Contractor’s claim notice provisions in Sub-Clause 20.1 are one of the most delicate provisions of the FIDIC contracts to navigate.1 Their purpose is to require the contractor to submit claims within a specified period so that they can be dealt with efficiently. However, the effectiveness and enforceability of such provisions can be affected by the law the parties have chosen to govern the contract.
Key features of Sub-Clause 20.1 of the FIDIC contract
Sub-Clause 20.1 provides that the contractor must give notice to the engineer for any claim that is related to any extension of the time for completion and/or any additional payment, “as soon as practicable”, and within a time limit of 28 days after the date on which the contractor “became aware, or should have became aware, of the relevant event or circumstances”. If he fails to give notice within this period, the FIDIC contracts state that the contractor will not be entitled to any extension of time or additional payment. Furthermore, the employer will be discharged from any liability in relation with the said claim.
Common law approach
English law has historically taken a strict approach to time-bar clauses such as these and considers compliance with Sub-Clause 20.1 to be a condition precedent to the contractor’s claim for an extension of time and additional payment. This interpretation has recently been confirmed by the High Court in Obrascon Huarte Lain SA v Attorney General for Gibraltar.2 This means that should the Contractor fail to provide the required notice, the contractor will lose its contractual rights and will become barred from claiming any extension of time or additional payment. This potentially provides the employer with a complete defence in case of any claim by the contractor. It can reasonably be expected that this interpretation will be followed in other common law jurisdictions.
Civil law approach
Civil law jurisdictions generally take a more lenient approach. Although the starting point is that the parties are bound by the terms of the contract, a failure to adhere strictly to Sub-Clause 20.1 may not necessarily restrict the contractor’s claims from being pursued based on arguments under the governing civil law. The contractor will carry the burden of proof that his claims are valid and are not affected by his failure to meet his notice obligation on time. Faced with an alleged failure to adhere to Sub-Clause 20.1, a contractor could raise arguments based on a breach by the employer of the principle of good faith3 or that an employer’s reliance on a contractor’s failure to give notice in time amounts to an unlawful exercise of a right because the consequences are disproportionate to the harm that will be suffered.4 Finally, most civil codes strictly govern limitation or prescription periods5 and it may be possible for a contractor to argue that a time-bar provision that contravenes the civil code is unenforceable. Whether these arguments are available, and ultimately successful, will depend on the particular facts and governing law, as well as their acceptance by the relevant court or arbitral tribunal.
Conclusion – the future?
The future second editions of the FIDIC contracts to be published shortly are expected to water down the strict provisions of the current contracts by giving the DAB an element of discretion to override the 28-day notice period where late submission was “acceptable” in the circumstances. If adopted, this might provide some comfort to contractors but is not without its own uncertainty as to when such relief may be available.
Irrespective of jurisdiction, contractors should ensure that they comply with the contractual requirements of Sub-Clause 20.1 to give timely notice on claims in order to avoid any uncertaint