Legal Framework of Administrative Contrats-Cape Verde

LEGAL FRAMEWORK OF ADMINISTRATIVE CONTRACTS CAPE VERDE Decree-Law nยบ50/2015, 23 September

Fevereiro de 2017

LEGAL FRAMEWORK OF ADMINISTRATIVE CONTRACTS (LFAC) Decree-Law 50/2015, of 23 September 2015 This statute enacts the Legal Framework of Administrative Contracts (LFAC), which establishes the regime applicable to the substantive regime of contracts of an administrative nature. It is therefore a regime to some degree subsequent to the Public Procurement Code: while the latter regulates the precontractual procedure, the LFAC governs the performance of the contract and associated vicissitudes.

The LFAC is the first statute in the Cabo-Verdean legal system addressing the administrative contracts regime in a consolidated and organized manner therefore representing a landmark in the evolution of national administrative law. As is the case of the Public Procurement Code for the contract formation stage, so the LFAC gives a new order and consolidates the substantive regimes of administrative contracts which to this date were scattered in the law or the contracts’ clauses.

On the one hand, the LFAC comprises a body of rules common to all administrative contracts and on the other hand specifically regulates the legal regime of certain contractual types such as public works and public utilities concession, public works contracts, purchase and lease of personal property and procurement of services.

In Part I of the Regime, administrative contracts in general, the first note is the concern for preservation of the specificity of administrative contracts, as follows: (i) a concern for the idea of public interest (for instance, in amendments to and termination of the contract); (ii) powers of the public party during the performance of the administrative contract; (iii) creation of special rules for any events of default of the public party; (iv) introduction of rules directly or indirectly addressing risk sharing between the parties.

Regulation in Part I also assigns greater responsibility to all those intervening in the administrative contractual relations. Rules were therefore created to foster the proper management of financial resources (such as rules concerning pre-payments and price update and release of securities) and rules on liability sharing during the performance stage (particularly noteworthy in this regard: the contractual breach, assignment and subcontracting regimes).

A title on concessions opens Part II of the Regime, Contracts in particular. It should be noted that the concession contract’s general provisions apply on a subsidiary basis to the concession contract for the exploitation of public domain assets.

The regulations applicable to concessions is driven by versatility to be consistent with the various types of possible concessions.

The following general regime aspects stand out: i) the contract must entail a significant and effective transfer of the risk to the concessionaire; ii) the rights and obligations of the grantor and the concessionaire are clarified; iii) a uniform regime of sequestration, redemption and termination by the grantor.

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It should be noted that determination of specific aspects of one or other concession contractual type is not warranted. Together, the general concession provisions and part I of the Code end up foregoing a more exhaustive regulation.

Regarding the public works contract, one of the main concerns in the alteration of its regime is embodied in the control of public spending. A new system to control costs and performance of public works was consequently designed which notably entailed the regulation of the additional works regime in addition to amendments to curtail free additions to the works and the subsequent and inevitable cost increases.

As such, this new system of cost control in the performance of public works contracts is aimed not only at preventing significant financial slippage between the initial value of the contract and the final value of the public works but also at promoting a culture of greater accountability of the main entities intervening in a public works contract.

It is also important to underline the fact that the percentage of construction fee contract has been eliminated, and the traditional trichotomy of “lump sum contract, unit price contract or percentage of construction fee contract� was abandoned. The former percentage of construction fee contract legal regime resulted in contractor's risk being substantially limited, since the latter did not have to fear any price fluctuations of inputs by virtue of the vicissitudes inherent to that type of contract. To that extent, it was very obvious and patent that the percentage of construction fee contract did not seek to stimulate the contractor for the swift, efficient and effective execution of the works, by virtue of the security afforded regarding price fluctuations of the works' inputs, and that was why that type of contract was eliminated.

Moreover, it was established that the legal regime required other amendments so as to better observe the regulations deemed as more adequate and in line with the public works market and of all its economic and legal operators.

Decree-Law 54/2010 was therefore overhauled and the amendments enshrined in this statute following a long preparation period during which several distinct entities were heard with recognized experience in the sector, and all their suggestions were taken on board and some of the foreseen solutions tested.

Regarding purchase and lease of assets and acquisition of services, the first topic that must be noted has to do with the inclusion of personal property purchase, asset lease and services contracts in the list of legally established administrative contracts. All contracts of that type executed by a public party shall be considered administrative contracts and observe the special regime provided for herein.

In that sense, a small body of special rules is enshrined applicable to contracts with this purpose, notably rules on compliance of the assets to be supplied, obligations of the supplier regarding delivered assets and termination by the public party.

Also provided for is a (more ample) body of special supplementary rules applicable to the performance of this type of administrative contracts.

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Lastly, the provisions in the law on aspects relating to the sale of consumption goods is extended to these personal property purchase contracts, which now places the public party in the same position as the consumer.

As for personal property lease contracts that are administrative in nature a set of special mandatory rules is established relating to the lease regime provided for in the Civil Code: (i) late payment damages to the public party; (ii) assignment of use and sublease of the leased asset; (iii) termination by the public party, where a special three-month deadline for the late compliance with lessor's maintenance or repair obligations is established. Also, a set of repair and maintenance obligations of the private lessor is established.

And the regulation of the services agreement is essentially based on a cross reference, mutatis mutandis, to the provisions in personal property purchase contracts.

Public consultation was held during the period running between 15 and 30 April 2013.

The following were heard: the Public Procurement Regulator Authority, the Ministry of Finance and Planning (through the Directorate General for Property and Public Procurement and the Treasury General Inspectorate), the Centralized Procurement Management Unit, the Ministry of Infrastructure and Maritime Economy (through the Directorate General for Infrastructure and the Public and Private Works General Inspectorate), the Audit Court, the Agency for Corporate Development and Innovation, Imobiliรกria Fundiรกria e Habitat, S.A., National Association of Cabo-Verdean Municipalities, the CaboVerdean Construction Companies Association, the Chambers of Commerce, professional associations, the Association of Young Entrepreneurs of Cabo-Verde and the Cabo-Verdean Construction Association (ACEC).

Now, therefore; By the powers vested in it under Article 204.2(a) of the Constitution, the Government decrees as follows:

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PART I ADMINISTRATIVE CONTRACTS IN GENERAL TITLE I General provisions Article 1 Purpose The purpose of this statute is to define the rules applicable to the substantive regime of administrative contracts without prejudice to the provisions in special laws.

Article 2 Public parties The following are public parties: a)

The State and the departments comprising Central Government;

b)

Local Government;

c) Public Institutes, irrespective of their autonomy degree, including Public Foundations and Regulatory Entities; d) State-Owned Companies that pursuant to the law comprise the state´s or local government’s corporate sector; e) Public Associations, Associations of Public Entities, or Associations of Public and Private Entities mainly funded by the entities listed in this Article or subject to their management control; f)

Public utilities concessionaires regarding the execution of public works contracts; and

g)

Entities executing agreements within the scope of materially administrative duties.

Article 3 Scope

1. Contracts executed by public parties shall be subject to the provisions in this statute, regardless of their form or name, including, among others, the following contracts: a)

Public works contract;

b)

Supply or lease of personal property

c)

Services supply;

d)

Public works concession;

e)

Public utilities concession.

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2. The provisions in Part I of this statute shall apply on a subsidiary basis to administrative contractual relations specifically regulated in this statute, the Public Procurement Code or any other law, save where the specificity of the type of contract removes the grounds for the relevant field.

3. The regime provided for in this statute does not apply to the following contracts: a) Contracts executed between the State of Cabo Verde and third countries, entities of foreign governments or intergovernmental institutions under an international agreement for the implementation or joint exploitation of any given project; and b) Contracts executed under the specific rules of any international organization of which Cabo Verde is a member.

4. Rules in this statute that are not contrary to the special nature of the contracts set out in the preceding paragraph may apply mutatis mutandis to those contracts.

Article 4 Subsidiary law Other administrative law rules or, in lack thereof, civil law, shall apply mutatis mutandis to administrative contractual relations regarding any matters on which this law or special law is silent or that cannot be regulated by general administrative law principles.

TITLE II Shape of the contractual relationship Article 5 Powers of the public party Save where otherwise required by the nature of the contract or the law, the public party may on the terms of the provisions of the contract and this law: a)

Direct how the supplies shall be performed;

b)

Supervise the performance of the contract;

c) Unilaterally modify the clauses on content and manner of performance of the supplies provided for in the agreement for reasons of public interest; d) Assess penalties in the event of breach or non-performance of the contract by the counterparty; e)

Unilaterally terminate the agreement.

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Article 6 Powers of direction and supervision 1. The public party shall ensure that the performance of the contract allows for achieving the underlying public interest by exercising its powers of direction and supervision.

2. The exercise of the powers of direction and supervision by the public party must: a) Be limited to what is strictly necessary to achieve the public interest, respecting the autonomy of the counterparty; b) Be made so as not to disrupt the performance of the agreement, observing the applicable legal or contractual rules.

3. The responsibility and the risk taken on by the counterparty regarding contract performance are not removed or mitigated by the exercise of the powers of direction and supervision of the public party.

Article 7 Power of direction 1. The public party has the power to direct the performance of the supplies of the counterparty in matters that are not regulated or insufficiently regulated so as to prevent the contract form being performed in a manner that is inconvenient or improper for the public interest.

2. The public party exercises the power of direction without prejudice to the provisions in Article 6.2 and the reserve of the autonomy of the counterparty which is ensured in the contract or arises from the applicable contractual type.

3. In addition to the actions typified in the contract, the public party exercises the power of direction by issuing written orders, directives or instructions in connection with the scope of the choices necessary regarding technical, financial or legal performance of the contractual supplies.

4. Where in light of the circumstances, the orders, directives or instructions are issued verbally, they must be set to writing and served on the counterparty within five days save in the event of justifiable reason.

Article 8 Power of supervision 1. The public party or anybody the latter may appoint for this purpose shall be vested with powers of supervision over the performance of the contract, which they will exercise so as to determine the corrections needed and apply the penalties required.

2. Supervision may occur notably through inspection of sites, equipment, documentation, computer files and accounts or by means of information requests without prejudice to the provisions on professional or business secrecy and the regime applicable to other legally protected information.

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3. Supervision actions performed shall be recorded in official records, reports or other books.

Article 9 Representations of the public party 1. The following representations of the public party are administrative acts in nature: a)

The exercise of the powers of direction and supervision;

b)

The unilateral amendment of the contract for reasons of public interest;

c)

The assessment of penalties due to non-performance of the contract;

d)

Unilateral termination of the contract.

2. The representations of the public party regarding interpretation, validity or performance of the contract that are not included in the preceding paragraph correspond to mere business statements.

3. In the absence of an agreement between the parties regarding the matters set out in paragraph 2, the administrative court with jurisdiction shall decide within proceedings to be brought by either party without prejudice to any possible arbitration clause.

4. The provisions in this Article shall be without prejudice to the application of general civil law provisions on bilateral agreements, save where those provisions were waived by the express will of the parties.

Article 10 Formation of the public party’s administrative acts 1. Formation of administrative acts issued within the exercise of the powers of the public party shall not be subject to the processing regime established in the General Framework of the Non-Judicial Administrative Procedure except for acts of assessment of the liquidated damages by means of an administrative act, which is subject to a pre-hearing of the counterparty according to Article 24 of the General Framework of the Non-Judicial Administrative Procedure.

2. Without prejudice to the provisions in Article 10.1, the public party may waive the pre-hearing conference where the penalty to be assessed is of pecuniary nature and is secured by a first demand bank guarantee or equivalent instrument, provided that there is well-founded fear that the enforcement of the guarantee will be thwarted by the hearing.

Article 11 Enforceability of administrative acts 1. Administrative acts of the public party in connection with the performance of the contract are an enforceable title.

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2. The public party may not compulsory impose the fulfilment of the obligations determined by the administrative acts specified in Article 11.1 save in the event of acts determining the termination of the contract, the sequestration and redemption of concessions and other events provided for by law.

TITLE III Performance of the contract Article 12 Payment 1. Save where otherwise provided for in the contract, the pecuniary obligation shall become due and payable without further notice within: a) Thirty (30) days as from the date when the public party received the invoice or equivalent document; b) Thirty (30) days as from the date of actual receipt of the goods or supply of the services where the date of receipt of the invoice or equivalent document cannot be determined; c) Thirty (30) days as from the date of actual receipt of the goods or supply of the services where the public party receives the invoice or equivalent document prior to the supply of the goods or of the services; d) Thirty (30) days as from the date of acceptance or verification where a process is foreseen to determine the compliance of goods and services and the public party receives the invoice or equivalent document on a prior date.

2. Save in the case of well-founded contractual provision to the contrary, the procedure of acceptance or verification set out in subparagraph (d) above may not exceed thirty days.

3. Where the contract sets forth a date or payment deadline for the public party, these shall occur within thirty days following delivery of the respective invoices which can only be issued after the obligation they pertain to has become due and payable.

4. The contract may establish a different deadline from that set out in the preceding paragraph which shall in no event exceed sixty (60) days.

Article 13 Price update Without prejudice to the rules applicable to the reinstatement of the contract’s financial balance and ordinary price update, prices may only be updated if provided for in the contract; in which case the contract must also provide for the relevant terms, notably manner of calculation and periodicity.

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Article 14 Premiums for early compliance 1. The public party may grant premiums to the counterparty for early compliance of the supplies contemplated in the contract save where not permitted by the nature of the contract or the law.

2. The contract must regulate the possibility to grant the premiums set out in the preceding paragraph and the conditions for their grant and respective value.

Article 15 Price advances 1. Where the contract provides for payment of a price by the public party, the latter may make advance payments on account of the supplies to be provided or of preparatory or ancillary acts of those supplies where: a)

Expressly provided for in the contract;

b)

The amount of advances does not exceed thirty per cent (30%) of the contract price; and

c) A security of equal or greater amount than the advances made is provided, and Articles 104 and 107 of the Public Procurement Code shall apply mutatis mutandis.

2. Without prejudice to the provisions in the preceding paragraph, if the expenditure associated with the contract should be incurred over the course of one economic year, the public party may only make advance payments where until the end of the economic year in which the advance payments are made, supplies are performed or preparatory or ancillary acts are performed in an amount equal to or greater than the advanced amounts.

3. In exceptional cases and upon reasoned decision of the body with authority to authorize the expense, advances can be made without the conditions provided for in the preceding paragraphs being met.

4. In the absence of contractual provisions, advances shall be allocated to the contractually foreseen payments.

5. The contract must determine the concrete terms of the allocation referred to in the preceding paragraph.

Article 16 Supplementary guarantee of advance payments Where the advance payment is made by reason of a contractually imposed allocation of moveable assets to the counterparty’s business, the public party shall enjoy a special, first-ranking personal property lien on the assets envisaged by the advances and the counterparty may not dispose of those assets or encumber or unallocate them from the performance of the agreement without the public party’s prior consent in addition to any other guarantees due.

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Article 17 Release of security 1. The contract shall establish the regime for releasing securities provided by the counterparty in accordance with the provisions in the following paragraphs.

2. The security to guarantee advance payments shall be released stepwise, as the supplies corresponding to the advance payment by the public party are performed.

3. The security to guarantee the correct and prompt performance of the contractual obligations shall be released in accordance with Article 109 of the Public Procurement Code.

4. Release of the security is subject to the non-defective performance of the counterparty or correction of any defects detected up to the moment of release without prejudice to the public party being able to decide otherwise, namely if it considers that the defects identified and not corrected are negligible and do not justify non-release.

5. Once the deadline set for release of the security has elapsed without release, the counterparty may notify the public party to comply with the obligation to release the security.

6. If the public party does not comply with the obligation to release the security within fifteen (15) days following notice to that effect, the counterparty may promote the partial or full release of the security.

7. The counterparty is entitled to be compensated for any costs it may have incurred by virtue of full or partial delay in the release of the security, namely any additional costs incurred by it in maintaining the security for a period longer than required.

Article 18 Call of the security 1. Without the need for prior judicial or arbitral decision, the public party may call the securities provided by the counterparty for purposes of satisfying any amounts due by reason of the counterparty’s failure to comply with the legal or contractual obligations, notably the following: a)

Pecuniary penalties assessed on the terms provided for in the contract;

b)

Losses suffered by the public party by reason of breach of the contract;

c)

Amounts provided for in the agreement by way of penalty clauses.

2. The counterparty is under the obligation to renew the amount arising from the full or partial enforcement of the security provided within fifteen (15) days following notice by the public party to that effect.

3. In the event the public party unduly calls the security, the counterparty is entitled to damages for any resulting losses.

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Article 19 Suspension of contract performance Either party may fully or partially suspend the performance of the supplies comprising the purpose of the contract on the following grounds: a) Temporary impossibility of performance which may notably arise from the delay of the public party in delivering or providing the resources or assets required for the performance; or b)

Exception of non-compliance of the contract.

Article 20 Resumption of contract performance

1. As soon as the events that determined the suspension of the contract cease, the public party shall notify the counterparty in writing to resume performance of the supplies comprising the purpose of the contract.

2. Full or partial suspension of the performance of the supplies comprising the purpose of the contract shall entail extension of the performance period for an equal period to that initially set out in the contract for its performance, plus the period strictly necessary to organize the means and performance of preparatory or ancillary works with a view to resuming performance.

