Too commonly employers or main contractors complain that the contractor or subcontractor is too claimed focused should a notice be given for every event which may give rise to an entitlement.Subsequently, after such a complaint, the contractor, to preserve the working relationship, stops giving  claim notices.  When the project ends and it comes to settle the final account, the employer rejects all claims as time barred due to no notice being given in time.

Most contracts will contain a clause requiring notice of claim to be given within a set time or the right to claim is lost. As the one who generally drafts the contract, the employer should not be surprised if the contractor actually follows its terms.  In fact, professional contract administration requires the contractor to follow the contract to preserve rights, whether needed later or not. These time bars have been enforced by the courts and will disentitle an otherwise genuine claim.

How to deal with this issue and the employer’s demands? Most contracts contain a “no variation unless in writing and signed clause”.  If the employer does not want to receive claim notices, the best option is to amend the contract. The contractor should continue giving notices until the contract is amended.

An alternative, yet not commercially the practice in the MENA Region, would be to remove time bars (whilst keeping a time frame for notices to be given).  It is important to acknowledge that if the contractor provides late notice, the contractor is in breach and damages would be reduced by the amount that the employer suffers from that breach. That is the cost to the employer of not being timely notified.

As a side issue, we see contracts detailing increasingly more administrative burdens on contractors to provide a wide variety of reports and if the contractor fails to comply, payment can be withheld. There are two questions to ask here:

    1. Is the requirement appropriate for the project or just taken from another contract as a good idea?
    2. Is the employer or engineer really going to use the information?

If the answer to either question is no, it is just an extra cost, as the cost of the administration should be included in the contractor’s preliminaries and only serves to increase the cost of the project.

Authors:  Scott Lambert – Partner and  Chris Gibson – Associate

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