My Musings on Construction Law Week No:6A
Today the topic is “Sources of Construction Law” — It’s impact on Claims and Disputes.
I have 3 queries from a reader this week who is from Nepal. His queries are in relation to Clause 19 (as amended in the PCC) of FIDIC 2017 Red Book. He pointed out that it is in conflict with the Prevailing Law in his country with regard to the Project Insurance Deductibles. The minimum deductibles stated in the Contract Documents are lower than those allowed under the Prevailing Law. His queries are :
- In general, If the terms of the Insurance stated in the Contract inconsistent with the prevailing Law — Which will prevail ? The Provisions of the Contract or the provisions of the Prevailing Law ?
2. Is an amendment of the Contract required so that terms on the Contract and Prevailing Law can be made identical ? What remedies are there if the Employer stays silent and delays the amendment Process ?
3. Subject to points 1 and 2, who bears the risk of loss and damage until the Comprehensive Policy is submitted as per Clause 19 of GCC/PCC ? . In this case the Engineer insists that the Contractor is not relieved from his obligation and does not accept the submission which are not as per the terms of the Prevailing Law.
For an answer to the 3 questions, you need to know the construction rule of law which is commonly known as the Hierarchy of the Sources of Law.
In my country which is Malaysia under the Common Law legal system, the hierarchy in the order of priority are :
Federal Constitution
Statutes/Acts aka Written Law
Rules of Equity
Common Law aka “Stare Decisis”
Private Law aka Unwritten Law (Contract Terms and Conditions)
The hierarchy works in the same manner as the Order of Priority under Clause 1.5 of FIDIC 2017 where the higher ranking will take precedence. This means simply that in the hierarchy of the sources of law, the prevailing law which is the written law will override all lower ranking laws. In simple lay man terms, this means that the Statutes and Acts will take precedence if there is a conflict.
So to answer your question :
1. Prevailing Law will take precedence and as such the Insurance Regulations will override whatever is stated in the Contract.
2. There is no need for any amendments to reconcile the Contract Terms with any Prevailing Law as in all instances the Prevailing Law will override and take precedence over the terms and conditions of the Contract, which is aka Unwritten Law.
3. Based on the answers in 1 to 3 above, I am sure you are able to comprehend that failure to comply with the prevailing law is a breach of the law and as such damages will be borne by the maker of the breach. In this case the Engineer is right in rejecting the Insurance Submission procured by the Contractor which is in compliance with the Contract but not the Prevailing Law.
The above is an interesting case and appears to be a conundrum at first glance. However it is not so if you analyze it according to the sources of law as practised under the jurisdiction of the contract.
On the point of jurisdiction, kindly take note and be aware that each particular country could have different sources of law which will dictate a different set of applicable construction law.
The Hierarchy and Sources of Law is different under the Sharia Law legal system , for example in Bahrain they are :
Sharia (Supreme Law)
Bahrain Constitution
Royal Decree
Ministerial Decree — Enacted Civil Codes
Court Judge Discretion
Private Law (Contract Terms and Conditions). P/s only refereed to as “Unwritten Law” in Common Law Countries
As can be seen when compared to the Common Law legal system, the Rules of Equity and Common Law are not recognized as a sources of law and as such inapplicable under Bahrain jurisdiction.
For those of you who found my weekly musings informative and helpful, I have posted 45+ posts at www.medium.com. You can access them there. You can use this link to find me at :-
Hope to see you guys signing up as my followers.
Want to know more about rules of Construction Law that most of you are unaware of (by virtue of what you are taught in college are too shallow to be of any use in your career path ) ?
Then check out my “Construction Dispute and Claims (CDC) Conversations,” a revolutionary program designed to empower construction leaders with the knowledge and tools needed to excel in the face of industry challenges.
This unique initiative provides an open, free, and easy platform for your team leaders to discuss anything that comes to mind during a weekly 1.5-hour session. Whether addressing site and operational issues or delving into the intricacies of construction law, our curated answers go beyond normal conversations, presenting legal basis and possible solutions, all while enhancing knowledge retention through a lessons-learned approach.
The CDC Conversations are essentially a weekly 1.5 hour meet where I will (over 30 sessions) mentor/coach you to attain a solid foundation on the nuances, intricacies and modalities of Construction Law under the Common, Civil and Sharia Law legal system at :-
** USD 150 (group of 5 pax) per session ) to as low as
** USD 15 to USD 30 per person per session*** (You don’t have to worry about finding a group yourself, we will do it for you ).
*** Please choose either the 5 or 10 person group.
Interested ? Please fill out the registration form at www.hqcontrol.com, or
send a message to me :-
What’s App at +6012–2673918,
My LinkedIn messenger,
or lhchin@hqcontrol.com
OR book an exploratory chat with Steven Chin (the Contract Claims Guru) before you decide to enroll at https://lnkd.in/gQRYKqSg
……………………………………………….
I have also created one What’s App Discussion Group and 3 LinkedIn Forum Groups and if you wish to join, please click on the one which interest you the most.
1# The International Construction Law Group on What’s App at https://chat.whatsapp.com/GCpIFSS63hR51XDoAYxynU
2# “FIDIC 1999 & 2017 Suite of Contracts | Group” | LinkedIn.
3# “Contract Claims Management Group — Construction Industry” | Groups | LinkedIn.
4# “ PAM 2018 and Construction Law in Malaysia” | Groups | LinkedIn — For those residing or working in Malaysia —
Cheers, Happy Reading and Wishing you Good Health Always.
