Administrative Contract

Arbitration in general

Arbitration is one of the alternative dispute resolution mechanisms that we have. When we say it is part of the Alternative Dispute Resolution (ADR) mechanism, we do not forget the controversy behind arbitration and the categorization of the same as Alternative Dispute Resolution mechanism. Some, taking arbitration by its outcome, resist accepting that it is really an alternative since it does not give the chance to the parties as to its execution.  In this sense, we are saying that arbitration is one of the Alternative Dispute Resolution mechanisms by taking the fact that it is optional for the parties whether to take their case to a judge appointed by the state or judge appointed by them. Arbitration is reference of a dispute to an impartial person or persons, called arbitrators, for a decision or award based on evidence and arguments presented by the disputants. The parties involved usually agree to resort to arbitration in lieu of court proceedings to resolve an existing dispute or any grievance that may arise between them. Arbitration may sometimes be compelled by law, particularly in connection with labor disputes involving public employees or employees of private companies invested with a public interest, such as utilities or railroads. Amicable settlement is a desirable solution for business disputes and differences.  It can occur before or during the litigation or arbitration of a dispute and can often be facilitated through the aid of third party (the neutral) acting in accordance with these rules.

In the first place, arbitration is a contract by which parties decide to resolve their disputes by a person duly appointed by them. Despite litigation, arbitration has different advantages. Arbitration is more flexible and adaptable as well as quicker as and more efficient than litigation.

Economically, ADR mechanisms including arbitration significantly reduce case congestion in courts. Out of court resolution of disputes reduces burdens both of courts as well as judges’. Hence arbitration saves the state’s resources as well as the judge’s time.

The economic and social implication of arbitration makes it more preferable than litigation. Especially in Ethiopia, the experience is native so it needs no further domestication. The society’s way of life i.e. its communal nature makes ADR mechanisms preferable than litigation. In communal societies where the face-saving practice has a wide speared acceptance, litigation has undesired consequences. Here the group is more important and indeed fundamental than the individual. The group is the refuge of the individual and it is protected at any cost. Conciliation plays a very important part in African law since the community life and group isolation give rise to a need for solidarity. As a result Africans always seek unanimity through dialogue, since only conciliation can put an end to disputes.

A society with a face –saving value wants to solve disputes in a win-win condition. The win-lose arrangement has negative implication on the status quo ante of such a society. From this point of view, ADR should be harnessed. . The recourse to legal actors and proceedings is costly emotionally debilitating, and potentially counterproductive .It is to meant that now it is a common knowledge that existing justice system is not able to cope up with the ever increasing burden of civil and criminal litigation . The problem is not of a load alone. The deficiency lies in the adversarial nature of judicial process which is time consuming and more often procedure oriented.  There is growing awareness that in the bulk of cases court action is not appropriate recourse for seeking justice. Alternative Dispute Resolution mechanism  is a process where disputes are settled with the assistance of a neutral third party generally of parties own choice: where the neutral is generally familiar with the nature of the dispute and the context in which such a dispute normally arise; where the proceedings are informal, devoid of procedural technicalities and are conducted, by and large, in the manner agreed by the parties; where the dispute is resolved expeditiously  and with less expenses: where a decision making process aims at substantial justice, keeping in view the interests involved and the contextual realities. In substance the ADR process aims at rendering justice in the form and content which not only resolves the dispute but tends to resolve the conflict in relationship of the parties which has given rise to that dispute.

Arbitrability: What is it?

Fortunately or unfortunately all matters submitted to arbitration may not be arbitrated. There is a further distinction between matters that cannot be arbitrated. This will lead us to one other discussion in arbitration called the arbitrability of matters.

Matters amenable to arbitration are called arbitrable matters and those not amenable as non-arbitrable matters. What do you think is the importance of such distinction?

The concept of arbitrability is in effect a public policy limitation upon the scope of arbitration as a method of setting disputes. Each country may decide, in accordance with its own public policy considerations, which matters may be settled by arbitration and which may not.  Often the arbitration clause is ineffective since it will be unenforceable. Moreover, recognition and enforcement of an award may be refused if the subject matter of the difference is not arbitrable under the law of the country where enforcement is sought.

Arbitration purely is a policy consideration. It is however also a private consideration. The law may clearly prohibit arbitration of a matter. The contract of arbitration might even do the same. Even when the contract authorizes arbitration, if the law prohibits arbitration, the same may not take effect.

What is the position of Ethiopian law from this angle?

No matter how careful you might be in drafting contracts you cannot totally avoid disputes especially in complex contractual undertakings. In such cases, the questions, whether or not we may submit the dispute to an arbitral tribunal? Can we allot a place in the contract to regulate its arbitration?  Are there special conditions which necessitate extra- judicial adjudication of administrative contracts? are of paramount importance.

The next discussion will therefore be devoted to consider the above questions.

In Ethiopia there are legal documents appropriate to consider the legality of the arbitration of administrative contracts. One is the Civil Code and the other is the Civil Procedure Code. Finally we have Proclamation No. 430/2005.

According to the civil procedure code, administrative contracts are not amenable to arbitration. Article 315(2) reads: “No arbitration may take place in relation to administrative contracts as defined in article 3132 of the civil code or in other case where it is prohibited by law in the civil procedure code”. But nothing to that effect or even similar to that is stated in anyone of Articles 3325-3346 of the civil code dealing with arbitration in general.

Article 315(4) of the civil procedure code further says “nothing in this chapter shall affect the provisions of Articles 3325 – 3346 of the civil code”.

