time bar clauses

Time-bar Clauses in Standard

Conditions of Contracts

W.K.Amila Gayan B.Sc. (Hons.) in QS, LLM (Cons.Law & Arbi.), FCIArb., MRICS, AIQS(SL)

Commercial Manager - Al Turki Enterprises LLC

Chartered Quantity Surveyor/Board Member of RICS MENA Construction & QS Working Group/ RICS and IQSSL

Counsellor/Supervisor

Disclaimer

The information contained in this presentation is for education purposes only and should not be considered as legal advice. The information presented should not be acted upon without professional advice.

Contents

Introduction

Purposes of time bar clauses

General legal principles

Effectiveness of time bar clauses

Role of QS

Q& A

Introduction Oxford dictionary defines bar as “A barrier or restriction to an action”. A clause in a contract which sets a strict deadline within which the party who entitle for a claim, shall comply with to exercise the right of his claim. There is an increase use of time bar clauses in standard forms of contracts. The discussion is limited to time bar clauses related additional cost and extension of time. Ex:- FIDIC 1999 clause 20.1, NEC 3 clause 61.3 The key question is whether the time bar clauses are effective in disallowing contractor’s claims/a complete defence to contractor’s claim

‘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

Employer, 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.’

Sample Time Bar Clause – Clause 20.1 FIDIC 99

‘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 . . .’

Sample Time Bar Clause – Clause 20.1 FIDIC 99

Purposes of time bar clauses

To alert Employer/Engineer on Contractor’s

claims

Enable Employer to take appropriate actions

to manage/mitigate additional cost & time

Allow to check the contemporary records

and swift evaluation of claims

Avoid forensic analysis of claims

Prevent accumulation of claims

General legal principles Temloc v Errill Properties (1987) 39 BLR 30 Time scales in construction contracts are directory and not mandatory.

The contractors should not lose the right of claim due to non compliance of the time scale for submission of notices/details of claims stipulated in the contract.

Bremer Handelgesellschaft mbH v Vanden Avenne Izegem PVBA [1978] 2 Lloyd’s Rep. 113 The House of Lords held that a notice provision should be construed as a condition precedent,

(i) it states the precise time within which the notice is to be served; and (ii) it makes plain by express language that unless the notice is served within that time the party making the claim will lose its rights under the clause.

Effectiveness of time bar clauses-FIDIC

1999 (Slide-01) Clause 20.1 (Contractor’s Claim) of FIDIC 1999 Clause 20.1 (Contractor’s Claim) of FIDIC 1999 Red (CONS), Yellow (P & DB) and Silver (EPCT) Books.

Wording of all three books are similar except the word “Employer” replaces “Engineer” in the Silver Book.

Describes the procedure to follow by the Contractor to claim additional cost or extension of time.

Lengthy clause around 10 paragraphs/665 words.


1999 (Slide -02) Clause 20.1 (Contractor’s Claim) of FIDIC 1999

“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..” Notice requirement is for EOT or any additional cost.

The claim procedure described here applies for all claims for additional cost and time in the contract

Effectiveness of time bar clauses-

FIDIC 1999 (Slide -03)

Clause 20.1 (Contractor’s Claim) of FIDIC 1999

Following are some examples from Red Book where the contractor can claim additional time or cost. o Clause 1.9 – Delayed drawings or instructions o Clause 2.1 – Right to access the site o Clause 4.7 – Errors in original setting out points/levels o Clause 4.12 – Unforeseeable physical conditions o Clause 7.4 – Additional tests o Clause 8.4 – Causes for EOT o Clause 8.5 – Delay caused by Authorities o Clause 8.9 – Suspension of Works o Clause 13.2 – Value Engineering o Clause 13.3 – Variation Procedure o Clause 13.7 – Changes in Legislation o Clause 14.8 – Delayed Payments o Clause 16.4 – Payments on Termination o Clause 17.4 – Consequences of Employer Risk Events o Clause 19.4 – Consequences of Force Majeure

The above Clauses states that the Contractor's entitlement for time or cost is subject to Clause 20.1

Effectiveness of time bar clauses-FIDIC 1999

(Slide -04)


Notices shall be in writing and properly delivered to recipient as per clause 1.3.

The word “notice” is not a defined term in the contract.

“The Contractor has merely to give a bare notice of claim within 28 days. A one- or two-sentence letter will do. The Contractor does not need to state the amount or time claimed nor the contractual basis of the claim nor provide any supporting documents.” (C.R.Seppala, 2001)


1999 (Slide -05)


“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. Otherwise, the following provisions of this Sub-Clause shall apply.”

Satisfy Bremer’s Case guidelines; precise time for a notice to be served and states unambiguously failing to submit notice will lose the right to claim.


