Out-Law / Your Daily Need-To-Know

Out-Law Guide 4 min. read

Notice provisions in construction contracts

All construction contracts require parties to notify each other in certain circumstances in order to trigger particular entitlements.

Common scenarios where a notice is required include:

  • where the contractor wishes to make extension of time claims;
  • where the employer wishes to make liquidated damages claims;
  • for making applications for payment and related responses;
  • for making claims for variations;
  • for making claims for loss and expense;
  • for terminating the contract, suspending the performance of works, or informing of defects in works.

Typically, contracts will include a notices clause to dictate when a notice is required and how it should be given. Every contract, including standard forms and their bespoke amendments, is different, and so the full and final contract, including any later amendments, must be read carefully.

Requirements for a valid contractual notice

Always check the contractual requirements of notices for the following, in particular:

  • whether a notice is required in a particular scenario;
  • where the notice should be served;
  • how the notice should be served;
  • ·on whom the notice the notice should be served;
  • what the time limits are for service of the notice;
  • what detail the notice should contain; and
  • whether its service is a condition precedent to entitlement.

The law is clear – notice requirements must be strictly complied with, as was exemplified in the case Mannai Investment Co Ltd v Eagle Star Life Assurance in 1997.

Getting notices wrong can therefore have costly consequences – for example, this could prevent a contractor from getting additional time or money, or from quashing a sub-contractor’s claim.

Some common issues that are encountered when serving notices include:

  • serving the notice on the wrong address or addressee – it is not only vital to be aware of the contractual requirements but also any properly notified changes in correspondence details post-contract;
  • serving the notice by a different method to that stated in the contract – i.e. hand, post, special delivery, email – as a general rule, a requirement for a notice to be 'in writing' or 'written' will include electronic communications, such as e-mail, unless this is specifically excluded; and
  • lack of proof of valid service – for example, does the contract assume that the notice has been received after a set period of time, known as deemed service? If not, ensure that proof of delivery is sought at the time of service by using, for example, delivery/read receipts or tracked mail.

Conditions precedent

It is good practice to comply consistently with contractual notice provisions and avoid any potential arguments about compliance. Some notice provisions are “conditions precedent”, whilst others are said to be “directory”. A condition precedent is a clause in the contract which must be satisfied before an entitlement can arise: for example, non-compliance will prevent a claim for time or money.

The requirement to provide notice may, but will not always be, a condition precedent to entitlement. It is therefore critical for both parties to understand the effect of a particular notice clause.

It is a matter of construction as to whether any particular clause is a condition precedent. While the words 'condition precedent' do not need to be used, the words must be clear and unambiguous for the courts to enforce a term as a condition precedent. Words and phrases such as ‘may’, ‘shall’, ‘must’, ‘without giving’, ‘subject to’, ‘provided that’, and ‘provided always that’ offer a sliding scale of examples of terminology often used which may indicate that the parties intend a clause to be a condition precedent, with 'provided always that' being the clearest indicator.

Failure to comply with a condition precedent

The purpose of making notice provisions a condition precedent in relation to claims is to ensure that the parties are notified of potential claims and given the opportunity to investigate and manage the effects, as well as to ensure certainty. However, if a notice provision is not interpreted as a condition precedent and the procedural requirements are only directory, then it is a general term of the contract – lack of notice will not always prohibit a claim in that case. It is, however, still a breach of contract potentially entitling the innocent party to claim any damages caused as a consequence of the breach, in the normal way.

Where the notice requirements of a contract are clear, the courts in England and Wales have developed a trend of upholding strict compliance with those requirements.

If a notice provision is deemed to be a condition precedent to entitlement, it is fatal to a claim if the contractor:

  • fails to serve notice at all or within time; or
  • serves notice but not in strict compliance with the requirements of the contract.

However, there may be alternative arguments open to the contractor, and/or pitfalls for the employer to be mindful of:

  • considerations for the contractor in the context of money claims: can I claim damages for breach of contract? Am I entitled to a variation? Is there an ongoing duty of the employer to assess loss and expense?
  • considerations for the contractor in the context of extension of time claims: is there an ongoing duty of the employer to award an extension of time? Is time at large?
  • potential waiver, estoppel or variation of express terms: for example, where the contract says one thing but the parties conduct themselves in a manner/act upon a notice that was not validly served; and

whether a notice provision is deemed to be a condition precedent to entitlement: failure to serve notice at all or validly is not necessarily fatal to a contractor's claim. If there are minor defects in notices and where the recipient of the notice is a reasonable recipient, with knowledge of the factual and contextual background and would not be perplexed by the error, the notice may not necessarily be invalidated. However, omissions in a notice to bring it in line with mandatory contractual requirements, such as the form of the notice and method of service, will make the notice invalid.

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