FIDIC under the laws of Botswana – Default Rules

‘FIDIC terms and conditions are well known standards for the procurement of construction services. Prof. Molineaux[1] has stated:

The forms of contract of the Fédération Internationale des Ingénieurs-Conseils (FIDIC) are widely used and their dissemination has already developed a degree of commonality or construction lex mercatoria.

In this regard a Kenyan court has pointed out[2]:

In his evidence the Construction industry is guided by a principal called Fédération Internationale Des Ingénieurs Conceils (FIDIC) Regulations which define the contract and the time. From the said principle, idle time is defined as non productive time during which an employee and/or machines are still paid due to work stoppage for any cause. It is also called waiting time or allowed time or down time. In the instant case idle time is the time when the Anticorruption stopped the Construction, time when he was arraigned in court till his release during which period he could not remove the machineries.

It worth to note that in Botswana road construction contracts are typically based on Standard Specifications for Road and Bridge Works [the Green Book][3].

However, FIDIC forms of Contract do not rule everything. Examplesare:

• Issues of contract formation
• Limitation of legal defects liability
• Legal remedies arising from defects after issue of Performance Certificate
• Quantum meruit claims

Hence, it is sometimes necessary to refer to the governing law of the Contract (see Sub-Clause 1.4). Typically the governing law is indicated in the Appendix to Tender/Contract Data. 15. The term “proper law” is synonymous and interchangeable with the terms “applicable law” and “governing law”[4]. Where the parties expressly stipulate that a contract shall be governed by a particular law, that law will be the proper law of the contract[5]. If there had been no express choice of the proper law, the Court will consider whether it can ascertain that there was the inferred or applied choice of law by the parties. If the parties agree, for example, that arbitration shall take place in a particular country, it can be concluded that the parties have chosen the law of the country of arbitration as the proper law[6]. Both, the courts and any arbitral body are bound to respect the parties´ choice of law[7].

If the governing law of the contract (also referred to as law governing the substance of the dispute (the Lex Causae)) is the law of Botswana, it is worth to note that like in South Africa the old Roman-Dutch law (the common law) applies. In this regard the Court of Appeal of Botswana has held[8]:

As a preliminary observation it is to be noted that the common law of Botswana is the Roman-Dutch law. Although this was laid down as long ago as 1909 [by Proclamation No. 36 of 1909] when Botswana was still the Bechuanaland Protectorate, the Roman-Dutch law had continued to this day to be applied and is still so applied in Botswana. In the classic passage in the Privy Council judgment in PEARL ASSURANCE CO. V. UNION GOVERNMENT 1934 A.C. 570  [P.C.I at 579, Lord Tomlin said:

“Roman-Dutch law is a virile living system of law, ever seeking, as every such system must, to adapt itself consistently with its inherent basic principles to deal effectively with the increasing complexities of modern organised society.”

In applying the principles of Roman-Dutch law, the Courts of Botswana have constantly adapted them to the “complexities of modern organised society”. The Courts of Botswana have never been reluctant, in their own adaptation of the common law to the requirements of modern times, to have regard to the approach of the South African Courts and to the writings of authoritative South African academics.  I shall do the same herein.

Complementary statutes have been set in force which in accordance with the common law principles are presumed not to operate retrospectively[9]. The statutes are cited as promulgated in the latest consolidation e.g. Arbitration Act (Cap. 06:01). Moreover the doctrine of judicial precedent applies. In terms of this principle a lower court is bound by the decision of the higher court.

It is now worthwhile to refer to the current law regarding the four issues above:

1. Issues of contract formation

After all a contract is binding on both parties and its terms cannot be altered only by one side, except if the contract itself gave the power to do so to that side[10]. The elements of a contract are:

• Offer
• Acceptance
• Consensus (meeting of the minds)
• The parties must have capacity to contract

According to the law applicable in building contracts, the contractor is enjoined to carry out the works in a proper and workmanlike manner. Ordinarily, this includes the provision of all labour, materials, plant and expertise required for the execution of the works[11]. The contractor takes possession of the site at the commencement of the construction and is required to deliver it to the employer at the end of the construction period[12].