1999 (Slide -06)


“The Contractor shall also submit any other notices which are required by the Contract, and supporting particulars for the claim, all as relevant to such event or circumstance. The Contractor shall keep such contemporary records as may be necessary to substantiate any claim, either on the Site or at another location acceptable to the Engineer. Without admitting the Employer’s liability, the Engineer may, after receiving any notice under this Sub-Clause, monitor the record-keeping and/or instruct the Contractor to keep further contemporary records. The Contractor shall permit the Engineer to inspect all these records, and shall (if instructed) submit copies to the Engineer.”

Specify the requirement to keep contemporary records. Engineer is vested with the authority to instruct keep further contemporary records.


1999 (Slide -07) Clause 20.1 (Contractor’s Claim) of FIDIC 1999

“Within 42 days after the Contractor became aware (or should have become aware) of the event or circumstance giving rise to the claim, or within such other period as may be proposed by the Contractor and approved by the Engineer, the Contractor shall send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed. If the event or circumstance giving rise to the claim has a continuing effect:

(a) this fully detailed claim shall be considered as interim;

(b) the Contractor shall send further interim claims at monthly intervals, giving the accumulated delay and/or amount claimed, and such further particulars as the Engineer may reasonably require; and

(c) the Contractor shall send a final claim within 28 days after the end of the effects resulting from the event or circumstance or within such other period as may be proposed by the Contractor and approved by the Engineer.”

Specify the timelines to submit the details of claim.


1999 (Slide -08)


“Within 42 days after receiving a claim or any further particulars supporting a previous claim, or within such other period as may be proposed by the Engineer and approved by the Contractor, the Engineer shall respond with approval, or with disapproval and detailed comments. He may also request any necessary further particulars, but shall nevertheless give his response on the principles of the claim within such time. Each Payment Certificate shall include such amounts for any claim as have been reasonably substantiated as due under the relevant provision of the Contract. Unless and until the particulars supplied are sufficient to substantiate the whole of the claim, the Contractor shall only be entitled to payment for such part of the claim as he has been able to substantiate.”

Specify the timeline that Engineer shall response to the Contractors Claims.


1999 (Slide -09)

Clause 20.1 (Contractor’s Claim) of FIDIC 1999 “The Engineer shall proceed in accordance with Sub-Clause 3.5 [ Determinations ] to agree or determine (i) the extension (if any) of the Time for Completion (before or after its expiry) in accordance with Sub- Clause 8.4 [ Extension of Time for Completion ], and/or (ii) the additional payment (if any) to which the Contractor is entitled under the Contract. The requirements of this Sub-Clause are in addition to those of any other Sub-Clause which may apply to a claim. If the Contractor fails to comply with this or another Sub-Clause in relation to any claim, any extension of time and/or additional payment shall take account of the extent (if any) to which the failure has prevented or prejudiced proper investigation of the claim, unless the claim is excluded under the second paragraph of this Sub-Clause.” If the Contractor’s claim is not time barred but failed to satisfy the procedure described in this clause, the Contractor’s entitlement may be limited.


1987 (Slide -01) FIDIC 1987 address the additional time and cost separately. Clause 44.1 & 2 (Extension of Time for Completion) 1987

“In the event of (a) the amount or nature of extra or additional work, (b) any cause of delay referred to in these Conditions, (c) exceptionally adverse climatic conditions, (d) any delay, impediment or prevention by the Employer, or (e) other special circumstances which may occur, other than through a default of or breach of contract by the Contractor or for which he is responsible. being such as fairly to entitle the Contractor to an extension of the Time for Completion of the Works, or any Section or part thereof, the Engineer shall, after due consultation with the Employer and the Contractor, determine the amount of such extension and shall notify the Contractor accordingly, with a copy to the Employer.” “Provided that the Engineer is not bound to make any determination unless the Contractor has (a) within 28 days after such event has first arisen notified the Engineer with a copy to the Employer, and (b) within 28 days. or such other reasonable time as may be agreed by the Engineer, after such notification submitted to the Engineer detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time.”


1987 (Slide -02)

Does the Clause 44.2 satisfy Bremer’s Case guidelines?

o precise time for a notice to be served and

o states unambiguously failing to submit notice will

lose the right to claim

Does the wording “Engineer is not bound to make any

determination” express clearly the Contractor’s failure to

give notice shall lose his right to claim EOT?

Deadlines on time for submitting notices may not

amount to condition precedent.


