Jurisdiction(s):
United Kingdom

Privy Council: FIDIC Yellow Book cl 19.6(c) bars recovery of supplier cancellation charges on termination for convenience where purchase orders were premature (Water and Sewerage Authority v Waterworks)

Published on: 21 February 2025

Published by a LexisNexis Construction expert

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Article summary

Water and Sewerage Authority of Trinidad and Tobago v Waterworks Ltd [2025] UKPC 9 What are the practical implications of this case?

This decision clarifies how clause 19.6(c) of the FIDIC 1999 Conditions of Contract (and likewise clause 18.5(c) in the 2017 editions, which is the same) should be read when assessing, after a termination for convenience, whether any other Cost or liability was reasonably incurred by contractors anticipating completion of the Works. The Board of the Privy Council concluded that a contractor’s obligation to pay cancellation fees to a third‑party equipment supplier did not fall within clause 19.6(c), as those liabilities were not reasonably incurred. The outcome was tough yet fair on the facts. Moreover, the judgment hints, at paragraphs 40 to 45, that if the contractor had advanced a sound justification for entering into the agreement and accepting the cancellation terms, recovery might have been allowed...

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