Employer's Claims: FIDIC Sub-Clause 2.5 Notice Guide
The Interim Payment Certificate lands with a smaller number than the Contractor submitted. Buried in the deductions is a liquidated-damages figure nobody flagged beforehand — no letter, no clause cited, no particulars. The instinct is to ask how much is missing. The better question is whether the Employer was ever entitled to deduct it at all. This guide covers Sub-Clause 2.5, the notice it requires before any Employer claim or deduction is valid, a template, and the case that decided what happens without one.
Sub-Clause 2.5 Is the Employer's Mirror of Clause 20.1 — and a Looser One
Under the FIDIC 1999 Red, Yellow and Silver Books, Sub-Clause 2.5 is titled "Employer's Claims" — the Employer-side counterpart to the Contractor's Sub-Clause 20.1. If the Employer considers itself entitled to any payment under any Clause or otherwise in connection with the Contract, and/or to any extension of the Defects Notification Period, the Employer or the Engineer must give notice and particulars to the Contractor.
Despite its title, the clause is widely read as Contractor-friendly rather than Employer-friendly. Its real function is to stop the Employer withholding payment, extending the Defects Notification Period, or raising a claim without putting it through the same discipline the Contractor follows — naming the basis, stating the figures, and going to the Engineer for determination.
Key Takeaway: Sub-Clause 2.5 is the Employer's own claims clause — the mirror image of the Contractor's Sub-Clause 20.1. It exists to stop the Employer from deducting or claiming informally, outside a notice-and-particulars process the Engineer can actually test.
"As Soon As Practicable" — Not 28 Days, But Not Optional Either
Here is where Sub-Clause 2.5 departs sharply from the Contractor's claims clause. Sub-Clause 20.1 gives the Contractor a hard 28-day deadline from awareness, with a conclusive time bar for missing it. Sub-Clause 2.5 sets no equivalent day count for most Employer's claims — notice must be given "as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim." There is no number to count to.
One claim under Sub-Clause 2.5 does carry a hard deadline: a claim for an extension of the Defects Notification Period must be notified before that period expires. Miss that date and the window is gone, however "practicable" the Employer's timing seemed.
Whatever the timing standard, the particulars must still specify the Clause or basis relied on and substantiate the amount or extension claimed. The Engineer then proceeds under Sub-Clause 3.5 (Determinations) to agree or determine what, if anything, the Employer is entitled to.
Key Takeaway: Most Employer's claims under FIDIC 1999 have no fixed day count — just "as soon as practicable." The one exception is a Defects Notification Period extension claim, which must be notified before the period expires. Either way, the particulars must still name the clause and substantiate the figures.
When the Employer Doesn't Need Sub-Clause 2.5 at All
Three categories sit outside the procedure entirely, as routine charges rather than disputed claims: amounts due under Sub-Clause 4.19 (electricity, water, gas supplied to the Contractor); under Sub-Clause 4.20 (use of the Employer's Equipment or free-issue materials); and for other services the Contractor itself requested. These get deducted without triggering 2.5 because the Contractor already knows what it used and agreed to pay for it.
Everything else — liquidated damages, the cost of remedying a defect, overpayment — needs the full procedure. A deduction labelled as one of these three categories, but which doesn't actually fit, does not escape Sub-Clause 2.5 by relabelling.
Why This Matters: No Valid Deduction Without Compliance
Sub-Clause 2.5's closing sentence gives the clause its teeth: the Employer "shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this Sub-Clause." That is a condition on the right to deduct, not a procedural suggestion.
The Privy Council confirmed exactly how far this goes in NH International (Caribbean) v National Insurance Property Development Company [2015] UKPC 37. An arbitrator had allowed the Employer to raise claims as a common-law set-off, reasoning that Sub-Clause 2.5 only barred a formal originating claim, not a defensive one. The Privy Council disagreed: a claim not notified as soon as practicable cannot be revived later as a set-off or counterclaim either — the back door is shut as firmly as the front door.
For a Contractor looking at an unexplained deduction, this is the leverage: a silent netting-off, with no clause cited and no particulars served, is not a valid exercise of Sub-Clause 2.5.
Key Takeaway: The Employer can only deduct or set off in accordance with Sub-Clause 2.5's own procedure. The Privy Council in NH International v NIPDC confirmed this blocks set-offs and counterclaims too — a late or unnotified claim cannot come in through the back door.
Employer's Claim Notice Template — Copy and Adapt
Replace everything in square brackets with the project's own facts, then delete the brackets.
Keep the description factual and the figures explicit — a notice that names the clause, states the awareness date, and attaches a calculation is the entire point of the procedure.
Worked Example: A Filled-In Employer's Claim
Filled in for a liquidated-damages claim following late completion:
Notice what makes this hard to challenge on process: a named clause, a stated awareness date, a transparent calculation the Contractor can check against its own records. Whether the Contractor agrees with the amount is a separate argument from whether the notice was procedurally valid.