Confusingly, those provisions embodied in Articles 3325 -3346 do not mention anything about the arbitrability of administrative contracts. To be clear Articles 3325 – 3346 are silent on the issue. If so, what is the implication of the reference made to them by the civil procedure code? Does it mean that administrative contracts are not subject to arbitration because nothing allowing their arbitration is said in the civil code provisions? Or does it mean that the silence in the law is acceptance of their arbitrability?

Please consider this excerpt from THE FORMATION, CONTENT AND EFFECT OF AN ARBITRAL SUBMISSION UNDER ETHIOIAN LAW (Bezzawork Shimelash, Journal of Ethiopian Law, Vol. XVII, 1994)

Effects of Non-Performance

The general effects of non-performance are dealt with when we discussed generally “non performance of administrative contracts”. Non-performance of contract of public works occurs when parties default in different ways. The section dealing with non-performance in our civil code magnifies the contractor as the only defaulting party. But because of the nature of the obligation that the contractor assumes, a special section for non-performance is important. Because the special section dealing with administrative contracts does not regulate the default on the part of authorities, it does not mean that the law does not regulate them generally. The presumption is the obligations assumed on their part is not that special which will not require special regulation other than the one we have under the general part. So it is reasonable to avoid any confusion that the code invites you in. Non-performance ensues when the contractor fails to undertake the obligations that he assumed under the contract. Basically, the obligation of the contractor is to construct, maintain or repair a public work. If he/she fails to do one of the things he undertook to do under the contract, we say there is non-performance. Non-performance has two special consequences. In the first place it results in the state control of the project. On the other hand, it may result in re-allocation of the work to another contractor. Let us briefly see these two effects.

1. State Control-This is a process where works began by a contractor are placed under the domain of the state. It is possible to infer this from Art 3288 (1) which says partly “… declaration of state control may be made where the contractor fails to perform his obligation.”

A state control is on the other hand a decision, next to being a process. So it is a declaration to the effect that contract of public works shall become under state control. Mostly order of state control presupposes failure to carry out obligations as a result of lack of resource. Inadequate resource to carry out the works within a given time is a ground for authorities to assume the full responsibility of carrying out the work.

What comes under state control is the project. The ground of making the declaration on the other hand is the non-performance evidenced by the contractor.

Declaration of state control must be made after putting the contractor in default. After ten day’s of summoning the contractor to perform his obligations, administrative authorities may make the declaration.

The effects of state control are two fold. From the start, the declaration will temporarily deprive the contractor of contract. What does this mean? The effect of depriving one’s contract may even be prohibition of exercising one’s rights in a contract. Is this fair?

On the other hand, the declaration will force the contractor to bear the expenses of control. What possible expenses can you guess? Such expenses may include costs of administering the remaining work, cost of preservation or any other related cost.

State control is not permanent. Especially Art.3289 (1) which explains on the effects of state control tries to tell us that the declaration is temporary. This nature however is conditional on one thing:

“[Showing] that he has the necessary means to resume the works and    to carry them out to completion.” (Art 3290).

Under such a condition, the contractor may be allowed to resume the work. Such a decision by the administrative authority is called an order of cessation.

1. The Allocation -The other effect of non-performance is re-allocation. As the name itself implies, reallocation is giving the work away to other person than the contractor. As to Art 3291, reallocation presupposes different conditions. One such prerequisite is the foreseeability of the matter. This is to mean that the contract should expressly foresee the possibility of reallocating the contract .Foreseeability may involve the situation in which the authorities are in. For example, the conditions may convince the authorities that they should not put the contract under state control. This again may be based on a cost-benefit analysis that a rational authority will make.  Secondly, reallocation presupposes cancellation. It is only contract that is cancelled that can be reallocated (Art. 3291 (1)).

Another condition which is worth considering is the “new contractor” requirement. The purpose of reallocation is to allow new contractors to take the work and act accordingly. Reallocation should not be in favor of the old contractor. The possibility of participation in the reallocation is barred by Art 3291 (1).

Reallocation may be made in two ways. Auction may be one option. Agreement on the other hand is also possible to effect reallocation.  Such a procedure has a different consequence than that of state control. Reallocation affects the arrangement in a permanent way, while state control has a temporary effect. In terms of effect, reallocation imposes a burden of bearing consequences, while state control involves costs and risks (Art 3291(2). We have two consequences (burdens. One is the burden of bearing the consequences of the transaction. But which transaction is the provision referring to? As you might observe from Art. 3291 (1), administrative authorities will enter into a transaction when they decide to reallocate the contract. They are forced to reallocate either by auction or private arrangement. Such transactions have consequences as well as costs. The code prefers consequences rather than costs here. Do not forget that consequences are wider than costs Can you show this? Among others, consequences may mean those side effects that the new contract will bring about.

Delay of Construction and Its Effect

Construction contracts stand on three pillars namely quality, price and time. Unless the contract proceeds compromising the disparities among these pillars, it will be terminated somewhere in point of time.  FIDIC contract has devised its own way to compromise the possible disparities. As such a mechanism of evaluating the problems that may ensue and proposing a plan that enables increase or decrease in time and price are some of the solutions that FIDIC has come up with. Concerning time, if the time fixed to conclude the project lapses, the contractor shall pay a liquated damage to the owner of the work.

