FIDIC Contracts in Kenya: Understanding Their Scope, Application, and Legal Implications

In the realm of construction and infrastructure projects in Kenya, FIDIC (Fédération Internationale Des Ingénieurs-Conseils) contracts have emerged as a cornerstone for ensuring clarity, fairness, and efficiency in project execution. Published by the International Federation of Consulting Engineers, FIDIC contracts provide internationally recognized standard forms that outline the roles, responsibilities, and obligations of all parties involved in construction projects. These contracts are widely adopted in Kenya, particularly for large-scale infrastructure projects, due to their structured approach and global applicability. This article delves into the types of FIDIC contracts, their application in Kenya, the choice of contract books, and their legal effect and enforcement under Kenyan law.

1. FIDIC Contract Books

FIDIC offers a variety of contract books tailored to different types of projects, each designed to meet specific needs while defining clear roles for the Developer, Contractor, and other stakeholders. These books provide a standardized framework for project execution, ensuring consistency and clarity. Below are the key FIDIC contract books relevant in the Kenyan context:

1. FIDIC Red Book: Conditions of Contract for Construction
   The Red Book is primarily used for projects where the Developer provides the design. It outlines the relationship between the Developer and Contractor and is typically used for traditional construction projects. The Red Book emphasizes the Developer’s role in providing the design, while the Contractor focuses on executing the construction based on the provided specifications.
2. FIDIC Yellow Book: Conditions of Contract for Plant and Design-Build
   The Yellow Book applies to design-and-build contracts, where the Contractor takes responsibility for both the design and construction of the works. This book is suitable for projects where the Contractor is expected to deliver a fully functional facility, taking on a broader scope of responsibilities compared to the Red Book.
3. FIDIC Silver Book: Conditions of Contract for EPC/Turnkey Projects
   The Silver Book is designed for EPC (Engineering, Procurement, and Construction) or turnkey projects, where the Contractor assumes full responsibility for the design, construction, and delivery of a fully operational project. This book is often used for complex projects where the Developer seeks a single point of responsibility, minimizing their involvement in the day-to-day execution.
4. FIDIC Green Book: Short Form of Contract
   The Green Book is a simplified version of FIDIC contracts, ideal for smaller, less complex projects with shorter durations. It provides a streamlined contract structure, making it easier for parties to manage smaller-scale construction works without the complexity of the other FIDIC books.
5. FIDIC White Book: Guide to the Use of FIDIC Conditions of Contract
   The White Book serves as a guide rather than a contract itself. It provides detailed advice on how to interpret and implement the terms of FIDIC contracts, offering clarity on the application of various clauses and conditions across the other books.

2. Choice of FIDIC Book

The choice of which FIDIC book to use for a construction project in Kenya is generally determined by the parties involved—the Developer and the Contractor—based on the nature of the project, the level of responsibility assigned to each party, and the complexity of the work. Below are key considerations for selecting the appropriate FIDIC book:

• Developer’s Role: If the Developer is responsible for the design of the project, the Red Book is typically preferred. This ensures that the Developer retains control over the design specifications while the Contractor focuses on construction.
• Contractor’s Role: For projects where the Contractor is responsible for both design and construction, the Yellow Book may be selected. This is common in design-and-build contracts where the Contractor has expertise in both areas.
• Turnkey Projects: For large, complex projects where the Developer desires a “turnkey” approach—meaning the Contractor delivers a fully operational project—the Silver Book is more appropriate. This book shifts most of the responsibility to the Contractor, reducing the Developer’s involvement.
• Smaller Projects: For less complex or smaller projects, such as those with a shorter duration, the Green Book provides a simpler, more streamlined contract. This is ideal for projects where the parties want to avoid the complexity of the other FIDIC books.

The parties must mutually agree on which FIDIC book will govern their contract based on the project’s specific needs. This choice is typically negotiated and explicitly stated in the contract documents before the project commences.