3. The party to which the suspension event is attributable shall not benefit from the derogation set forth in paragraph 2.

TITLE IV Reinstatement of the contract’s financial balance Article 21 Reinstatement of the contract’s financial balance Article 1. Reinstatement of financial balance shall only occur as provided for by law or the contract, pursuant to the following paragraphs.

2. Without prejudice to the provisions in Article 21.1, the counterparty is only entitled to reinstatement of financial balance where, considering risk sharing between the parties, the fact alleged as the reason for that entitlement changes the premises based on which the counterparty established the value of the supplies it undertook, provided that the public party was aware or could not have been unaware of those premises.

3. Reinstatement of financial balance is effective from the date of occurrence of the fact that changed the premises set out in Article 21.2 and is sole, complete and final for the entire contract term as regards that fact, notwithstanding that it can be partially accepted where any specific effects of the relevant event are not liable to immediate evaluation or where the parties disagree on its existence, scope or quantification.

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4. In the event there is no contractual provision, reinstatement of financial balance: a) Is made notably through extension of the deadline to perform the supplies or the term of the contract, price update or the public party taking on the obligation to provide to the counterparty the amount corresponding to the decrease in expected revenue or increase of the charges anticipated in connection with contract performance; and b) It has a value corresponding to that required to reinstate the financial proportion on which the contract was initially based, calculated in accordance with the supplies to which the parties committed and the effects resulting from the event that triggered the right to reinstatement.

5. Reinstatement of financial balance may not leave either party in a situation that is more favorable than that resulting from the financial balance initially established and may not cover any losses arising from that balance or inherent to contract-specific risks.

TITLE V Objective amendments to the contract Article 22 Objective amendments to the contract 1. The contract may be amended: a)

By agreement between the parties, in a form not less solemn than that of the contract;

b)

By court or arbitral decision;

c)

By an administrative act of the public party where the reason alleged is public interest related.

2. The amendment of the contract may occur: a) Where the circumstances on which the parties based their decision to enter into a contract suffered an abnormal and unforeseeable alteration, provided that the enforceability of the obligations it undertook is not covered by contract-specific risks; b) For reasons of public interest arising from new requirements or new appraisal of existing circumstances.

3. The amendment to the contract may not entail an alteration of its purpose nor in any way prevent or distort the competition guaranteed by the provisions in the Public Procurement Code on contract formation.

4. For purposes of the provisions in the preceding paragraph, amendments that do not arise from a supervening change in circumstances shall only be allowed where it is demonstrable that the order of bids evaluated in the contract formation procedure would not have been altered if the tender specifications had contemplated that modification save where the long-term nature of the contract and the course of time so warrant.

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Article 23 Contract amendment consequences 1. In the event of amendments to the contract, the counterparty shall be entitled to the reinstatement of the financial balance in accordance with the criteria established in this statute provided that the amendment is based on: a) An abnormal and unforeseeable change of the circumstances arising from a decision of the public party adopted outside the scope of its powers to shape the contractual relationship that has a concrete impact on the counterparty’s contractual situation; or b)

For reasons of public interest.

2. An abnormal and unforeseeable change in circumstances not provided for in subparagraph (a) above shall entitle the party to an amendment to the contract or financial compensation in accordance with equity criteria.

Article 24 Publicity duty The public party must publicize through the proper publication means the administrative acts of the public party or agreements between the parties entailing any objective amendments to the contract and representing an aggregate value greater than fifteen per cent (15%) of the contract price, and publicity shall me maintained up to six (6) months following expiry of the contract.

TITLE VI Subjective amendments Article 25 Corporate changes Where the counterparty must be incorporated as a company, the contract may subject any amendments to the company’s articles of incorporation to the public party’s authorization, or the disposal or encumbrance of shares in the respective share capital.

Article 26 Assignment of rights and obligations under the contract and subcontracting 1. The assignment of rights and obligations under the contract and subcontracting are allowed subject to the provisions in the next paragraphs, save where the contractual provision or the nature of the contract establish otherwise.

2. The counterparty may not assign its rights and obligations under the contract or subcontract where: a) The counterparty was chosen by direct award, in those cases where only one entity may be invited;

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b) The prospective assignee or subcontractor is an entity covered by the grounds for exclusion provided for in Article 70 of the Public Procurement Code; c) There is strong evidence that the assignment of rights and obligations under the contract or the subcontracting are the result of acts, agreements, practices or information liable to distort competition rules.

3. In the event of subcontracting, the limitation established in Article 26.2(a) shall be restricted to contractual supplies that underpinned the direct award.

4. In the instances set out in Article 26.2(c) the public party shall immediately notify the relevant competition authority and, regarding works contracts and public works concessions, the entity with authority to inspect public and private works of such evidence of acts, agreements, practices or information liable to distort competition rules.

Article 27 Authorization of assignment and subcontracting by the counterparty 1. The assignment of rights and obligations under the contract and subcontracting may be authorized in the contract regarding entities identified therein.

2. During the performance of the contract, the assignment of rights and obligations under the contract and subcontracting shall be subject to the public party's authorization upon submission by the counterparty of a founded proposal attaching all documents supporting fulfilment of any requirements for authorization of the assignment and subcontracting in the contract itself pursuant to paragraphs 5 and 6.

3. The public party shall issue its opinion regarding the counterparty’s proposal within thirty (30) days from submission provided that it attaches all proper documents.

4. If the public party does not issue an opinion within the deadline provided for in the preceding paragraph, the request shall be deemed rejected; if a new request is submitted and the public party issues no opinion, the request shall be deemed tacitly approved.

5. Authorization of assignment of the rights and obligations under the contract is in any way subject to: a) Previous production of the qualification documents relating to the prospective assignee that are required from the assignor at the relevant contract's formation stage; b) Fulfilment by the prospective assignee of the minimum technical and financial capacity requirements also applicable to assignee for qualification purposes where this occurred at the relevant contract’s formation stage.

6. Authorization of the subcontracting is in any way subject to: a) Previous production of the qualification documents relating to the prospective subcontractor that are required from the contractor at the relevant contract's formation stage; 14

b) Fulfilment by the prospective subcontractor of minimum technical or financial capacity requirements where the contract expressly subjects subcontracting to the evaluation of both or any one of those capacities.

7. The contract may prohibit subcontracting of certain contractual supplies or supplies which aggregate value exceeds a certain percentage of the contract price.

8. The contractual prohibition established in the preceding paragraph may not operate to restrict, limit or distort competition as ensured by the Public Procurement Code in respect of contract formation and it may not, among other things, limit the possibility of using any third-party technical capacity deemed essential for purposes of qualification of the counterparty.

9. Whenever the prospective subcontractor is qualified and has the technical and financial capacity set out in Article 26 and the limits in Article 26.2 through 26.4 are observed, the public party may only reject subcontracting within the contract or withhold its authorization at the performance stage where there is well-founded fear that the subcontracting will involve an increased risk of breach of the obligations arising from the contract.

Article 28 Liability of the counterparty In the event of subcontracting, the counterparty shall remain fully liable towards the public party for the proper and prompt compliance of all obligations in the contract.

Article 29 Assignment of rights and obligations under the contract by the public party The counterparty may only withhold consent for the assignment of the public party’s rights and obligations under the contract if there is a well-founded fear that the assignment will involve an increased risk of breach of the obligations arising from the contract by the prospective assignee or decrease of the counterparty's guarantees.

Article 30 Step in and step out rights 1. In the event of serious breach by the counterparty of the contractual obligations undertaken towards the public party or any third parties with whom the counterparty executed subcontracts crucial for the achievement of the contract’s purpose, the financers may, subject to the public party’s authorization and on contractually established terms, step in to ensure the continuity of the supplies contemplated therein, pursuant to legal rules governing the activity underlying the relevant supplies.

2. The provisions in Article 30.1 shall only apply provided that there is a threatened breach or the requirements for the public party to terminate the contract or third parties to terminate any subcontracts are met.

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a) Transfer of corporate control of the counterparty to the financers or any entity designated by the financers; b) Assignment of the counterparty’s rights and obligations under the contract to the financers or any entity designated by the financers.

4. In the instances provided for in Article 30.3(b), the rights and obligations of the counterparty under any executed subcontracts shall be automatically transferred to the financers or any entity they designate, and then again to the counterparty upon expiry of the step-in period, where applicable.

TITLE VII Breach of the contract Article 31 Breach by the counterparty 1. In the event of total or partial breach by the counterparty of its contractual obligations ascribable to it, the public party shall notify it to comply within a reasonable deadline, save where compliance has become impossible or the public party has lost interest in the supply.

2. If, on expiry of the deadline provided for in Article 31.1 the counterparty is still in default, the public party may opt for: a)

Perform the outstanding fungible supplies directly or through a third party, or

b)

Terminate the contract based on fundamental breach pursuant to Article 39.

3. If the public party chooses to perform the fungible supplies through a third party, the provisions in the Public Procurement Code shall apply to the contract formation with that third party.

4. In case of performance of fungible supplies directly by the public party or through a third party, costs reasonably incurred by the public party with the supply shall be borne by the counterparty.

5. The provisions in the preceding paragraphs shall be without prejudice to the assessment by the public party of the penalties provided for in the contract in case of breach by the counterparty ascribable to it, nor to the enforcement of the provisions relating to the obligation to compensate damages arising from late payment and fundamental breach.

Article 32 Delays in payments 1. If the public party is late in discharging its pecuniary obligations, it must pay late payment interest to the counterparty on the outstanding amount at the rate legally established for that purpose for the period corresponding to the late payment.

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2. The obligation to pay late payment interest becomes due and payable automatically without the need for further notice, as applicable, once the pecuniary obligation has become due and payable pursuant to Article 12.1 or once the deadline established in Articles 12.3 and 12.4 has elapsed.

3. Contractual clauses excluding liability for late payment shall be null and void, as shall any contractual clauses that limit liability for late payment without any reasonable and justified ground considering the circumstances.

Article 33 Exception of breach of contract 1. In the event of breach by and attributable to the public party of provisions in bilateral agreements the counterparty may claim the exception of breach of contract instead of terminating the contract.

2. To that end, the counterparty shall previously notify the public party of its intention to apply the exception of breach of contract and relevant grounds no less than fifteen (15) days prior, unless the contract stipulates a different deadline.

3. Should the refusal to comply referred to in the preceding paragraphs seriously harm the public interest underpinning the legal contractual relation, the counterparty may only claim the exception of breach where the discharge of the contractual obligations manifestly jeopardizes the economic and financial viability of the counterparty or is unreasonably burdensome, and in this latter case the existing public and private interests must be duly weighted.

4. Claim of exception of breach is deemed not to seriously harm the public interest where the public party within fifteen (15) days as from the notice in Article 33.3 fails to acknowledge by means of reasoned resolution that the refusal to comply would be seriously harmful to public interest.

Article 34 Right of retention The provisions in Article 34 shall apply, mutatis mutandis, to the claim to right of retention by the counterparty.

Article 35 Liquidated damages 1. In the event of breach by the counterparty, the public party may, as a penalty, terminate the contract and assess the penalties provided for in the contract or by law, pursuant to this statute.

2. If the penalties set out in Article 35.1 are pecuniary in nature their aggregate value shall not exceed fifteen per cent (15%) of the contract price without prejudice to the right to terminate the contract as provided for in the next chapter.

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3. If the threshold provided for in Article 35.2 is reached and the public party decides not to terminate the agreement as it could cause serious damage to public interest, the threshold shall be increased to thirty per cent (30%).

Article 36 Force majeure 1. The public party and the counterparty may not be held liable for failure to perform or the defective performance of any obligations undertaken under the contract where and to the precise extent that it results from the occurrence of an extraordinary or unforeseeable event beyond the will or control of the public party or the counterparty, including without limitation, war whether or not declared, riots, civil uprising, acts of God, national general strikes, fire, floods, explosions, governmental acts or any other events beyond the parties’ control that prevent or impair the compliance of the obligations undertaken under this Contract.

2. Whenever a force majeure event occurs pursuant to Article 36.1, the public party or the counterparty as applicable shall notify the counterparty accordingly within five (5) days as from the date they became aware of the occurrence of the event.

3. Where the force majeure event definitely prevents compliance with the contract by either party it shall be terminated, and no damages for breach shall be payable.

TITLE VIII Contract expiry Article 37 Expiry events The contract may expire by reason of: a)

Full discharge, impossibility and other grounds for extinction of obligations set forth in civil law;

b)

Cancellation;

c) Termination by court or arbitral decision, declaration of the counterparty to the public party, or decision of the public party in the instances provided for in Article 39.

Article 38 Cancellation 1. The contract may be cancelled at all times by agreement between the parties. Cancellation must be made in a form at least as solemn as the contract itself.

2. The consequences of cancellation are validly established in the agreement.

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Article 39 Termination by the public party 1. The public party may terminate the agreement in the event of serious breach of the contractual obligations set forth in the agreement by the counterparty and in the following instances without prejudice to the right to damages: a)

Reasons of public interest by means of reasoned termination;

b)

Abnormal and unforeseeable change in circumstances pursuant to Article 22.2(a);

c)

Fundamental breach of the contract for a reason attributable to the counterparty;

d) Counterparty’s failure to comply with orders, directives or instructions issued under powers of direction on matters relating to the performance of contractual obligations; e) Repeated opposition by the counterparty to the exercise of the public party’s supervisory powers; f) Assignment of rights and obligations under the contract or subcontracting in breach of the terms and limits provided for by law or in the contract, provided that the counterparty’s demand to maintain the obligations undertaken by the public party counters the principle of good faith; g) If the aggregate amount of the liquidated damages of a pecuniary nature exceeds the limit provided for in Article 35.2; h)

Breach by the counterparty of any court or arbitral decisions pertaining to the contract;

i)

Counterparty’s failure to renew the amount of the security;

j)

If the counterparty files for insolvency or its insolvency is ordered by court.

2. In the event of termination for reasons of public interest pursuant to Article 39.1(a) the counterparty shall be entitled to compensation which shall include actual damages and loss of profit. Regarding loss of profit, the benefit resulting from the anticipation of forecasted revenue shall be deducted.

3. Where contract termination based on an abnormal and unforeseeable change in circumstances according to Article 39.1(b) is ascribable to a decision of the public party adopted outside the scope of its powers to shape the contractual relation, the counterparty is entitled to payment of fair compensation pursuant to Article 39.2.

4. If the counterparty is liable, the relevant amount is deducted from the amounts payable to it, and the public party may also call the guarantees provided by the counterparty.

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Article 40 Termination by the counterparty 1. The counterparty may terminate the contract in the event of serious breach of the contractual obligations set forth in the contract by the public party and in the following instances: a)

Abnormal and unforeseeable change in circumstances;

b)

Fundamental breach of the contract for a reason attributable to the public party;

c) Breach of pecuniary obligations by the public party for a period greater than six months or when the outstanding amount exceeds twenty-five per cent (25%) of the contract price, without interest; d) Unlawful exercise of the powers of the public party to shape the contractual relation, where it renders the public party's demand to maintain the agreement counter to good faith; e)

Breach by the public party of any court or arbitral decisions pertaining to the contract.

2. In the instance provided for in Article 40.1(a), there is only a right to termination where: a) The termination does not seriously harm the achievement of the public interest underpinning the legal contractual relation, or b) If it causes such loss, where the maintenance of the contract manifestly jeopardizes the economic and financial viability of the counterparty or is unreasonably burdensome, in this last case existing public and private interests must be duly weighted.

3. The right to termination shall be enforced through the courts or arbitration.

4. In the instances foreseen in Article 40.1(c) the right to termination may be enforced by means of declaration to the public party and becomes effective within thirty (30) days from receipt of the declaration, unless the public party performs the outstanding obligations within that deadline plus any late payment interest payable.

TITLE IX Contract invalidity Article 41 Invalidity resulting from invalid procedural acts 1. The contract shall be null and void if it was formed based on a procedural act which nullity has been or might be judicially declared.

2. The contract shall be annullable if it was formed based on a procedural act that was annulled or is annullable.

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3. The provisions in Article 41.2 shall not apply if the annullable procedural act based on which the contract was executed is remedied in the legal system, validated or renewed expunged of the same causes for invalidity.

4. The voidable effect provided for in Article 41.2 may be waived by judicial or arbitral order where: a) The annulment of the contract is deemed disproportionate or counter to good faith following weighting of the relevant public and private interests and the seriousness of the offence that caused the defect of the relevant procedural act, or b) Whenever it is unequivocally demonstrated that the defect would not entail a subjective change of the executed contract or a change of its fundamental content.

Article 42 Annulment of contracts based on procedural defects 1. Contracts shall be annullable when executed before the suspension periods, as applicable, provided for in Article 186 of the Public Procurement Code have elapsed.

2. The annulment effect provided for in Article 42.1 may be waived under Article 41.4, provided that the decision mandatorily assesses one of the following administrative penalties: a)

Reduction of contract’s term; or

b)

Pecuniary penalty equal to or less than the contract price.

