A few years ago I wrote an article concerning ‘Notices’ for Contractors operating in the
Middle East. The arguments remain as valid now as they were back then. Perhaps even more so..
Of the many changes in the construction sector over the last few years, one of the most striking is the number of giga projects now being awarded under frighteningly complex and detailed forms of contract. I observed in the extract from my article below that a 1987 FIDIC Red Book contained circa 115 uses of the words ‘notice’ or ‘notify’. Having recently reviewed a Saudi Arabian giga project construction Contract Conditions I found that the references had skyrocketed up to 270 uses. More than a doubling of the requirement to give notice! The giga project Conditions also included the following gem:
“If the Contractor fails to give notice of a claim under any Clause of this Contract within such period of fourteen (14) days, or if a notice of claim is submitted, but the Contract or Employer requires a further notice including further documents or particulars and the Contractor fails to supply such further notice, documents and/or particulars as required by the Contract within the time prescribed by the Contract, the Milestone Dates and 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 to the extent accruing prior to the date of the Contractor’s notice..”
With the ongoing and widespread use of such heavy-handed clauses, the consequences of ignoring contractual Notice provisions has never been greater. Some protection may be derived from the governing law of the Contract. Many Saudi giga projects in the Power, Energy and Process sectors are subject to English Law and under this jurisdiction you can expect a very precise and literal interpretation of the Notice provisions and related Condition Precent wording. Saudi Civils and Building Construction contracts tend to be subject to local law where there is more ambiguity and less likelihood of an otherwise just claim entitlement being extinguished by late notification. That said, whichever the governing law, only the foolhardy would throw caution to the wind and ignore the following recommendations extracted from my old article:
Claims Notices – Fact and Fiction
The concept of giving ‘notice’ or ‘notifying’ another party is common to most legal systems and one of the building blocks of just about every contractual process. At some point in most transactions it is necessary to notify the other party of an event, a requirement, an assessment or other such thing necessary for the transaction to progress smoothly. Failure to provide such notice can prevent the other party from making timely decisions and in certain circumstances lead to a party incurring a loss or cost that could have been avoided if notification had been received.
It is often said that contracts are ‘onerously’ drafted to trip up the unwary party, that contracts are ‘craftily’ drafted to ensure that otherwise valid entitlements are somehow thwarted. ‘Notice’ provisions are regularly referred to with disdain. The reason for their inclusion in an agreement is often cited as being to ensure that Contractor claims fail. Is this allegation true? Is this a fair assessment of intent or is it perhaps a little misrepresentative?
You will not be surprised to hear that a 1987 FIDIC Red Book contract contains circa 115 uses of the words ‘notice’ or ‘notify’. However, you may well be surprised to hear that whilst around 30 of those uses place specific notification obligations on the Contractor, there are around 60 uses placing specific notification obligations on the Engineer or Employer. Effectively the Engineer and Employer have twice as many notification obligations as the Contractor. Not everyone will agree, but the figures do show that the most common standard form contract used in the region places far greater notification responsibilities on the Engineer / Employer than the Contractor.
Though, one thing should be very clear, the Contractor’s failure to comply with notice provisions is likely to have a far more serious impact on his financial position than a similar default by the Employer. A failure or delay to give notice by a Contractor can have very serious consequences on any claim related to that notice. Stories of Contractors losing out on millions of dollars of claimed costs because they were “only a few days late in submitting a piece of paper…” are not fiction, they are fact and often the cause of great moral outrage.
Claim events happen on all projects and that will continue to be the case, but you can avoid being the subject of the next “…contractor losing out on millions of dollars…” tale by simply:
- At the outset of the project, ensure your team has read and understood every item in the Contract that requires notification.
- Pay particular attention to any notice that is stated as a ‘condition precedent’ to entitlement or where it is stated that any entitlement is ‘conditional’ upon the submission of notice (this will be the subject of a separate article)
- Give your team a list of the events requiring notice and the notice periods applicable to each.
- Better still, draft a series of template notices for your team to use in each circumstance.
- Put in place a notice tracking system to ensure that supplementary notices and further particulars are submitted at the required times.
- Don’t be dissuaded by anyone (including your own management!) that submitting a notice is a bad idea. If the Contract requires that you submit a notice, then do it.
- If the Contract requires that you notify the Employer of events that ‘may’ or ‘might’ cause delay or additional cost, then do it! They can always be withdrawn.
- Remember – this is not an aggressive commercial act – this is merely contract compliance at work. It is the Contract that mandates your action not your commercial strategy.
The fact is that notices are required for valid reasons. Failure to comply with notice provisions leaves both parties at risk. Take simple steps to comply with the Contract and minimise the risks of noncompliance.
–David Brodie-Stedman
davidbrodiestedman@dispute-iq.com
