Professional Documents
Culture Documents
he FIDIC 'Rainbow Suite' of New Contracts was published in 1999 and includes:
the Red Book: Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer;
the Yellow Book: Conditions of Contract for Plant and Design-Build;
the Silver Book: Conditions of Contract for EPC/Turnkey Projects;
the Green Book: Conditions of Short Form of Contract.
These 'new' forms were first editions and designed to be user-friendly, with a standardized
approach and a reduction in the general conditions from over 60 to 20 clauses.
Additional forms in use since 1999 include:
the Blue Book: Contract for Dredging and Reclamation Works;
MDB/FIDIC Contract: FIDIC conditions incorporated in the standard bidding documents of
multilateral development banks;
the White Book: Client/Consultant Model Services Agreement;
the Gold Book: FIDIC Design, Build and Operate Projects.
5 COLOR INCLUDING 1 BIS HARMONIZED EDITION - IN FIDIC
1. RED BOOK - FOR CONTRUCTION
2. PINK BOOK - FOR CONTRUCTION IN RED BOOK
3.YELLOW BOOK- FOR PLANT & DESIGN-BUILD
4. SILVER BOOK - FOR EPC TURNKEY PROJECT
5. GREEN BOOK - FOR SHORT FORM OF CONTRACT
Conditions of Contract for Works of Civil Engineering Construction (Red Book 4th) -First Edition 1957
Fourth Edition 1987 -Reprinted 1988 with editorial amendments -Reprinted 1992 with further amendments
Supplement to the 1992 Red Book published in 1996
2. Conditions of Contract for Electrical and Mechanical Works including erection on site (Yellow Book) -First
Edition 1963 -Third Edition 1987
3. Conditional of Contract for Design-Build and Turnkey (Orange Book) -First Edition 1995
4. Conditions of Sub-contract for Works of Civil Engineering Construction -First Edition 1994
5. Client/Consultant - Model Services Agreement (White Book) -Third Edition 1998 -Fourth Edition 2006
6. Short Form of Contract (Green Book) -First Edition 1999
7. Conditions of Contract for Construction, for Building and Engineering Works, Designed by the Employer (Red
Book 1999) - First Edition 1999
8. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and
Engineering Works, Designed by the Contractor (Yellow Book) First Edition 1999
9. Conditions of Contract for EPC Turnkey Projects (Silver Book) -First Edition 1999
10. Form of Contract for Dredging & Reclamation Works (Blue Book) -First Edition 2006.
11. The Harmonised Multilateral Development Banks Form of Contract (Pink Book) -First Edition 2005 -Third
Edition 2010
12. Conditions of Contract for Design, Build and Operate Projects (Gold Book) -First Edition 2008
13. Conditions of Subcontract for Construction (compatible with the 1999 Red Book) -First Edition 2011
Background
The Federation International des Ingnieurs - Conseils (FIDIC) is the leading body for the development of
model standard forms of contract for use in the international construction industry. The standard forms
are generally accepted by Employers and Contractors as providing a balanced allocation of risks and
providing fair procedures for administration of contracts.
In September 1998 FIDIC published "test editions" of its forms of contract in a new livery of colours Red
and Yellow to update the existing Red, Yellow and Orange Books. FIDIC also introduced a short form of
contract in another primary colour - the Green Book. A metallic colour has now been added in the Silver
Book which is likely to be the most controversial form.
The new Red Book is the traditional form for civil engineering construction in which the Contractor
constructs to the Employer's design. There is however provision for the Contractor to carry out design
where specified. The form maintains the role of the Engineer and the payment mechanism is based on
measure and value. The new Red Book revises the previous Red Book version and incorporates current
thinking on the management of contracts.
The new Yellow Book replaces the existing Yellow and Orange Books. It is intended to be used for Design
and Build contracts and for Plant Contracts. The Engineer administers the contract and payment is on
periods or installments of the Lump Sum.
