05 Jul 2024
Sub-Clause 20.2.1 of the FIDIC Red Book details the notice requirements applicable to Employer and Contractor Claims. If an Employer considers itself entitled to: i. additional payment by the Contractor; ii. a reduction in the contract price; or iii. an extension of the defects notification period, it must give the Engineer a Notice describing the event or circumstance giving rise to the Claim (the Notice of Claim). In the same way, if a Contractor considers itself entitled to: i. an extension of time; or ii. any additional payment by the Employer; it must give the Engineer a Notice of Claim. The Notice of Claim must be given as soon as practicable, and not later than twenty-eight days after the claiming Party became or should have become aware of the relevant event or circumstance.
This sub-clause 20.2.1 contains clear time bar wording to the effect that a claiming Party who fails to give a Notice of Claim within this twenty-eight days period loses its entitlement to relief. In common law jurisdictions, the giving of a valid and timely Notice of Claim under sub-clause 20.2.1, is seen as a condition precedent to the right to claim an extension of time or additional payment. This is because common law tends to require strict compliance with time-bar clauses in order for such a claim to be made, as evidenced by the decision of the English Technology & Construction Court in Obrascon Huarte Lain SA v Attorney General for Gibraltar [2014 EWHC 1028 (TCC)] (Obrascon).
In civil law jurisdictions, arguments may be open to a party claiming an extension of time or additional payment from the other party that it should not lose its rights to make such a claim, despite the expiry of a Claim notification period. Such arguments may be founded upon principles of good faith or an inability to abuse rights in the operation of a contract, or upon mandatory provisions of local law, notably laws forbidding the abridgment of limitation periods. However, good practice dictates that both parties should aim to give valid and timely notices of their claims, in accordance with the provisions of sub-clause 20.2.1.
Obrascon serves as one of the leading judgments on the interpretation of sub-clause 20.2.1 and is lenient towards contractors, as it permitted delay notifications under clause 20.1 to be deferred until a delaying event had actually impacted the progress of the works, which could result in many months passing after the occurrence of the event. However, this lenient approach has been countered by an appellate decision of the DIFC Courts.
In the recent case of Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC, the two parties entered into a contract for the construction of a residential building, with completion scheduled for 16 December 2018. This contract was drafted in accordance with the FIDIC Red Book 1999, as amended by the Particular Conditions and other detailed provisions. Modern Executive Systems Contracting LLC (MESC) issued three extension of time applications between February 2018 and June 2019, all of which were rejected by the engineer. Panther Real Estate Development LLC (Panther) commenced proceedings for delay liquidated damages and other damages arising from MESC’s failure to complete the project on time, and MESC counterclaimed for extension of time and prolongation costs.
The Court of First Instance and Court of Appeal dismissed MESC’s claims, on the following grounds, primarily: i. MESC’s failure to notify Panther of the delay events within twenty-eight days of the time when it became aware or should have become aware, of the delay event or circumstance relied upon for the claimed extension of time; and ii. MESC’s failure to send a fully detailed claim with supporting particulars to Panther, within the prescribed time period.
The Courts found that the time for notification began from the date when MESC was aware or ought to have been aware, of an event or circumstance that could give rise to a claim for an extension of time, irrespective of whether there was likely to be or had been any actual delay by that time. This is a significant departure from previous judgments and indicates that a failure to notify claims on time results in a loss of entitlement under FIDIC form of contract.