractor entitled to relief if after the contract is concluded it transpires (but not due to external events) that it is impossible for the contractor to achieve a particular aspect of the contractual specification? What relief is available?


  21. Clauses that seek to pass risks to the contractor for matters it cannot foresee or control

  22. 12.

    How effective are contractual provisions that seek to pass risks to the contractor for matters it cannot foresee or control, for example making the contractor liable for: (a) a specified event of force majeure; (b) ground conditions that no reasonably diligent contractor could have foreseen; or (c) errors in documents provided by the employer, such as employer's requirements in design and build forms?


  23. Duty to warn

  24. 13.

    When must the contractor warn the employer of an error in a design provided by the employer?


  25. Good faith

  26. 14.

    Is there a general duty of good faith? If so, how does it impact upon the following (where they are otherwise permitted under the construction contract): (a) the level of intervention in the works that is allowed by the employer; (b) a party’s discretion whether to terminate or suspend the contract; or (c) the employer’s discretion to claim pre-agreed sums under the contract, such as liquidated damages for delay?


  27. Time bars

  28. 15.

    How do contractual provisions that bar claims if they are not validly notified within a certain period operate (including limitation or prescription laws that cannot be contracted out of, interpretation rules, any good faith principles and laws on unfair contract terms)? What is the scope for bringing claims outside the written terms of the contract under provisions such as sub-clause 20.1 of the FIDIC Red Book 1999 ("otherwise in connection with the contract")? Is there any difference in approach to claims based on matters that the employer caused and matters it did not, such as weather or ground conditions? Is there any difference in approach to claims for (a) extensions of time and relief from liquidated damages for delay and (b) monetary sums?


  29. Suspension

  30. 16.

    What rights does the employer have to suspend paying the contractor or performing other duties under the contract due to the contractor’s (non-)performance, or the contractor have to suspend carrying out the works (or part of the works) due to the employer’s (non-) performance?


  31. Omissions and termination for convenience

  32. 17.

    May the employer exercise an express power to omit work; or terminate the contract at will or for convenience, so as to give work to another contractor or to carry out the work itself?


  33. Termination

  34. 18.

    What termination rights exist? Can a construction contract be terminated in part? What are the practical and financial consequences?


  35. 19.

    If the construction contract provides for the circumstances in which each party may terminate the contract but does not expressly or impliedly state that those rights are exhaustive, are other rights to terminate available? If so, what are they and what are the practical and financial consequences?


  36. 20.

    What limits apply to exercising termination rights?


  37. Completion

  38. 21.

    Does the law of your jurisdiction deem the works to be completed (irrespective of what the contract says) if, say, the employer takes beneficial possession of the works and starts using them?


  39. 22.

    Does approval or acceptance of work by or on behalf of the employer bar a subsequent complaint? What constitutes acceptance? Does taking over the work by the employer constitute acceptance? Does this bar subsequent complaint?


  40. Liquidated damages and similar pre-agreed sums ('liquidated damages')

  41. 23.

    To what extent are liquidated damages for delay to the completion of the works treated as an exhaustive remedy for all of the employer’s losses due to (a) delay to the completion of the works by the contractual completion date; and (b) delays prior to the contractual completion date (in the absence of, say, interim milestone dates with liquidated damages for delay attaching to them)? What difference does it make if any critical delay is caused by the contractor’s fraud, wilful misconduct, recklessness or gross negligence? If so, what constitutes such behaviour and can it be excluded by agreement?


  42. 24.

    If the employer causes critical delay to the completion of the works and the construction contract does not provide for an extension of time to the contractual completion date (there being no "sweep up" provision such as that in sub-clause 8.4(c) of the FIDIC Silver Book 1999) is the employer still entitled to liquidated damages due to the late completion of works provided for under the contract?


  43. 25.

    When might a court or arbitral tribunal award less than the liquidated damages specified in the contract for delay or other matters (eg, substandard work)? What factors are taken into account?