3. The court or arbitral decision set out in Article 42.3 may not waive the annulment effect based on the weighting of the economic interest directly relating to the relevant contract if such interest is notably based on the costs resulting from the delay in performing the contract, opening of a new contract formation procedure, change of the counterparty or legal obligations arising from the annulment effect.

4. If the retroactive effect of the contract’s annulment based on the defects set out in Article 42.1 is proven disproportionate or counter to the principle of good faith or when the retroactive effect is impaired by absolute impossibility or pressing public interest reasons, the court may limit its extent to the future and the decision must assess one of the optional penalties set forth in Article 42.2.

Article 43 Invalidity of the contract itself 1. Contracts executed in breach of mandatory principles or rules shall be annullable.

2. Contracts shall be null and void where: a) If one of the grounds provided for in Article 19 of the General Framework of Administrative Regulations and Acts occurs, or 21

b)

The defect entails nullity under general administrative law principles.

3. The provisions in the Civil Code on lack of will or defective will shall apply to administrative contracts.

Article 44 Invalidity regime 1. The invalidity regime foreseen for the act with the same purpose and identical regulation of the actual situation shall apply to contracts with a purpose subject to administrative acts and other contracts on the exercise of public powers.

2. The invalidity regime enshrined in civil law shall apply to other administrative contracts.

3. All administrative contracts are severable and convertible pursuant to the provisions in the Civil Code regardless of their lack of legal value.

TITLE X Contract litigation Article 45 Courts with jurisdiction 1. Any issues arising from the interpretation, validity or performance of administrative contracts shall be referred to the administrative courts.

2. The courts with jurisdiction shall be those designated as such in the judicial organization law.

Article 46 Arbitration clause Clauses referring any disputes arising between the parties under an administrative contract to arbitrators shall be valid.

Article 47 Arbitral tribunal 1. If the parties choose to refer their dispute to an arbitral tribunal, the arbitration clause must be signed prior to expiry of the legal statute of limitations.

2. The arbitral tribunal shall be set up and operate in accordance with the Law. 3. Where the value of the dispute is not greater than twenty million Escudos (20,000,000$00) a sole arbitrator may be appointed.

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PART II CONTRACTS IN PARTICULAR TITLE I Public works and public utilities concessions CHAPTER I General provisions Article 48 Concept and parties 1. While displaying the same characteristics as the public works contract, the counterparty’s consideration under a public works concession is the exploitation of the public works whether or not accompanied by payment of a price by the public party.

2. Public utilities concession means a contract which purpose is the installation and temporary exploitation of a public service for the account and risk of the concessionaire, who is remunerated for the financial results of the management, whether or not accompanied by payment of a price.

3. The concession contract must entail an effective transfer of risk to the counterparty without prejudice to which form of risk sharing the public party wishes to undertake being regulated in the contract.

4. The parties to the contracts referred in the previous paragraphs are the grantor, the public party and the concessionaire, counterparty.

Article 49 Concessionaire company 1. The concessionaire shall be incorporated as a limited liability company by shares and have its registered offices in Cabo Verde, save where otherwise provided for in the contract.

2. The activities comprising the purpose of the concession shall be the exclusive corporate purpose of the concessionaire for the entire duration of the concession.

3. The concessionaire company must adopt the measures required so that at the end of each financial year its share capital is equal to the minimum percentage of the net fixed assets established in the concession contract.

4. The concessionaire may not perform the following acts without the grantor’s prior authorization: a)

Change the corporate purpose;

b)

Reduce the share capital;

c)

Transform, merge, demerge or wind-up the company.

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Article 50 Concessionaire activities 1. The concessionaire may perform activities not contemplated in the concession contract provided it secures the grantor’s authorization and that the activities are ancillary or supplementary to the main purpose of the concession contract in accordance with the provisions in that contract.

2. For purposes of obtaining the authorization referred to in the preceding paragraph, the concessionaire shall submit to grantor an economic and financial forecast of the activity or activities to be developed and the grantor may subject the authorization to a revenue sharing agreement between the parties, reduction of the tariffs levied by concessionaire or any other consideration that benefit the users of the works or the services supplied or the grantor.

Article 51 Concession period 1. The concession shall be awarded for a fixed period, potential renewals notwithstanding.

2. The concession period must be in line with the time necessary for the amortization and return on capital invested by the concessionaire.

3. In the absence of a contractual provision, the concession period shall be thirty (30) years.

Article 52 Authority powers 1. Under public works and public utilities concession contracts, awarding entities grant, respectively, the performance or design and performance of public works or management of the public utilities.

2. If they have been stipulated in the contract, the concessionaire may exercise the following authority powers: a) Expropriation for public use, by means of proper application to Government under Legislative Decree 3/2007, of 19 July 2007, that regulates expropriations for public use; b)

Use and management of the infrastructures allocated to the public utility;

c) Licensing and concession of the occupation or the exercise of any activity on the lands, buildings and other infrastructure allocated to it under the laws applicable to the use of public domain.

Article 53 Establishment of the concession 1. Personal and real property allocated to the concession and the rights and obligations intended for the achievement of the public interest underlying the execution of the contract comprise the establishment of the concession.

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2. All assets existing at the date of execution of the contract shall be deemed allocated to the concession as will all assets to be created, built, acquired or installed by the concessionaire during contract performance, that are indispensable for the proper development of the activities granted regardless of whether the property right is vested with the grantor, the concessionaire or any third parties.

3. Assets allocated to the concession that are public domain assets may not be encumbered by the concessionaire save with the express authorization of the grantor, which can only be granted if the encumbrance is not final nor impairs the activity under concession.

4. Own assets of the concessionaire that are essential to the development of the activities under concession may only be disposed of or encumbered on authorization of the grantor and provided that the concessionaire ensures the existence of assets functionally suitable for the performance of those activities.

5. Own assets of the concessionaire that are not essential to the development of the activities under concession may only be disposed of or encumbered provided that the concessionaire ensures the existence of assets functionally suitable for the performance of those activities.

6. The concessionaire may lease assets and equipment to be allocated to the concession, by leasing or equivalent contract, provided that grantor is reserved a right to use those assets against consideration and take on the respective rights and obligations under the contract in the event of sequestration, redemption or termination of the concession, but the term of the contract shall in no event exceed the term of the concession contract to which it pertains.

Article 54 Monitoring and evaluation of concessionaire performance 1. The contract establishes indicators for monitoring and evaluating concessionaire performance from the user’s and public interest’s perspective, and calculation procedures for periodic assessment, notably with respect to the number of users and levels of satisfaction, unless incompatible with or unnecessary considering the purpose of the concession.

2. Under the contract and considering the results of the application of the indicators set out in Article 54.1, the grantor may grant economic advantages or assess economic penalties to the concessionaire.

Article 55 Concessionaire obligations The concessionaire has the following obligations as regards the concession: a)

Perform the activity under concession without any non-agreed or unjustified interruption;

b) Notify the grantor of any circumstance that could hinder the normal development of the activities under concession;

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c) Provide to grantor or any person it may indicate for that purpose any information or prepare specific reports on any aspects relating to the performance of the contract as may be requested in writing by the grantor or its representative; d) Obtain all licenses, certifications, credentials and authorizations necessary for the performance of the activities comprised in or relating to the purpose of the contract, save where otherwise provided for in the contract; e) Allocate to the concession the human, technical and financial resources required for its good performance; f) Retain the staff required for the performance of the concession, which must be Cabo-Verdean residents; g) Provide to grantor all projects, plans, plants and other items of any nature, including items acquired or created during the performance of the activities granted by the concessionaire or any third parties subcontracted by it that prove necessary or useful for the exercise of the rights of the grantor or the performance of duties legally or contractually assigned to grantor; h)

Ensure the proper maintenance and conservation of the establishment of the concession;

i)

Other obligations provided for by law or in the contract.

Article 56 Concessionaire rights

1. The concessionaire has the following rights as regards the concession: a) Exploit the public works or the public utility under concession on an exclusive basis regarding the purpose of the concession, respective scope and limits; b)

Receive any consideration provided for in the contract;

c) Use according to the law and the contract any public domain assets necessary for the development of the activities under concession; d)

Create easements or rights of access;

e)

Any other rights provided for by law or in the contract.

2. The contract may entitle the concessionaire to economic and financial advantages where the latter are essential for the economic and financial viability of the concession and do not cancel out the effective transfer of risk of the concession to the concessionaire.

3. Concessionaire may apply with grantor for declaration of public use for purposes of any expropriation deemed necessary for the achievement of the concession’s purposes on the terms and conditions provided for in the general regime for expropriations for public use.

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Article 57 Grantor rights 1. The grantor has the following rights in connection with the concession, to be exercised on the terms and conditions of the contract or the law: a)

Establish minimum and maximum tariffs for the use of the public works or public utilities;

b)

Sequester the concession;

c)

Redeem the concession;

d)

Demand equitable sharing of any increase in financial benefits;

e)

Supervise the performance of the concession;

f)

Any other rights provided for by law or in the contract.

2. The concession contract may establish a right of the grantor to participate in the share capital or management of the concessionaire and how to enforce the right.

Article 58 Sequestration 1. The grantor may by means of sequestration, take on the performance of the activities under concession if there is an actual or threatened serious breach of contractual obligations by the concessionaire.

2. The grantor may sequester the concession notably in the following circumstances: a) In the event of actual or threatened full or partial termination or suspension of the activities under concession; b) In the event of disruption or serious defects in the organization and regular development of the activities under concession or the general condition of the facilities and equipment that hinder or compromise the continuity or regularity of those activities or the integrity and safety of persons and assets.

3. If an event occurs that could determine the sequestration of the concession, the grantor shall notify the concessionaire to discharge its obligations in full within a reasonable deadline and remedy or make good the consequences of its actions, save in the case of an irremediable breach.

4. If the financers are entitled to step in the concession in situations of threatened sequestration by the grantor, sequestration shall only take place after the grantor notifies its intention to the financers.

5. The sequestration shall continue for such time as is deemed necessary by the grantor, for a maximum one-year period.

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6. At the end of the sequestration, grantor shall notify the concessionaire to resume the performance of the activities under concession on the date that may be set by grantor for that purpose.

7. If the concessionaire cannot or refuses to resume the performance of the activities under concession or if, having done so, the events that gave rise to the sequestration are still ongoing, grantor may terminate the contract.

8. Concessionaire shall bear the charges of the performance of the activities under concession during sequestration, and any expenses necessary for the reinstatement of the normal performance or exploitation of the public works or the normal exploitation of the public utility.

Article 59 Redemption 1. The grantor may redeem the concession for reasons of public interest once one third (1/3) of the term of the contract has elapsed, unless a different deadline is established in the contract.

2. Redemption shall be notified by grantor to concessionaire no less than six (6) months prior, unless a different deadline is established in the contract.

3. Upon redemption, the grantor automatically takes on the rights and obligations of the concessionaire directly relating to the activities under concession provided they arose prior to the date of notice of the redemption set out in Article 59.2.

4. Obligations taken on by concessionaire after the notice set out in Article 59.2 shall only bind the grantor if it has previously and expressly approved their assumption.

5. Once the contract has been redeemed concessionaire shall be entitled to a compensation for actual damages and loss of profit, the latter being deducted from the benefit resulting from the anticipation of forecasted revenue, determined in accordance with the contract or, if the contract does not indicate the exact amount, in accordance with Article 566.3 of the Civil Code.

6. The redemption entails reversion of the assets comprising the establishment of the concession and concessionaire's obligation to return to grantor the relevant assets under the contract by transfer clause.

7. The security and guarantees provided shall be released one year after the date of redemption by notice addressed by grantor to the relevant trustees or issuers.

Article 60 Termination by the grantor 1. The grantor may terminate the contract in any of the following situations without prejudice to the general termination events set out in Title I, or other events set forth in the contract, or the right to damages on general terms: a)

Deviation from the concession’s purpose; 28

b) Full or partial termination or suspension by concessionaire of the performance or exploitation of the public works or management of the public utilities without the proper measures having been taken to remove the relevant cause; c)

Concessionaire’s refusal or impossibility of resuming the concession following sequestration;

d) Repetition following resumption of the concession of the situations that brought about the sequestration; e) Serious defect in the organization and development by concessionaire of the activities under concession on terms that could compromise their continuity or regularity on the conditions required by the law and the contract; f)

Obstruction to the sequestration;

g)

Sequestration of the concession for the maximum period permitted by law or the contract.

2. If the financers are entitled to step in the concession in situations of threatened termination of the concession by the grantor, termination shall only take place after the grantor notifies its intention to the financers.

3. Termination of the contract entails reversion of grantor’s assets allocated to the concession and the obligation of the concessionaire to return to grantor the assets covered under the contract by a transfer clause in addition to other consequences set forth in the contract.

Article 61 Liability towards third parties 1. The grantor shall be liable for damages caused to third parties by concessionaire in the development of the activities under concession in relation to any event attributable to grantor.

2. The grantor is further liable for events that are not attributable to it but in this case only after enforcement of any rights arising from applicable insurance agreements and execution of the concessionaire’s property.

Article 62 Consequences of expiry of the contract 1. Upon expiry of the contract, contracts executed by and between the concessionaire and any third parties for the development of the activities under concession shall not be enforceable against the grantor, without prejudice to the provisions in Article 62.2.

2. Intellectual property rights over surveys and projects prepared for purposes of the activities comprised in the concession, and over projects, plans, plants, documents and other items set out in Article 55(g) are transferred for free and on an exclusivity basis to the grantor upon expiry of the concession contract, and concessionaire shall be responsible for adopting all measures required to that end without prejudice to the provisions in Article 55(c).

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3. All assets comprising the establishment of the concession also revert free of charge to the grantor at the end of the concession and concessionaire undertakes to deliver them in good repair and operating condition without prejudice to the normal wear and tear resulting from use for purposes of contract performance.

4. If the contract establishes the transfer free of charge or for consideration to the grantor of concessionaire assets allocated to the concession, the latter must upon expiry of the term of the contract deliver them free of liens or encumbrances on the terms of the last part of Article 62.3.

Article 63 Subsidiary application This section applies on a subsidiary basis to the concession contract for the exploitation of public domain assets.

CHAPTER II Public works concession Article 64 Conservation and use of the works and assets allocated to the concession 1. Concessionaire shall maintain the works in a good state of repair and optimal use conditions, carrying out all works required for the same to remain fully and permanently fit for the purpose they are intended.

2. If necessary and if it is impossible for the relevant public authority to intervene on time, concessionaire may take the necessary measures to use the public works, in which case it shall immediately notify the relevant public authority accordingly.

3. Concessionaire may only prevent the use of the public works in the situations foreseen in the contract without prejudice to any provisions in special legislation on the matter.

Article 65 Commercial exploitation zones 1. In addition to the premises inherently comprising the public works, the latter may include, where provided for in the contract, other zones functionally connected to the concession intended for commercial or industrial activities that may be used for a distinct economic purpose, notably hotels, gas stations, recreational areas, parking lots and malls, which must be exploited in strict compliance with applicable legislation.

2. At concession's end, the assets and premises included in the zone of activities ancillary to the works under concession shall be delivered to grantor on the same terms as the assets allocated to the concession.

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Article 66 Cross reference The legal framework of public works contracts established in the next title shall apply mutatis mutandis to all matters in connection with public works contracts which performance is necessary to achieve the concession’s purpose and on which this section or the concession contract are silent.

CHAPTER III Public utilities concession Article 67 General principles When exploiting a public utility, concessionaire shall be subject to the following principles: a)

Continuity and regularity;

b)

Equality;

c)

Adjustment to requirements.

Article 68 Similar contracts

The public utility principles set out in Article 67 and the framework established in chapter I of this Title shall apply mutatis mutandis to any contracts similar in nature to the public utilities concession contract.

TITLE II Public works contract CHAPTER I Fundamental provisions SECTION I Purpose and Parties Article 69 Public works contract and public works concept 1. A public works contract is a contract for consideration aimed at performing or designing and performing a public work.

2. For purposes of Article 69.1, public works are any construction, design and construction, reconstruction, enlargement, alteration, repair, upkeep, rehabilitation, cleaning, refurbishment, adaptation, upgrading and demolition works in real property carried out on behalf of any public works developer.

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Article 70 Contract parties The developer and the contractor are the parties to the public works contract.

Article 71 Public works developer 1. The developer is the legal person that orders performance of the works.

2. For purposes of Article 71.1, the awarding entities identified in the Public Procurement Code shall be deemed public works developers.

3. Where this statute refers to decisions and resolutions of the developer, those decisions and resolutions are deemed to be adopted by the body with authority to that end according to the law and respective articles of association.

Article 72 Public works contractors 1. Sole proprietors, national companies and branches of foreign companies in the country, legally incorporated, holders of a registration certificate, civil construction works contractor permit or a classification certificate issued by the entity with authority to issue construction permits are deemed to be public works contractors.

2. Foreign companies holding a specific provisional permit issued by the relevant entity set out in Article 72.1 are deemed as public works contractors.

Article 73 Party representation 1. In the performance of the contract the developer is represented by the construction supervisor and the contractor by the technical manager save regarding matters for which the law or the contract establish another representation.

2. Without prejudice to other limitations provided for in the contract, the construction supervisor does not have representation powers regarding amendments to, termination or cancellation of the contract.

