“PETROBUDGET ENGINEERS”

I convince clients that… they are wrong.

I am not referring to the nice mural in the Warsaw Ursynów district, nor to the famous song written by Stanisław Staszewski and sung by his son on the 1993 album ‘Kazik’s Dad’. I am referring to a case from -teen years ago, after which I became aware of how different paths the thoughts of lawyers and representatives of other professions can follow.

Once upon a time, as a newly-qualified independent lawyer, I was faced with the task of taking on and advising a group of engineers from a renowned company which was about to execute a complex public contract for one of the municipalities in the Silesian Province. I was expected to show them a way to “force” the investor to pay for the full scope of works performed so far. In the opinion of my guests, the extent of the work carried out to date was so significant that it was only a matter of days before the “suspension of the work site” was fully legitimate. As you might guess, I reached out to the contract. The very extensive scope of the construction project was, clearly, being carried out under a written contract. However, this was not a ‘classic’ construction contract – in the sense of one that can be constructed based on the provisions of Articles 647-658 of the Civil Code. Indeed, the investor and the contractor regulated their mutual rights and obligations based on the so-called FIDIC Conditions of Contract.

FIDIC stands for the International Federation of Consulting Engineers (Fédération Internationale des Ingénieurs-Conseils), and the Conditions of Contract are a commercially accepted set of significantly complex formulae regulating the mutual rights and obligations of the investor and the contractor during the course of construction processes. Each of the models of wording (referred to in the trade by reference to the colour of the cover – for example ‘FIDIC yellow’, ‘FIDIC red’ etc. has the capacity of a book of several dozen pages, intended by the authors to regulate the course of the construction project ‘from A to Z’. In the basic agreement, the parties most often refer to the relevant type of “fidic”, by specifying in this content only deviations from the solutions adopted in the chosen model, which is allowed under the principle of freedom of contract adopted in civil law (Article 3531 of the Civil Code). This was also the case here. Regretfully, this did not prevent conflict. In the course of the construction process, the contractor carried out a number of works not designated in the contract as its subject matter, solely following the instructions of the Contract Engineer. This engineer was – according to the ‘fidik’ chosen by the parties – a person independent of both the investor and the contractor, not being a representative of either of them.

The engineer’s statements as to the necessity of performing certain works (though not listed in the content of the agreement with the investor) were performed by the contractor on an ongoing basis – without any prior contact with the investor, requests for confirmations, or warnings that the contractor expected separate remuneration on this account. My interlocutors came with the firm intention of stopping the contract until the investor had settled the ‘arrears’. In particular, they pointed to the issuing of a demand bearing this rigour for the investor to ‘annex the contract’. It was then that it became apparent that we were looking at the same problem as differently as if we inhabited different planets. The engineers took it for granted that the contract should be ‘annexed’ if work not covered by it was carried out – otherwise the contractor would have a legitimate claim to rescind the contract – obviously the fault of the investor.

For me, on the other hand, it was equally obvious that the contract could not be effectively terminated on the grounds of failure to pay for works which, although performed, were not covered by the contract, and the investor had not undertaken to pay for them on the basis of the contract. Moreover, the contract expressly stipulated that its provisions could only be amended in writing, which rendered pointless considering an implied amendment of its provisions (extension of the material scope). I had to spend a lot of time explaining that improper performance of a contract (and therefore its effective withdrawal) cannot be alleged on the basis of a lack of agreement to amend its content or failure to pay for services not covered by it. I had to spend even more time explaining that the cost of additional works can be claimed, but on a different basis than the “request for annexation”, that stopping the works in this case would give the investor – not the contractor – a legitimate basis for rescission of the contract (and charging not inconsiderable contractual penalties), and that the best solution for everyone would be to try to reach an agreement.

After a very exhaustive debate, and having said goodbye to the not yet fully convinced Engineers, I was finally able to sit down to dinner – well overdue – to celebrate my birthday. Fortunately, though I arrived over an hour late, my wife was waiting for me at the restaurant table. My efforts and her waiting were not in vain: soon all those involved – including the contract engineer, the investor and the contractor – met on the same planet and reached a compromise.