The Green Book is an entirely new FIDIC form and adopts the overall risk philosophy of the Red and
Yellow Books. It is intended for contracts of low capital value or simple contracts of short duration such as
dredging works. There is no Engineer and the payment mechanism is required to be specified in the
Appendix to the Form of Agreement, but payment is at monthly intervals.
The new Silver Book is an entirely new FIDIC form for BOT and similar projects. It is intended to be used
on fixed-price turn key projects. There is no Engineer, instead the Employer deals directly with the
Contractor. Risk is placed largely with the Contractor. Payment is on periods or installments of the Lump
Sum.
One form of contract missing from the new livery is the Target Cost Reimbursable form of contract. This is
not widely used internationally but is used extensively in the UK and particularly on tunnelling contracts.
Available standard forms are the IChemE Green Book and the ECC Options D and E which have all been
used with some success.
Allocation of Risks
In many projects one of the significant risks is that of changed Site and Ground conditions. The starting
point is the responsibility for supply of information.
Clauses 4.10 and 4.11 are the relevant provisions in the Red and Yellow Book. Clause 4.10 requires the
Employer to have made available, 28 days prior to the latest date for submission of the Tender, all
relevant data in his possession on sub-surface conditions at the Site. The Contractor is only responsible
for interpreting the data. Under Clause 4.11(b) the Contractor is deemed to have based the Contract
amount on such data, and in the case of the Yellow Book any further data relevant to the Contractor's
design. This effectively means that the Employer warrants the accuracy of the information he has
provided.
Under Clause 4.10 the contractor is also deemed to have obtained all necessary information as to risks
which may influence or affect his Tender or the Works. He is deemed to have inspected and examined
the Site and other available information. However, these "deeming" provisions are limited to the extent
that the investigation by the Contractor is practicable, taking into account cost and time.
Clause 4.12 defines the allocation of risk forchanged ground which in the Red and Yellow Books follows
the traditional forseeability test. The Employer carries the risk of physical condition which could not have
reasonably been foreseen by an experienced contractor by the date for submission of the Tender.
Physical Conditions is defined as both natural physical conditions as well as man-made and other
physical obstructions and pollutants. The definition excludes climatic conditions, but includes hydrological
conditions.
The Green Book (Short Form) is silent on the matter of supply of information. Clause 6.1 defines the
Employer's risks which include changed ground . Sub-clause 6.1(b) includes as an Employer's risk any
operation of the forces of nature affecting the Site and/or the Works which were either unforeseeable or
against which an experienced contractor could not reasonably have been expected to take precautions.
Sub-Clause 6.1(e) defines as the Employer's Risks physical conditions or obstructions other than climatic
conditions where were not reasonably foreseeable by an experience contractor.
The Silver Book adopts a different approach. The Employer is required to have made available to the
Contractor all relevant data in the Employer's possession on hydrological and sub-surface conditions at
the Site. The Contractor however is responsible for verifying as well as interpreting the data. There is
therefore no warranty by the Employer of the accuracy of the information.
The Silver Book allocates all the risk of changed ground conditions to the Contractor. Clause 4.11
provides that the Contractor is deemed to have satisfied himself as to the sufficiency of the Contract
Price, and states that it covers all things necessary to design, execute and complete the Works. Clause
4.12 provides that the Contractor accepts responsibility for having foreseen all difficulties and costs of
successfully completing the Works.
Controversially the Silver Book at Clause 5.1 also passes to the Contractor responsibility for the accuracy
and completeness of the Employer's Requirements. The Employer is expressly stated not to be
responsible for any error, inaccuracy or omission in the Employer's Requirements. The Employer is only
responsible for the definition of the intended purpose of the Works and the criteria for testing/performance
of completed Works.
The more usual provision for responsibility for the Employer's Requirements is to be found at Clause 5.1
of the new Yellow Book. This allows the Contractor within a specified period after Notice of
Commencement, to notify the Engineer of any error, fault or defect in the Employer's Requirements. The
Engineer then decides whether to issue a variation. The Contractor is entitled to extension of time and
adjustment of the Contract Price, unless the error was one which an experienced contractor would have
discovered before submitting his Tender, had he used reasonable skill and care.