Unilateral Modification: The Contractor

The right to unilaterally modify the contract is not a privilege operative in favor of the contractor. In the strict sense our civil code does not provide such a right i.e. a right to unilaterally modify a contract to the contractor. Even under normal course of things, a contract can be varied only by a court of law (Art 1763). What we have under Art 3268 is not unilateral modification of the contract. Rather the contractual right extends only to requiring the revision of the contract. Even this right of requiring revision is conditional upon other issues mentioned under Art. 3286(1). Hence, the contractor should encounter material difficulties of an absolutely abnormal nature, unforeseeable at the time of the contract.

What makes the modification unilateral probably is the fact that the administrative authorities are placed in a situation they cannot question the validity of the request. If the conditions mentioned under 3286(1) are fulfilled, Art.3286 (2) obliges administrative authorities to bear part of the exceptional expenses. However, administrative authorities have one choice -preferring to cancel the contract.

If the difficulty is not that much material or of an abnormal nature i.e. if it simply compels the contractor to perform a supplementary work not mentioned in the contract, in this case he may initiate the work after having obtained a requisition order. However, if the supplementary work is very necessary in the absolute sense, and of an urgent nature, the contractor should initiate the work without a requisition order. In this case, administrative authorities will not have the chance of canceling the contract. They would rather simply compensate the contactor.

Example

The Ministry of Defense has entered in to a contract with a domestic construction company to construct a military complex which incidentally involves the residents of over twelve hundred military officers. After the completion of the significant portion of the complex, the contractor came across a silly still critical omission in the building- the complex has no stairs. Because the contract was a build- only contract, the design was made by another contractor to whom the contractor at hand has no legal relation. And it was in the design that the stairs were missing. Now the contractor wants to know your position as to the possibility of constructing the stairs as of self help. What will be your position?

Unilateral Modification: The administrative Authorities

This right of administrative authorities makes them special parties to a contractual arrangement. This is a prerogative in two senses.

1. “During the currency of the contract… the administrative authorities may impose unilaterally upon the contractor changes in the original conditions of the contract” (Art 3283 (1). They may even order the contractor to perform works not even mentioned in the contract. There however reservations held by the law with this respect. Accordingly:

1.1.      the changes under Art.3283(1) may affect only the provisions which affect the arrangement of the public works,

1.2.      those changes under Art.3283(1) may not affect the financial position of the contractor,

1.3.      new works under Art.3284 involve payment of compensation and they are conditioned on the same

1.4.      new works may not imply imposing tasks which completely differ in terms of object from the work mentioned in the contract,

1.5.      new works may not dictate new ways of performing them,

1.6.      Unilateral revisions may entitle the contractor to cancel the contract “where the increase or reduction of the work required by the administrative authorities involves a variation of more than one-sixth of the cost mentioned in the contract.”

1. The imposition by the administrative authorities is irrevocable even by an otherwise stipulation in a contract. The contracting parties may not agree to the effect that the administrative authority cannot unilaterally modify the contract.

Revision by a Court

Courts may vary a contract based on different considerations. For equity considerations variations may be made. On the other hand, courts are entitled to vary administrative contacts. This is an exception to the rule under Art 1764(1). Thus, a contract cannot be varied simply because it has become more onerous. The law holds “A contract shall remain in force notwithstanding that the conditions of its performance have changed and the obligations assumed by a party have become more onerous than he foresaw.” Furthermore, the law is explicit with regard to the limitations that we have against courts with relation to contracts. As such courts shall not make contracts for parties under the guise of variation. The effect of economic changes must be regulated by the parties and not by courts. However, under Art.1767 (1) an administrative contract may be varied even when it is made more onerous than before. But, the court may vary the contract only when the contract was made onerous because of an official decision. This “official decision” should not be any type of official decision. For sure, an official decision is a measure taken by a grant of compensation. Does this mean that the official decision may not entitle the court to vary the contract? See Article 1767 (2) with Art 3193 (1) and Art 1767 (1) with Art.3193 (1). It is wise to consider the reference Art. 1767(2) makes to Articles 3191-3193. These three articles further elaborate on the exception under Art.1767. Read the articles and discuss whether they return us back to the rule under Art.1764?

Administrative contracts highly involve the public interest. Quality of the service that we have to provide to the public really matters. The inverse relation often times, between quality and price makes attaining quality a difficult task. The basic consideration of our law is quality. That is why under Art. 3246 competition will be waged among skilled persons or among specialized undertakings. Skill and specialization are therefore the ground rules to pick-up possible contractors.

Still, Art 3246 is cognizant enough of the role of competition. In normally operating economy, competition leads to efficiency. It is even possible to reverse the relationship between quality and price. This is so because Art 3246 authorized administrative authorities to “put up for competition the working out of a project of a work…”

The relevance of projects is many folds. On the part of administrative authorities, it helps them to assess the cost that a specific project will consume and the quality of the work resulting from the project.

The possible competitors will be screened out and the authorities will “freely choose the persons whom they admit to take part in the competition.” (3247/3/).

These are only procedures, because simple admission of persons to participate in competition in no way is indicative of the conclusion of the contract. It is one step ahead in the contract. After the preparation of the list, the authorities will announce the winner and allot the contract to such a winner. Reasons of selection need not be explicit. The authorities should allot the contract to the competitor they think fit.

