Out-Law Guide | 16 Aug 2011 | 10:40 am | 3 min. read
Notice clauses are contained in many contracts and are important, although often overlooked, in construction contracts. These clauses require parties to contracts to notify each other in certain circumstances, to give them the chance to deal with any problems which might come up. Even a trivial mistake when giving notice might cause problems later for the claiming party.
Notice clauses are useful because they allow the party employing the builder in a construction project (the 'employer') more time to react to problems such as delays. The employer needs to find out any such problems in enough time to do something about them. They also help the builder in a construction contract (the 'contractor'). They should make it clear what the contractor has to do if it hits problems like delay and needs to extend the completion date or claim additional money.
Notice clauses are easy to forget about once work begins on the site. However, if a contractor fails to follow the contract when giving notice it may find that it is not entitled to claim anything.
When dealing with notice clauses, look out for:
Giving notice and making claims
A notice clause should be precise and unambiguous about what is required. A typical notice clause will say:
Contractors should comply with every requirement of the notice clause. If they do not, they may not be able to make a claim.
A condition precedent is a condition which must be satisfied before an entitlement to extra time or money can arise. In many cases, the courts might well consider giving notice to be a condition precedent for making a valid claim. This will depend on the type of claim and the language of the notice clause. Sometimes clauses use the words 'condition precedent' when describing the significance of a notice, but even if these specific words are not used the clause can still have this effect.
Contractors should be wary, however, even where giving notice is not expressly described as a condition precedent. Failing to give notice in these circumstances may still defeat a contractor's claim.
A contractor may seek a waiver from an employer if it has failed to comply with a notice requirement. However, whether this will be issued relies on the goodwill of the employer.
Remember that failing to give notice required by the contract may give the paying party the opportunity to challenge the notice. This might prevent an otherwise valid claim from being successful.
Notice by email: it would be surprising if a court decided that notice by email was not 'in writing'. Notice by email does not have to be read, proof of delivery will be enough. However, the contract might exclude email as a valid form of notice. This is for the parties to decide.
Service by 'any effective means': the courts have considered this wording when it has been used in contracts. They decided that this phrase can include email, post, hand delivery and fax, as long as delivery can be proved.
Who should serve notice? Notices should be served by a party authorised to do so under the contract. Take care where agents have the authority to give and receive notices on behalf of a contracting party - other agents may not have the same authority, even if those agents think that they do.
Address for service of notice: a contract should contain the address for service of notices, and the procedure for notifying changes of this address. The contract should name a company officer, for example the Company Secretary, as opposed to an individual as the recipient. This will accommodate changes in personnel after the contract is signed. If a contract with a UK company does not contain a notice clause, notice can be served at the company's registered UK address.
Personal delivery: this is intended to mean delivery to an individual, which can be anybody at the address for service. This includes, for example, a receptionist as opposed to the person who is actually best placed to deal with the notice. Make sure that the contract names the person the notice should go to, for example the Company Secretary, to help avoid the notice being lost in the internal post.
Delivery by 'registered post': as this no longer exists as a postal service it will be enough to send something by an equivalent service. Remember to keep proof of delivery.
Deemed receipt: a contract might say that a letter, fax or email is deemed to have been delivered once a specified period of time has elapsed from its being sent. This means that, for the purposes of the contract, a notice has been delivered unless the recipient can prove that this did not happen. Remember that proof of sending is required. Examples include: recorded delivery slips, certificates of posting, fax transmission reports and email delivery receipts. If there is proof of non-delivery such as the return to the sender of a recorded delivery letter, this will override the deemed delivery.