Under FIDIC Red Book, if the Employer fails to make timely payments, the Contractor has specific remedies to address such delays:
These remedy methods are given below in order;
1. Entitlement to Financing Charges
According to FIDIC Red Book Sub-Clause 14.8 titled “Delay in Payment”, if the Contractor does not receive payment in accordance with Sub-Clause 14.7 titled “Payment”, they are entitled to financing charges. These charges are compounded monthly on the unpaid amount during the period of delay. Unless otherwise specified in the particular conditions of the agreement, the annual rate is three percentage points above the discount rate of the central bank in the currency of payment. The Contractor is entitled to this payment without formal notice or certification, and without prejudice to any other right or remedy.
2. Suspension of Work
If the Employer fails to pay amounts due, the Contractor may issue a notice of suspension under Sub-Clause 16.1 titled “Contractor’s Entitlement to Suspend Work”. This allows the Contractor to suspend work or reduce the rate of work until payment is received. The Contractor must give the Employer 21 days’ notice before suspending work.
3. Termination of Contract
It’s essential for the Contractor to follow the procedures outlined in the contract, including issuing the necessary notices and adhering to specified time frames, to ensure these remedies are enforceable.