3. The contractor undertakes, subject to developer’s acceptance, to entrust the technical direction of the works to a technician with the minimum qualification and experience specified in the tender specifications.

4. The works’ technical manager must monitor the tasks regularly and be present at the worksite.

5. In the absence of a contractual provision, during such periods when they are absent or unable to perform their duties, the construction supervisor and the technical manager shall be replaced by persons designated by them to that end, provided however that in the case of the technical manager 32

the appointment of a replacement is accepted by the developer by means of notice sent to the contractor.

Article 74 Impartiality and impediments 1. Developers, their officers and works supervisors must act with objectivity and impartiality and ensure that there is no discrimination between the different contractors, and the provisions in general law on impediments, recuse and suspicion regarding public officers and civil servants shall apply.

2. Supervisors assigned to the public works may under no circumstance be the designer of the works except where those duties are directly carried out by services of the developer itself.

SECTION II Types of contracts SUBSECTION I General provisions Article 75 Types of contracts 1. In accordance with the remuneration terms agreed, public works contracts may be divided into: a)

Lump sum contract; or

b)

Unit price contract.

2. The contract may be for parts of or all the works and save agreement otherwise entails supply of the needed materials by contractor.

SUB-SECTION II Lump sum contracts Article 76 Concept and scope 1. A lump sum contract is a contract which consideration amount corresponding to the completion of all tasks necessary to perform the works or part of the works contemplated in the contract is previously established.

2. Only works which projects and technical clauses of the contract specifications allow for determination with a small margin of error the nature and quantities and costs of the tasks to be performed may be agreed on a lump sum basis.

3. Articles 141 and 142 shall apply to any errors or omissions.

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Article 77 Payments 1. Payment of the contract price may be made in periodic fixed instalments or variable instalments.

2. Where payment must be made in variable instalments, it must be in line with the quantities of works periodically carried out.

3. Where payment must be made in fixed instalments, the contract shall set the amounts, due dates and consistency with the approved work plan.

4. In the cases provided for in Article 77.3, any adjustments made to the price as a result of rectifications or alterations to the project shall be allotted between any instalments falling due and payable after its assessment save where otherwise provided for in the contract.

5. If payment must be made in accordance with quantities of works periodically executed it shall be made based on measurements and contractual unit prices but only up to the contract's price.

6. If after completing all the works a balance remains in favor of the contractor, that balance shall be paid out to contractor as the last instalment.

SUB-SECTION III Unit price contracts Article 78 Concept The contract is agreed based on unit prices whenever the contractor’s remuneration results from the application of unit prices provided for in the contract for each type of work to the quantities of works actually completed.

Article 79 Purpose of the contract 1. In unit price contracts the contract is always based on a forecast of the types and quantities of tasks necessary to carry out the works relating to the proprietary project and the contractor undertakes to perform all tasks of each type for their respective unit price under the contract.

2. If the project items, the contract specifications or the contract itself are silent on the quality of the materials, contractor may not use any materials that do not correspond to the characteristics of the works or that are substandard when compared to those typically used in works intended for the same use and of the same category.

Article 80 Calculation of payments

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1. Each kind of work performed shall be periodically measured so as to pay the quantities assessed to which the unit prices apply.

2. The relative periodicity of work measurement and payments must be expressed in the contract.

CHAPTER II Assignment of Access and Possession Rights to Contractor Article 81 Concept and consequences of assignment of access and possession rights to contractor Assignment of Access and Possession Rights to Contractor (“Assignment�) is an act whereby the representative of the developer provides contractor with the sites where the tasks must be performed and the written or drawn elements ancillary to the project that are necessary for that performance.

Article 82 Deadline for execution of the works The deadline set in the contract for execution of the works shall start to run as from the date of assignment, save where otherwise specially provided for in the contract.

Article 83 Assignment period 1. In lack of any provision to the contrary, assignment shall occur within thirty days as from the date of signature of the contract, and the contractor shall be notified by registered letter with recorded delivery of the date, time and place it must appear for that purpose.

2. If the contractor fails to appear at the time and place and on the date notified by the developer without justification, the assigning entity shall schedule a new deadline, non-extendable, for the contractor to appear. If the contractor still fails to appear on the set date the works contract shall be deemed expired with forfeiture of the security and subsequent notice, for the purposes deemed convenient, to the entity with authority to issue permits.

3. If within the deadline set out in Article 83.1 the developer still does not have all lands required to carry out the assignment shall occur on taking possession thereof.

Article 84 Partial assignments 1. Where in light of the extent and importance of the works the assignment operations are lengthy or where due to any other circumstance they cannot be made in full right away, the developer may make partial assignments starting with the lands which allow for the beginning of the works based on the written and drawn items, provided that possession of the others is ensured within a time frame that guarantees non-interruption of the works and the normal development of the work plan.

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2. In the event of partial assignments the date of beginning of the works shall be the date of the first partial assignment provided that the absence of timely delivery of lands or written and drawn items shall not entail any interruption of the works or impair the normal development of the work plan.

3. If, in the event of Article 84.3, lack of timely delivery of lands or written and drawn items of the project should entail any interruption of the works or impair the normal development of the work plan, the contractor shall be entitled to an extension of the deadline equal to the interference of the delays with the work plan.

Article 85 Delay in the date of assignment 1. Any delay in the date of assignment attributable to the developer that impairs the beginning of the works or results in the interruption of the works or disruption to the normal development of the work plan shall entitle the contractor to be compensated for damages suffered as a direct consequence of that fact.

2. The contractor may terminate the contract based on delay of the assignment act on the terms and conditions set forth in Article 193.

Article 86 Assignment official record 1. A record shall be drawn up for the assignment which shall refer to the contract and include the following mandatory mentions: a) Modifications which in relation to the project occur on the site where the works are being performed and that may have an impact on its cost; b) Operations performed or to be performed such as re-establishment of layouts, implementation of works and placement of references; c)

Lands and buildings whose possession is granted to contractor;

d) Any written or drawn items, ancillary to the project which at the time are delivered to the contractor; and e) Claims or reservations submitted by contractor regarding the assignment act and any clarifications provided by the developer’s representative.

2. The official record of the assignment must be drawn up in duplicate and signed by the developer’s representative in charge of the assignment, the contractor or its representative.

3. In the event of partial assignment as many official records must be drawn up as the number of assignments.

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Article 87 Change in local conditions and suspension of the assignment act 1. Where there is a relevant change in existing local conditions by comparison with the items of solution of the works, notably as foreseen in the project or with the data on which its preparation was based determining the need for an alteration project, the assignment shall be suspended unless it is possible to make partial assignments regarding work zones not affected by the alteration project which, in that case, must comply with established deadlines.

2. The suspended assignment may only proceed once the alterations to the project have been notified to the contractor and the relevant official record shall be drawn up.

Article 88 Contractor claims 1. Contractor shall include its claims in the official report of the assignment and may just set out their object and reserve the right to submit written reasoned allegations within ten days.

2. If the contractor does not act in accordance with Article 88.1, the findings in the official report shall become final.

3. The claim set out or outlined in the official record shall be decided by the developer within twenty (20) days as from the date of the official record or delivery of the reasoned allegations, as applicable, and the contractor shall abide by that decision for purposes of proceeding with the works.

4. If the claim is not decided within the deadline established in Article 88.3, it shall be deemed accepted by the developer.

Article 89 Compensation in the event of delay 1. If, should the contractor wish to exercise the right to terminate the contract due to delay of the act of assignment, this right is denied by the developer and it is subsequently assessed, by the relevant means, that the denial was unlawful, the developer shall compensate the contractor for the damages arising from having been prevented to exercise its right in a timely fashion.

2. Compensation shall be restricted to damages directly arising from contract compliance that do not result from the original insufficiency of the unit prices in the proposal or any errors therein.

CHAPTER III Work Plan Article 90 Purpose and approval of the work plan 1. The work plan is aimed at setting the order, deadline and time of execution of each kind of work comprising the contract and specifying the resources with which the contractor proposes to execute 37

them and must include a payment schedule with a forecast of their scheduling and periodicity during the contract's term.

2. Within the deadline established in the contract that may not exceed ninety days as from the date of assignment, contractor shall submit its final work plan to the developer's representative for approval.

3. The developer must issue its opinion regarding the work plan within forty-five (45) days and may introduce any amendments it deems convenient, provided however that it shall not be permitted to amend any items that were of the essence for the validity of the contractor's proposal other than with the prior agreement of the contractor.

4. Once the deadline set out in the previous paragraph has elapsed without the developer having made its position known, the final work plan shall be deemed accepted.

5. Once the work plan has been approved the execution of the works must be in line with it.

Article 91 Modification of the work plan 1. The developer may alter the work plan in force at any time without prejudice to contractor's right to compensation in general terms, should it incur damages as a consequence of that alteration.

2. Contractor may at any time put forward modifications to the work plan or submit a new plan to replace the plan in force, submitting the grounds for its proposal, and the modification or new plan shall be accepted provided it does not cause any losses to the works or the extension of the execution deadlines.

3. In any situations where by reason of any event not attributable to the contractor and if duly justified there is a need for alteration of the existing work plan, contractor must submit a new work plan and corresponding payment schedule adapted to the circumstances, and the developer must issue its opinion within twenty days.

4. Once the deadline set out in the previous paragraph has elapsed without the developer having made its opinion known, the plans shall be deemed accepted.

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CHAPTER IV Execution of the works SECTION I General provisions Article 92 Date of beginning of the works 1. The works shall begin on the date set out in the work plan.

2. The developer may authorize the works to begin on an earlier or later date on contractor’s request.

The request to begin on a later date must be justified by submitting and demonstrating the grounds for the delay.

3. If the contractor does not start the works in accordance with the work plan but is not granted any delay, the developer may terminate the contract pursuant to Article 189.1(c), unless it chooses to assess liquidated damages for each day of delay under Article 184 of this statute.

4. In the event of contract termination, the rules on failure of the contractor to appear at the assignment shall apply.

Article 93 Elements required for the execution and measurement of the works 1. No work item may begin without the contractor having been provided with duly authenticated plans, profiles, elevations, cuts, reference quotas and other indications necessary for the optimal identification and execution of the works in accordance with the project or its alterations and for the accurate measurement of the works, where they must be paid based on measurements.

2. All works carried out in breach of Article 93.1 or not complying with the items referred therein shall be demolished and rebuilt by the contractor whenever ordered in writing and at its expense.

Article 94 Delay in the delivery of the items required for execution and measurement of the works If the works are suspended or interrupted or their execution is slowed down by reason of the delay in delivering the technical elements set out in Article 93.1, the procedure in Article 128 of this statute shall apply.

Article 95 Works of art and antiques 1. All works of art, antiques, coins and any mineral or other substances with historical, archaeological or scientific value found in excavation or demolition sites shall be delivered by contractor to the project supervisor and an official record shall be drawn up specifying the nature of the delivery.

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2. Where the extraction or disassembly of the object involve specialized works, know-how or processes, contractor shall notify the discovery to the project supervisor and suspend the execution of the works until it receives the necessary instructions.

3. Loss or destruction of the objects falling under the scope of this Article shall be reported by the developer to the Public Prosecutor for the corresponding criminal procedure.

4. The developer must notify all discoveries to the entity in charge of heritage protection.

Article 96 Notices regarding contract performance 1. Notices of the developer’s or its supervisor’s resolutions must be served on contractor or its representative in writing and signed by the project supervisor.

2. Notice shall be served by means of delivery of the text of the resolution being notified in duplicate, and contractor or its representative shall return one of the copies by way of receipt.

3. Should the served party refuse to receive the notice or issue receipt, the project supervisor shall draw up an official record before two witnesses who must sign with the supervisor and the notice shall be deemed served.

Article 97 Absence of the contractor or its representative from the worksite 1. The contractor or its representative must not be absent from the worksite without notifying the project supervisor and leaving a replacement agreed upon by the developer.

2. Contractors unable to reside at the worksite’s location must appoint a representative with permanent residence in that location, duly empowered to represent it in all acts requiring its presence and also to be accountable before supervisor for the execution of the works.

Article 98 Safety and order at the workplace 1. Contractor is under an obligation to ensure the safety and good order at the worksite.

2. For purposes of compliance with the obligation of good order at the worksite provided for in Article 98.1, contractor must remove from the site on its own initiative or immediately after orders of the developer to that effect any staff whose behavior disrupts the normal execution of the works, notably because of less probity in the performance of their duties, indiscipline or contempt for the representatives or agents of the developer or the representatives or agents of the contractor, subcontractors or third parties.

3. The order set out in Article 98.2 must be justified in writing whenever so required by contractor without prejudice to the immediate suspension of the worker or staff in question.

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4. Breach of this Article shall be punished with a fine on the terms of the law, doubled in case of repeat offense.

Article 99 Acts requiring contractor’s presence 1. Contractor or its representative shall accompany the developer’s representatives in all inspections to the works whenever called, and in all acts requiring its presence.

2. Whenever this statute or the contract requires an official record of the action performed to be drawn up, the record must be signed by the project supervisor and the contractor or its representative, who shall retain a copy thereof.

3. All claims or reservations of the contractor regarding the actions performed and respective outcome must be included in the report set out in Article 99.2, as must any clarifications provided by the representatives of the developer.

4. If the contractor or its representative refuses to sign the official record, it must mention both the fact and the reason for it therein, which must be confirmed by two witnesses who shall also sign.

Article 100 Salaries 1. Contractor must pay salaries to the staff employed in the works that are not less than the existing minimum salaries table.

2. The minimum salaries table to which the contract is subject, after approval by supervision must be displayed in a conspicuous place at the worksite.

3. The table set out in Article 100.2 is also mandatory for subcontractors.

4. Whenever it is established that the contractor is paying salaries lower than it must pay pursuant to the table, such event must be immediately notified to the relevant authorities by the project supervisor.

Article 101 Insurance 1. The contractor shall take out and maintain the following insurance: a) and

Workers compensation insurance for all contractor employees or staff assigned to the works;

b)

Third party liability insurance.

2. The insurance policies listed in Article 101.1 shall be submitted by contractor prior to the beginning of the execution of the works and whenever required by the project supervisor.

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3. Whenever developer deems convenient, it may include clauses in the contract specifications relating to insurance covering the execution of the works, including damages inherent to the works.

Article 102 Advertising Affixing advertising at the worksite by the contractor is subject to the developer’s and relevant authorities’ prior authorization.

Article 103 Mandatory mentions at the worksite Without prejudice to provisions in special law, contractor must, for the purposes of Article 109.2(e) affix at a conspicuous place at the worksite the identification of the works, the developer, the contractor, supervision, and subcontractors, if any, mentioning the relevant permit or other qualifying document.

Article 104 Security, hygiene, health and safety at work The contractor undertakes to comply and ensure that its staff complies with the laws on security, hygiene, health and safety at work.

Article 105 Contractor death, disability or bankruptcy 1. If, following the signature of the contract, the contractor dies or is declared unfit, disabled or bankrupt by any court ruling, the contract shall be deemed expired.

2. Developer may, at its convenience, accept that the heirs of the deceased contractor take on compliance provided that they are legally qualified to do so.

3. Should contractor file for bankruptcy, developer may also, at its convenience and with the creditors’ agreement, accept that the contract continue to be performed by the company incorporated by the creditors at the latter’s request if the works have not meanwhile been interrupted.

Article 106 Assignment of contractual rights and obligations by the developer 1. The assignment of the developer’s rights and obligations under the contract may only be rejected by contractor where there are duly founded reasons that the assignment will involve an increased risk of breach of the obligations arising from the contract by the prospective assignee or a reduction of the counterparty’s guarantees.

2. If the contractor opposes the assignment of the developer’s rights and obligations under the contract based on the reasons set out in Article 106.1 and the assignment still goes ahead, the assignor shall be jointly and severally liable for assignee's debts arising from the contractual breach.

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Article 107 Prohibition to transfer works to another contractor The developer may not without the contractor's prior consent separate any works from the contract or part of the works to have them performed by a third party except in the instance provided for in Article 185.4.

Article 108 Contractor obligations Save where otherwise provided for, contractor shall be responsible for supplying devices, implements, tools, utensils and scaffolding required for the good execution of the works.

Article 109 Preparatory or ancillary works 1. Save where otherwise provided for, contractor must execute at its expense all tasks preparatory or ancillary to the works either by nature or according to current use.

2. Save where otherwise provided for, contractor must particularly execute the following: a)

Assembly, construction, disassembly, demolition and maintenance of the site;

b) The works required to ensure the safety of all persons involved in the works, including subcontractors’ staff and the general public, to avoid damages to adjacent buildings and comply with the security, safety, hygiene and health at work and traffic police regulations; c) Reinstatement by means of provisional works of all easements and rights of way that must be altered or destroyed for the execution of the works and avoid potential stagnation of waters by those works; d)

Construction of accesses to the site and internal rights of way;

e)

Affixing the sign with the mentions set out in Article 103 of this statute; and

f)

Other preparatory or ancillary works set forth in the contract specifications.

3. In the case of works with high technical complexity or specialization, ancillary works must be clearly defined in the documents comprising the project.

4. The developer shall be responsible for any charges in connection with the assembly, construction, disassembly and demolition of the site, which constitute as regards their determination, a unit price paid in accordance with the percentage of works executed.