2. Contract Interpretation

The primary rule in the construction of statutory provisions is to ascertain the intention of the legislature. It is also well settled Botswana case law that in carrying out that exercise the courts should give the words used their ordinary and natural meaning. If in doing that the meaning of the words is plain and unambiguous they should be given that meaning unless it would lead to an absurdity or a result which having regard to the context and purpose of the legislation, the legislature could not have intended[13].

In order to determine the proper interpretation for a relevant provision in a contract the contract language should be given its ordinary grammatical meaning, and if the result is clear and unambiguous it will be assumed that it accurately reflects the intentions of the parties. Words must be interpreted in the context of other provisions in the document and the nature and purpose of the transaction as a whole. If giving words their ordinary meaning would lead to an absurdity or to a result which the parties could A not have intended, the court can depart from the literal meaning in order to give effect to the parties” intention. If the words read in context are capable of more than one meaning, background circumstances may be used to determine the probable common intention of the parties. An interpretation will be preferred which prevents words from being tautologous or superfluous. A difference in wording will be taken to indicate a change of intention[14].

3. Limitation Rules

The Prescription Act [Cap 13:01] provides:

4. Extinctive prescription

(1) Extinctive prescription is the rendering unenforceable of a right by the lapse of time.

(2) The periods of extinctive prescription shall, subject to the provisions of section 14(2), be the following-

(a)        one year in respect of-

(i)          an action for defamation;

(ii)        the actio redhibitoria;

(iii)       the actio quanti minoris;

(b)         three years in respect of-

(i)          any oral contract;

(ii)        any remuneration whatever or disbursement due to any person for or in connection with services rendered or work done by him;

(iii)      the price of movables sold and delivered, materials provided or board or lodging supplied;

(iv)       rent due upon any contract;

(v)        interest due upon any contract including a mortgage bond;

(vi)       actions for damages other than those for which another period is laid down in this Act;

(vii)      the actio doli;

(viii)    subject to the provisions of paragraph (a) condictiones indebiti, condictiones sine causa, and proceedings at common law for restitutio in integrum;

(c)         six years in respect of written contracts including bills of exchange and other liquid documents but excluding mortgage bonds unless a shorter period is applicable under any provision of paragraph (b);

(d)        30 years in respect of-

(i)          mortgage bonds;

(ii)        judgments of a court of law for payment of money or for specific performance or other such judgments which require further action by the person in whose favour they have been given in order to secure compliance therewith;

(iii)      any other action for which a period has not been provided in this Act.

(3) No defence to a claim shall become prescribed before the said claim is itself prescribed.

(4) A judgment of a court of law other than one referred to in subsection (2)(d)(ii) shall never be prescribed.

(5) A debt prescribed by extinctive prescription-

(a)        may be set off against a debt which came into existence after the expiration of the period of prescription; and

(b)         is sufficient to support a contract of suretyship; but

(c)         may not be ceded or in any other way transferred:

Provided that after the lapse of 30 years from the date on which the right of action in respect thereof first came into existence a debt so prescribed shall cease to be capable of being set off or of supporting such contract of suretyship.

Moreover, the Local Authority (Proceedings) Act, Cap. 10:04 must be taken in consideration. Pursuant to Section 4 of the Act no action shall be brought against a local authority after the expiration of two years from the date on which the cause of action accrued. The plain meaning of s 4 is that any action brought against a local authority after the expiration of two years from the date on which the cause of action accrued is barred. It does not deal with particular rights of action at all, which prescribe over a wide range of periods, from one year in the case of certain claims to many years in others. The section is terse and uncompromising in this regard. There is no ambiguity about it. Furthermore, it makes no exceptions such as one would find under the Prescriptions Act or the common law with regard to persons under disability and others[15].

4. Legal Remedies after the issue of the Performance Certificate

In general terms the remedies which are available to the innocent party prejudiced by breach of contract may be[16]

• cancellation of contract,
• claim for damages,
• specific performance.

