Notices of Claim and Civil Law
I recently read an interesting article by Joseph Durkin, Senior Vice President at Burford Capital. The article discusses notices, with a focus on the Saudi Arabian jurisdiction.
This region is known for using FIDIC. And under FIDIC, once aware of an event which provides entitlement to claim, the Contractor must submit a notice of claim within 28 days. If notice is not given, the Contractor loses all entitlement. Now, in a common law jurisdiction, the situation is simple. If the Contractor has signed an agreement which says that if they do not submit a notice, the court will uphold the Contract. As a result, the Contractor will not be entitled to anything. In civil jurisdictions, however, things may not be quite so straightforward.
The article refers to the findings of tribunals in Saudi Arabia, Dubai, Qatar and Kuwait. In these jurisdictions, the parties must act in good faith. The article explains that in some circumstances, however, the notice provisions have not been upheld either entirely or partially by arbitral proceedings or in the courts. The important phrase here, however, is “in some circumstances”. In some cases, the situation is certainly not clear cut-and in other circumstances, the time bar has been upheld. Whilst the article draws on Middle East experiences, it doesn’t matter where in the world you are working, this situation is fairly typical of civil law jurisdictions.
Given the uncertainty of such a situation, isn’t it better to simply give notice within the time frame rather than be forced to spend time and a lot of money challenging a decision via legal proceedings?
10 Tips for Notices
Preparing and sending a notice of claim is not an onerous task, so here are my 10 top tips for getting notices right:
1. Ensure that the document is identified as a notice.
2. Ensure that the notice is delivered to the address(es) stated in the Contract.
3. Ensure that the notice is delivered by the means stated in the Contract.
4. Ensure that the notice is copied to the Employer.
5. Make reference to the clause(s) of the Contract which require the notice to be given.
6. Briefly describe the circumstances of the event giving rise to the notice.
7. Record relevant dates in the notice.
8. Restrict the contents of the notice to the requirements of the clause that requires the notice to be given. Do not go into detail of the effect of the event. The time to do this is when you submit the particulars of the claim.
9. Avoid accusatory language and finger pointing. A simple statement of the facts cannot be argued and is less likely to elicit a defensive response.
10. If you are unsure whether the event will have an effect on the time for completion or will incur additional cost, send a notice anyway. If, having later examined the circumstances more thoroughly, you decide not to submit a claim, then it’s a simple matter to write to confirm the situation.
Interested in learning more about notices under FIDIC? Check out our FIDIC e-courses where we cover this topic and much more regarding your obligations, rights and remedies under these popular contracts.
You may also be interested in adding these books to your bookshelf: FIDIC 1999 Notices and FIDIC 2017 Notices.
10 Point Strategy for Responding to a Claim
You are tasked with reviewing a claim, responding to it and hopefully, reaching agreement with the contractor. So, how do you go about it?
Some forms of contract set out clear provisions that oblige the engineer to act fairly in producing a response. It is, however, true to say that not all responses to claims will be treated in this way. A strategy to deal with the claim should be considered carefully by the engineer and the employer. In this article, we set out ten considerations you should make before responding to a claim.
1. What is your responsibility?
Is your responsibility as the responding party to defend the respondent's interests, minimising the claim as much as possible? Or is it to produce a fair and reasonable determination?
2. Value of the Claim Vs. Cost of Defence
If the defence of the respondent's interests is of primary concern, you should assess the value of the claim. Does it justify the expenditure of significant resources to offer up a rigorous defence? If a claim is likely to result in a significant award, it would probably be worth providing the necessary resources to ensure that a high-quality effort is made.
3. Chance of Success
What are the strengths and merits of the claim and its chances of success? Are the odds of success favourable enough to justify the effort and expense in providing a rigorous defence?
4. Quality of the Claim
What is the quality of the claim submission? Does it provide enough information to enable proper conclusions to be made? Does it satisfy the basic principles necessary to establish entitlement and quantum? Can it be properly understood? If the claim does not fulfil the necessary criteria, should it be rejected on the basis that the case has not been proven? In this situation you might request further particulars. Alternatively you could proceed with a response and attempt to close the matter equitably.