What the Contractor Should Check Before Accepting a Deduction
Run any deduction through the same checklist the Engineer should have applied first:
- Was any notice served? A deduction with no notice is not a valid exercise of Sub-Clause 2.5.
- Does it cite a Clause? A general complaint, without naming the basis, fails the particulars requirement.
- Is the calculation shown? Substantiation means figures the Contractor can test, not an asserted round number.
- Is it one of the three exempt categories? A genuine 4.19/4.20 charge or requested service needs no notice — check it actually fits first.
- Has the Engineer determined it? The amount should reflect a Sub-Clause 3.5 determination, not a unilateral Employer figure.
Key Takeaway: Before accepting any Employer deduction, check whether a notice was served, whether it names a clause and shows a calculation, and whether the Engineer actually determined the figure. A deduction missing any of these is open to challenge on process alone.
What Changes Under the 2017 Second Edition
The 2017 Rainbow Suite removes the asymmetry this guide has been describing. Clause 20 is restructured as "Employer's and Contractor's Claims," and the mechanism itself sits in Sub-Clause 20.2 — a single procedure applying to both Parties equally, with the same 28-day Notice of Claim, contemporary-records duty, and detailed claim.
In practice, "as soon as practicable" is a 1999-edition feature only. On a 2017 contract, treat an Employer's claim exactly like a Contractor's for timing — 28 days either way. For the mechanics, see the Clause 20.2 guide in the sidebar.
Key Takeaway: FIDIC 2017 folds Employer's claims into the same Clause 20.2 procedure as the Contractor's — same 28-day notice, same detailed-claim steps. The looser 1999 "as soon as practicable" standard does not carry over.
Common Mistakes Around Employer's Claims
- Deducting first, notifying never. A figure simply netted off a Payment Certificate is the mistake the Privy Council's NH International decision was about.
- Particulars without a clause. Stating an amount without naming the Sub-Clause relied on fails the clause's own requirement.
- Missing the Defects Notification Period deadline. The one Sub-Clause 2.5 claim with a hard date — notified after expiry, it is simply too late.
- Assuming 1999 flexibility on a 2017 contract. "As soon as practicable" is gone under Clause 20.2 — a late Employer's claim can now be time-barred exactly like a Contractor's.
- Accepting a deduction without checking it. Silence reads as acceptance. If notice and particulars were never served, say so in writing before the next Certificate repeats it.
Frequently Asked Questions
Does Sub-Clause 2.5 set a 28-day deadline for Employer's claims, like Sub-Clause 20.1 does for the Contractor?
No, not under FIDIC 1999. Sub-Clause 2.5 only requires notice and particulars as soon as practicable after the Employer becomes aware — no fixed day count for most claims. The exception is a Defects Notification Period extension claim, which must be notified before the period expires. FIDIC 2017 removes this asymmetry and puts Employer's claims on the same 28-day clock as the Contractor's.
Can the Employer deduct liquidated damages without first serving a Sub-Clause 2.5 notice?
Not validly. Sub-Clause 2.5's closing sentence limits the Employer to setting off, deducting, or claiming against the Contractor only in accordance with the sub-clause's own procedure. The Privy Council confirmed this in NH International (Caribbean) v National Insurance Property Development Company: a claim not notified in time cannot be revived later as a set-off or counterclaim either.
What must the particulars in an Employer's claim actually contain?
The Clause or other contractual basis relied on, and substantiation of the amount and/or extension claimed. A bare statement that money is being deducted, with no clause cited and no supporting figures, does not meet Sub-Clause 2.5's own requirement.
Which deductions don't need a Sub-Clause 2.5 notice at all?
Three categories are excluded: Sub-Clause 4.19 charges (electricity, water, gas supplied to the Contractor), Sub-Clause 4.20 charges (use of the Employer's Equipment or free-issue materials), and amounts for other services the Contractor itself requested. These are routine, Contractor-acknowledged charges rather than disputed claims.
Who decides an Employer's claim once notice and particulars have been given?
The Engineer, under Sub-Clause 3.5 (Determinations), agrees or determines the amount and/or Defects Notification Period extension due. That determination is what entitles the Employer to deduct it in a Payment Certificate — not a unilateral figure the Employer sets itself.
Authoritative Sources
For the primary materials behind this guide, see:
- FIDIC Conditions of Contract — the official contract suite published by the International Federation of Consulting Engineers, which sets out the Sub-Clause 2.5 Employer's claims procedure referenced throughout this guide.
- NH International (Caribbean) v National Insurance Property Development Company — the Privy Council decision confirming that an Employer cannot set off or counterclaim without complying with Sub-Clause 2.5's notice-and-particulars procedure.
About the Author
Muhammad M. Jiwani is a Project Director with 15 years' experience on major infrastructure and energy projects administered under FIDIC contracts. He writes from first-hand experience serving notices and managing contractual claims on live projects.