An international construction contract is an agreement for the execution of a construction project involving parties from multiple countries. Construction projects are legally complex: multiple parties, long durations, multi-million dollar sums, and political risks. In our practice, we advise Dutch contractors and clients on projects in Germany, the Middle East, and Africa, among others. A well-thought-out contract is not a formality but the foundation of the entire project.
What is the legal problem?
Construction contracts regulate design, execution, payment, completion quality, warranty, force majeure, and modifications. Internationally, claims for extension of time, variations, and force majeure occur frequently. Differences between common law and civil law determine how delays, delay damages, and delay penalties are valued. Local building regulations, permits, and labor law impose additional requirements.
What does the law say?
FIDIC model contracts (Red, Yellow, Silver Book — 2017 edition, revised Reprint 2022) are the international standard. Under Dutch law, Articles 7:750-769 of the Civil Code apply to contracts for work. UAV 2012 and UAV-GC 2005 are common for Dutch projects. Within the EU, the Late Payment Directive (2011/7/EU) and procurement rules under Directive 2014/24/EU have effect.
For ten-year liability, Article 1792 of the Code Civil applies in France, Section 634a of the BGB in Germany (five-year term), and Article 7:761 of the Civil Code (twenty-year term) in the Netherlands. Competition and procurement rules apply to public contracts.
What risks do companies face?
Delays lead to delay penalties and lost profits for the contracting authority. Variations without a clear modification regime degenerate into endless claims. Unlimited liability for latent defects can result in liabilities under Section 7:761 of the Dutch Civil Code years after delivery. Political risks, currency fluctuations, and sanctions can derail the project. International arbitration in construction projects often costs millions in expert fees.
Practical example from our practice
We advised a Dutch contractor on a project for a Saudi client under FIDIC Silver Book 2017. Upon a project modification, the contractor failed to send a formal notice of variation under Clause 13. The Dispute Avoidance and Adjudication Board (DAAB) partially rejected the claim of 1.4 million euros due to procedural irregularity. Upon renegotiation, we built in internal procedures for strict adherence to notice periods. Subsequent variations yielded additional compensation within 60 days.
What can you do?
Work with FIDIC Model Contracts 2017 tailored to your division of roles. Carefully document all notices, variations, and delays within the FIDIC deadlines. Incorporate DAAB for rapid settlement. Arrange liability ceilings, warranty periods, and ten-year coverage. Align with local construction law and employment law. See also our article on FIDIC contracts: an introduction.