The” fitness” standard we have is a default standard: applicable only in the absence of express undertaking to choose the competitor who is ranged first. Selecting the person who is ranged first corresponds to the fitness standard because this competitor stood first based on some standards of fitness. The proviso “to whom they think fit” must by itself have a standard. The administrative authorities must have an express standard to adjudge a competitor as fit and unfit. By doing so, the authorities will comply with one of the constitutional principle called transparency. This is a logical continuation of Art 3248 under which administrative authorities are obliged to be strictly bound to respect the rules of the competition made by them.

Try to justify how Art 3249, second sentence, is a logical continuation of Art 3248?

The contract will be concluded only after application of Art. 3249.

Contract Procurement Alternatives

The process of selecting the contractor and entering into an arrangement with the same is tantamount to procurement of work thereby necessitating as the case may be procurement by open bidding, restricted tendering or direct procurement.

4.2 Performance of the Contract

The normal performance of contract of public works involves three elements on the part of both parties. Generally, direction of work, payment of price and acceptance of work are the elements. Some correspond to administrative authorities and others to the contractor. Let us begin with the first.

4.3.1 Rights of Administrative Authorities

In aggregate the basic rights take two shapes. One is the right to direct the work. The other is the right to supervise the contractor. Art. 3250 (1) establishes this right of supervision as “The administrative authorities may supervise the performance of the works”.

As to the direction right, Art 3250 (2) says” they may also prescribe to the contractor the manner of performance of his work”.

4.3.1.1 Right to Supervise

This right involves two things on the part of the contractor and also the administrative authorities. Administrative authorities may directly supervise the works of the contractor. To this end, they may enter the yards at any time and require the contractor the information necessary for their control. (3251 (1)) Authorities may also make regulations that ensure good order and security in the yards.

The consequent obligations on the contractor are observing the regulations made and furnishing the necessary information to administrative authorities. (3251/2/).

These arrangements are mandatory to the extent that no one party to the contract may agree to the contrary.

The supervisory role of administrative authorities is not limited to supervise only works and yards but also the personnel of the undertaking. In addition to this, materials may also be supervised. With relation to personnel, the authorities may require that employees be changed or dismissed. The quality of materials shall also be controlled by administrative authorities.

4.3.1.2 Right to Direct

This right to direct involves regulating the development of the works and prescribing to the contractor the manner of performance of such works. This involves the how of the work.

To this end, administrative authorities may give plans and models. Not only this, administrative authorities have the right to arrange the rhythm of works. This is to mean that the authorities may fix the period of time for the performance of the work. A general period may be fixed to this end. Or special periods for each work might still be fixed.

Fixing a general period by administrative authorities entails another responsibility of “specifying the time at which the works shall begin.”

But arranging the rhythm of the work is not only about fixing general and special periods. It is also about “regulating the order, sequence and the rhythm of the works within the general period laid down in the contract”.

On default of fixed periods indicating the starting point, the law provides us with one:

A/ periods shall run from the date of notification of the contract.

(See Art. 3254(1) cum 3249).

B/ periods shall run from the materialization of a condition.

4.3.1.3 Right to Demolish (3256)

Administrative authorities have this right of ordering the demolition and the reconstruction of any defective work at the expense of the contractor. This is usually the case in contracts of measurement or re-measurement where the contractor agrees only to build while the administrative authorities undertake to provide the design and model of the work. Otherwise, the situation is rare. We can raise questions concerning the validity of a demolition order. Can the authorities order the demolition of a work without any condition? Who should decide whether a work is defective or not? What type of defect justifies demolition? Does the magnitude have any contribution to the decision the authorities make?

4.3.2 Rights & Duties of the Contractor

It will not be a hard remark to say contractors have very limited right with relation to administrative authorities. Even the way in which the article is devised to confer rights on contractors is negative. It magnifies than ever the administrative prerogatives of administrative authorities.

As such, contractors are prohibited from demanding compensation from administrative authorities save for the fault that the latter might commit. (3259(2)).

What rights do contractors have? Art 3259 gives them the right to demand compensation, but only after observing certain legal considerations.

Under normal course of things compensation cannot be demanded as of right (see Art.3259 (1)) Compensation however is due when:

A/ damage is caused due to the fault of administrative authorities by either making abusive requirements or by postponing the performance of the contract (3259(2)). Abusive requirements show the malicious intent of administrative authorities. Postponing the performance of the contract makes things more burdensome on the contractor.

Contractors in need of compensation must establish many things.

I. The existence of damage: to get compensation, proving injury to a legitimate interest is a requirement.

II. The existence of fault: the contractor must prove the existence of fault on the part of the authorities. The usual types of faults are those related with abuse of power.

III. Violation of the contract: the terms of the contract must be violated to get compensation from the authorities.

B/ damage is caused, regardless of fault, by the aggravation of the normal conditions of performance of the contract. (3259(3)) The first rule is partly based on the principle that no one should benefit from his/her fault. This one is based on the idea that persons should make good what they have made bad. When the administrative authorities make the performance of the contract more burdensome, they are those which should make the ways of performing the contract suitable to the contractor.

. When parties enter in to a contract, they foresee expenses and costs. Parties make a risk assessment plan and agree or disagree to enter in to a venture. When a party is forced to bear what he/she has not foreseen before, this will completely ruin the plan of such a party. It will also make parties skeptical of the system there by to withdraw from engaging in similar activities in the future. It is because of this and other reasons the law protects from unreasonable shift in the balance of the contract as sponsored the authorities.

4.3.3 Payment: Modalities and Time

Payment is performance or only part of it. While generally it is indicative of the conclusive performance of the contract sometimes, at times like this, payment is only the performance. When we started discussing about contract of public works, we defined the same under Art.3244 making reference to “price”. Contract of public works is a contract in “consideration of a price.” Specifically the contractor binds himself in favor of administrative authorities so that the latter will pay him a price.

