FIDIC reference
Clause 15 — Termination by Employer
Grounds and procedure for the Employer to terminate — for default and for convenience.
Applies in: Red BookYellow BookSilver Book
Clause 15 lets the Employer terminate for the Contractor’s material default — after a Notice to Correct (15.1) and on the 15.2 grounds — and also for convenience (15.5). The procedure is strict: notices, time limits and a valuation at the termination date. A wrongful termination itself becomes the Employer’s breach, so following the procedure precisely is critical.
Key points
- Notice to Correct (15.1) before terminating for default.
- Termination for Contractor’s Default — 15.2.
- Termination for convenience — 15.5.
- Procedural failure = risk of a counter-claim.
How this works in practice
Termination under Clause 15 is a procedure, not a decision. The sequence is normally a notice to correct with a reasonable period, then, if the default persists, a notice of termination, then valuation and accounting. Breaking that sequence is the most common reason a termination is later held wrongful, flipping the Employer from claimant to respondent. Termination for convenience sits separately: it is available, but it carries compensation to the Contractor and cannot be used simply to hand the works to someone else on better terms.
Common traps
- A notice of termination goes out without a prior notice to correct, or before the period given has expired.
- The state of the works, quantities and materials at the termination date are not recorded — the accounting is then guesswork.
- Termination for convenience is dressed up as termination for default to avoid compensation, which arbitration usually sees through.
Versions: 1999 → 2017 → 2022
- 1999
Clause 15 with similar termination grounds.
- 2017
Notice timing and the termination-date valuation were clarified.
- 2022
No substantive change in the 2022 reprint.
Clause FAQ
Which FIDIC books use Sub-Clause 15?
The clause applies in Red Book, Yellow Book, Silver Book. Particular Conditions may change the standard risk allocation, so always check the project contract.
What grounds entitle the Employer to terminate?
The usual set: failure to remedy a substantial default after notice, abandonment or demonstrated inability to proceed, failure to provide or maintain the performance security, and insolvency. Separate grounds address corrupt and fraudulent practice — on MDB projects those provisions are normally expanded by the lender’s requirements.
What happens to the performance security on termination?
On a valid termination for default, the Employer is normally entitled to call the security to the extent of its proven losses. If the termination is later held wrongful, sums drawn must be repaid together with consequential losses. That is why calling the security immediately after termination is a step to take only when the whole procedure is known to have been followed.
Related clauses
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Reference material, not legal advice. Always check your contract and the Particular Conditions.