Normally Roman-Dutch common law requires the innocent party to give a notice of a claim and to afford the other party reasonable time to correct the fault[17]. Damages in contractual matters are awarded to the party who suffered as a result of the breach[18]. In Dennill v Atkins & Co[19]Innes J held that the purpose of granting damages where a breach has occurred, is to place the injured party as nearly as possible, in the same position he would have occupied if the contract had been performed. In Victoria Falls & Transvaal Power Co Ltd v  Consolidated Langlaagte Mines Ltd[20], it was held that the plaintiff must take all reasonable steps to reduce the damage which was threatening, that is, he must mitigate his damages.

In Schmidt Plant Hire (Pty) Ltd v. Pedrelli[21], Findlay J held that the usual rule in contracts is that if the contractor performed defective work, the employer was generally entitled to the cost of remedying the defects. In that case, reference was made to Cardoza v. Fletcher[22], where Schreiner J (as he then was) said the following in  respect of defects in the construction of a house at 96:

”The general rule in fixed price contracts is that the owner is entitled to deduct from the price of the works that he has accepted the cost of putting right defects therein.”

Damages are only awarded as flow naturally from the breach, or as may reasonably be supposed to have been in the contemplation of the contracting parties as likely to result therefrom.”[23]

5. Quantum meruit claims

Under Roman-Dutch law the exceptio non adimpleti rule applies. Thus, in principle the employer may withhold the full price if the contractor´s performance remains incomplete. In these cases Roman-Dutch law allow the contractor to bring a claim for a reduced price also refereed to as the quantum meruit[24].

In the Botswana case Eurafric (Pty) Ltd v. Leading Auto Engineering (Pty) Ltd[25] the court confirmed that in principle

the equitable principle that no one should be enriched at the expense of another (Middleton v. Carr 1949 (2) S.A. 374) and the principle of quantum meruit, which is defined in Halsbury”s Laws of England, 4th ed. para 692 [apply].

In Eurafric the facts were this:

By the end of the original construction period, i.e. 30 November 1991, the works were not completed and the services of the project manager were still required by the employer. There was therefore, the need for extension of time as provided for under clause 6 of the FIDIC based consultancy agreement. The parties never reviewed or mutually agreed upon remuneration payable to the project manager in respect of the extended time, again, as required under the same clause 6. However, the project manager rendered and the employer accepted and utilized those services rendered by the project manager.

The High Court granted relief for the project manager”s quantum meruit claim based on a time basis.

In the South African case Middleton v. Carr[26] Schreiner J.A. had this to say in respect of quantum claims:

“Claims for unliquidated amounts as fair or reasonable remuneration or compensation in cases of locatio conductio operis or operarum are often referred to as quantum meruit claims. This expression is not technical, that is to say, it has not a D hard and fast legal meaning but is descriptive of a type or types of claim which have certain features in common (see Inkin v. Borehole Drillers 1949 (2) S.A.L.R. 366)). One such type of claim arises where a contract of locatio conductio operis or operarum has failed or has remained incomplete after part of it has been carried out; in such cases our law normally  E  approaches the problem of adjusting the rights of the parties from the angle of unjust enrichment. A considerable number of cases have been decided on these lines and the principles on which the presence or absence of unjust enrichment may be decided, its extent assessed and its correction achieved have become fairly well established. In such cases it may not be difficult to conclude that to avoid unjust enrichment a sum of money ought to be awarded to the conductor of the job or the  F  locator of his services even though no express claim of that kind appears on the pleadings.

Gyeke-Dako J in Eurafric (Pty) Ltd v. Leading Auto Engineering (Pty) Ltd[27] observed in respect of a second class of quantum claims:

In other cases, also frequently described as quantum meruit claims, there is not a contract complete in all its terms which has failed or been only partly fulfilled, but a contract in which the express terms are insufficient to fix the remuneration of the party who is to do the work, whether he be a conductor operis or a locator operarum. In  G  such cases, of which the present is an example, the matter is approached rather from an angle of implication, in fact or in law, of a term fixing the remuneration. In such cases before an amount of money can be lawfully awarded the Court has to be satisfied both that an agreement to remunerate fairly or reasonably for the services is to be implied and that the rate or amount of fair or reasonable remuneration can be sufficiently certainly fixed on the evidence.” (See also Chamotte (Pty.) Ltd. v. Carl Coetzee (Pty.) Ltd. 1973 (1) S.A. 644 (A.D.)