  44. 26.

    When might a court or arbitral tribunal award more than the liquidated damages specified in the contract for delay or other matters (eg, work that does not achieve a specified standard)? What factors are taken into account?


  45. Assessing damages and limitations and exclusions of liability

  46. 27.

    How is monetary compensation for breach of contract assessed? For instance, if the contractor is liable for a defect in its works is the employer entitled to its lost profits? What if the lost profits are exceptionally high?


  47. 28.

    If the contractor’s work is technically non-compliant, is the contractor liable for remedying it if the rectification cost is disproportionate to the benefit of the remedy? Can the parties agree on a regime that is stricter for the contractor than under the law of your jurisdiction?


  48. 29.

    If there is a defects notification period (DNP) during which the contractor must or may remedy any defect in its works that appears during a certain period after their completion, if the construction contract is otherwise silent, does it affect the employer’s rights to claim for any defects appearing after the DNP expires?


  49. 30.

    What is the effect of a construction contract excluding liability for “indirect or consequential loss”?


  50. 31.

    Are contractually agreed limits on – or exclusions of – liability effective and how readily do claims in tort or delict avoid them? Do they not apply if there is fraud, wilful misconduct, recklessness or gross negligence: (a) if the contract is silent as to such behaviour; or (b) if the contract states that they apply notwithstanding such behaviour? If so, what causation is required between the behaviour and the loss?


  51. Liens

  52. 32.

    What right does a contractor have to claim a lien (or similar) in the works it has carried out? If so, what are the limits of the right if, for example, the employer has no interest in the site for the permanent works? How is the right recognised and enforced?


  53. Subcontractors

  54. 33.

    How do conditional payment (such as pay-when-paid) provisions operate under the law of your jurisdiction (including interpretation rules, any good faith principles and laws on unfair contract terms)?


  55. 34.

    May a subcontractor claim against the employer for sums due to the subcontractor from the contractor? How are difficulties with the merits and proof of the subcontractor’s claim addressed, including any rights the contractor has to withhold payment? What if aspects of the project suggest that the law of your jurisdiction should not apply (eg, the parties to both the main contract and the subcontract have chosen a foreign law as the governing law)?


  56. 35.

    May an employer hold its contractor to their arbitration agreement if their dispute concerns a subcontractor (there being no arbitration agreement between the contractor and the subcontractor or no scope for joining two sets of arbitral proceedings) or can the contractor, for example, require litigation between itself, the employer and the subcontractor? Does it matter if the arbitration agreement does not have its seat in your jurisdiction?


  57. Third parties

  58. 36.

    May third parties obtain rights under construction contracts? How readily can those connected with the employer (such as future or ultimate owners) bring claims against the contractor in respect of (a) delays and (b) defects? To what extent are exclusions and limitations of liability in the construction contract relevant?


  59. 37.

    How readily (absent fraud, wilful misconduct, recklessness or gross negligence) can those connected with the contractor (such as affiliates, directors or employees) face claims in respect of (a) delays (b) defects and (c) payment? To what extent are exclusions and limitations of liability in the construction contract relevant?


  60. Limitation and prescription periods

  61. 38.

    What are the key limitation or prescription rules for claims for money and defects (and insofar as you have a mandatory decennial liability (or similar) regime, what is its scope)? What stops time running for the purposes of these rules (assuming the arbitral rules are silent)? Are the rules substantive or procedural law? May parties agree different limitation or prescription rules?


  62. Other key laws

  63. 39.

    What laws apply which cannot be excluded or modified by agreement where the law of your jurisdiction is the governing law of a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?


  64. 40.

    What laws of your jurisdiction apply anyway where a foreign law governs a construction contract? What are the key aspects of, say, the FIDIC Silver Book 1999 that would not operate as its plain words suggest?


  65. Enforcement of binding (but not finally binding) dispute adjudication board (DAB) decisions

  66. 41.