5. The site is the place where the works are carried out and any locations where direct support activities to the works are undertaken.

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Article 110 Easements and occupation of private buildings Save where otherwise provided for, contractor shall be responsible for paying the compensation due for constitution of easements or temporary occupation of private buildings required for the execution of the works awarded and performed pursuant to the law.

SECTION II Materials Article 111 Priority of national products Save where otherwise expressly provided for or for international rule binding on the State of Cabo Verde, and if they are equivalent in price and quality, the contractor shall preferably use materials produced by national industry in the works.

Article 112 Specifications 1. All materials used in the works must have the quality, the size, the form and other features designated in the relevant project, with the regulatory tolerances or such tolerances as are admitted in the contract specifications or the contract.

2. Where the project, the contract specifications or the contract do not establish the materials' features, the contractor shall be responsible for their choice, who must at all times observe the relevant official standards, homologations and certifications required and usual features in analogous works.

Article 113 Operation of quarries, gravel sites, sandpits and similar 1. The materials to be used in the works, originating from quarries, gravel sites, sandpits or similar are, as a rule, extracted at the places set out in the project, the contract specifications or the contract and, where this operation is not specifically imposed, at such places as preferred by contractor, in which case the use of the materials is subject to the project supervisor’s prior approval.

2. Where the place of extraction of the materials is defined in any contract document, contractor shall bear the costs in connection with the acquisition of the materials, save where otherwise provided for.

3. If the contractor accepts the extraction of the materials from the locations set out in the project, contract specifications or the contract and if during execution of the works and given their requirements it becomes necessary to mine all or some of them in different locations, the costs of the works where the materials are used shall be rectified subject to the developer’s prior authorization, where the increase or reduction of charges arising from the transfer of the extraction sites shall be added or deducted.

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4. Where the project, the contract specifications or the contract do not establish any quarry, gravel sites or sand pits from where the contractor may extract the materials needed for construction, it must obtain by the legal means afforded to it the materials that it needs to perform the contract, taking responsibility for extraction, transport and deposit of materials.

5. Where the place of extraction of the quarry is not defined in any contract document, contractor shall bear any costs in connection with the acquisition of the materials, save where otherwise provided for.

6. In the instances set out in Article 113.4, the contractor shall submit whenever required by the developer or its representatives any contracts it may have entered into for that purpose.

7. Where the materials are extracted from places chosen by the contractor, their transfer to another location does not entail any alteration of the price of the works unless the transfer results from an imposition of the developer or the project supervisor to the effect of use of materials with features other than those provided for in the project, the contract specifications or the contract.

8. While the contract works are ongoing, any lands across which access to the places of mining of quarries, gravel sites or sandpits must be made shall be subject to the legal framework of the temporary easement.

9. For purposes of rectification or alteration of the costs of works under this Article the limit contained in Article 135.2 of this statute shall be observed.

Article 114 New mining sites If during the execution of the works, the developer has a need for or it is convenient to apply materials originating from locations other than those provided for in the project, the contract specifications or the contract, or other than those chosen by contractor it may order so provided it adjusts the cost of the works wherein the materials will be used and the provisions in Article 148 shall apply.

Article 115 Materials belonging to the developer or originating from other works or demolitions 1. Should the developer deem it convenient to use materials belonging to it in the works, originating from demolitions or other works, the contractor must use those materials and, if that is the case, their respective costs shall be deducted from the price of the contract or the price of the works where they will be used shall be adjusted, and the provisions in Article 148 shall apply in any event.

2. The provisions in Article 115.1 shall not apply if the contractor demonstrates that it has already acquired the materials necessary for the execution of the works or to the extent it has already done so.

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Article 116 Approval of materials 1. Whenever compliance of the features of the materials to be used with those established in the project, the contract specifications or the contract must be ascertained, contractor shall submit the materials to the project supervisor’s approval.

2. Contractor may at any time request the approval set out in Article 116.1, which shall be deemed granted if the project supervisor does not issue an opinion within ten (10) days, unless testing requires a longer period, which must be notified to the contractor within that deadline.

3. Contractor must provide any samples of the materials that may be requested by the project supervisor.

4. Collection and shipping of the samples shall be made in accordance with official standards in force or any other imposed by contract.

5. The contract’s specifications shall specify which tests must be for the account of the contractor; in the event of silence, test costs shall be borne by the developer.

Article 117 Complaint in the event of non-approval of the materials 1. If approval is withheld and contractor believes that it should have been granted as the materials fulfil the contract's conditions, contractor may request any actions it deems adequate, including immediate collection of samples and laboratory tests in a laboratory chosen by mutual agreement between the parties and submit a reasoned complaint to the project supervisor requesting those actions within five (5) days.

2. The complaint shall be deemed rejected if the project supervisor does not issue an opinion within five days following submission unless it requires a longer period for review, which must be notified to contractor within that deadline.

3. Rejection may be appealed against with the developer, and contractor may promote new tests and other actions deemed appropriate to justify its position to help the proceedings.

4. Contractor is entitled to compensation for any losses it may suffer in the meantime and any potential cost increase arising from the procurement and use of other materials if it is recognized by the relevant means that its complaint must be upheld.

5. Costs incurred with new tests and other actions arising from contractor’s complaint and appeal shall be for the account of the defeated party.

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Article 118 Consequences of the approval of the materials 1. Once the materials used in the works have been approved they may not be subsequently rejected unless circumstances occur that change their quality.

2. Upon approval of the materials contractor may demand that samples be collected from any of them.

3. If the change in quality of the materials is due to circumstances attributable to the contractor it shall be responsible for their replacement.

4. If the change in quality of the materials owes to a force majeure event, contractor is entitled to be compensated by the developer for any losses incurred with their replacement.

Article 119 Use of the materials 1. The materials shall be used and applied by contractor in strict compliance with the contract’s technical specifications.

2. In lack of contract technical specifications, existing official standards shall be observed or, in their absence, the processes submitted by the contractor and approved by the project supervisor.

Article 120 Replacement of materials 1. The following materials must be rejected, removed from the worksite and replaced with others satisfying the requirements: a)

Materials different from those approved; or

b) Materials not used and/or applied in compliance with the contract’s technical specifications or, in lack thereof, with the standards or procedures to be observed and that cannot be reused.

2. Demolitions, removal and replacement of the materials shall be for the contractor’s account.

3. If the contractor considers that the circumstances set out in Article 120.1(a) and (b) do not occur it may request collection of samples and testing, and file a complaint in accordance with Article 117.

Article 121 Warehousing of materials not intended for the works Contractor shall not store any materials or equipment not intended for the execution of the works pertaining to the contract ongoing at the relevant site without the previous authorization of the project supervisor.

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Article 122 Removal of materials 1. If the contractor does not remove any materials definitely disapproved or rejected or the materials or equipment not pertaining to the works from the sites within a reasonable deadline determined by the project supervisor in accordance with the specific circumstances of the works, the supervisor may order their transport to any location it may deem more convenient and contractor shall be responsible for payment of all expenses relating to the transport.

2. Once the works are completed, contractor must remove the remaining materials, rubble, equipment, scaffolding and anything else used in the execution of the works from the site within the deadline specified in the contract specifications. If it fails do so, the developer shall order their removal which shall be for the account of the contractor.

SECTION III Supervision of the works Article 123 Supervision and agents 1. Execution of the works is supervised by the developer’s representatives appointed to that end by the latter.

2. Where supervision is carried out by one or more representatives the developer shall appoint a head supervisor as project supervisor and in the event there is only one representative, he/she shall be tasked with project supervision.

3. The contractor or its representative shall remain at the worksite during execution of the works and must be vested with the powers necessary to be responsible for the progress of the works before the project supervisor.

4. Without prejudice to provisions in Article 124(n), the project supervisor shall be duly empowered and qualified with the elements indispensable to solve all issues submitted by the contractor for the normal execution of the works.

5. The decisions of the project supervisor on contractor’s or its representative’s complaints may always be appealed against to the developer.

6. The works and the contractor shall also be subject to the supervision of other entities according to the law.

7. The supervision in the preceding paragraph shall be exercised so as to: a)

Give prior notice to the project supervisor of any action at the worksite; and

b) Immediately notify the project supervisor in writing of all orders given that may have an impact on the normal development of the works.

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Article 124 Supervision role Supervision is tasked with supervising and verifying the exact compliance with the project and its changes, the contract, the contract specifications and the existing work plan and notably with: a) Verifying the implementation of the works in accordance with the necessary references supplied to the contractor; b) Verifying the accuracy or any error of the project's forecasts in particular and with the cooperation of the contractor regarding field conditions; c)

Approving the materials to be used;

d)

Supervising the execution processes;

e)

Verifying the dimensioned features of the works;

f)

Generally verifying how the works are performed;

g)

Verifying compliance with established deadlines;

h)

Taking the necessary measurements and verifying the progress of the works;

i) Ascertaining whether any provisions in the contract and applicable laws and regulations were breached; j) Verifying whether the works are executed in the order and with the resources established in the relevant plan; k) Notifying the contractor of any amendments to the work plan introduced by the developer and the replies of the developer to the amendment proposals submitted by contractor; l) Notifying the need or convenience of establishing new easements or changing those foreseen and of making any acquisitions or expropriations, taking a position regarding any circumstances which not having been foreseen in the project grant any third party a right to compensation and notifying the contractual and legal consequences of those events; m) Resolving when falling within their scope of powers or otherwise refer all issues arising or submitted by contractor along with information in their possession to the developer for decision and ensure as necessary the good progress of the works for optimal execution, safety and quality of the works and ease of measurements; n) Conveying to contractor any orders of the developer and verifying their prompt and full compliance; and o)

Perform all other acts set forth in other provisions of this statute.

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Article 125 How supervision must act 1. To discharge their duties supervision must give orders to contractor, issue notices, verify and measure and perform other acts necessary as part of their duties.

2. The acts provided for in Article 125.1 may only be proven for or against the contractor by means of a written document.

3. Supervision must always be made so as not to disrupt the normal progress of the works and without curtailing the initiative and corresponding responsibility of the contractor.

Article 126 Complaint against orders received 1. If the contractor should consider any order received as illegal, contrary to the contract or disruptive of the works, it shall submit its complaint to the project supervisor within ten (10) days in duplicate, and the project supervisor shall return one copy by way of receipt.

2. If the project supervisor is not responsible for the order, it shall immediately forward the complaint to the relevant authority and request the necessary instructions.

3. The project supervisor shall notify the decision taken to the contractor within twenty days, and also within that deadline notify the need for extension for an additional twenty (20) days. Silence shall be deemed as upholding of the complaint.

4. In the event of urgency or threatened danger, the project supervisor may confirm the order pending complaint in writing and demand immediate compliance.

5. In the case of Article 126.4 and when the complaint is rejected, contractor must promptly comply with the order.

6. If under Article 126.5 the complaint is upheld, contractor is released from all civil and criminal liability arising from compliance and shall be entitled to compensation for all losses it may suffer.

7. The decisions of the project supervisor on contractor’s or its representative’s complaints may always be appealed against to the developer, and the appeal has mere devolutive effect.

CHAPTER V Suspension of the works Article 127 Suspension of the works by contractor 1. Contractor may only fully or partially suspend the execution of the works for more than ten (10) consecutive days or fifteen (15) interpolated days when the suspension has been already foreseen in the existing plan or arises from: 50

a)

Order or authorization of the developer or its agents or any event attributable to them;

b)

Force majeure events;

c) Lack of payment of the instalments under the contract or payable for work performed within sixty (60) days as from their due date; d)

Lack of supply of the technical items required from the developer; and

e)

Existing legal provision.

2. Enforcement of the right to suspend the execution of the works provided for in Article 127.1 shall be preceded by notice to the developer by judicial notice or registered letter with express reference to the fundamental aspects of the decision, save as regards subparagraph (b), in which case the notice must be served pursuant to Article 187.

3. As for Article 127.1(c) and (d), the notice set out in Article 127.2 must be served no less than fifteen (15) days prior to the date of suspension, and the normal progress of the work plan must be ensured, which means that the works shall not be suspended if on expiry of the deadline the developer makes payment of the outstanding amounts or supplies the technical items, respectively.

4. Where the urgency or pressing need is not compatible with the requirement of prior written communication, the notices set out in this Article may be made verbally and confirmed in writing within five (5) days.

Article 128 Suspension of the works by developer 1. Where special circumstances prevent the works from being executed or progress in satisfactory fashion, or where the review of the changes to the project so determines, or in the event of binding determination or relevant recommendation on the part of any relevant administrative entities, the project supervisor may on the necessary authorization temporarily suspend the works, in whole or in part.

2. In the event that any delay in obtaining the authorization to suspend the works involves threatened danger or serious damages to public interest, supervision may order at its responsibility the immediate suspension of the works immediately informing the developer.

3. In any of the situations set out in this Article contractor must immediately comply with the orders for suspension of the works issued by supervision.

Article 129 Suspension authorized by developer Developer may authorize the suspension of the works upon the contractor’s request, provided it does not jeopardize the final deadline of the works or of any relevant work milestones and does not entail any additional charges for the developer.

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Article 130 Official suspension records 1. Both in the cases foreseen in Article 128 and any others where the developer orders suspension, supervision shall draw up an official record with the assistance of the contractor or its representative detailing the causes underpinning the superior decision that authorized it or the grounds of threatened danger or serious damages that led to action without authorization, the works involved and anticipated duration.

2. The contractor or its representative are entitled to enter any fact they deem convenient for the protection of their interests in the record.

3. The official suspension record must be drawn up in duplicate and signed by the project supervisor and the contractor or its representative.

4. If the contractor or its representative should refuse to sign the official record, the provisions in Article 99.4 shall apply.

Article 131 Compensation for suspension If due to a fact not attributable to contractor any total or partial suspension is ordered which causes disruption to the normal progress of the works in accordance with the existing work plan, the contractor shall be entitled to be compensated for actual damages.

Article 132 Suspension for facts attributable to contractor 1. Where the suspension ordered by the developer is caused by a fact attributable to the contractor, it shall be mentioned in the official record and the contractor may submit a written complaint against such attribution within eight days.

2. The developer must issue its opinion on the complaint within fifteen days.

3. If it is established that the event attributed to the contractor does not justify the suspension, the provisions pertaining to suspension for events not attributable to the contractor shall apply.

4. If it is established that the suspension was indeed caused by an event attributable to the contractor, the latter must still comply with the contractual schedule regardless of the suspension period necessarily arising from the event.

5. If as provided for in Article 132.4, the developer maintains the suspension for longer than would necessarily result from the event causing the suspension, the excess suspension period shall be treated as being caused by an event not attributable to the contractor.

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6. In the event provided for in the first part of Article 132.5, the developer may whenever it deems preferable opt for terminating the contract pursuant to Article 189.1(e) with forfeiture of the security deposit and amounts withheld for contractor.

Article 133 Resumption of the works The works shall be resumed as soon as the events determining suspension end, and contractor shall be accordingly notified in writing.

Article 134 Extension of the term 1. Where total suspension occurs not attributable to contractor or caused by the nature of the works, the terms of the contract and the work plan shall be deemed extended for a period equal to that of the suspension.

2. In the event of partial suspension of the works not attributable to the contractor, the term of the contract shall be extended if and to the extent that the suspension interferes with the critical path of the work plan.

CHAPTER VI Objective amendments and price change Article 135 Excess work 1. Excess work is any work whose type or quantity is not established in the contract and that: a) Became necessary for the execution of the same works following an unforeseen circumstance; and b) May not be technically or economically detached from the purpose of the contract without serious inconvenience to the developer or that, while detachable, are strictly necessary for completion of the works.

2. Excess works may not be ordered where their aggregate price including previous excess work and minus suppressed work is greater than twenty-five per cent (25%) of the contract price.

3. If the condition provided for in Article 135.1 is not met, excess works shall be subject to a contract executed following a procedure adopted on the terms of the Public Procurement Code.

Article 136 Obligation to execute excess work 1. The contractor must execute the excess work provided it is ordered in writing by the developer and it is provided with the amendments to the work solution items required for their execution where those items were already included in the tender specifications for the contract formation procedure.

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2. Contractor is not subject to the obligation provided for in the preceding paragraph where it opts to exercise the right to terminate the contract or where the excess work is of a different type than those set out in the contract or of the same type of others provided for therein but to be executed under different conditions, the contractor does not have the human or technical resources required for their execution.

Article 137 Refusal to perform excess work 1. For purposes of the provisions in Article 136.2 or when contractor considers that the requirements in Article 136.1 are not fulfilled, contractor may within ten (10) days as from receipt of the developer’s order for excess work file a reasoned complaint against it.

2. After receiving the contractor’s complaint, the developer shall review it within twenty (20) days as from receipt, and its silence shall be deemed as implied acceptance.

3. If it considers that the non-performance of excess work is unjustified, the developer may: a)

Notify the contractor no less than five days in advance to execute the excess work; or

b) Opt for performing the excess work directly or through a third party where the contractor has peremptorily expressed that it does not intend to perform them and Article 185.4 shall apply mutatis mutandis.

