Notices: Should a Contractor submit if they are not sure whether they intend to make a claim?
A Claims Class blog follower recently asked for advice on the correct interpretation of FIDIC Sub-Clause 20.1 (Contractor’s Claims). What happens in situations where the Contractor is not sure if they will submit a claim or not—should they submit a notice of claim?
Often, the Contractor becomes aware of an event that may cause delay, additional cost, or entitlement for additional payment. At that time, they may not be aware of the final effect of the event.
Should I submit a notice?
Perhaps a delay will end before it affects the Time for Completion. Perhaps an instruction received will not constitute a variation that changes a lump sum contract. Or, the Contractor may decide that the value of the claim will not justify the time and cost involved in preparing it.
The wording of the first part of this clause is as follows:
‘If the Contractor considers themselves to be entitled to any extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.’
Consequently, the Contractor is obliged to submit a notice within 28 days after they became aware of the event or circumstance. This may sound like a long time, but it is surprising how many contractors fail to abide by this time frame. They may not have become aware of the event when they should have. Or, they may not have had enough time or resources to investigate the matter sufficiently. This means it is difficult to make a decision on whether a claim would be justified.
What if you fail to give notice?
Paragraph 2 of Sub-Clause 20.1 goes on to explain the consequences of failing to give notice as follows:
‘If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim.’
So, if the Contractor does not submit a notice within 28 days, they lose all entitlement to make a claim. This may sound very harsh, but the notice provisions ensure that the Employer and Engineer are aware of the Contractor’s intentions. That way, mitigating action or cost and time provisions may be made as soon as possible.
Failure to submit a notice of claim could be very costly for the Contractor. Some people say that time bars may not be applied in Civil Law jurisdictions, and in some cases, I agree with them. This is not, however, a clear-cut matter. It takes a lot of time and effort to put forward a case to justify that the Contract conditions are contrary to the law. It’s much less risky and certainly more cost-effective to simply comply with the Contract.
So, what’s my advice?
Contractors should submit a notice of claim within 28 days, even if they are not sure at this time whether they will follow it up with a claim. It’s very easy to subsequently write to the Engineer to advise that, having investigated the matter further, they will not be submitting a claim. That way, the Contractor will not have made life difficult for themselves if they later pursue the matter.
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Dear All,
experienced Contractor had to be aware of all serious events which could cause delays from the project very very beginning I would say even from the tender stage. Notice(s) and monthly reports where I maintained them, were for me always very helpful. Below just one small example.
There was a project divided into several sections with their exact schedule, relationships and individual time completions. In the tender stage I had to prepare the programme. Contract was awarded to my company. At the kick-off meeting Employer proposed to change the schedule significantly. That time the proposal at the first view was rather reasonable even could bring some advantages and savings also to the Contractor. After deeper analysis even before the initial POW submission and works commencement I decided to submit claim notice explaining in a very kind manner all possible risks. Employer (Engineer) rejected the claim and the issue was pending more then two years during the course of the works. It was permanently subject of discussions, several signed addendums, lot of EoT requests, different mutual claims, Engineer’s determinations etc etc etc
At the end some issues came to the DAB.
Almost three years after the commencement date everyone became aware that the notice had been reasonable and should had been subject of one common and serious analysis and agreement between parties and Engineer even if it would take couple months (it was winter time …).
At the end I was as Contractor in a much better position but made an compromising ammicable agreement with Employer which enabled both of us to avoid expensive DAB and Arbitration procedures.
I agree with Andy that we need to err on the side of caution. I subsequently worked with Employers and Consultants, but this has always been my guide (during the time when I worked with Contractors). When in doubt, send a Notice.
It is recommended to submit for any event/circumstances a claim notice, even if you are not sure about the effect today. The typical claim clauses are shown in the FiDiC Contract, which requires a Notice of Determination (RB1999 SC03.5 – either a notice of agreement or a notice of ascertainment by the Engineer / RB2017 SC03.7).
Anyway, you have the chance to submit interim claims on a monthly basis with the accumulated effects (time, cost, profit).
Here onther important issue is raised , from when specifically will the 28 days start ? ,from the employers perspective , this start date should be specified and tracked.
Hi Kyeyune,
Thank you for your comment.
I am going to assume that the contract is FIDIC, although my advice is probably applicable to other forms of contract too.
“Foreseeing delay in payment of certificate”. You cannot really send a notice just because you foresee a delay in payment. Although this is not a contractual requirement, I would send a notice immediately when the payment has become overdue. Sub-Clause 16.1 (Contractor’s Entitlement to Suspend Work) allows you, subject to giving 21-days’ notice, to suspend or reduce the rate of work, so I would also suggest that such a notice be given of your intention to do so when the payment becomes overdue.
“Foreseeing price adjustment in case where weights were not put in a contract of more than two year execution period”, Sorry, but I don’t really understand this question. If you mean that you intend to claim for price increases due to extensions of time, you would be advised to send a notice that you consider that you are entitled to claim for additional payment in accordance with the requirements of Sub-Clause 20.1 (Contractor’s Claims).
“Delay in issuing of instruction”. Sub-Clause 1.9 (Delayed Drawings or Instructions) provides that you must first give a notice when the works are likely to be delayed if an instruction is not issued within a particular time. If the instruction is not issued and you suffer delay and/or incur cost, you need to send a second notice.
I hope this helps.
Many thanks for your advice.
What would be the appropriate notice in case of the following
-Foreseeing delay in payment of certificate
-Foreseeing price adjustment in case where weights were not put in a contract of more than two year execution period
Delay in issuing of instruction
Hi Kyeyune – thanks for your comment. Andy will respond, he’s just tied up for the next few days with webinars and presenting one of our workshops in Dubai. He’ll get back to you as soon as he can. Regards, Nina.