Thus, under our current discussion, we will try to see how this issue is regulated. 

4.3.3.1 Modalities

Different types of payment are recognized. We have contract with a fixed price under which contractors will get their payment in a lump sum. (3261) On the other hand, we have contract with series of prices. Here without determining the extent of the work, price is fixed based on the different types of work that the contract envisages. We have different prices for different works. (3262).

It is also possible to determine the extent of the final work and determine the services of prices applicable to each kind of work. The type of contracts determines the form of payment that a system follows. In the case of measurement contract for example, lump sum payment is unthinkable. The construction cost of the project is disbursed on the basis of each work accomplished. The basis of payment is unit rate as determined by the contract. The price will be multiplied by the quantity of the work. The total amount of the work during the allocation of the contract may increase or decrease during the actual accomplishment of the work. The price of the work is payable periodically usually on a monthly basis. Payment is made after the measurement made by the architect or the concerned expert. The payment is registered on a document called certificate of payment. Arithmetic errors, if any, may be corrected in the next payment. That is why measurement contract is also called re-measurement contract. The total cost of the project can be known only after the completion of the work.  What we have to know however is the truism that Ethiopian law acknowledges both forms of payment. Between the extremes, parties have the freedom to adhere to anyone form. It is however advisable parties agree to one of the forms of payment depending on the exigencies of the project and other rational considerations which relate to the advantages and disadvantages of each form of payment.

Do you see the difference between Art 3262 and Art 3263? Can you appreciate the relevance of each? Which one is more important? On what basis?

Parties are given the mandate to fix by their contracts the manner in which payment of price is to be undertaken. That is what we can gather from the provisions that we previously considered and others which generally relate to the manner of effecting payment.

The freedom of parties on the modality of effecting payment is not without any control. Art 3267 comes up with a standard. No contract will arrange a clause of deferred payment. Even so, it can be only by bills of exchange or by annual installments.

4.3.3.2 Time of Payment

The time fixed by parties and conditions fixed by them as well are crucial to determine time of payment. Art.3268 (1) says “where the ascertainment of the services performed constitutes a preliminary condition for the determination of the price, such ascertainment shall be made within the periods specified in the contract”.

One thing we have to know here is we cannot fix the time of payment without first fixing what is going to be paid. What if the contract does not regulate such issues? Art 3268(2) raises more questions than it answers. Let us see this.

We can imagine two defaults:

1/ when the contract generally defaults to regulate the issue under Art.3268 (1).

2/ when one of the parties defaults to undertake the requirements envisaged under Art.3268 (1) even when the contract is not defaulting.

4.3.4 Acceptance of Work

As the contractor has a right to payment, the administrative authorities have the right of taking possession of the work done.

4.3.4.1 What is Acceptance?

Acceptance is not merely taking possession of the work. Rather it is the delivery of the work. Acceptance is “a joint ascertainment of the works made immediately after the completion of the works”. As such it is an examination of the works by the contractor and the administrative authorities.

Generally we have two types of acceptance- Provisional acceptance and final acceptance. Even though both involve in the ascertainment of the works, there are areas of departure between the two ways of acceptance.

1. Provisional Acceptance

This involves the ascertainment of the works both by the contractor and the authorities. What makes provisional acceptance special, among other things, is that it is made under reservation. Though it involves the effective taking of possession, the acceptance is made under reservation.

A/ Effects

On the other hand, the effects of provisional acceptance are different from that of final acceptance. The effects of provisional acceptance are two fold. In the first place provisional acceptance does not imply the exoneration of the contractor from any defect (Art 3275(1)).In the second place, it shall amount to a tacit acceptance of the modifications  there under.(3275)2(2).

More informally, provisional acceptance marks the beginning of the period of warrant whose expiry marks the final acceptance of the work. (3275(3)).

B/ Risks

Provisional acceptance is a critical decision which will help us determine transfer of risk.

What is the rule?

Art. 1758 (1) reads: “The debtor bound to deliver a thing shall bear the risk of loss of or damage to such thing (until delivery) is made in accordance with the contract”.

Art 3276 (1) is not different from Art 1758 (1) in stating the rule. But one thing you should question is “is it only when the loss or damage results from force majeure that the contractor will bear the costs? Why? Why not?”

Sticking to Art 3276 (1) leads us to an affirmative determination. But one can question the soundness of Art 3276 (1) taken lightly. If the contractor bears the damage or loss caused  by force majeure before the making of provisional acceptance, even for a stronger reason he can bear the damage caused regardless of the cause( i.e. for damages caused while he was able to avoid or defer them).

1. Final Acceptance

This is the definite appropriation of the works after ascertaining that the contractor has performed his obligations in their entirety (Art. 3279(1)).

The definiteness of the appropriation strengthens this assertion. In addition, the effect of final acceptance is evidence to the validity of the assertion we made.

Final acceptance involves both parties in the ascertaining procedure. Art.3279 is strict in this sense. It requires the joint presence of the parties and the making of record as well. Therefore, the issue is clear with regard to the absence of the administrative authorities during the

Just like any other rule of payment on the event of contestation or doubt as to the creditor (see Art.1744), Art 3280(1) authorizes the contractor to require the court to ascertain that the works are in a condition to be accepted.