4. In the event set out in Article 137.3(a), if contractor does not begin the works, the developer may without prejudice to the right to terminate the contract: a) Assess a compulsory pecuniary penalty on contractor for each day of delay in an amount corresponding to one per thousand (1‰) of the contract price, without prejudice to the contract establishing a higher value; or b)

Choose to execute the excess work directly or through a third party.

Article 138 Price and deadline for execution of excess work

1. In the absence of a contractual provision, the price payable for excess work and respective execution deadline shall be established as follows: a) For works of the same type as others foreseen in the contract and to be executed on similar conditions, the contract price and execution deadlines provided for in the work plan for that type of work shall apply; or b) For works of a different type or of the same type as others provided for in the contract but to be executed on different conditions the contractor must submit a price and execution deadline proposal.

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2. In the case of Article 138.1(b), contractor shall submit a price and execution deadline proposal for the excess work to developer within ten (10) days as from the date of receipt of the order to execute them.

3. If the contractor should fail to comply with the provisions in Article 138.2 it shall forfeit the right to collect late payment interest in connection with the delay in submitting the proposal but not the right to receive the price for the excess work and the right to the deadline resulting from it.

4. The developer has ten (10) days to issue an opinion on contractor’s proposal and may submit a reasoned counteroffer in the event it does not accept it.

5. If the developer does not notify the contractor within the deadline in Article 138.4, contractor's proposal shall be deemed accepted unless the developer notifies contractor within that deadline that it needs additional time to express its opinion, in any event no more than ten (10) days.

6. Without prejudice to the provisions in Article 138.5, pending agreement on all or some of the prices or the execution deadline, the relevant works shall be executed and paid based on the developer's counteroffer. If applicable, the corresponding adjustment shall be made plus, regarding prices, any late payment interest due as soon as there is an agreement or a judicial or arbitral decision on the matter.

Article 139 Extension of the works schedule 1. In the event of excess works the works schedule shall be extended in accordance with the execution periods determined under Article 138 and their reflection on the existing work plan.

2. There shall be no extension in the case of excess work whose execution does not impair the normal development of the work plan.

Article 140 Formalization of excess work Once the terms and conditions to which the excess work execution shall be subject are established the developer and contractor shall formalize them in writing.

Article 141 Claims against project errors and omissions 1. Within ninety (90) days or such deadline as may be established for the purpose in the contract specifications, but in no event less than thirty (30) days as from assignment, contractor may submit a claim against: a) Project errors or omissions regarding the nature or volume of the works in the event of differences between existing local conditions and those foreseen, or between the data on which the project is based and reality; and

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b) Calculation errors, material errors and other errors or omissions on the measurement map, due to discrepancies between the latter and the other project documents.

2. Once the deadline established in the preceding paragraph has lapsed, claims shall be admitted based on project errors or omissions provided that in arguing the error or omission within ten (10) days as from becoming aware of it contractor proves that it was impossible to detect it any sooner.

3. In the claim provided for in the preceding paragraphs the contractor shall specify the price it allocates to the excess or suppressed work resulting from the rectification of the argued errors or omissions.

4. The developer shall issue an opinion on the claims within twenty (20) days from the date of submission, which shall be deemed accepted if no notice of the decision is given during that period, unless the contract has been executed under the specific rules of an international organization, in which case the latter shall apply.

5. If the developer ascertains at any time during execution that there were project errors or omissions due to any causes which foreseeability or detection was impossible any sooner, it shall notify them to contractor indicating which value it ascribes them.

6. Contractor may file a claim against the interpretation and value ascribed by the developer to the errors and omissions mentioned in Article 141.5 within ten (10) days.

7. In lack of an agreement regarding the amounts in the foregoing paragraphs the parties may by mutual agreement refer to a mediation committee comprised of three (3) representatives, one appointed by the developer, the second by the contractor and a third agreed upon by the two representatives previously appointed by the parties.

Article 142 Rectification of project errors or omissions 1. Once any project error or omission has been rectified, the respective value shall be added to or deducted from the price of the award.

2. If the contractor is responsible for the project or variant it shall bear any damages resulting from project errors or omissions or the measurement maps, except where the errors or omissions result from deficient data provided by the developer.

Article 143 Suppressed work 1. Save in the event of impossibility to comply, contractor may only refrain from executing any works contemplated in the agreement if the developer issues an order to that effect, specifying the suppressed work.

2. The price corresponding to the suppressed work shall be deducted from the contract price.

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Article 144 Destruction of already performed works If the execution of excess work or the order for suppressed work causes destruction of works already executed in accordance with the contract or instructions, their value shall not be deducted from the contract price and the contractor shall be entitled to be compensated for works already performed and any works required for reinstatement of the previous situation.

Article 145 Compensation for reduction of the total value of the works 1. If, as a consequence of the alteration of the project or correction of forecast errors or suppression of works under Article 144, the contractor performs a total work volume less than contemplated in the contract, it shall be entitled to compensation corresponding to ten per cent (10%) of the amount of the difference ascertained.

2. Compensation shall be settled in the contract’s final account.

Article 146 Ordinary price update 1. The price set in the contract for execution of the works must be updated according to contractual terms and the provisions in the law.

2. In lack of contractual provision regarding the price update formula, the standard formula established by law for works of the same nature shall apply.

3. If on the dates of the measurement official records or submission of the map the final values of the economic indicators to be used to update the prices of works performed are still unknown, the developer shall make a provisional payment based on the initial value of the contract updated in accordance with the last known indicators.

4. For purposes of Article 146.3, as soon as the economic indicators pertaining to the month of execution of the works or the period established to that effect in the work plan are published, the developer shall immediately calculate the final update and pay the contractor or deduct from the following works the ascertained difference.

5. Pending publication of a special law to regulate price updates the parties, by mutual agreement, shall use appropriate formulae and economic indicators by reference to other jurisdictions.

Article 147 Defective works 1. Where supervision recognizes any defective works or that contract conditions were not met it shall draw up an official record of the fact and notify contractor to remedy the defects within a reasonably established deadline.

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2. If the existence of said defects is presumed but cannot be proven by simple observation, the developer may, either during the execution of the works, or after their completion, but within the warranty period, order the necessary demolitions, so as to ascertain whether or not the defects exist, subsequently drawing up an official record in accordance with the previous paragraph.

3. The costs of demolition and reconstruction are borne by the contractor if the existence of defects is ascertained, otherwise they are borne by the developer.

4. The deadline may be extended if the process for ascertaining the defects and their causes results in delays.

5. Contractor may object to the official records and notices mentioned in paragraphs 1 and 2 and, if the demolition and reconstruction works are of a significant value or have the potential to delay the execution of the works, it may request that the presumption of existence of defects be confirmed through an inspection carried out by 3 (three) experts, one being nominated by him, another by the developer, and a third by the entity responsible for ensuring the quality and safety of the civil construction works and materials and products used, scientific research and technological development necessary for progress and good civil engineering practice.

Article 148 Cost control Developer may not authorize the excess works provided for in article 135 if they result from its errors or omissions, variants or alterations to the project, alterations to the works plan, or any other alterations, whenever it is foreseen that the global accumulated value during the execution of the contract will exceed 25% (twenty five percent) of the contract price.

CHAPTER VII Subcontracts Article 149 General Principles 1. Only the entities referred to in article 72.1 may execute public works as subcontractors.

2. The previous paragraph, as well as the general rules on subcontracting provided for in Part I of this statute, apply both to subcontracts which result from a contract between the public works contractor and winning bidder and its subcontractor, and to the subcontracts between the subcontractor and a third party.

3. The public works contractor and winning bidder may not subcontract more than seventy five percent (75%) of the value of the awarded works, unless the developer so authorizes expressly and in writing.

4. The framework provided for in the previous paragraph is equally applicable to subsequent subcontracts.

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5. Contractor may not replace the subcontractors mentioned in the contract without the developer’s prior authorization.

6. Developer may not oppose the public works contractor and winning bidder’s choice of subcontractor, save in the event it does not satisfy the legal conditions for the execution of the subcontracted works or does not meet the technical qualification requirements in accordance with paragraph 2, when applicable.

Article 150 Subcontract 1. For the purposes of this statute, a subcontract is a works contract which directly or indirectly results from an administrative public works contract.

2. Contractor shall, within five (5) days following the execution of each subcontract, notify the developer in writing, submitting a declaration evidencing that the qualification and technical and financial capacity requirements for the execution of the subcontracted works are met.

Article 151 Opposition and refusal to authorize a subcontract Developer may oppose or refuse to authorize the subcontract if the limits for subcontracting established in article 149.3 are not observed, or the subcontractor does not meet the qualification requirements established in paragraph 1 of the same article, or if he does not meet the technical and financial capacity requirements, when applicable, as established in paragraph 2 of the same article.

Article 152 Contractor obligations The contractor has the following obligations, in addition to the responsibilities it has towards the developer: a) Ensure that the subcontractor holds the public works contractor permits necessary for the execution of the works to be subcontracted; b) Ensure that the subcontractor meets all the technical capacity requirements for the execution of the contracted works; c)

Ensure strict compliance with applicable legislation and regulations;

d) Submit the declaration provided for in article 150.2 to the developer within five (5) days following the execution of the subcontract.

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Article 153 Developer obligations Developers have the following obligations under this chapter: a)

Ensure that the entities executing public works under their responsibility comply with the law;

b) Notify breaches of the provisions in this chapter to the entity in charge of inspecting public works; c) Notify the General Labor Inspectorate of all irregularities verified and falling within the scope of its authority; and d) Notify the entity in charge of inspecting public works of cases where illegal activity by the subcontractor is detected.

Article 154 Liability of the contractor Notwithstanding the execution of one or more subcontracts, the contractor is always liable towards the developer for the obligations arising from the public works contract, as well as for actions or omissions by any subcontractor in breach of said contract.

Article 155 Derogation and Prevalence The framework established in this chapter prevails over the works contracts legal framework provided for in the Civil Code, to the extent that they are not consistent.

CHAPTER VIII Payments SECTION I Payments based on measurement Article 156 Periodicity and formalities of measurement 1. Whenever the measurement of performed works is required, it shall be made on a monthly basis, save where otherwise provided for.

2. Measurements shall be taken at the work site, with the assistance of the contractor or his representative, and official records shall be drawn up and signed by the intervening parties, in which they shall enter everything deemed convenient, as well as provide samples of any materials or products from the excavation.

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3. The methods and criteria to be adopted to take for measurements must be set out in the contract and, if alterations become necessary, the new measurement methods and criteria shall be immediately defined and agreed between the parties.

Article 157 Object of measurement All executed works must be measured, even when not contemplated in the project or when not duly ordered, and regardless of the question of whether or not they shall be paid to the contractor.

Article 158 Measurement Errors 1. If, at any time during the contract, errors or faults in any of the measurement official records previously drawn up are detected, they shall be corrected in the measurement official record following their recognition, if both parties agree as to the object and quantities to be corrected.

2. Whenever the errors or faults are claimed by the contractor in writing, but not recognized by supervision, contractor may file a complaint in the event of founded and legitimate disagreement.

3. Whenever the errors or faults are claimed by supervision, but not recognized by the contractor, the next measurement official record shall be corrected, and contractor may file a complaint under article 160 if disagreement is founded and legitimate.

Article 159 Status of works 1. After measurement, a current account is opened, specifying the amount of works ascertained, unit price, total amount credited, discounts to be applied, advance payments to the contractor and balance owed by contractor.

2. The current account and further documents constituting the status of works shall be verified and signed by the contractor and its representative, who shall retain a copy thereof.

3. Whenever there is any defect or error in any of the documents mentioned in this Article, contractor shall formulate the corresponding reservation at the time of signing.

Article 160 Contractor Complaints 1. Whenever the contractor formulated reservations in the measurement official record or was denied the recognition of the invoked errors or faults, in relation to official records previously drawn up or others that he does not recognize, or it formulated reservations in the documents comprising the status of works, it shall file a complaint within ten (10) days, specifying the nature of the defects, errors or faults and corresponding value that it considers it is entitled to.

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2. If, within the deadline established in the previous paragraph, the contractor does not file a complaint, it shall be deemed to agree with the conditions established in the official records and the results of the documents comprising the status of works.

3. After a complaint is filed, it shall be deemed approved if the developer does not notify its decision within twenty (20) days following the date of filing, unless it is necessary to undertake laboratory tests, exams or verifications requiring a longer deadline, which shall be communicated to the contractor within twenty (20) days.

4. Expenses made for special measurements necessary for the assessment of contractor complaints are borne by it, if the challenged measurements are deemed correct.

Article 161 Settlement and payment 1. After contractor signs the documents comprising the status of works, the undisputed amounts due shall be settled, after deducting discounts provided for in the contract, and contractor shall be notified of settlement for payment.

2. Whenever all measured works are not settled, this fact should be recorded in an explanatory note attached to the respective current account.

3. As soon as the complaints filed are resolved, the current account shall be rectified by settling the amount ascertained in favor of the contractor.

Article 162 Interim situations 1. Whenever distance, difficult access or multiplicity of fronts, nature of the works or other circumstances render the monthly measurement impossible, or whenever supervision, for any reason, ceases to take the measurements, contractor shall submit a map of the quantity of works undertaken in the previous month, with the respective documents, until the end of the following month.

2. After the map is submitted and approved and authenticated by supervision, it shall be considered as an interim status of works within five (5) days, for the sole purpose of verifying any of the conditions which justify the procedure under the previous paragraph, and the procedure for definitive work status shall apply.

3. If supervision remains silent until the deadline established in the previous paragraph, the map is deemed approved as an interim status of works.

4. The accuracy of the quantities entered in the maps is verified in the first measurement official record drawn up, based on which any necessary rectifications shall be made.

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5. If the contractor wilfully enters works that have not been executed in its map, this shall be reported to the Public Prosecutor for the relevant criminal procedure, as well as to the entity in charge of inspecting public works.

SECTION II Payment by installments Article 163 Payment by fixed installments 1. When payment is made by fixed installments, the contractor shall, for that purpose, submit a map defining the status of works effectively executed, which shall be verified by supervision within ten days, and official record of the respective action shall be drawn up.

2. If the formalities established in the final part of the previous paragraph are not observed, the map submitted by the contractor shall be effective immediately.

Article 164 Payment by variable installments When payment is made by variable installments according to the quantity of executed works, the framework for measurement of works within unit price contracts shall be observed, when applicable.

SECTION III Common Provisions Article 165 Discount for guarantee 1. Five per cent (5%) of the amount that contractor is entitled to receive in each installment shall be deducted for contract guarantee, reinforcing the performance security, except if the contract establishes a lower percentage or waives such deduction.

2. The previous paragraph applies to any payments made by the developer to the contractor.

3. The deducted amounts are immediately deposited with a credit institution.

4. The deduction provided for in paragraph 1 may be replaced with securities issued or guaranteed by the State, by first demand bank guarantee or insurance bond, under the same terms as the security.

Article 166 Payment schedule 1. Contracts shall establish the deadlines for the developer to pay the executed works and for relevant updates and possible adjustments, which cannot exceed sixty (60) days, counted, as applicable: a)

From the dates of the measurement official records referred to in article 159;

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b)

From the dates of submission of the quantities maps provided for in article 162; or

c)

From the dates when adjustments are decided.

2. Contracts shall also establish the deadlines within which the developer shall make the payment for updates and possible adjustments, which cannot exceed sixty (60) days, counted in accordance with applicable special laws.

3. If contracts do not establish the deadlines referred to in the previous paragraphs, such deadlines shall be sixty days.

Article 167 Late payment 1. In case of late payment of the approved accounts due to expiry of the deadline established in the contract or determined under the previous, the contractor is entitled to late payment interest calculated at a rate equal to the basic discount rate of the Banco de Cabo Verde (Central Bank), plus one per cent (1 %) and counted from the due date of the contractor’s credit.

2. In case of disagreement on the amount established in the status of works, price update or quantities maps, payment shall be made provisionally based on the sums accepted by developer.

3. Whenever the amounts paid are less than those eventually due to the contractor, it is entitled to late payment interest calculated on the difference established under paragraph 1, which payment shall be made up to twenty days after the due date for payment of the works, updates or adjustments that triggered it.

Article 168 Advance payments to the contractor 1. The developer may make advance payments to the contractor for the materials used in the works at the beginning of the execution of the contract.

2. Save where otherwise provided for in the contract, advance payments shall not exceed two thirds of the value of materials, in their current condition, and said value is determined by the project’s unit price list, if any, or otherwise ascertained by supervision.

3. On the same terms as the previous paragraph, the developer may make advance payments to the contractor based on the equipment used in the works at the beginning of the performance of the contract and which application was provided for in the work plan.

4. In the instances provided for in the previous paragraph, the value of the equipment shall be as approved by supervision and the advance payment may not exceed fifty per cent (50%) of that value.

5. The contractor may be granted advance payment for the part of the costs of the works that are necessary for the purchase of materials and equipment subject to price fluctuation, which use or

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application was provided for in the approved work plans, by means of reasoned request and provision of bank guarantee or insurance bond.

6. The global value of advance payments made under the previous paragraph may not exceed fifty per cent (50%) of the part of the price of the works yet to be accepted.

7. Advance payments to the contractor may not exceed twenty per cent (20%) of the global value of the contract, save in exceptional circumstances by means of a reasoned decision by the developer.

