Termination by Employer: FIDIC Clause 15.2 Notice Guide
The Contractor has ignored a notice to correct, the programme has stalled for months, and the Employer's board is asking why the Works have not simply been taken away from a Contractor that plainly is not performing. It sounds like a business decision. Under FIDIC it is a legal one, and getting it wrong is expensive: a termination that does not fit one of the six grounds in Sub-Clause 15.2, served the wrong way, can itself be treated as a repudiation — turning the Employer into the party in breach.
What Clause 15.2 Actually Gives the Employer
Sub-Clause 15.2 is the Employer's mirror to Clause 16 — where Clause 16 gives the Contractor grounds to act against a defaulting Employer, Clause 15 gives the Employer grounds to act against a defaulting Contractor. It sits alongside two related provisions that are easy to confuse with it.
Sub-Clause 15.1 comes first: a formal demand from the Engineer to remedy a specific failure within a reasonable time. It is not a termination in itself, but ignoring one is the most common route into 15.2. Sub-Clause 15.5, covered later in this guide, is a completely different power — termination for the Employer's own convenience, with no default required at all. Clause 15.2 sits between them: termination because the Contractor has done something specific enough to name.
Key Takeaway: Sub-Clause 15.2 lets the Employer terminate for a defined default by the Contractor. It is distinct from the Sub-Clause 15.1 notice to correct that often precedes it, and from the no-fault Sub-Clause 15.5 termination for convenience covered further down.
The Six Grounds for Termination Under Sub-Clause 15.2
Under the FIDIC 1999 Red Book, the Employer may terminate the Contract only if the Contractor:
- (a) fails to comply with the Sub-Clause 4.2 Performance Security, or with a notice issued under Sub-Clause 15.1.
- (b) abandons the Works, or otherwise plainly demonstrates an intention not to continue performing its obligations.
- (c) without reasonable excuse, fails to proceed with the Works in accordance with Clause 8, or fails to comply with a notice under Sub-Clause 7.5 (Rejection) or 7.6 (Remedial Work) within 28 days of receiving it.
- (d) subcontracts the whole of the Works, or assigns the Contract, without the agreement the Contract requires.
- (e) becomes bankrupt or insolvent, goes into liquidation, or suffers an equivalent event under the applicable law.
- (f) gives or offers a bribe, gift, gratuity, commission, or other thing of value as an inducement or reward connected with the Contract.
Grounds (a) and (c) are the ones with a built-in warning: both typically depend on the Contractor having already ignored an earlier notice — a 15.1 notice to correct, or a 7.5/7.6 notice — rather than a first-time failure. Grounds (b) and (d) are conduct the Employer can point to directly. Grounds (e) and (f) are treated differently again, for reasons the next section explains.
Key Takeaway: Six grounds, not a general dissatisfaction test. Name the specific lettered ground in the notice — (a) through (f) — and, for grounds (a) and (c), be ready to show the earlier notice that was ignored.
The Termination Notice — 14 Days, or Immediate for Two Grounds
For grounds (a) through (d), the Employer must give the Contractor 14 days' notice before termination takes effect. That window is not a formality — it is often the last practical chance for the Contractor to remedy the default, or for the parties to agree a way forward, before the Contract actually ends.
For grounds (e) and (f) — insolvency and corruption — the Employer may terminate immediately, by notice, with no waiting period. An insolvent counterparty or one implicated in bribery is not a relationship a 14-day cure period is designed to save.
Key Takeaway: Fourteen days for grounds (a)–(d), immediate for (e) and (f). Name the exact ground and, where one exists, the earlier notice it built on — a termination notice that reads as a general complaint about performance is the easiest one to challenge later.
What Happens After Termination: Sub-Clauses 15.3 and 15.4
Termination ends the Contract, but it does not end the paperwork. Under Sub-Clause 15.3, the Engineer values the work done, Goods on Site, and Contractor's Documents as at the date of termination — this valuation is the starting point for what, if anything, the Contractor is eventually paid.
Sub-Clause 15.4 gives the Employer the stronger hand at this stage. The Employer may withhold further payment to the Contractor until the cost of completing the Works and any damages the Employer has suffered are established, then recover those costs and damages from the Sub-Clause 15.3 valuation. Only after that recovery, if a balance remains, is it paid to the Contractor. If the Employer's costs of completion and damages exceed the valuation, the Contractor owes the difference.
Key Takeaway: The Contractor is not paid the 15.3 valuation up front. The Employer withholds payment until its own completion costs and damages are established, recovers those first, and pays only the remaining balance — which can be zero, or negative.
Termination by Employer vs Termination for Convenience
A search for "termination by Employer" often turns up two very different clauses, and mixing them up is a costly mistake in either direction. Sub-Clause 15.2, covered above, requires a default — one of the six named grounds — and is followed by the withhold-and-recover payment mechanism in Sub-Clause 15.4.