Unlike the situation under Art.1744, ascertainment by the court will not automatically result in a conclusive acceptance of the work. If a period of warranty is fixed, the expiration of such period marks the final acceptance of the work. Otherwise, final acceptance will be deemed to have taken place when the day fixed by the court arrives.

4.3.4.2 Effect of Acceptance (Art.3281)

Final acceptance relieves the contractor from his obligation of maintaining the works. Before the final acceptance of the work, the contractor has the obligation of maintaining the work. What is this obligation? This obligation refers to the fact of preserving the work in a purposive manner. Before delivering the work, the contractor must ascertain that the work is fit for the purpose it is made. He/she can meet this end if the same can maintain the work in every manner.  The acceptance will irrevocably place the works in the hands of administrative authorities. The same will put such an obligation in the hands of the authorities. It will also entitle the contractor to payments that are due to him but still not made waiting the arrival of this date.

Definition of Public Works

Art. 3244 (1)

“A contract of public works is a contract whereby a person, the contractor, binds himself in favor of an administrative authority to construct, maintain or repair a public work in consideration of a price”.

Unlike concessions, the specific service to be provided is described in contracts of public works. This undertaking on the part of the contractor is either to construct, maintain or repair a public work. Accordingly, when the undertaking is to simply supply materials for the purpose of carrying out a public work, then the contract will not be that of public works. (3244/2/).  Generally contracts relating to the construction and development as well as the maintenance and repairing of buildings, housing, bridges, highways, water supply and sewage disposal facilities, dams and other power supply facilities form part of contracts of public works. What makes the contracts that of public works is their widespread affective dimension in the sense that their availability, use and administration involve the public at large.

The history of contracts of public works tells us one thing. That the contracts are made not only to enable the construction, maintenance and repair of the works, but also to generate employment prospects to the unemployed section of the society. This was partly the construction history of United States. It is now part of the contemporary history of Ethiopia.

Example:

The locality of J is to have a 31 km all weather road. It accordingly wants to allocate the work to an efficient construction company. In this case the contract to be concluded between J and the competent construction company will be a contract of public works. While J is called the client the company is called the contractor.

Types of Contracts of Public Works

Contracts of public works take different forms. The suitable type is determined based on the nature of the project. The normal type of contract is called measurement contract. Measurement contract goes by other different nomenclatures such as re-measurement contract, build-only contract, unit price contract and the traditional method contract. The other type of contract is the design and build contract. We have also other types of contracts such as management contract, construction management contract, turnkey contract, cost plus fee contract and partnering contract. The predominantly practiced types of contracts are the measurement contracts and the design and build contracts. While measurement contracts are highly practiced in developing countries the design and build contracts are very much practiced in developed countries. The specialization the countries take with this regard is attributable to the nature of each type of contracts. Measurement contracts are far less sophisticated than design and build contracts. Taken with the capacity of contractors in developing countries, authorities resort to measurement contracts which involve their intensive participation on the project. Let us briefly consider the two types of contracts:

Measurement Contract: under this type of contract the design is made by a person provided for this very purpose usually called a consultant engineer. The construction is carried out by another person. Such type of contract presupposes the impossibility of presenting a full-fledged design during the allocation of the work. The name measurement contract by itself implies the fact the work is measurable.

1. Design and Build Contract: under this type of contract, the contractor undertakes to make the design and build the work. To this end, the contractor has full obligation to make the design and to build the work. Thus under this type of contract, the obligation is two fold. The degree of obligation is higher under design and build contract. Because of this, the cost of this contract is higher.  This does not mean that the owner of the work has no say on the work. Far from it, the contractor must solicit the advice of experts on the work and the interest of the owner of the work on the design. To better express the interest of the owner of the work the same comes up with a conceptual design.

Because of the types of contracts of public works we have, different standards are being devised, drafted and distributed. These new standards try to preserve the contractual balance and distribute responsibility in a delicate way. The prominent standard form contract we have in the world is the Federation International Des Ingeniers Conseils’ (FIDIC) standard. Till now, we have five standard editions of FIDIC. In its kind, FIDIC is a measurement contract.

The FIDIC Contracts Guide is dated 2000 but actually became available mid-2001. It is the official guide to the 3 new FIDIC standard forms of Conditions of Contract dated 1999, viz.:

- Conditions of Contract for Construction (New Red Book)
- Conditions of Contract for Design-Build (New Yellow Book)
- Conditions of Contract for EPC/Turnkey Contracts (Silver Book)

It was decided at an early stage to have just one Guide for all the three New Books, which have been produced as a suite, instead of a separate guide for the individual Books, which was the case for the earlier Red, Yellow and Orange Books. Having one Guide for all three Books enables direct comparison of the differences between the Books, and saves repetition when the wording in the three Books is the same.

As it covers the 3 Books it has been necessary to use abbreviations for the 3 Books. So you will find throughout the Guide the following abbreviations:

- CONS: Conditions of Contract for Construction, which are recommended for building or engineering works where the Employer provides most of the design. However, the works may include some Contractor-designed civil, mechanical, electrical and/or construction works.

- P&DB: Conditions of Contract for Plant and Design-Build, which are recommended for the provision of electrical and/or mechanical plant, and for the design and execution of building or engineering works. However, the works may include some Employer-designed works.