I think the instant case falls into this second category; and as long as the law recognises the necessary implication for payment of a fair and reasonable price or fees for such services rendered, there appears to me to be no difference between Roman-Dutch law and the English law on the principle of quantum meruit. It is this concept of reasonable remuneration, fee or price which is often referred to  A  in English law as “quantum meruit” and it is defined in Halsbury”s Laws of England (4th ed) para. 692 as:

“A reasonable price or remuneration which will be implied in a contract where no price or remuneration has been fixed for goods sold or work done.”

In Powell v. Braun [1954] 1 All E.R. 484 (C.A.), Denning L.J. at p. 486H said of “quantum meruit”: “it would be the amount which a fair and just man would pay in the exercise of a reasonable discretion.”  C

Later the same year, Denning L.J. in Eales v. Dale [1954] 1 All E.R. 717 at p. 720 defined a “reasonable price” as follows:

“It is the price which one would reasonably expect to be agreed between an incoming tenant who was ready to take over the articles and an outgoing tenant who was ready to leave them there… It is obvious that, as between a willing outgoing  D  tenant and a willing incoming tenant, there is room for a good deal of latitude in the ascertainment of the figure…”

In the view of Gyeke-Dako J in Eurafric (Pty) Ltd v. Leading Auto Engineering (Pty) Ltd[28], what is “reasonable” will depend upon the facts of each case[29]. Gyeke-Dako J had then this to say:

And of course, the test applicable in determining what is “reasonable” is objective. In other words, it is what is considered a reasonable amount to be paid by the defendant as the purchase price for the plaintiff”s services as opposed to the plaintiff who is to receive that he considers a reasonable fee:

Put in another way, as far as the claim for the extended period, on which the parties are ad idem that the plaintiff is entitled to some remuneration, this court must discover the reasonable price or fee, the parties were likely to have agreed upon.

Under FIDIC, if the Contractor considers that it would be more advantageous to claim, for example[30]:

(1) that the Employer had, under the governing law, “misrepresented” the conditions at site rather than to claim for unforeseeable physical conditions under Sub-Clause 4.12 of the Red and Yellow Books, or

(2) where the Employer has wrongfully terminated the contract, upon the basis of breach of contract under the governing law rather than upon the basis of the termination clause in the contracts [Clause 15], or

(3) assuming the contract was governed by the law of a civil law country, such as France or many countries in the Middle East, upon the basis of such legal doctrines as sujétions imprévues, imprévision or fait du prince rather than upon the basis of the unforeseeable site conditions clause, the Force Majeure clause [Clause 19] or other clauses in the contracts,

(4) that the Employer has, under the governing law, to pay the quantum meruit rather than to refer to the variation regime of the contract

(5) that he was misled by design specification errors presented within a government contract. Robins Maintenance, Inc. v. United States, 265 F.3d 1254, 1257 (Fed. Cir. 2001) the Contractor is free to do so. Nothing in the FIDIC Books for major works expressly precludes the Contractor from making claims based on the law governing the contract.

6. Dispute Resolution

According to the Arbitration Act [Cap 06:01] arbitration involves the parties agreeing to submit to arbitration and an arbitrator being nominated jointly by the parties or by the Botswana Institute of Botswana Institute of Arbitrators or the courts.

The courts in Botswana have been consistent in their approach in requiring ”a very strong case” to be made out by a party seeking to be absolved from a contract to have a dispute referred to arbitration. The onus of satisfying the court that it should not, in the exercise of its discretion, refer the matter to arbitration is on the party who instituted legal proceedings[31].

Dr. Hök has been involved in FIDIC based projects worldwide. He has been a friendly reviewer of the FIDIC Gold Book and he is the legal advisor of TG 11 (Operate Design and Build) also referred to as the FIDIC Bronce Book. He has operated as a member of DABs for design and build contracts in the offshore windmill industry, harbor projects, wastewater and irrigation projects. Moeover he has been a member of DABs for road Projects in Armenia, Bosnia and Tanzania.

Dr. Hök has held FIDIC various trainings in Botswana since 2010 on behalf of ACEB. He is BOTA accredited.