The Silver Book therefore clearly envisages that the Contractor will carry our a rigorous check of the
Employer's Requirements before submitting his tender and take the risk of any errors whether it is
reasonable or not for the Contractor to identify the errors.
Communications
There has been a significant shift in current thinking in the UK on the nature, timing and effect of
communications in construction contracts. The trend is towards more detailed programming, early
warning of the potential consequences of events and the adoption of notices as a condition precedent to
the contractor's entitlement under the contract. A further recent development has been the adoption of
"exhaustive remedy" clauses, which provide that the only remedies available to the parties are those
stated in the contract, to the exclusion of any other legal remedies. The FIDIC forms have adopted only
some of these new ideas.
The provision in the Red, Yellow and Silver Books in relation to programme are not radical. Clause 8.3
simply requires the Contractor to submit a programme and to revise the programme when it is no longer
consistent with actual progress. The Contractor is required however to give prompt notice of specific
probable future events or circumstance which may adversely affect the work, increase the Contract Price
or delay execution of the Work. There is no direct sanction for failure to warn, but it is to be noted that in
making a fair determination under Clause 3.5, due regard is to be taken of all relevant circumstance. It
may be argued that this would include the contractor's failure to warn when he could have done, although
this is not so expressly stated.
The Green Book under Clause 7.,2 simply requires the Contractor to submit a programme but does
provide for Early Warning at Clause 10.3. If the contractor fails to notify as soon as he becomes aware of
any circumstance which may delay or disrupt the Works or give rise to a claim for additional payment,
then the Contractor's entitlement is reduced if the Engineer as a result is unable to keep relevant records
or take steps to minimise the effects of the events.
One of the features of the new forms is the stringent notice provisions. Under the Red, Yellow and Silver
forms, Clause 20.1 requires the Contractor to give notice as soon as practical, and not later than 28 days
after the event or circumstance giving rise to the claim for extension of time or additional payment. Within
42 days of the event or circumstance the contractor is required to submit a fully detailed claim with full
supporting particulars.
If the event or circumstance has a continuing effect then the Contractor is required to send further claims
at monthly intervals giving the accumulated delay and/or amount claimed. The final claim is to be sent
within 28 days after the end of the effects.
The Contractor is only entitled to payment for such part of the claim as he has been able to substantiate.
If the Contractor fails to comply with the provisions, then there will be no entitlement to extension of time
nor to additional payment.
In the Red and Yellow Books any notice for unforseen physical conditions is required to described the
physical conditions so they can be inspected by the Engineer, and set out the reasons why the Contractor
considers them to be unforeseeable.
None of the FIDIC forms adopt an "exhaustive remedy" clause, so the absence of notice may not cause
the contractor to lose all entitlements, but clearly will have a significant effect on the administration of the
contract.
Impossibility
The FIDIC forms have kept the impossibility provisions found in many standard forms.
The new Red, Yellow and Silver Books at Clause 19.7 release the parties from further performance if any
event or circumstance outside the control of the Parties make it impossible or unlawful for either or both
parties to fulfill its obligations.
The Green Book at Clause 1.1.14 goes further and defines "Force Majeure" as any event or circumstance
which makes performance of a Party's obligations illegal or impracticable and which is beyond that
Party's reasonable control. Clause 13.2 allows the Contractor to suspend the execution of the Works but
only "if necessary". If the event continues for a period of 84 Days then either Party may give notice of
termination.
Design Liability
A significant feature of all the new forms is that the Contractor has a fitness for purpose obligation for any
design which is his responsibility.
The new Red Book at Clause 4.1(c) makes the Contractor responsible for any part of the Permanent
Works which the Contract specifies is to be designed by the Contractor. When the Works are completed,
that part designed by the Contractor is required to be fit for such purpose for which that part was
intended.