1987 (Slide -03) Clause 53.1 (Notices of Claims) of FIDIC 1987

“Notwithstanding any other provision of the Contract, if the Contractor intends to claim any additional payment pursuant to any Clause of these Conditions or otherwise, he shall give notice of his intention to the Engineer, with a copy to the Employer; within 28 days after the event giving rise to the claim has first arisen.” Clause 53.4 (Failure to Comply) of FIDIC 1987

“If the Contractor fails to comply with any of the provisions of this Clause in respect of any claim which he seeks to make, his entitlement to payment in respect thereof shall not exceed such amount as the Engineer or any arbitrator or arbitrators appointed pursuant to Sub-Clause 67.3 assessing the claim considers to be verified by contemporary records (whether or not such records were brought to the Engineer’s notice as required under Sub-Clauses 53.2 and 53.3).” Failure by the Contractor to adhere to provisions in Clause 53.1,53.2 and 53.3 should not bar the Contractor from receiving remuneration for any work which the Contractor can substantiate from contemporary records. (Guide to the use of FIDIC, 1989)

Effectiveness of time bar clauses-Oman

Conditions 1981/99 (Slide -01) Clause 44 (Extension for Time for Completion)

“Should the amount of extra or additional work of any kind or any cause of delay referred to in these conditions, or exceptional adverse climatic conditions, or other special circumstances of any kind whatsoever which may occur, other than through a default of the Contractor; be such as fairly to entitle the Contractor to an extension of time for the completion of the Works, the Engineer shall determine the amount of such extension and the Engineer shall consult with and provide to the Employer a detailed written report giving the reasons for his decision to extend the completion date prior to notifying the Contractor provided that the Engineer is not bound to take into account any extra or additional work or other special circumstances unless the Contractor has within twenty – eight days after such work has been commenced, or such circumstances have arisen, or as soon thereafter as is practicable, submitted to the Engineer’s Representative full and detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time. Provided that the decision of the Engineer regarding extension of time shall be final and binding.”

Effectiveness of time bar clauses-Oman

Conditions 1981/99 (Slide -02) Clause 52.5 (Claims)

“The Contractor shall send to the Engineer’s Representative once in every month an account giving particulars, as full and detailed as possible, of all claims for any additional payment to which the Contractor may consider himself entitled and of all extra or additional work ordered by the Engineer which he has executed during the preceding month. No final or interim claim for payment for any such work or expense will be considered which has not been included in such particulars. Provided always that the Engineer shall be entitled to authorize payment to be made for any such work or expenses, notwithstanding the Contractor’s failure to comply with this condition, if the Contractor has, at the earliest practicable opportunity, notified the Engineer in writing that he intends to make a claim for such work and has as soon as is practicable thereafter send detailed particulars of the claim.”

Prevention Principle V Time Bar Clauses Prevention Principle

One party [the contractor] to a contract has failed to perform a condition of that contract [e.g. complete the works by the completion date], the other party [the employer] cannot rely on its non-performance if it was caused by his own wrongful act. [ Roberts v. The Bury Improvement Commissioners (1870) LR 5 CP 310, Holme v. Guppy (1838) 3 M&W 387] ‘There are, however, conceptual difficulties, it is submitted, where

the event causing delay has been caused by the employer’s default . . . There is no authority on whether the employer can in those circumstances recover liquidated damages. It is arguable that although the contractor may not be entitled to an extension of time, the employer would not be able to recover liquidated damages on the basis that he cannot take advantage of his own breach of contract.’ (Keating on Building Contracts, 2001)

Prevention Principle V Time Bar Clauses

It has been held that prevention principle defeats time bar clauses in Australian cases of Gaymark Investments Pty Ltd v. Walter Construction Group Ltd (1999) 18 BCL 449 and Peninsula Balamain Pty Ltd v. Abigroup Contractors Corp Pty Ltd [2002] NSWCA 211.

However, in Scottish case City Inns Ltd v. Shepherd Construction Ltd ScotCS 146, the judge took a robust a robust judicial view was taken of the contractor’s obligation to comply with an express time-bar clause.

In this case, the employer argued that liquidated damages should be

payable since the contractor had failed to comply with the express time-bar clause. The judge agreed with the employer, stating:

‘if he [the Contractor] wishes an extension of time, he must comply with the condition precedent that clause 13.8 provides for these specific circumstances . . . But if the contractor fails to take the specified steps in clause 13.8.1, then, unless the architect waivesthe requirements of the clause under13.8.4, the contractor will not be entitled to an extension of time on account of that particular instruction.’

Role of QS in relation to time bar clauses Represent Client/Developer at pre-contract stage

o Identify the effectiveness of time bar clauses provided the employer requires to include such clause in a contract.

o Understand that the this is a fertile area for disputes. o Obtain legal advice.

Represent Contractor at pre-contract stage

o Identify the risk of loosing potential claims due to time bar.

o Carefully consider the construction management and supervision cost.

o Consider the additional requirement of QSs/Planners.

Role of QS in relation to time bar clauses

Represent Client/Developer at post-contract stage

o Identify the effectiveness of time bar clause. o Agree on the forms of communication at the outset. o Prompt actions/determinations on notices/claims. o Request for additional contemporary records if required. o Consistent approach on rejection of claims on the basis of

time barred to avoid waiver arguments. Represent Contractor at post-contract stage

o Be vigilant on instances where additional time and cost could be claimed.

o Deliver the notices prior to deadlines. o Develop a mechanism to keep site contemporary records. o Submit the contemporary record and details of claims within

specified time lines.

time bar clauses

Documents