WARNING: the material contained in these notes is a simplified guide to some of the major topics in international and German construction law. It is not intended as a substitute for legal advice on individual transactions, and does not necessarily stand on its own. Whilst the contents are believed to be correct, the authors cannot accept any responsibility for errors or omissions.

 

[1] Molineaux, Charles, Moving Toward a Lex Mercatoria – A Lex Constructionis, 14 J. Int‘l Arb. 1997, No. 1, at 55 et seq.

[2] Jacob Juma & Another v. Commissioner of Police & Another [2013]eKLR [High Court Nairobi]

[3] This document was published by the Botswana Road Department, Volume III, November 1983. This document does not always fit with the FIDIC Red Book, 1999 edition.

[4] Kundan Singh Construction Ltd v. Tanzanian National Roads Agency [2012]eKLR [High Court Nairobi].

[5] Tononoka Steels v. Eastern and Southern Africa Trade and Development Bank [1999]eKLR; Roberta Macclendon Fonville v. James Otis Kelley III, Civ. case 3727/1995 [High Court Kenya]

[6] Tononoka Steels v. Eastern and Southern Africa Trade and Development Bank [1999]eKLR.

[7] Nedermar Technology Bv Ltd v. Kenya Anti-Corruption Commission & another [ 2006]eKLR.

[8] Silverstone [Pty] Limited Sapro [Pty] v. Lobatse Clay Works, Civil Appeal No. 42 of 1995 [High Court Misca App. Nos.” 148/95 & 201/95]

[9] CBET (Pty) Ltd t/a Midweeksun and Others v Mzwinila and Another, In re: Mzwinila v CBET (Pty) Ltd t/a Midweeksun and Others (CC-2334-04) [2010] BWHC 4 (15 February 2010).

[10] Pusetso Polelo v. Debswana Club, [High Court Lobatse] Civil Case No. 1516/96

[11] Nnyepi v. Sijo Construction (Pty) Ltd 2007 (2) BLR 192 (HC)

[12] Nnyepi v. Sijo Construction (Pty) Ltd 2007 (2) BLR 192 (HC)

[13] See for example, Molomo v. Molomo 1979-1980 B.L.R. 250, Hannah J at p 254.

[14] Mascom Wireless Botswana (Pty) Ltd v. Linda´s Holdings (Pty) Ltd t/a Fones 4U [2004] 2 B.L.R. 65, CA, Lord Sutherland JA at pp 68, 69.

[15] Miles and Another v. South Eats District Council, 2011 1 BLR 77 HC

[16] Finsen, Building Contract, 2nd edition, 13 referring to Radiotronics (Pty) Ltd. v. Scott, Lindberg and Co. Ltd. (1) SA 312 (C).

[17] Finsen, Building Contract, 2nd edition, 13.

[18] Nnyepi v. Sijo Construction (Pty) Ltd 2007 (2) BLR 192 (HC)

[19] 1905 TS at p 282 AD at p 289

[20] 1915 AD 1

[21] 1990 (1) SA 398 (D) at p 415

[22] 1943 WLD 94

[23] Nnyepi v. Sijo Construction (Pty) Ltd 2007 (2) BLR 192 (HC)

[24] Ambrose and Aitken v. Johnson and Flectcher 1917 AD 327, 343; Spencer v. Gostelow 1920 AD 617; B&P Foundry Engineers v. Cilliers 1950 1 SA 257 (O); Jacobs v. Maree & Son 1965 3 SA 73 (T); Grizzell v. P&W Erection Co (Pvt) Ltd 1972 4 SA 449 (R).

[25] 1994 BLR 165 (HC Lobatse)

[26] 1949 (2) S.A. 374 at p. 386

[27] 1994 BLR 165 (HC Lobatse)

[28] 1994 BLR 165 (HC Lobatse)

[29] See Vanderbijlpark Health Committee v. Wilson 1950 (1) S.A. 447 (A.D.) at p. 458; Johannesburg Liquor Licensing Board v. Kuhn 1963 (4) S.A. 666 (A.D.) at p. 671

[30] See Seppälä RDAI/ IBLJ, N°6, 2004, 733, 741

[31] Ropace Botswana (Pty) Ltd v. Dawson and Fraser (Pty) Ltd 2001 (1) BLR 479 (HC)’