    For a DAB decision awarding a sum to a contractor under, say, sub-clause 20.4 of the FIDIC Red Book 1999 for which the employer has given a timely notice of dissatisfaction, in an arbitration with its seat in your jurisdiction, might the contractor obtain: a partial or interim award requiring payment of the sum awarded by the DAB pending any final award that would be enforceable in your jurisdiction (assuming the arbitral rules are silent); or interim relief from a court in your jurisdiction requiring payment of the sum awarded by the DAB pending any award?


  67. Courts and arbitral tribunals

  68. 42.

    Does your jurisdiction have courts or judges specialising in construction and arbitration?


  69. 43.

    What are the relevant levels of court for construction and arbitration matters? Are their decisions published? Is there a doctrine of binding precedent?


  70. 44.

    In your jurisdiction, if a judge or arbitrator (specialist or otherwise) has views on the issues as they see them that are not put to them by the parties, can they raise them with the parties? Is the court or arbitral tribunal permitted or expected to give preliminary indications as to how it views the merits of the dispute?


  71. 45.

    If a contractor, say, wishes to arbitrate pursuant to an arbitration agreement, what parallel proceedings might the employer bring in your jurisdiction? Does it make any difference if the dispute has yet to pass through preconditions to arbitration (such as those in clause 20 of the FIDIC Red Book 1999) or if one of the parties shows no regard for the preconditions (such as a DAB or amicable settlement process)?


  72. 46.

    If the seat of the arbitration is in your jurisdiction, might a contractor lose its right to arbitrate if it applied to a foreign court for interim or provisional relief?


  73. Expert witnesses

  74. 47.

    In your jurisdiction, are tribunal- or party-appointed experts used? To whom do party-appointed experts owe their duties?


  75. State entities

  76. 48.

    Summarise any specific limitations or requirements that apply when the employer is a state entity or public authority (including, for example, public procurement rules, limits on rights to suspend or terminate, excluded lien rights and arbitrating – as well as enforcing an award – against such an employer)?


  77. Settlement offers

  78. 49.

    If the seat of the arbitration is in your jurisdiction, on what basis can a party make a settlement offer that may not be put before the arbitral tribunal until costs fall to be decided?


  79. Privilege

  80. 50.

    Does the law of your jurisdiction recognise "without prejudice" privilege (such that "without privilege" communications are privileged from disclosure)? If not, may it be agreed that a sum is payable if communications to try to achieve a settlement are disclosed to a court or arbitral tribunal?


  81. 51.

    Is the advice of in-house counsel privileged from disclosure under the law of your jurisdiction? Is the relevant law characterised as substantive or procedural law?


  82. Guarantees

  83. 52.

    What are the requirements for a guarantee under the law of your jurisdiction? Are oral guarantees effective?


  84. 53.

    Under the law of your jurisdiction, will the guarantor’s liability be limited to that of the party to the underlying construction contract, if the guarantee is silent? Can the guarantee’s wording affect the position?


  85. 54.

    Under the law of your jurisdiction, in what circumstances will a guarantor be released from liability under a guarantee, if the guarantee is silent? Can the guarantee’s wording affect the position?


  86. On-demand bonds

  87. 55.

    If an on-demand bond is governed by the law of your jurisdiction on what basis might a call be challenged in your courts as a matter of jurisdiction as well as substantive law? Assume the underlying contract is silent on when calls may be made.


  88. 56.

    If an on-demand bond is governed by the law of your jurisdiction and the underlying contract restrains calls except for amounts which the employer is entitled to (like sub-clause 4.2 of the FIDIC Red Book 1999), when would a court or arbitral tribunal applying your jurisdiction’s law restrain a call if the contractor contended that: (i) the employer does not have an entitlement in principle; or (ii) the employer has an entitlement in principle but not for the amount of the call?


  89. Further considerations

  90. 57.

    Are there any other material aspects of the law of your jurisdiction concerning construction projects not covered above?