8. The developer may not make advance payments outside the instances provided for in this Article.

Article 169 Reimbursement of advance payments 1. The reimbursement of advance payments provided for in Article 168. 1 shall be made as and when the materials are applied and through deduction from the respective contractual payments.

2. Whatever the status of works in relation to the approved work plan, advance payments granted under Articles 168.3 and 168.5 shall be reimbursed gradually, by means of deduction from the payments established in the payment plan, and the amounts to be deducted shall be calculated based on the following formula: Vri=(Va/Vt)x Vpi Where: Vri is the value of each reimbursement; Va is the value of the advance payment; Vt is the value of the works to be executed on the date of the advance payment; Vpi is the value provided for in the approved payment schedule for each of the situations in which reimbursement takes place.

Article 170 Guarantee of advance payments 1. The developer shall enjoy a special, first ranking personal property lien on the materials and equipment relating to the advance payments granted, and the contractor may not dispose of those assets or encumber or remove them from the works location without the developer’s prior written consent.

2. In the instances provided for in Article 168.5, the guarantee provided will expire where the advance payment is deemed sufficiently guaranteed by the lien, as soon as the materials and equipment are held by the contractor.

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3. Without prejudice to the provisions in the previous paragraph, and as the advance payment is reimbursed, the developer shall release the corresponding fraction of the guarantee provided.

CHAPTER IX Acceptance and settlement of the works SECTION I Provisional acceptance Article 171 Inspection 1. The provisional acceptance of the works is subject to inspection, which shall take place as soon as the works are completed, on contractor’s request or developer’s initiative, taking account of the cutoff date for completion or milestones for the execution of works.

2. The previous paragraph equally applies to the part or parts of the works that may or shall be accepted separately under the contract.

3. The inspection is undertaken by the developer or its representatives, with the cooperation of the contractor or its representatives, and an official record shall be drawn up and signed by all the parties, with the purpose of verifying if all the contractual and legal obligations of the contractor are fully and perfectly fulfilled in relation to the works to be accepted.

4. The developer shall summon the contractor to the inspection in writing, at least five (5) days in advance, and if it does not attend or justify his absence, the inspection shall take place with the intervention of two reliable witnesses, who also sign the respective official record.

5. In the instance referred to in the previous paragraph, the official record shall be notified to the contractor immediately for the purposes provided for in paragraphs 3, 4 and 5 of the following Article.

6. When the inspection is requested by the contractor, the developer shall undertake it within thirty (30) days as from the date of receipt of the request, summoning the contractor pursuant to paragraph 4.

7. If the developer does not undertake the inspection within thirty days as from the contractor’s request and it was not prevented from doing so due to force majeure or to the nature and extent of the works, it shall for all intents and purposes be deemed accepted on the expiry of this deadline.

8. The inspection official record shall be drawn up within ten (10) days as from the inspection, and the works shall be deemed accepted if such official record is not notified to the contractor until expiry of that deadline.

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Article 172 Defects in execution 1. If the works are not wholly or partly ready for acceptance due to the detection of defects that resulted from breach of contractual or legal obligations of the contractor, the developer’s representative shall specify such defects in the official record, including statement of non-acceptance as well as the respective grounds, notifying the contractor and establishing the deadline for the necessary modifications or repairs.

2. The developer may provisionally accept the part of the works that is ready to be accepted.

3. The contractor may file a complaint regarding the content of the official record and the notice, in the official record itself or within ten (10) days, and the developer shall respond to the complaint within twenty (20) days.

4. Whenever the contractor does not file a complaint or its complaint is rejected and the ordered modifications or repairs are not made within the deadlines established to that end, the developer is entitled to have them made on behalf of the contractor, by calling the guarantees provided for in the contract.

5. After the deadline established in the notice referred to in paragraph 1, a new inspection shall take place for the purpose of provisional acceptance.

Article 173 Provisional acceptance 1. If the inspection determines that the works are wholly or partly ready to be accepted, that fact is entered into the official record, and to the extent that the works do not present defects in accordance with the previous Article, they shall be deemed provisionally accepted and the deadline for the guarantee established in the contract shall be counted from that moment, for the works accepted.

2. The contractor may file a complaint in relation to any fact or circumstance stated in the official record, introducing them in the official record or submitting them in writing within ten (10) days.

3. The developer shall respond to the complaint within twenty (20) days, except if it needs a longer deadline due to the indispensability of testing, in which case it shall notify the contractor accordingly, immediately establishing the necessary additional period, which shall not be longer than that required for the execution and assessment of such testing.

4. If the developer does not serve its decision within the deadlines provided for in the previous paragraphs, the complaint shall be deemed accepted.

5. If the developer intends to use the works wholly or partially, it shall promote their acceptance prior to the desired use.

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SECTION II Settlement of the contract Article 174 Preparation of the account 1. After the provisional acceptance of the works, the contract’s account shall be prepared within sixty (60) days.

2. The works and values which are the object of pending complaints shall be settled as and when they are definitively decided.

Article 175 Account items The contract account comprises the following items: a) A current account which integrates, as global amounts, the value of all measurements and updates or possible adjustments of the complaints already decided, premiums due and payable and liquidated damages applied; b)

A map of all excess and suppressed work, with the indication of the respective unit prices; and

c) A map of all the works and values that have been the object of contractor complaints that have not yet been decided, expressly referring to the map mentioned in the previous paragraph, whenever they are stated there.

Article 176 Notice of the account to contractor 1. After the account is prepared, a copy is sent to the contractor, by registered letter with recorded delivery, so it may sign or file a reasoned complaint within twenty (20) days.

2. The contractor shall be given access to the documents necessary for the review of the account.

3. If the contractor signs the account and does not file any complaint within the deadline established in paragraph 1, it is deemed to accept it, without prejudice to the complaints that have been filed before it was notified of the final account.

4. If the contractor does not sign the account or file any complaint within the deadline established in paragraph 1, and if it was not prevented from doing so due to a force majeure event, it is deemed to have accepted it, for the purposes laid down in the previous paragraph.

5. In its complaint, the contractor may not: a)

File new complaints regarding measurements;

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b) File new complaints regarding the amounts that constitute a mere and truthful reproduction of the measurement accounts or of the complaints already decided; or c)

Address pending complaints that have not yet been decided.

6. The developer shall respond to the contractor’s complaint within thirty (30) days, except if it communicates to the contractor within that deadline that it needs additional time, up to a maximum of thirty (30) days.

7. If the developer remains silent throughout the applicable deadline established under the previous paragraph, its silence shall be deemed as implied acceptance.

SECTION III Works guarantee Article 177 Works warranty 1. The works warranty period begins on the date of the official record of provisional acceptance, and during such period the contractor shall repair any defects detected after provisional acceptance.

2. The works warranty period is five (5) years, but the contract specifications may establish a shorter deadline as long as it is justified by the nature of the works.

3. The contract may stipulate a different period on contractor’s proposal, which shall only be longer if it relates to a non-mandatory aspect of the contract specifications and is subject to evaluation within the contract formation procedure.

4. If, regarding the equipment allocated to, but detachable from, the works, the contractor benefits from a warranty period that is longer than established in this Article, considering the third parties that it acquired them from, it must observe such period towards the developer.

5. The contractor must correct, at its expense, all the defects in the works and equipment integrated therein, which are identified up until expiry of the warranty period, and such defects shall comprise, notably, any disparities between the executed works and the equipment provided or integrated therein, on the one hand, and the relevant contract, on the other.

6. If the defects identified cannot be corrected, the developer may, without any additional costs, demand that the contractor re-perform the defective works or replace the defective equipment, except if this is impossible or constitutes abuse of rights on general terms.

7. Without prejudice to the option to exercise the right to terminate the contract, if the defects are not corrected and the previous paragraph is not complied with, even if the instances provided for in its final part are verified, the developer may demand a price reduction and is entitled to be compensated under the general terms.

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SECTION IV Final acceptance Article 178 Inspection 1. After expiry of the warranty period, a new inspection of all the contract works shall be undertaken of developer’s own initiative or on request by the contractor.

2. If the inspection reveals that there are no defects, deterioration, evidence of ruins or lack of solidity which the contractor should be liable for, final acceptance ensues.

3. The corresponding provisions applicable to provisional acceptance shall apply, mutatis mutandis, to the inspection and official record of final acceptance.

Article 179 Defects in execution 1. If the inspection reveals that there are defects, deterioration, evidence of ruins or lack of solidity, which the contractor is liable for, only the works that are in a good condition and may be partially accepted shall be accepted, and the developer shall follow the corresponding provisions on provisional acceptance regarding the remaining works.

2. Contractor liability only arises if the defects or deficiencies found are attributable to it and do not represent normal depreciation arising from the use that was established for the works.

SECTION V Release of the security and amounts withheld and possible settlements Article 180 Release of the security and amounts withheld The release of the security provided by the contractor and of the amounts withheld as guarantee or for any other purposes shall be in accordance with the general part of this statute and article 109 of the Public Procurement Code.

Article 181 Payment of works after provisional acceptance If, after temporary acceptance, the contractor executes works that must be paid, the procedure for payments based on measurement shall apply to the partial payments, and the procedure for contract settlement shall apply to their final settlement, to be done immediately after final acceptance.

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SECTION VI Settlement and payment of penalties and premiums Article 182 Settlement of penalties and premiums 1. Liquidated damages assessed against the contractor and the premiums it is entitled to throughout the execution of works and until provisional acceptance shall be discounted from or added to the first contractual payment thereafter.

2. Liquidated damages assessed and premiums granted after provisional acceptance shall be settled and paid under the terms provided for deductions or payments during that period.

3. No sanction shall be definitively assessed before the contractor is informed of the reasons and given the opportunity to arrange for its defense.

4. After provisional acceptance, liquidated damages cannot be assessed in relation to previous facts or situations.

5. The premium for early completion shall only be paid after the date of provisional acceptance.

CHAPTER X Breach of the contract Article 183 Assessment of liquidated damages If the developer assesses a penalty of a pecuniary nature provided for in the contract or by law following contractor’s breach, its aggregate value may not exceed fifteen per cent (15%) of the contract price, without prejudice to the right of termination of the contract provided for herein.

Article 184 Delay in execution of the works 1. In the event of delay in the beginning or completion of the works attributable to the contractor, developer may assess liquidated damages for each day of delay in an amount corresponding to one per thousand (1‰) of the contract price without prejudice to the contract establishing a higher value up to double that amount.

2. In the event of breach of mandatory works milestones attributable to contractor, the provisions in Article 184.1 apply, and the per mileage of the liquidated damages therein shall be halved and the reference value shall be that of the part of the works covered by the mandatory milestones.

3. The contractor is entitled to a reimbursement of any amounts paid by way of liquidated damages due to breach of mandatory works milestones as soon as it recovers from the delay in execution of the works and the works are concluded within the contract’s term.

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4. Upon contractor’s request or on the initiative of the developer, liquidated damages may be brought down to more adequate values if they are found to be disproportionate considering the actual loss suffered by the developer, and shall be cancelled where it is ascertained that the works were executed and that the delays in complying with the milestones have been recouped and the works were completed within the global term of the contract.

5. If provisional acceptance of part of the works has already occurred the liquidated damages set out in Article 184.1 shall be assessed based on the value of the works still not accepted.

6. Assessment of liquidated damages according to the foregoing paragraphs shall be preceded by an official record drawn up by supervision of which the developer shall copy the contractor notifying it to submit its defense within ten days.

Article 185 Deviation from the work plan 1. In the event of deviation from the work plan unreasonably jeopardizing compliance with the work completion deadline or respective mandatory milestones, the developer may notify the contractor to submit within ten days a modified work plan adopting such correction measures as are necessary to recover from the delay.

2. Once the notice provided for in Article 185.1 is served if the contractor fails to submit a modified work plan satisfactory to the developer, the latter may prepare a new work plan together with an explanatory statement of its feasibility and serve it on the contractor.

3. In the cases provided for in the preceding paragraph, the work plan shall establish a reasonable deadline for the contractor to readjust or organize the sites required for the performance of the notified plan.

4. If new deviations are ascertained, whether pertaining to the work plan modified by contractor or the work plan notified by the developer under Article 185.2, the latter may take administrative possession of the works and any moveable or immoveable assets allocated to it and execute the works directly or through a third party pursuant to Article 191(2) through (4) and make the required inventories, measurements and evaluations.

5. Without prejudice to the provisions in the foregoing paragraphs, the contractor shall be responsible towards the developer for any damages arising from any unjustified deviation from the work plan whether regarding the content of the relevant supply or the deadline for execution of the works.

Article 186 Force majeure event 1. The contractor shall not be liable for any failure to perform, defective performance or delay in the performance of the contract if the default arises from a force majeure event.

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2. Damages to the works under a contract by a force majeure event or any other event not attributable to the contractor under this statute shall be borne by the developer where they do not correspond to risks that must be taken on by the contractor pursuant to the contract.

Article 187 Occurrence of a force majeure event 1. If an event occurs that should be considered a force majeure event, contractor shall within five (5) days as from the date it becomes aware of the occurrence notify the developer accordingly.

2. Within ten (10) days, supervision shall draw up an official report, assisted by the contractor, pertaining to the occurrence of the event and containing: a)

The root causes of the event or accident;

b)

The situation following the event or accident and how it differs from the previous situation;

c)

If the rules of the trade and supervision requirements were complied with;

d) If any measure was omitted which according to normal prudence and experience standards the contractor should have taken to avoid or mitigate the consequences of the force majeure event; e) If the works must be suspended in whole or in part, definitively or temporarily, where the part of the works and the likely duration of the interruption shall be specified in the event of partial or temporary interruption; f)

Likely value of the damage sustained; and

g) Any other mention deemed of relevance or that the contractor or its representative asks to be recorded.

3. Contractor may immediately in the official record or within ten (10) days as from its date submit to supervision a reasoned application presenting its claims as it deems it is entitled to, specifying the damages to be remedied and their amount if it is possible to determine them at that point in time.

4. Once the contractor’s application is received it shall be forwarded along with the official record and duly notified by supervision to the developer, who shall then notify contractor of its decision within twenty (20) days as from the official record or submission of the application, if any.

5. If the developer does not issue an opinion within the deadline set out in Article 187.4, contractor’s claims shall be deemed tacitly accepted.

6. If the contractor does not submit the applications provided for herein on time it is barred from exercising its rights, unless a force majeure event also prevented it from timely requesting ascertainment of the facts.

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7. If supervision does not verify the occurrence in accordance with the provisions in this Article, the contractor or its representative may do so by drawing up the official record in duplicate before two witnesses and promptly sending the original to the developer.

Article 188 Increased burden 1. If the developer performs or causes any fact resulting in greater difficulty in the performance of the contract with an increase in the respective costs, contractor shall be entitled to be compensated for damages sustained, without prejudice to the provisions in Article 193(e).

2. The right provided for in Article 188.1 shall expire within thirty (30) days as from the event giving rise to it or the moment when contractor alleges to have become aware of it without submitting claim for the relevant damages pursuant to the next paragraph even if it is unaware of their full extension.

3. The claim shall be submitted by means of an application where contractor must present the points of law and of fact and attach the documents or other evidence it may deem convenient.

CHAPTER XI Contract expiry Article 189 Contract termination by developer 1. Without prejudice to the termination events provided for in the contract or the general part of this statute and the right to compensation on general terms, the developer may terminate the agreement in the following instances: a) If the contractor seriously or repeatedly fails to comply with the provisions in the legislation on security, safety, hygiene and health at work; b) If, having failed to appear at the assignment without a justification deemed acceptable by the developer, contractor fails to appear on second notice at the place, time and on the date specified by the developer for new assignment provided it does not offer justification or the justification is not accepted by the developer; c) If there is a delay in the beginning of the works attributable to the contractor that is greater than one tenth (1/10) of the works execution deadline; d) If the contractor fails to begin the excess works within fifteen (15) days as from the notice of the developer’s decision rejecting the claim submitted by contractor and reiterating the order for their execution; e) If there is a suspension of the works by the developer for any event attributable to the contractor or if the latter suspends the execution of the works without cause or outside the instances provided for in Article 127 provided that the suspension seriously harms the public interest; 74

f)

In the event of any deviations from the work plan pursuant to Article 185.4; and

g) If the defects detected within the works warranty period are not repaired or if the defected works are not re-performed or the defective equipment is not replaced pursuant to Article 179.

2. In the event of termination the developer shall inform the entity in charge of inspecting public works and in the case of paragraph 1(a) the General Labor Inspectorate.

Article 190 Process of contract termination by developer 1. The developer shall notify the contractor that it intends to exercise its right to terminate the contract and grant it a deadline of not less than five (5) days to challenge the grounds put forward unless it has abandoned the works or stopped the works.

2. Before proceeding in accordance with the provisions in Article 190.1, the developer shall follow the process established in Articles 194.2 and 194.3.

3. Once the contract has been terminated, the developer shall immediately take administrative possession of the works with contractor’s assistance and comply with the provisions in Article 191 for that purpose.

Article 191 Administrative possession 1. Developers authorized under the law to take administrative possession of ongoing works may do so immediately by means of an official record drawn up at the worksite by the relevant supervisor with either contractor or its representative’s assistance who shall be summoned for that purpose and the official record shall be signed by both.