- EPCT: Conditions of Contract for EPC'/Turnkey Projects, which may be suitable for the provision on a turnkey basis of a process or power plant, factory, infrastructure or other type of project where (i) a high degree of certainty of final price and completion time is required, and (ii) the Contractor takes total responsibility for the design and execution of the project.
Each of the above 3 New Books comprises three sections, viz.:

- General Conditions, which are intended for inclusion unchanged in any contract, and where the clauses hopefully apply to the great majority of contracts of the relevant type;

- Guidance for the Preparation of the Particular Conditions ('GPPC'), which provides some basic guidance on what (if any) provisions may be appropriate for the contract's Particular. Conditions, including some example texts that are not repeated in the Guide;

-  forms for Letter of Tender, Contract Agreement and Dispute Adjudication Agreements.

The General Conditions recognize that provisions in tender documents for a particular project may differ from the standard 'General Conditions', and the intention is that changes and added or deleted provisions should be made in the Particular Conditions.

The Guide is therefore intended to provide general guidance and comment concerning the clauses FIDIC has included in these 3 standard forms, where applicable to indicate why any given provision has been included, and what its intention was. The Guide also is intended to indicate circumstances where a provision in the General Conditions should not be used, or should be amended, and it includes guidance and sometimes text of how a provision should be modified.

As we go through the Guide, you will see that it also includes a wealth of other useful information - far beyond simple commentary on the standard clauses - for those involved in procurement of construction projects and in preparing and dealing with contract documentation.

FIDIC contract is build by eight documents arranged in a hierarchical order as

1. The contract agreement
2. The letter of acceptance
3. The tender
4. The conditions of Contract Part II(Particular Conditions)
5. The conditions of Contract Part I(General Conditions)
6. The specifications
7. The Drawings, and
8. The Priced Bill of Quantities.

If we start at page 4 we see a practical and useful comparison of the main features of the 3 Books.

- Selection of the appropriate Book is critical to the success of a project, and the 'Introduction' on page 5 leads into FIDIC's way of answering the question, "Which Book should be used for my project?" On pages 6-8 are set out a series of questions, the answers to which should indicate which is the appropriate Book to use.

- Pages 9-12 entitled 'Project Procurement' contain a useful commentary on the basic questions of procurement strategy. The commentary indicates the importance of reviewing alternative procurement options before selecting the appropriate strategy for the project in question, and thereafter selecting the appropriate FIDIC Book. It concludes on page 12 with a list of circumstances when FIDIC definitely does not recommend and warns against the use of the EPCT Book (the P&DB Book should normally be used instead).

- Pages 13-16 entitled 'Recommended Procedures' contain a series of charts (taken from the FIDIC publication 'Tendering Procedure' 1994) showing the recommended procedures: for prequalification of tenderers, obtaining tenders, and opening and evaluating tenders. These charts basically apply to tendering for CONS (Red Book) contracts. For P&DB and EPCT contracts the processes are somewhat different as tenderers usually have to submit details of design proposals, which have to be examined and assessed, and the design remains the responsibility of the Contractor.

- Pages 17-20 entitled 'Procurement Documentation' contains an instructive commentary on the documentation required for the prequalification and tendering procedures. It concludes with some good advice about managing the whole tendering procedure.

- Pages 21-40 contain, first, an example form for the 'Letter of Invitation to Tender', then - more importantly - a set of example forms for the complete 'Instructions to Tenderers' for use with each of the 3 New Books. These example forms are intended as a model to assist those preparing the 'Instructions' for any particular contract.

You will realize by now that this Guide is far more than just a commentary to the Clauses in the New Books. It is, in fact, a rather comprehensive 'procurement manual', giving the 'best recommended practice for the procurement of international construction projects'. Peter Booen liked to call it, a 'procurement-learning book', and, indeed, it gives instruction on nearly everything one should learn and know about procurement of such projects.

All of a sudden, at page 41, the commentary on the Sub-clauses of the FIDIC New Books actually begins! As mentioned, it would have been useful if markers or tabs could have indicated the various sections and Clauses, but perhaps one can attach one's own. The text of the 3 Books, followed by the commentary on each Sub-clause, continues all the way to page 317. Thereafter, pages 318-338, follows the text and commentary on the 'Appendix' to the New Books, i.e. the 'General Conditions of Dispute Adjudication Agreement' and its Annex, the 'Procedural Rules'.

We will return to the commentary, but a brief look at two remaining useful sections of this 'monumental' Guide:

- Pages 339-346 contain a glossary of words and phrases used in the fields of construction, consultancy, engineering and associated activities. One or two of the definitions may be slightly controversial, but the list should prove most useful to many in the industry, particularly newcomers and those from countries where English - as spoken in Europe - is not their home language. These definitions are not necessarily those found in the 'Definitions' at the beginning of the New Books.

- Finally, pages 347-353 contain a useful index to where subjects and terms can be found in the Sub-clauses in the 3 Books, in which Book and in which Sub-clause as well as on which page of the Guide.

Duration of Concession

Concessions are contracts of perpetuity. They are perpetual in nature. Still these arrangements are not unlimited by time, thought they cannot limit time.

Under normal course of things, durations are regulated by the contract. Just like any other issue, failure to regulate by the contract will invite in place one legal presumption. The concession will be deemed to have been made for a period of seven years (Art 3227/3/). This is not the end. Failure to renew the concession within two years implies the implicit renewal of the concession for another seven years. The renewal goes on like this for a maximum period not exceeding sixty years.

Termination of Concession Contracts

By now we suppose you very well know the effects of termination of contracts in general. The effect of termination of concession contracts is different from the rest of contracts. This basically arises from the very nature and object of the undertaking. As such concession contracts result in the establishment of an organization to effectively provide public service.