The new Green Book at Clause 5.2 also provides that the Contractor's design is fit for the purpose
intended defined in the Contract.
The Yellow and Silver Books has a similar provision, but since the Contractor is responsible for all design
Clause 4.1 provides that the Works are to be fit for their purpose. Any error in the design in the
Employer's Requirements is subject to Clause 5.1 described above.
Conclusions
The new FIDIC forms have adopted much of current thinking in the administration of contracts and shifted
risk and responsibility to the Contractor. Many of the changes will cause controversy.
Unfortunately there is no radical thinking in the mechanism for dealing with the evaluation and settlement
of claims, which are an inevitable result of the changes. The adoption of a Dispute Adjudication Board is a
welcome change, but the procedure is unwieldy for all but the most complex disputes. It is unfortunate
that the opportunity was not taken to introduce a mechanism for evaluating entitlement which would
reduce the most costly part of disputes resolution.
Function
Up until the mid-1970s, companies only had the choice of forming a corporation or partnership,
and both had severe disadvantages. Partnerships have little legal protection from company debt
obligations and lawsuits, but are taxed only once. Corporations, on the other hand, face double
taxation because the tax code applies to net profits and capital gains, but offer legal protection to
their shareholders. LLCs essentially combine the best features of corporations and partnerships.
Benefits
Under LLC statutes, a company automatically qualifies for a "tax pass-through." Tax pass-through
means that the company does not pay taxes on net profits; the owners pay taxes on income from
the business that's shown on their personal tax returns. The biggest benefit is that shareholders
and owners retain no responsibility for debts unless someone specifically signs an agreement
taking liability for a debt.
Related Reading: What Does LLC Mean As a Professional Designation?
Disadvantage
Despite LLCs' popularity, you may still want to form an S or C corporation in certain
circumstances. LLC companies are a relatively new type of business entity as of 2010, so many
investors are hesitant to invest in an LLC until they are better understood, according to the
Gaebler website, a resource for entrepreneurs. In addition, LLCs usually have higher legal fees
because S and C corporations already have pre-made agreements.
Misconceptions
As of 2010, LLC businesses are not recognized by the federal government, according to the IRS.
An LLC has to file as a corporation, partnership or sole proprietorship on its tax returnmost LLCs
are automatically considered a corporation. Certain types of business, such as banks and
insurance companies, cannot form an LLC, but actual restrictions on forming an LLC depend on
the laws of the state in which the company resides.
Tip
You can quickly convert any business into an LLC in most states by filling out a simple form called
a "certificate of conversion," according to legal information website Nolo. Other states require
formal articles declaring the formation of an LLC. In addition, every potential LLC must transfer all
pertinent business information, such as identification numbers and sales tax permits, to the new
entity. A few states require a newspaper article declaring the end of a partnership and the
formation of an LLC.
References (5)
Meaning
Limited Liability Partnership entities, the world wide recognized form of business organization has been introduced in
India by way of Limited Liability Partnership Act, 2008. A Limited Liability Partnership, popularly known as LLP
combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one
partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from
that of a unlimited partnership. In an LLP, all partners have a form of limited liability for each individual's protection
within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders,
the partners have the right to manage the business directly.An LLP also limits the personal liability of a partner for the
errors, omissions, incompetence, or negligence of the LLP's employees or other agents.
Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the
LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which
describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership
and its partners.
LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to
their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by
another partners wrongful business decisions or misconduct.
Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March 2009.
Easy to establish.
Professionals can form Multi-disciplinary Professional LLP, which was not allowed earlier.
Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.
Any act of the partner without the other partner, may bind the LLP.