2. If the contractor or its representative fails to appear or if it refuses to sign the official record the latter shall be signed by the project supervisor and three (3) reliable witnesses confirming its content.

3. If there are works ongoing at different locations for the same contract, developer shall make the necessary arrangements for possession to be granted on successive days and shall cause proper surveillance of the locations so that no contractor assets can be misappropriated.

4. The official record shall inventory the works, including assigned or occupied lands, materials, own or leased buildings, sites, tools, machinery and vehicles allocated to the works.

5. If any party should submit a recent, reliable inventory, it shall be checked and attached to the official record with any addenda and corrections deemed convenient, and a new inventory may then be waived.

6. Where the inventory cannot be completed in one day, possession shall be immediately granted to the developer’s representative and inventory shall proceed in the following days.

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7. In the official record the contractor or its representative may make claims but only when they consider that anything has been improperly inventoried.

8. Within thirty (30) days as from completion of the official record, developer shall decide on the claims and order the return of the inventoried assets (or not). If no decision is notified, rejection shall be presumed.

Article 192 Execution of the works by the developer 1. In executing the works, developer may use the machinery, the materials, tools, utensils, buildings, sites and vehicles it took possession of by means of lease or purchase, by agreed or set price, in arbitration or court proceedings, which shall be deposited as an additional guarantee of contractor’s liabilities.

2. If the parties are unable to reach an agreement, developer must value the assets used and justify the value attributed without prejudice to a subsequent correction arising from any settlement or court or arbitral decision, if any.

3. The contractor may request that the machinery, materials, tools, utensils, buildings, sites and vehicles be returned to it that the developer does not wish to use under Article 192.2, by providing a security in an amount equal to the inventory, in the form of cash deposit, bank guarantee, insurance bond, mortgage or pledge.

4. Materials existing at the works and liable to deterioration shall be given the following destination: a) If they are approved or in a condition to be approved they must be acquired by the developer at their unit price if any or otherwise that on the invoice, but their value shall be withheld as an additional guarantee of the contractor’s liability; and b) If they are not in the condition required by subparagraph (a) they may be collected by contractor, who shall remove them from the work site within the deadline established to that effect, otherwise the removal shall be made by the developer and the transportation costs shall be for contractor's account.

Article 193 Contract termination by contractor Without prejudice to the termination events provided for in this statute and the right to compensation on general terms, the contractor is entitled to terminate the agreement in the following instances: a) If no assignment of the works occurs within one hundred and eighty days as from the date of execution of the agreement for any reason not attributable to contractor; b) If, in the case of one or more partial assignments, the delay in subsequent assignments causes the works to be interrupted for more than one hundred and eighty consecutive or interpolated days; 76

c) If, once the excess work has been evaluated, the corrections arising from errors and omissions and the suppressed works relating to the contract and arising from acts or events not attributable to contractor a reduction occurs equal to or greater than twenty per cent (20%) of the contract price; d)

If the suspension of the works continues:

i.

For a period greater than one fifth of the works execution deadline as a result of a force majeure event; ii.

For a period greater than one tenth of that same deadline as a result of an event attributable to the developer; e) If, the requirements in Article 188 being met, contractor’s damages exceed twenty per cent (20%) of the contract price; and f)

If the developer should breach Article 106.

Article 194 Process of contract termination by contractor

1. The exercise of the contractor’s termination right established in Article 193 shall occur by means of reasoned notice served on the developer within twenty (20) days as from the triggering event, and attaching the documents demonstrating the alleged grounds.

2. Before proceeding in accordance with Article 194.1 contractor shall notify the developer to remedy the situation underpinning its termination intent within a reasonable deadline, save where compliance has become impossible or the contractor lost interest in the supply.

3. If the situation should continue following expiry of the deadline in Article 194.2, contractor may then materialize its termination intent.

Article 195 Possession of the works following contractor’s termination Where the termination of the contract is a result of the exercise of the contractor’s right, developer shall take possession of the works and the materials, tools, utensils and buildings belonging to it in accordance with an inventory of assets which shall include measurements of works performed.

Article 196 Final settlement 1. In all events of termination, cancellation or expiry of the contract final settlement shall be made as at the date they occur.

2. In the event of any payable damages that cannot be immediately determined with any certainty, they shall be settled separately as soon as their amount is quantified by agreement or court or arbitral decision.

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3. The balance of the settlement shall be withheld by the developer as guarantee until the contractor’s liability is ascertained.

CHAPTER XII Claims and litigation Article 197 Subject for debate Rejection of claims timely submitted by the contractor to the developer shall not prevent the contractor from discussing the claims within proceedings brought for that purpose.

Article 198 Acceptance of the act 1. Compliance with or acceptance by contractor of any decision made by the developer or its representatives shall not be deemed as tacit acceptance of the decision complied with or accepted at the time.

2. However, if contract does not claim against or submit any reservations of its rights within ten (10) days as from the date it became aware of the decision, the decision shall be deemed accepted.

Article 199 Limitation period If no other deadline is provided for by law, proceedings must be brought by either party within one hundred and eighty (180) days as from the date of provisional acceptance of the works or any contract expiry event if prior to provisional acceptance.

Article 200 Arbitration proceedings 1. Should it be decided to refer the dispute to arbitration, once the decision is notified to the parties the arbitration proceedings shall be submitted to the entity in charge of public works inspection where it shall be filed, and the member of Government in charge of infrastructure shall be tasked with deciding on all matters pertaining to the relevant execution on the part of the administrative entities, without prejudice to the jurisdiction of the courts to enforce the contractor’s obligations. A copy of the arbitral tribunal’s decision shall be forwarded to the relevant judge for purposes of the enforcement proceedings.

2. A copy of the arbitral award must be sent to the entity in charge of public works inspection.

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TITLE III Lease of personal property Article 201 Concept 1. Lease of personal property is a contract whereby a certain entity, the lessor, undertakes to provide a public party, the lessee, with the temporary enjoyment of personal property against consideration.

2. Leasing is a contract whereby the lessor undertakes, for consideration, to provide a public party, the lessee, with the temporary enjoyment of a moveable asset acquired or built upon the latter's indication, that the lessee may then acquire once the agreed term has elapsed for a price in the contract determined or determinable by mere application of the criteria provided for therein.

3. For purposes of this chapter, lease of moveable property includes leasing and any lease with an option to buy the leased assets.

Article 202 Repair and maintenance obligations 1. Lessor must keep the leased asset in optimal use conditions and make any repairs and maintenance works needed save where otherwise provided for in the agreement.

2. Whenever repairs and maintenance works are necessary for reason ascribable to the public party, the latter shall bear the corresponding expenses to the extent it contributed toward the asset’s deterioration.

Article 203 Compensation for late payment by the public party In the event of delay of the public party in the payments payable to the lessor, the sole remedy available to the latter shall be payment of late payment interest by way of compensation.

Article 204 Assignment of use and sublease of the leased asset The public party may assign the use or sublease the leased asset to any entity over which it has powers of direction, supervision or de facto supervision or to any entity having those powers over the public party, without the need for lessor’s authorization to that end.

Article 205 Termination by the public party The public party may terminate the contract where compliance with any asset repair or maintenance obligation is delayed for a period greater than three months without prejudice to other general grounds for contract termination and others provided for herein and the right to compensation on general terms.

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Article 206 Cross reference The provisions in the chapter on personal property acquisition contracts shall apply mutatis mutandis to personal property lease contracts regarding all matters on which this title may be silent.

TITLE IV Acquisition of personal property Article 207 Concept Acquisition of personal property is a contract whereby the public party purchases personal property from a supplier.

Article 208 Purpose The purpose of the personal property acquisition contract may be the purchase of existing assets, assets to be manufactured or engineered after the execution of the contract in accordance with specific characteristics established by the public party.

Article 209 Duration 1. The term of the contract may not exceed three (3) years, including any express or implied extensions of the deadline to perform the supplies contemplated therein, save if it proves necessary or convenient in light of the nature of the supplies contemplated in the contract or the conditions for their performance in which case the procurement decision for a period greater than five years must be expressly justified by the public party.

2. The provisions in Article 209.1 shall not apply to ancillary obligations unequivocally established to the benefit of the public party, notably secrecy, compliance of the purchased assets and guarantee of the purchased assets obligations.

Article 210 Asset compliance 1. Supplier must deliver all assets contemplated in the contract in compliance with its terms, considering their respective nature and the purpose for which they are intended.

2. In the absence of a contractual provision, all assets contemplated in the contract and their parts, components or equipment must be new.

3. The provisions in the law governing aspects relating to consumer protection and guarantees pertaining to asset compliance with the contract contained in those guarantees shall apply mutatis mutandis to the contracts regulated in this chapter.

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Article 211 Monitoring of manufacture 1. In the absence of a contractual provision in the contracts for the purchase of assets to be manufactured, the public party may assign monitoring missions to the manufacturer’s premises or of the manufacturers of the assets contemplated in the contract, which composition, powers and procedures must be agreed between the parties.

2. If the parties do not reach an agreement within a reasonable time on the aspects set out in Article 211.1, they shall be established by the public party in accordance with proportionality and reasonableness criteria.

3. Access of monitoring mission members to the manufacturer’s premises must be made to avoid any harmful interference in the management and operation of the premises and the asset manufacturing process, and those members shall observe safety rules applicable to the premises they have access to, and any safety instructions imposed by manufacturer.

4. Where the supplier is not the manufacturer of the assets, it must ensure access to and the carrying out of the work of the monitoring missions at the manufacturer's premises.

5. The performance of the duties of the monitoring mission shall not remove nor in any way limit the liability of the supplier for any defects of the assets contemplated in the contract or their noncompliance with the characteristics, specifications and requirements set forth in the contract.

6. The provisions in this Article apply mutatis mutandis to contracts contemplating the refurbishment or engineering of assets.

Article 212 Asset delivery 1. The supplier shall deliver the assets contemplated in the contract at the place designated in the contract, or in the absence of any indication, the place designated by the public party.

2. The supplier shall deliver to the public party together with the assets contemplated in the contract all documents necessary for their good and full use, operation or consumption.

Article 213 Supplier obligations in connection with the assets delivered 1. The public party has the legal position of the consumer in the contracts regulated in this title.

2. The deadline of the obligations to reinstate compliance of the assets supplied shall start to run as from each individual receipt or the date of receipt of the last assets supplied, depending on whether it is a contract establishing phased deliveries of the assets with or without functional autonomy between them, respectively.

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3. The obligations imposed on the supplier under Article 213.1 extend to all costs incurred with testing to be carried out by supplier that the public party reasonably deems necessary to perform to functionally assess the assets contemplated in the contract.

4. In addition to the obligations arising for the supplier under the preceding paragraphs, the contract may stipulate a warranty obligation which concrete conditions, notably those pertaining to its period and supplier obligations, shall be established in the contract and the provisions in the law referred to in Article 213.1 shall apply.

5. The warranty period referred to in Article 213.4 may not exceed two years. It may however be longer where proposed by supplier for any aspect of contract performance subject to competition in the contract specifications.

Article 214 General charges The following are supplier’s obligations except where otherwise provided for in the contract: a) Payment of any taxes, fees, duties of any kind or other charges imposed by the relevant authorities and pertaining to performance of the contract in the territories of the country or countries of the supplier, its subcontractors or transit in transport. b) Procurement of any authorizations and payment of any emoluments imposed by the relevant authorities relating to the compliance of obligations imposed on the supplier within the scope of the agreement; c) Performance of all acts necessary or convenient for the procurement of any export and import licenses required by the countries involved in the performance of the contract and pertaining thereto, and payment of any fees and other charges applicable; d) Payment of any expenses arising from the provision of the securities set forth in Articles 103 through 109 of the Public Procurement Code and in Article 15.

Article 215 Continuity of manufacture In the absence of a contractual provision and unless otherwise required by the nature of the asset to be provided, supplier shall ensure the continuity of the manufacture and supply of all parts, components and equipment comprising the assets contemplated in the contract for their estimated useful life without prejudice to any temporary or final impossibility of performance for reasons not attributable to it.

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Article 216 Intellectual property rights 1. In the absence of a contractual provision, supplier shall fully bear any charges or civil liability arising from the incorporation of any assets contemplated in the contract, or the use in those assets of any items of construction, hardware, software or others pertaining to any patents, licenses, trademarks, registered drawings and other industrial property rights, copyright or neighboring rights.

2. If any claim is brought against the public party for infringement during the performance of the contract or subsequent use of the assets contemplated therein of any of the rights referred to in Article 216.1, it shall have a right of recourse against the supplier for any amounts paid at any title.

3. Charges and civil liability towards third parties arising from the events mentioned in Articles 216.1 and 216.2 shall not be for supplier's account if it demonstrates that they are attributable to the public party or any third parties that are not its subcontractors.

Article 217 Termination by the public party The public party may terminate the contract if the supplier seriously or repeatedly breaches any of its obligations, namely where the delivery of any asset to be supplied is delayed by more than three months without prejudice to other general contract termination events and other grounds provided for in this statute and the right to compensation on general terms.

Article 218 Termination by supplier In the absence of contractual provision, in the event of termination of the contract by the supplier all its obligations under the contract shall be extinguished save for the obligations set forth in Article 213.

Article 219 Cross reference The provisions in the legal framework of the public works contract shall apply mutatis mutandis to asset acquisition contracts, with respect to correction of errors and omissions.

TITLE V Procurement of services Article 220 Concept Procurement of services is contract whereby a public party acquires the supply of one or several types of services against payment of a price.

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Article 221 Consultant services 1. Consultant services means the performance of legal, technical, artistic, intellectual or scientific works, including without limitation the preparation of surveys, plans or projects of a legal, technical, organizational, economic, financial, environmental or social nature; assistance and advice in connection with the establishment of policies, institutional reform, project preparation and management; implementation of IT projects; collection of data and/or the preparation of statistical surveys; or the carrying out of any investigation and development activities.

2. Before deciding on the procurement of consultant services the public party shall investigate whether the same or other public parties germane to the purpose of the consultant service sought have acquired services with the same purpose and end in the last five (5) years.

3. If consultant services with the same purpose and end were acquired in the last five (5) years, the public party shall reassess the need for a new procurement of those services and, if yes, justify the decision for new procurement.

Article 222 Facilities and equipment The services provider shall be responsible for the facilities, equipment and any other resources required for the proper and prompt discharge of the services provider’s contractual obligations, save where otherwise provided for in the contract.

Article 223 Public service obligations 1. Where the purpose of the services contract directly relates to a public utility the contract shall establish the public utility obligations consistent with applicable rules and community principles to which the services provider shall be subject.

2. As consideration for the discharge of public utility obligations, the public party may allocate a financial remuneration to the services provider.

Article 224 Excess services 1. Excess services are services whose type or quantity is not established in the contract and that: a) and

Have become necessary to the supply of contracted services following an unforeseeable event;

b) May not be technically or economically detached from the purpose of the contract without serious inconvenience to the public party or that, while detachable, are strictly necessary for achieving the contract’s purpose.

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2. Performance of excess services may not be ordered in the following instances: a) Where the contract was executed following a direct award procedure pursuant to Article 30.4 of the Public Procurement Code, if the sum of the contract price and the price allocated to the excess services including previous excess services is equal to or greater than the amount set out in Article 30.3(b) of the PPC; b) If the price allocated to the excess services, including previous excess services, exceeds the contract price by forty per cent (40%).

3. Services required to correct errors or omissions shall not be deemed excess services irrespective of the party liable for them.

4. In the event of any of the circumstances provided for in Article 224.2, excess services shall be subject to a contract executed following a procedure adopted on the terms of the Public Procurement Code.

5. The provisions in Articles 136 through 140 and 142 through 145 of this statute shall apply mutatis mutandis to excess services and suppressed services.

Article 225 Cross reference The provisions in the chapter on personal property acquisition contracts shall apply to services contracts regarding all matters on which this chapter may be silent.

TITLE VI Final and transitional provisions Article 226 Repeal 1. The following statutes are hereby repealed: a)

Decree-Law 34/2005, of 30 May 2005;

b)

Decree-Law 35/2005, of 30 May 2005;

c) Chapters 1 through 6 and Chapters 12 through 28 of Decree-Law 54/2010, of 29 November 2010.

2. All legislation on the matters regulated herein and contrary to this statute is also repealed.

Article 227 Cross references to repealed laws All cross references to legal provisions and legislative acts repealed under Article 226 shall be deemed made to the corresponding provisions in this law.

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Article 228 Grandfather clause 1. This statute only applies to the performance of contracts that are administrative in nature, executed following formation procedures initiated after its effective date.

2. This statute does not apply to express or implied extensions of the deadline to perform the supplies contemplated in any public contracts which procedure was initiated prior to its entry into force.

Article 229 Entry into force This statute shall come into force on the same date as the Public Procurement Code.

Approved by the Council of Ministers of 4 June 2015.

JosĂŠ Maria Pereira Neves - Cristina Isabel Lopes da Silva Monteiro Duarte Enacted on 18 September 2015 Let it be published.

The President of the Republic, JORGE CARLOS DE ALMEIDA FONSECA

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FED/2016/374-483 VersĂŁo traduzida por VDA