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 it 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, he 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 which will change a lump sum contract. Or, the Contractor will just 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 himself 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 it 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 done. Or, they may not have had enough time or resources to investigate the matter sufficiently enough. This means it is difficult to make 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, it loses 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 then 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 just 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 this 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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