Company
LLP
Prevailing Law
Registration
Creation
Created by Law
Created by Law
Distinct entity
Name of Entity
Cost of Formation
Perpetual Succession
Charter Document
Common Seal
Formalities of Incorporation
Time line
Legal Proceedings
A company is a legal entity which can A LLP is a legal entity can sue and
sue and be sued
be sued
Foreign Participation
Number of Members
Ownership of Assets
Liability of Partners/Members
Tax Liability
Principal/Agent Relationship
Director Identification
Number(DIN)
Digital Signature
Dissolution
Transferability of Interest
Requirement of Managerial
Personnel for day to day
administration
Statutory Meetings
Maintenance of Minutes
Voting Rights
Remuneration of Managerial
Personnel for day to day
administration
Annual Filing
Share Certificate
Audit of accounts
Applicability of Accounting
Standards.
Compromise / arrangements /
merger / amalgamation
arrangements / merger /
amalgamation
Whistle Blowing
Partnership
LLP
Prevailing Law
Partnership is prevailed by
The Indian Partnership
Act, 1932 and various
Rules made there under
Registration
Registration is optional
Creation
Created by Contract
Created by Law
Distinct entity
Name of Entity
Cost of Formation
Perpetual Succession
It does not have perpetual It has perpetual succession and partners may come and
succession as this depends go
upon the will of partners
Charter Document
Partnership Deed is a
charter of the firm which
denotes its scope of
operation and rights and
duties of the partners
Common Seal
There is no concept of
common seal in
partnership
Formalities of
Incorporation
In case of registration,
Various eForms and the LLP Agreement are filed with
Partnership Deed along
the Registrar of LLP along with the prescribed Fee.
with form / affidavit required
to be filled with Registrar of
firms along with requisite
filing fee
Time line
Legal Proceedings
Only registered partnership A LLP is a legal entity can sue and be sued
can sue third party
Foreign Participation
Number of Members
Ownership of Assets
Rights / Duties /
obligation of the Partners
/ Managing Partners /
Directors
Liability of
Partners/Members
Tax Liability
Income of Partnership is
taxed at a Flat rate of 30%
plus education cess as
applicable.
Principal/Agent
Relationship
Transfer / Inheritance of
Rights
Not transferable. In case of Regulations relating to transfer are governed by the LLP
death the legal heir
Agreement .
receives the financial value
of share.
Transfer of Share /
In case of death of a
Partnership rights in case partner, the legal heirs
of death
have the right to get the
refund of the capital
contribution + share in
accumulated profits, if any.
Legal heirs will not become
partners
Director Identification
Number(DIN)
Digital Signature
There is no requirement of
Dissolution
By agreement, mutual
Voluntary or by order of National Company Law Tribunal.
consent, insolvency, certain
contingencies, and by court
order.
Transferability of Interest
Admission as partner /
member
Cessation as partner /
member
A person can cease to be a A person can cease to be a partner as per the LLP
partner as per the
Agreement or in absence of the same by giving 30 days
agreement
prior notice to the LLP.
Requirement of
No requirement of any
Managerial Personnel for managerial; personnel ,
day to day administration partners themselves
administer the business
Statutory Meetings
There is no provision in
regard to holding of any
meeting
Maintenance of Minutes
Voting Rights
Remuneration of
The firm can pay
Remuneration to partner will depend upon LLP
Managerial Personnel for remuneration to its partners Agreement.
day to day administration
Contracts with
Partners/Director
Maintenance of Statutory
Records
Annual Filing
Share Certificate
Audit of accounts
All LLP except for those having turnover less than Rs.40
Lacs or Rs.25 Lacs contribution in any financial year are
required to get their accounts audited annually as per the
provisions of LLP Act 2008.
Applicability of
Accounting Standards.
No Accounting Standards
are applicable
Compromise /
arrangements / merger /
amalgamation
or partners
Oppression and
mismanagement
No provision relating to
redressal in case of
oppression and
mismanagement
Credit Worthiness of
organization
Creditworthiness of firm
depends upon goodwill and
creditworthiness of its
partners
Whistle Blowing
No such provision is
No such provision is
provided under Partnership provided under the
Act, 1932
Companies Act, 1956.
Due to Stringent
Compliances & disclosures
under various laws,
Companies enjoys high
degree of creditworthiness.