Comment: Risk Allocation Norms of Civil Construction Contracts in Ethiopia

Author:Yohannes Eneyew Ayalew
Position:Yohannes Eneyew Ayalew, NFP Fellow in International Human Rights Law at Faculty of Law ( University of Groningen, The Netherlands); LL.M (Addis Ababa University) and LL.B (Wollo University). Formerly served as Lecturer and Head of School of Law at Samara University. E-mail: <eneyewyohannes@gmail.com>.
Pages:440-456
SUMMARY

Risk is any uncertainty in an industry including the construction sector. Claims and disputes arise when risks occur in construction projects. This comment discusses risk allocation under Ethiopian construction law and examines risks in civil construction contracts. The comment highlights the gaps in risk allocation norms under the standard format of construction contract that was issued by the... (see full summary)

 
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440
Risk Allocation Norms of Civil
Construction Contracts in Ethiopia
DOI http://dx.doi.org/10.4314/mlr.v11i2.9
Yohannes Eneyew Ayalew
Abstract
Risk is any uncertainty in an industry including the construction sector. Claims
and disputes arise when risks occur in construction projects. This comment
discusses risk allocation under Ethiopian construction law and examines risks in
civil construction contracts. The comment highlights the gaps in risk allocation
norms under the standard format of construction contract that was issued by the
Ethiopian Ministry of Work and Urban Development (MoWUD) in 1994. I argue
that MoWUD’s principles of risk allocation should be updated so that they can
include employer insurance and embody provisions that adequately regulate legal
risks which can arise from amendment of laws.
Key terms
Risk · Civil construction contract · FIDIC · MOWUD format · Employer ·
Contractor
____________
Introduction
Risk in the construction industry refers to any uncertainty.1 Whenever risks
occur in projects, claims and disputes arise.2 The modern understanding of risk
Yohannes Eneyew Ayalew, NFP Fellow in International Human Rights Law at Faculty of
Law ( University of Groningen, The Netherlands); LL.M (Addis Ababa University) and
LL.B (Wollo University). Formerly served as Lect urer and Head of School of Law at
Samara University. E-mail: <eneyewyohannes@gmail.com>.
The author is grateful to Mr. Zerihun Asgid, who read the initial draft and gave insightful
comments.
List of Acronyms:
FIDIC Fédération Internationale Des Ingénieurs-Conseils
MoWUD Ministry of Works and Urban Development.
1 Nael G. Bunni (2003), Risk and Insurance in Construction (Spon Press, 2nded). pp. 27-52.
2 Will Hughes, Ronan Champion and John Murdoch (2 015), Construction Contracts Law
and Management, (Routledge, 5th ed), p. 94.
COMMENT 441
presupposes accountability of subjects or institutions which err in their actions
or decisions under conditions of apparent uncertainty.3 Risk is understood as
intentional interaction with uncertainty. Uncertainty is a potential, unpredictable
and uncontrollable outcome; risk is a consequence of action taken in spite of
uncertainty.4
When one thinks about researching risk and related issues, the challenge of
which field of study to approach the issue from presents itself. Many of the
institutions that humanity has built, could be viewed as a way to address
uncertainty, including politics, religion, philosophy, technology, laws, ethics and
morality.5 Therefore, human wisdom has been capable of identifying patterns
for uncertainty and developing heuristics.6 As a result, whenever risk occurs,
every discipline devises its own solutions to prevent or minimize it.
Risk is usually recognized and accepted as inevitable and unavoidable in
every field of human endeavor.7 Conversely, there are also proponents of the
view that risk can be avoided. Irrespective of such variation in views,
identifying risk factors and solutions require advanced knowledge.8 As Greene
notes “any definition of risk is likely to carry an element of subjectivity,
depending upon the nature of the risk and to what it is applied. As such, there is
no all-encompassing definition of risk.”9
The Association for Project Management defined risk as “Any uncertain
event or set of circumstances that, should it occur, would have an effect on one
or more objectives”.10 In light of the elements of the definition given above,
risk could be any uncertain event or unpredicted situation, secondly, the said
event should at least happen, and finally the effect aspect the risk must have
impact on our objectives. Thus, as Association for Project Management notes,
3 Karin Zachmann (2014), “Risk in Historical Perspective: Concepts, Contexts, and
Conjunctions”, in C. Klüppelberg et al. (eds.), Risk – A Multidisciplinary Introduction,
(Springer), p. 3.
4 Ricardo Antunes et al (2015), A Production Model for Construction: a Theoretical
Framework, Buildings 5(1) 209-228, p. 209.
5 David Hillson (2006). The Risk Management Universe: A Guided Tour, British Standards
Institution. p.4.
6 Ignacio C. Spikin (2013), “Risk Management Theory: The integrated perspective and its
application in the public sector”, Estado, Gobierno, Gestión Pública, Nº21, pp. 89, 126
7 Ibid.
8 Brayn S. Shapiro (2005), Transferring Risks under Construction Contracts (SHK,
Vancouver, BC, Canada), p.2.
9 Adam Greene(2006), “A Process Approach To Project Risk Management”, Journal of
Business Economics and management, Vol. VII, No. 2, p.17.
10 Association for Project management (2000), Project Risk Analysis and Management, A
Guide (APM, 2nd ed.), p. 3.

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