Hence, when the contract is terminated a winding up procedure will be the effect. This winding up in turn will entail the “settlement of accounts between the grantee and the authorities. (Art 3229/1/) The rules of winding up are supposed to be stipulated (3229/2/), short of which the provision of the law to that end will be in place. We have two types of laws applicable in this case. One is the law in the civil code. On the other hand the provisions of the commercial code will also be effective. Termination of concession has different reasons and different consequences as well. Let us first consider some causes of termination under the law.

1. 1. Redemption

What is Redemption?

Redemption can be taken to mean improving of something: the act of saving something or somebody from a declined, dilapidated, or corrupted state and restoring it, him, or her to a better condition.  Normally a contract for concessions is terminated when the stipulated condition materializes or the fixed time arrives. But redemption is one way of terminating concession contract before the normal time of termination. As the definition given above implies, redemption has its own causes. It is only when the conditions that are mentioned as causes materialize that we resort to redemption. In addition to this, redemption must be resorted to only to meet the rationales of redemption.

Simply speaking, redemption is a decision whereby an administrative authority puts an end to the concession before the expiration of its time. (3236/1/) The grantee should not necessarily commit fault redemption to take place. Rather the condition in which the concession is put necessitates a decision of redemption.

The rationales of redemption might be anything except a motive to “… replace the grantee by another grantee”. Otherwise, redemption may take place at any time with the objective of abolishing all in all or partly (reorganizing) the public service. This is a very good indicator of the prerogative of administrative authorities. However the law does not totally put the law in the hands of administrative authorities. It rather fixes a standard that should be observed before deciding to redeem the service. The effect of redemption is winding up. (3237/1/). On the other hand, redemption will result in the payment of compensation the grantee. The payment made as a result of redemption is called redeeming fee.

1. 2. Withdrawal Order

What is envisaged under Art 3228 is a grantee that commits a fault. The rule is the grantee can lose his right only by the order of a court. But if there is an express agreement entrusting this privilege to administrative authorities, then the grantor may order loss of right of the grantee. This order is called withdrawal order. It results in a premature termination of the concession contract. Withdrawal order presupposes the commission of an especially grave fault. This makes the order special from redemption.

We do not know what special fault is. Neither do we know which one is so grave. Courts are those who have the right to determine the nature of the fault and that will decide the loss of right. This being the rule, the law devises a general rule which allows stipulating a clause empowering administrative authorities to order loss of right without going to courts. But can we say that the administrative authorities may order loss of right in a valid way given the volatile nature of the concept of gravity of fault? The final say as to whether an act constitutes a fault or not and as to whether a fault is grave or not should be determined by a court of law.

3. Sequestration:

Just like the above situation, sequestration presupposes, even though not always, an element of fault on the part of the grantee. The degree of fault is not predetermined in the case of sequestration. Art 3238/1/) is quite indicative of this degree. In the case of loss of right the fault required is a special one in gravity. But Art.3241/1/ shows the fault as being default, incompetence or incapacity. What are the effects of sequestration?

Temporary suspension of rights: The concept of sequestration necessarily envisages a possibility of suspension of rights. The suspension of right is only for a limited time. It is temporary owing to the conditions attached on it. Under our law, sequestration is a measure ordered either to abort a possible interruption in the provision of services as a result of the incapacity of the grantee or sequestration is a punitive measure taken against a defaulting grantee. Though the law is not clear as to the how long the sequestration order will last, it is even ambiguous as to whether the order is temporary in the first place when it is made in lieu of punishment. Can the grantee claim repossession as of right? Who shall determine the arrival of the appropriate time for the cessation of the order of sequestration?

Management of the expenses and works of the grantee: The other effect of sequestration is observable in connection with the management of the work. This issue is related with the first effect i.e. loss of right of the grantee. One of the rights that the grantee will lose as a result of order of sequestration is the right to manage the work. The loss of right by itself has its own effects. Although the ultimate effect is expulsion from the management of the work, because this intrinsically necessitates the fact of managing the work by another person, the grantee may have a legal duty to cover the cost of management. The law still has reservations on the matter. The management expenses are to be covered by the grantee only when the sequestration is ordered in lieu of punishment. Otherwise the expenses are going to be covered by the grantor.

Though the above orders can be associated with the prerogative of administrative authorities, Art.3243 on the other hand tries to strike a balance between the prerogative of administrative authorities and the interest of the grantee. It is a good indicative of the fact that measures taken under Articles 3236-3242 should be in accordance with law. Illegality of the measures as ordered by the grantee entails different consequences:

1. Cancellation of order: the orders of the grantor are not absolute in the sense that they are amenable to change by a court of law. Although the law says “The court may cancel the sanctions of coercion or dissolution, such as measures of sequestration, state control, loss of right or termination, taken by the administrative authorities against the grantee of a public service”, it is not clear as to when the court orders the cancellation. It is however clear that the order should follow an arbitrary and manipulative decision of an administrative authority. Above all, it should follow an illegal order of the same.

2. Order of compensation: the sanctions imposed on the grantee will definitely cause loss to the same. Taking this into account, it is important to force the administrative authorities to make good what they have made bad by their decision. The authorities are obliged to compensate the grantee only if they have injured the interest of the grantee by their fault. Art.3243 (2) reads as follows:

“It may order the authorities to pay compensation for the damage caused to the grantee in consequence of sanctions applied by such authorities contrary to the law”.[emphasis]