5. How to Respond
The strategy should also consider how the response is to be pitched. Is it felt that the best result would be obtained by minimising any awards and leaving plenty of room for negotiation? Perhaps it would be better to ensure that the value of the award is reasonable. In this case you should assess whether arguments are absolutely sound, and the case for the respondent is bulletproof. The latter usually results in an initially higher award to the claimant but is often harder to refute. A response strategy aimed at minimising the quantum might have a chance of success if received by inexperienced parties, but, if the matter subsequently proceeds to a dispute, such a response is unlikely to succeed when experts get involved.
6. Dispute Procedures
If a strategy of rigorous defence is adopted, what is the dispute procedure and what is likely to be the outcome if the matter does progress to a dispute?
7. Time Scales and Obligations
Would the respondent's interests be best served by protracting the matter or by dealing with it in a timely manner? If the former strategy is adopted, would protraction cause the respondent to be in breach of any contractual obligations and, if so, to what effect?
8. Resource Management
Some claims are complicated in their very nature. If this is the case, they require a certain amount of specialist knowledge and experience to prepare an adequate response. Do the resources available include the required experience and knowledge, or should additional resources be brought in?
9. Relationship Management
Past and future relationships between the parties should be considered, possibly at executive level. Consider the impact before embarking on a course of action that could end in contention.
10. Who Will Receive the Response?
The actual personnel who are likely to receive the response or determination should also be considered. Will they be difficult to persuade? Has animosity crept into the relationship? Is the person responsible likely to have sufficient knowledge to understand the matters in question and the contractual principles relied upon? Is the claimant likely to engage the services of an expert to assist him/her or to deal with the matter on his/her behalf if a negative response is issued?
I hope that this gives you some guidance if you are responsible for responding to claims.
The above is an amended version of a chapter from the Third Edition of Andy Hewitt’s book, Construction Claims and Responses. It is available from Wiley Blackwell.
Responses to claims are covered in detail during the 6th module of our Construction Claims Premium E-Course. To view the full course syllabus or to enrol click here.
Construction Claims: 8 Important Principles
I recently presented our Construction Claims training course to a government department in Africa. As part of the practical nature of the course, we asked the attendees to complete an assignment to test their knowledge. When grading the assignments, it became clear to me that certain important principles were often misunderstood. I therefore thought it would be worthwhile to replicate them here for the benefit of our Claims Class community.
Principle 1: Incorporating Changes at Tender Stage
Question: How should changes to tender drawings (issued through a tender addendum) be incorporated into the contract documents?
Sometimes, during the tender process new information or errors come to light or the scope of work changes. Often tenderers raise queries which are addressed and clarifications are issued to all the tenderers.
The tenderers then price the work based on the revised information. This information must subsequently be incorporated into the contract documents. The way to do this is not to simply include the tender addendums or responses to requests for information as supplementary documents. to the correct way is to incorporate the information by changing the contract documents to reflect any changes during the tender period. This will avoid confusion, ambiguities and possible contention as the project proceeds.
Principle 2: Measuring Variations on a Remeasurable Contract
Question: On a remeasurable contract, how are variations taken into account?
Under a remeasureable contract the whole of the works are remeasured. The contractor is paid based on the actual quantities provided which are valued at the contract rates and prices. The contractor will be paid on the basis of the remeasured works – whether the quantity of work increases or decreases.
The remeasurement will therefore include any changes brought about by variations.
Principle 3: Measuring Variations on a Lump-Sum Contract
Question: On a lump sum contract, how is the Contractor compensated for variations?
If a variation is instructed on a lump sum contract, the works affected by the variation must be measured and evaluated separately in order to calculate the value of the varied works. This value will them be added to or omitted from the contract price.
Principle 4: Costs Associated with Extension of Time Claims
Question: Should costs associated with an extension of time be based on the resources being used during the time of the delay or the extended period?
A claim for prolongation costs is a claim for actual time-related costs incurred as a result of the delay. This means the costs that have been incurred during the period of the delay and not the costs incurred during the extended period. The following illustrates the principle:
- Contract period 1 January to 31 December
- Period of compensable delay – 30 days during July
- Effect on the critical path and the completion date – 20 days until 20 January, Year 2
- Prolongation costs incurred – 20 days during July.
The costs must be time related costs. Typically they would include site management and admin, time-related labour, site establishment, non-productive plant and equipment, insurances bonds and guarantees and head office overheads,
It is essential to substantiate the claim with detailed records of the resources deployed during the time of delay and cost records.