Sub-Clause 15.5 is a separate, no-fault power: the Employer may terminate the Contract at any time, for its own convenience, on 28 days' notice, without alleging any Contractor default at all. The trade-off is that Sub-Clause 15.5 cannot be used to hand the unfinished Works to another contractor, and the payment the Contractor receives is calculated differently — closer to a fair valuation of work done, without the deductions and set-offs that make a 15.2 termination so much harder on the Contractor's cash position.
Key Takeaway: 15.2 needs a default and one of six named grounds; 15.5 needs none, but forbids re-engaging another contractor to finish the Works and pays the Contractor on a fairer basis. Cite the wrong clause and the termination itself becomes the dispute.
How the FIDIC 2017 Second Edition Changes This
The substance of the six grounds carries over largely unchanged into the 2017 Second Edition, and the revised Contract makes the corrupt-practices ground more explicit. What changes most is procedure.
For most grounds, 2017 splits the process into two notices: a Notice of Intention to Terminate, which gives the Contractor a further opportunity to remedy the default, followed by a formal Notice to Terminate once that opportunity has passed without a cure. Insolvency and corruption remain the exceptions — the Employer can proceed straight to an immediate Notice to Terminate, without the intermediate step. Confirm which edition governs before following the 1999 sequence above.
Key Takeaway: FIDIC 2017 keeps the same six grounds but adds a Notice of Intention to Terminate ahead of the formal Notice to Terminate for most cases — insolvency and corruption still allow the Employer to go straight to termination.
Common Mistakes That Undermine an Employer's Termination
- No named ground. A notice complaining generally about poor performance, rather than citing (a) through (f), gives the Contractor an easy line of attack.
- Skipping the 15.1 step. Terminating under ground (a) or (c) without ever having served the notice to correct or the 7.5/7.6 notice that ground depends on.
- Terminating early. Ending the Contract before the 14-day period has run, for grounds that require it.
- Confusing 15.2 with 15.5. Citing a default that will not hold up, when a clean Sub-Clause 15.5 termination for convenience would have achieved the same practical outcome without the fight over grounds.
- A thin paper trail. The termination rests on dates and documents — the 15.1 notice, the remedy deadline, evidence the failure continued — not on how frustrated the Employer's team has become.
Key Takeaway: Most challenged terminations fail on sequence and evidence, not on whether the Contractor was actually underperforming. Name the ground, serve any required precursor notice, let the 14 days run, and keep a dated record of every step.
Frequently Asked Questions
Can the Employer terminate a FIDIC contract without warning?
For most grounds, no. Sub-Clause 15.2 requires 14 days' notice before termination takes effect, and grounds (a) and (c) usually depend on an earlier Sub-Clause 15.1 notice to correct having already been given and ignored. Only grounds (e) bankruptcy or insolvency, and (f) bribery or corruption, allow the Employer to terminate immediately, with no notice period at all.
What is the difference between terminating under Clause 15.2 and Clause 15.5?
Sub-Clause 15.2 terminates for the Contractor's default and requires citing one of six specific grounds. Sub-Clause 15.5 lets the Employer terminate for its own convenience at any time, for any reason, on 28 days' notice — but it cannot be used to hand the Works to another contractor, and the payment due to the Contractor is calculated differently, without the penalties a default termination can attract.
Does the Contractor get paid after the Employer terminates under Clause 15.2?
Yes, but the Employer pays last, not first. Under Sub-Clause 15.3 the Engineer values the work done, Goods, and Contractor's Documents. Under Sub-Clause 15.4 the Employer may withhold payment until its own costs of completing the Works and any damages are established, recover those costs and damages from the valuation, and pay the Contractor only the balance, if any remains.
Do the Clause 15.2 grounds change under FIDIC 2017?
The substance carries over largely unchanged, and the 2017 edition adds an explicit corrupt-practices ground. The procedure changes more: for most grounds the Employer must first give a Notice of Intention to Terminate, allowing a further chance to remedy, before a formal Notice to Terminate follows. Insolvency and corruption remain grounds for an immediate Notice to Terminate, with no intermediate step.
Can the Employer terminate just because the Contractor is behind programme?
Not on its own. Being behind programme is not itself one of the six grounds. It becomes relevant only if it amounts to abandoning the Works, a plain refusal to continue, or a failure to proceed in accordance with Clause 8 without reasonable excuse — and even then, grounds (a) and (c) typically require a prior Sub-Clause 15.1 notice to correct that the Contractor has failed to satisfy.
Authoritative Sources
This guide reflects the FIDIC Conditions of Contract and established construction-law authority:
- FIDIC Conditions of Contract — the official contract suite published by the International Federation of Consulting Engineers, setting out the Clause 15 termination provisions.
- Obrascon Huarte Lain SA v HM Attorney General for Gibraltar — the leading authority on the validity of the Sub-Clause 15.1 notice to correct that grounds (a) and (c) of a 15.2 termination often depend on.
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.