Other common standard form contracts

HomeCommon issues on international projectsApplicable law and jurisdictionOperation of the standard forms: FIDICOperation of the standard forms: NECOther common standard form contractsInternational Disputes Overview

In this section, we have summarised certain provisions in the MF/1 Rev 6 contract. It is also important to note that in projects, your contracts may be heavily amended and therefore always refer to the agreed versions (as amended) and seek legal advice as required.

Please get in touch if you have any specific queries about your contract.

The MF suite of contracts are model forms for electrical and mechanical work and consultancy.

The MF/1 form of contract is a lump sum contract for the design, supply and installation of electrical, electronic or mechanical plant and is used for domestic and international projects.


How is MF/1 different to other forms of contract?

The primary purpose of the MF/1 form of contract is to achieve the specific performance requirements of the plant. In this regard, MF/1 provides for three testing processes: tests before delivery, tests on completion and performance tests (after take-over). The performance requirements are therefore key and need to be clearly specified.

Given the performance nature of the contract, the MF/1 form also has quite strict limitations on liability, which include: a defect 12 month Defect Liability Period (if no other period is stated) and a three year period of liability for latent defects (which are only latent if they would not have been disclosed by a reasonable examination prior to the expiry of the DLP) which are exclusive remedies in relation to any defects or damage. The contractor’s liability is also limited to the Contract Price (if not other sum is stated) and liability for loss of profit, production and indirect/consequential loss is excluded.


How does MF/1 address extensions of time/delay?

Potential events entitling the contractor to an extension of time are:

  • Any industrial dispute (clause 33.1(c)).
  • Circumstances beyond the reasonable control of the Contractor arising after the date of the Letter of Acceptance or the date of the Agreement (clause 33.1(d)). This is broadly drafted but the contractor would need to show that a circumstance was beyond its reasonable control which may be a difficult test.

Once the Contractor has given notice of an entitlement to an extension of time, the Contractor is to consult with the Engineer to determine the steps which can be taken to overcome or minimise the actual or anticipated delay. The Contractor shall comply with all reasonable instructions of the Engineer and if compliance incurs additional Cost, the amount of additional Costs is added to the Contract Price (clause 33.3).

If the Contractor fails to complete within the Time for Completion, liquidated damages are deducted up the maximum percentage stated of the Contract Value (clause 34.1). If the limit of liquidated damages has been reached and there is prolonged delay, the Purchaser can require the Contractor to complete by a final Time for Completion which if not met may entitle the Purchaser to terminate and recover the loss suffered (clause 34.2).

 


How does MF/1 address claims for cost?

Cost is defined at paragraph 1.1.i as “all expenses and costs incurred including overhead and financing charges properly allocable to such expenses and cost with no allowance¬†for profit”.

If the Cost of performing the Contractor’s obligations is increased or reduced by any law, order, regulation or bylaw, the amount of any increase or decrease is added to or deducted from the Contract Price (clause 6.1).

If the Cost is increased or reduced due to any rise or fall in the Cost of labour or material or transport, the amount of the amount of any increase or decrease is added to or deducted from the Contract Price (clause 6.2).

There are a number of other provisions throughout the contract which entitle the Contractor to additional Cost. Clause 41.2 also provides that if entitlement arises under one of the listed provisions, the Contractor is entitled to add profit to such Cost.


What are the relevant notice provisions?

  • Claims for an extension of time need to be notified as soon as reasonably practicable with full supporting details (clause 33.1)
  • Claims for additional payment need to be notified within 30 days of the circumstance arising stating the reasons why the Contractor consider it is entitled to claim and as soon as reasonably practicable after the date of notice and not later than the expiry of the last DLP, the Contractor is to submit full particulars of and the actual amount of the claim (clause 41.1). Compliance with clause 41 is a requirement to entitlement to additional payment (clause 41.3).

How does MF/1 address force majeure?

Force Majeure is defined in clause 46.1 and includes:

(a) war, hostilities (whether war be declared or not), invasion, act of foreign enemies;

(b) rebellion, revolution, insurrection, military or usurped power or civil war;

(c) riot, civil commotion or disorder; and

(d) any circumstance beyond the reasonable control of either of the parties. This final limb is a broad provision and could capture a variety of events including unforeseen weather events/natural disasters.

If a party is prevent from or delayed in performing obligations then it is to give notice to the other part of the circumstances constituting force majeure and of the obligations delayed or prevented and is then excused from performance for so long as the circumstances of prevention or delay continue (clause 46.2).

If the delaying/prevention period continues for 120 days, then either party may terminate the Contract (clause 46.3) and clause 46.4 sets out the process for calculating the payment due on termination.

“These materials are written and provided for general information purposes only. They are not intended and should not be used as a substitute for taking legal advice. Specific legal advice should be taken before acting on any of the topics covered.

Osborne Clarke is the business name for an international legal practice and its associated businesses. Full details here >

¬© Osborne Clarke LLP”