Principle 5: Preliminaries
Question: May the preliminaries or general items be used to calculate costs?
Most forms of contract allow for payment of ‘cost’ or ‘loss and expense’ for compensable events. Cost is defined as actual cost incurred by the claimant. Therefore, they may not be derived from notional estimates such as those included in the preliminaries or general items sections of the bills of quantities.
Principle 6: Notices
Question: Why are notices usually a contractual requirement?
Notices are a contractual requirement to formally advise parties of events that may affect their rights, obligations, and the contract’s performance. They serve as a trigger point for specific procedures, such as claims or variations. Correctly used, they help prevent disputes by allowing transparency and proper communication.
In most contracts (e.g., FIDIC, JCT, NEC), notices are required to notify the employer or project manager of potential delays, claims, or changes. These notices often include strict timeframes. This allows the affected party sufficient time to investigate, respond to, or mitigate the impact of the event.
Failure to issue a notice within the prescribed period can result in loss of entitlement to claims, even if the contractor has a valid case. This is because there must be a fair opportunity to address the issue, minimise costs, or adjust the project schedule accordingly.
Ultimately, notices promote good project management. They ensure timely communication of key events, preserving contractual rights, and reducing the risk of disputes.
Principle 7: Cause and Effect
Question: What must be linked to the cause of a delay in order to demonstrate entitlement to compensation?
Linking cause and effect in a delay claim is essential to establish entitlement to an extension of time and prolongation costs. A delay claim must demonstrate a clear causal link between the delay event (cause) and its impact on the project’s critical path (effect) and thus the completion date.
Without this link, a contractor’s claim may be rejected on the grounds that the event didn’t actually cause any delay to project completion. Merely stating that a delay event occurred is insufficient; the contractor must demonstrate how the event impacted key activities and prevented progress on critical tasks. This is usually achieved by way of a suitable delay analysis.
Establishing cause and effect establishes the claim is valid, credible, and defensible. It allows the employer to assess liability fairly. Clearly identifying the responsible party and impact on the schedule and will help to avoid or resolve disputes.
Principle 8: Time Impact Analysis
Question: A time impact delay analysis compares two programmes to calculate the effects of a delay event. What are the two programmes used in the comparison?
Time Impact Analysis is a prospective method of delay analysis. It is used to assess the impact of a delay event on a project’s critical path and completion date. The process is as follows:
- Update the current programme for progress for the date immediately before the delay and note the predicted completion date. Progress before the delay may have affected the completion date, but this needs to be allowed for.
- Insert a fragnet to illustrate the delay into the updated programme. Ensure that the appropriate logic links are included and note the predicted completion date including the delay.
- The difference between the two completion dates is the number of days extension of time caused by the delay in question. This should be added to the prevailing completion date to calculated the revised date.
This method is favoured for claims because it takes into account progress before the delay. It only calculates the effect of the delay which is the subject of the claim.
A time impact analysis is most effective when used in real-time, during the project, to assess ongoing delays. It provides objective evidence of whether a delay justifies an extension of time. It will also quantify the duration of the extension based on the actual impact on the project schedule.
Want to learn more about construction claims? Check out our Construction Claims Intermediate E-Course and get the confidence you need to manage claims effectively.
10 Things Construction Gets Wrong When it Comes to Claims
Inadequately expressed claims are one of the leading causes of time-consuming and costly disputes. Avoid common mistakes to ensure acceptance of claims.
In this post, we set out ten common reasons that claims end up as disputes and offer best practice tips so you can ensure you do better. Take a look at the following, have you fallen foul of them? Are you constantly looking out for them so you can avoid them?
Common Mistakes
- Contractors wait until the end of the project to submit claims, instead of submitting claims when entitled to, as the project progresses.
- Contractors include several delay events into a single consolidated claim instead of preparing separate claims for each delay event.
- Contractors do not give notices of claim within contractual timeframes, and notices do not contain necessary information.
- Claims do not contain an adequate examination of cause, effect, and entitlement to justify the claim.
- Claims are not adequately substantiated to prove that the claim is just.
- Engineers and contract administrators do not follow their contractual obligations to respond to claims and attempt to reach agreement.
- Both claims and responses to claims are poorly expressed, so the recipient has difficulty in understanding the claimant or respondent’s positions.
