Notice Of Claims For Daily Penalties

A recent arbitration award confirms the well-established rule that an employer forfeits its claim for daily penalties if it fails to give notice within reasonable time. At the same time, the award raises the question of how early the employer must react to an anticipated delay under the General Conditions for Building and Construction Works and Supplies (AB18).

Daily penalties constitute key contractual remedies for delays attributable to the contractor. In particular, daily penalties enable the employer to recover without proving a particular financial loss and may serve as an incentive for the contractor to accelerate performance. However, entitlement to daily penalties is conditional upon compliance with both the agreement and the subsequent formal requirements.