FIDIC / Legal Reference: FIDIC Red Book Clause 15 (Employer) / Clause 16 (Contractor)
The early ending of a construction contract before the Works are complete, either by the employer (for contractor default or convenience) or by the contractor (for employer default). Termination is the most commercially serious event in a construction contract and carries significant legal and financial consequences.
What it means in practice
Under Clause 15, the employer may terminate for cause following a specified notice and cure procedure. Under Clause 15.5 (2017 edition), the employer may also terminate for convenience, paying the contractor for all work done and a fair allowance for profit.
Under Clause 16, the contractor may terminate where: the employer fails to pay within 42 days of the due date; the Engineer suspends the Works for more than 84 days for employer-risk reasons; or the employer becomes insolvent.
Where disputes arise
Wrongful termination — purporting to terminate for cause where the contractual trigger has not been met — amounts to repudiation of the contract. The wrongfully terminated party is entitled to damages including loss of profit on the remainder of the contract.
UAE Context
UAE Civil Code provisions on termination (Articles 267-274) operate alongside and in addition to the contractual termination regime. UAE courts have jurisdiction to terminate contracts for serious breaches even where the contract’s termination procedure has not been followed.
Related terms
Termination disputes are among the highest-value and highest-risk matters in construction law. e-Basel provides specialist claims and expert witness support for termination disputes across UAE projects.
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