- Delay analyses to demonstrate extensions of time are not performed following good practice.
- Cost claims are poorly demonstrated and substantiated.
- Those tasked with preparing and responding to claims are inadequately trained and qualified.
Whilst very common mistakes, these are all avoidable. They are all things you can keep an eye out for and minimise or even eliminate to ensure project success.
If you would like to learn how to submit successful claims and achieve quick resolution on projects, take a look at our e-courses.
Cost Claims: 11 Tips for Success
Cost claims can be tricky...and if you want yours to be a success, there are some important principles to follow. Not only that, you need to present your claim in line with good practice. This article discusses both.
Before we go further though, I'd like to mention that some contracts and legal jurisdictions refer to “costs” and others refer to “loss and expense”. Essentially, they mean the same thing, but here I will refer to “costs”.
Principles for Cost Claims
1. The general principle for cost claims: put the claimant in the position that he/she would have been in, had the breach of contract or claimable event not happened.
2. Most cost claims are related to extension of time claims. If there is an extension of time, the Contractor will incur costs to maintain his site and head office for longer than planned. These costs are generally referred to as “prolongation costs” and form the majority of cost claims.
3. Most contracts provide that cost is actual cost incurred. In other words, money that the claimant has spent or will have to spend.
4. In light of the above, you cannot calculate costs from estimated costs shown in the Preliminaries or General Items from the bills of quantities.
5. If there is true concurrent delay, i.e., where an Employer-responsible delay and a Contractor-responsible delay occur at the same time, and both affect the time for completion, then the entitlement to claim costs for the concurrent delay period is generally negated. Why? Because the Contractor would have incurred costs for this period had there been no Employer-responsible delay, so he/she may not profit from his/her own failure.
6. In some cases, the contract may allow for recovery of profit and costs. Check your contract and the clause that provides entitlement for this.
7. Calculate the cost at the time that the cost was incurred. In a claim for prolongation costs, the costs are incurred during the time of the delay and not for the extended period. If, for example, a delay of 30 days occurred in August and the delay analysis demonstrates that this delays the time of completion by 15 days, you need to calculate the cost for 15 days of time-related costs during August.
Good Practice
1. Prolongation cost claims will be for extra site overheads, i.e., time-related resources deployed to the project during the time of delay. You need to keep contemporaneous records of resources to show that the claimed resources were deployed to the project. You need to submit these with the claim as substantiation.
2. Show actual cost with reference to payroll information (invoices, etc.). Substantiate these records and submit with the claim.
3. Calculate prolongation costs based on a cost per calendar day. This will then relate directly to the extension of time period. If you try to allow for irregular work weeks or public holidays, the calculations will get complicated, difficult to understand and any revisions during negotiations will be difficult to make. Keep it simple.
4. Present cost calculations in a clear, well-explained manner. Explain the principles that you've based the calculations on in the claim narrative. If necessary, provide further explanation in the narrative of how you've done the calculations. The idea here is that any non-financial expert reviewing the claim can understand the calculations, audit them and ultimately, agree with them.
Will Your Contract Admin Stand Up to Future Claims?
Good contract admin (or administration) is key to any successful project. If a claim is to succeed, it must contain certain essential elements: Cause, effect, entitlement and substantiation.
In other words:
- What happened that gave rise to the claim.
- The dates that various events occurred.
- The effect of delays on the time for completion
- In the case of incurred costs: Are they appropriate? Are they calculated correctly?
- Does the contract contain entitlement to compensation?
- Is every statement or fact in the claim substantiated?
We should also remember that the onus is on the claimant to prove that the claim is just. It is not the respondent’s job to do this when reviewing the claim.
To achieve this, the contractor’s contract administration systems must be able to support future claims. If they are not, it will be difficult or impossible to prepare a claim that fulfils these criteria.
Contract Administration: Things to Consider
Some things to consider in this respect are as follows:
- Is your record keeping adequate and can the records be easily retrieved?
- Are important and formal records drafted so that they may be understood by a person not familiar with the project?
- Are notices that are required by the contract given within the prescribed time frames? Do they contain the correct information?
- Has a baseline programme been established? Is it prepared in line with good practice?
- Are revised programmes prepared when circumstances dictate?
- Are progress updates accurate? It is difficult to subsequently claim a delay if progress has been reported showing no delay.
