23 Aug 2021
While notices may be perceived as hostile in nature, their main purpose is to facilitate and promote effective communication between the parties to a contract. If one party is made aware of a potential issue, that party may be able to take steps to remove, or at least mitigate, the impact of such issue; after all, you can only prepare for a problem you know about!
Why are contractual notices important in construction?
Notices are generally a contractual requirement. Under standard forms of contract there are, more often than not, express provisions obliging the contracting parties to notify one another if certain circumstances occur. These provisions are very important, although they are often overlooked.
The submission of a valid notice is, under many forms of contract, a condition precedent for making a claim. That is, failure to give such a notice may result in loss of entitlement to make a claim for an extension of time, additional costs, or both. For instance, in FIDIC the provisions of clause 20.1 will exclude the employer’s liability to the contractor unless the contractor first provides a notice.
Moreover, there is a growing trend in construction contracts to prescribe a period by which a valid notice shall be served. If these time periods are written in conjunction with a waiver of a party’s right to claim, they are referred to as a ‘time bar’ provisions.
This means in practice that, if a notice is not issued within the timescale stipulated in the contract, the claiming party may lose its right to claim given that a condition precedent has not been met. For example, with NEC3 the contractor must notify the project manager within eight weeks of becoming aware of an event that it considers to constitute a compensation event. If the contractor fails to do so, it may not be entitled to a change in price.
The aim of time barring provisions is to improve the management of construction contracts. Setting a notice deadline for the claimant ensures that the defendant is notified early. This gives the party in default time to assess the issue and devise the mitigation measures which limit any potential impacts on the project. These provisions encourage the contracting parties to work together by addressing issues as soon as one of the parties becomes aware of them.
Before a notice can be issued, it is important to review the contract and identify the clauses which relate to the matter at hand, and which will be relied on for claiming an extension of time and/or additional costs.
When drafting the notice, the issuing party should include, as a minimum, a clear description of the event giving rise to the claim, whether the event is likely to cause delay to the works, details of the mitigation measures which have been (or will be) adopted, whether the contract sum is likely to be affected and whether a meeting between the parties will be needed.
Such notice shall be drafted in line with what is prescribed in the contract, it shall contain all relevant details the party wishes to rely on when submitting its claim and it shall be updated once more information becomes available.
Although the claiming party may not be able to identify specific impacts at the time of drafting its notice, by issuing one the claimant is protecting its position. Thus, regardless of the contract type, it is strongly recommended that any notices required by the contract are served in a timely manner. This will not only protect the claimant’s rights, but it will also enable a collaborative resolution of the issues impacting the project.
Omnium Resolve is the independent dispute resolution and claims management arm of leading UAE Cost Consultancy Omnium International. Omnium Resolve delivers a complete suite of claims management and dispute resolution services throughout a project’s lifecycle and across all sectors of the construction industry, including:
In addition, in the UK our team also supports clients with mediation and adjudication processes. Omnium Resolve supports clients throughout Dubai, Abu Dhabi, Saudi Arabia, Kuwait, the wider GCC, UK and Europe.
For more information about Omnium Resolve, visit www.omniumresolve.com.
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