3. Legal Effect and Enforcement of FIDIC Contracts in Kenya

FIDIC contracts are legally binding once executed by the parties and carry the same weight and legal effect as any other contract governed by Kenyan law, provided they do not contravene any specific provisions of Kenyan legislation. Below are key aspects of their legal recognition, enforcement, and implications in Kenya:

Recognition of FIDIC Contracts in Kenya
FIDIC contracts are recognized in Kenya, particularly in large-scale infrastructure and construction projects, and align with Kenya’s legal system. Based on common law principles, Kenyan courts generally consider these contracts valid and enforceable, provided they adhere to the principles laid out in the FIDIC books. However, FIDIC contracts must comply with Kenyan law and should not contravene any specific provisions of local statutes.

Incorporation of FIDIC Clauses: In many Kenyan construction projects, particularly those funded by international entities or involving foreign contractors, FIDIC contract provisions are incorporated as standard practices. These contracts are seen as international best practices and are recognized by Kenyan courts and arbitral tribunals.

International Arbitration: A key feature of FIDIC contracts is the inclusion of alternative dispute resolution mechanisms, such as arbitration. These mechanisms are consistent with Kenya’s approach to resolving commercial and construction-related disputes through arbitration, as outlined in the Arbitration Act (Cap 49) of the Laws of Kenya.

Adherence to Kenyan Law: Although FIDIC contracts are internationally recognized, they must comply with local laws in Kenya, including labor laws, health and safety regulations, and environmental requirements. Any provision in a FIDIC contract that conflicts with Kenyan statutes may be unenforceable.

Effect on Project Timelines and Payments: The enforceability of FIDIC provisions related to payment terms, performance bonds, liquidated damages, and completion timelines is critical. Kenyan courts will enforce these provisions as long as they are in compliance with local laws and do not contradict public policy.

Court Enforcement: In Kenya, a party can enforce a FIDIC contract in court if the other party breaches its terms. For example, in the case of Hydro Water Well (K) Limited v. Nelson Kiarie Sesecher & Others (2021) KHC 22 (KLR), the plaintiff, under a FIDIC-based contract, sued the defendants for breach of contract after they failed to provide critical documentation. This led to delays in drilling and equipping boreholes. The plaintiff sought compensation for lost profits, idle machinery, and advance payment bonds, totaling Kshs. 139,985,688.33. The court ruled that the delay was the defendants’ fault and that the plaintiff was entitled to compensation for idle machinery, but the amount was reduced by 50% to account for lack of wear and tear, resulting in Kshs. 14,400,000. The court also highlighted that under FIDIC contracts, advance payment bonds are typically required when contractors request upfront payments for major procurement, offering protection to the client in case the contractor fails to fulfill their obligations. However, the court did not award the full bond premium.

Arbitration and Dispute Resolution: Kenya’s emphasis on arbitration aligns with FIDIC’s preference for resolving construction disputes through arbitration or other alternative dispute resolution (ADR) mechanisms before resorting to the courts. This is in line with international best practices, ensuring that disputes are resolved more efficiently and outside the judicial system whenever possible.

4. Conclusion

FIDIC contracts provide a flexible, clear framework for managing construction projects in Kenya. The choice of which FIDIC book to use—whether the Red, Yellow, Silver, or Green Book—depends on the nature of the project and the responsibilities of the parties involved. Whether using the Red Book for Developer-designed projects, the Yellow Book for design-and-build contracts, the Silver Book for turnkey projects, or the Green Book for simpler projects, the selected contract must align with the project’s needs and comply with Kenyan law.

In Kenya, FIDIC contracts are recognized and enforceable under the country’s legal system, particularly for projects designed to be adaptable to different jurisdictions and their dispute resolution mechanisms. Their arbitration provisions align well with Kenyan law, ensuring that parties can resolve disputes efficiently. However, the legal effect of FIDIC contracts in Kenya is subject to compliance with the country’s laws. With the increasing adoption of FIDIC forms in Kenya’s construction industry, it is crucial for parties to carefully consider the appropriate contract form and ensure they are fully aware of the dispute resolution mechanisms outlined in the contracts.