- Do monthly reports adequately record the events, and may they be understood by a person not familiar with the project?
- Are daily records of resources deployed to the project being maintained and submitted to the engineer on a regular basis?
- Do you have adequate and properly qualified and experienced resources to create and maintain efficient contract administration?
- Do you have adequate and properly qualified and experienced resources to prepare your claims?
If you can answer yes, to all these questions, there is a good chance of success for your claims. If not, then you may need to reconsider your approach.
For more help with these subjects, why not consider joining one of our e-courses?
Abbreviations and Acronyms: To Use or Not?
A couple of days ago, I spent a frustrating couple of hours reading a FIDIC report.
Why was it frustrating?
It was not because the report was particularly difficult to understand. It was because it was littered with so many abbreviations and acronyms.
I have a lot of experience reading contract documents, but even for me, it was difficult to make sense of.
Sure, FIDIC placed footnotes in the document to explain what the abbreviations stood for. But, the fact that I had to keep checking these disrupted the 'flow' of reading and again, made it harder to understand.Read more
The Cycle of A Poorly Written Construction Claim
It is no secret that poorly written construction claims are one of the main causes of time-consuming and costly disputes.
However, the dispute process often finds in favour of the claimant.
Why is this?
Let’s look at a typical claim and dispute cycle:
- The claimant submits a construction claim that does not include: Cause, Effect, Entitlement and Substantiation (CEES).
- The respondent rejects the claim because it does not prove the claimant’s case.
- Discussions and negotiations take place, but the parties maintain their positions.
- The claimant is convinced that the claim is a fair one and elevates the matter to a dispute.
- At this point, the claimant realises that the claim needs improvement. They consult an expert.
- The expert confirms that the claim is poorly written. They advise that if it has any chance of persuading adjudicators or arbitrators in favour of the claimant, it needs improvement.
- The claimant engages the expert to improve or rewrite the claim.
- The adjudicators or arbitrators decide in favour of the claimant.
- The respondent agrees with the adjudicators or arbitrators, and would have made an award if the claim was properly presented in the first place.
So here's a question...
Wouldn't it have been better for the claimant to submit a well written construction claim in the first place, saving all parties time and money?
Need to improve your claims writing skills? Check out our e-courses today.
Looking to upskill your project teams? Book a call with us to discuss how we could support you.
FIDIC 2017 Claims: Andy Hewitt's Latest Release
I’m old enough to remember when the FIDIC 1999 contracts were published. If I remember correctly, it took a good 10 years for the industry to, not only adopt them, but to see their use as best practice on new projects.
At the time, I was lucky enough to work for a proactive company that sent me on a training course about the new contracts. They also bought copies of Brian Totterdil’s excellent book: FIDIC User’s Guide for all its contracts and claims consultants.
Fast-forward to the release of the FIDIC 2017 Editions...
It is now 6 years since FIDIC introduced the 2017 editions. The updated contracts aimed to improve, strengthen and clarify several aspects of the old editions.
Based on past trends, Read more
Construction Claims Education - Celebrating 10 years!
This Summer marks 10 years since we started delivering education on construction claims and contracts.
When I decided to write a book on claims all those years ago, I never imagined it would lead us here.
But off the back of that book, people started to contact me about training. I realised there was a need for practical, quality training in the field. A few months later we launched our first course on construction claims and 'Claims Class' was born.
10 Years On…
Fast-forward to today and I'm proud to say that Claims Class is a recognisable brand. We are well-known for the quality of training we provide and offer a range of courses on construction contracts and claims.
Our mission has been, and continues to be, to:
- provide construction contract and claims training that is accessible, practical and accredited;
- provide students with knowledge and skills to work as sought after construction professionals;
- improve professional standards within the specialist field of construction contracts and claims;
- ensure that projects are well-managed, completed on-time under the contract;
- reduce construction claims; and
- ensure that where claims do arise, resolution happens quickly and professionally.
We've trained hundreds of professionals across the globe and at any one time, have students from over 60 countries studying with us.
Celebrate with us
As a thank you to everyone who has attended a workshop, taken an e-course or follows and likes what we do...
we're offering a huge 30% saving on intermediate and premium and 20% on basic e-courses until 26th August.
You won't see this saving for another 10 years so if you've been sat on the fence, now is the time to sign up! Check out our e-courses today.