Notices: Should a Contractor submit if he is not sure whether he intends 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) with regard to situations where the Contractor is not sure if he will submit a claim or not.

It’s not unusual for the Contractor to become aware of an event that may cause delay, the occurrence of additional Cost or entitlement for additional payment, but at the time that he becomes aware, he may not be aware of the final effect of the event.

For example, perhaps a delay will end before it affects the Time for Completion or perhaps an instruction received will not constitute a variation which will change a lump sum contract or, possibly 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 he 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 to make decision on whether a claim would be justified.

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, he loses all entitlement to make a claim. This may sound very harsh, but the notice provisions are included so that the Employer and Engineer are made aware of the Contractor’s intentions, so that mitigating action or cost and time provisions may be made as soon as possible.

Failure then to submit a notice 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 and a lot of time and effort has to be expended in order 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 and the Contractor will not have made life difficult for himself if he does decide to pursue the matter.