Claims notification provisions in construction contracts: Court of Appeal guidance on “if … then” clauses
A recent Court of Appeal decision has considered the effect of a claims notification provision using “if … then” language. The Court found that notification itself was a condition precedent, but stopped short of finding that a late notification would bar entitlement. There is very little previous case law on the use of “if … then” notification provisions and the Court’s judgment provides significant guidance on the topic. The judgment also demonstrates the need for care in the drafting of such clauses, as the natural meaning of the words used may be sufficient to give rise to strict condition precedents where parties may have otherwise thought stronger language was required.
Claims notification provisions in construction contracts
Claims notification provisions are commonly included in construction contracts. Claims by contractors for extensions of time or additional payment may be required to be notified within a certain period of time and similar provisions are sometimes applied to employers.
Whether non-compliance with such provisions will bar the recovery of claims will depend heavily on the words used. At one end of the spectrum, a clause may state expressly that compliance is a condition precedent to entitlement. An example is clause 20.1 of the FIDIC 1st edition contracts, which state expressly that “the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim” where a timely notice of claim is not given. A recent example of the FIDIC time-bar being enforced is Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC. For our Law-Now on that case, please click here.
Some notification clauses do not state expressly that they are conditions precedent, but have nevertheless been interpreted as such. Most notable in this regard is the “provided that” wording used in the loss and expense provisions of the older JCT forms, which was held to be a condition precedent in WW Gear Construction Ltd v McGee Group Ltd (for our Law-Now on that case, please click here). Whilst in 2016 the JCT replaced the words “provided that” with “subject to”, this wording has recently been found to create a condition precedent also (see our Law-Now here).
At the other end of the spectrum, clauses merely using obligatory language, such as “shall”, to require notification but without specifying consequences for non-compliance are usually not treated as conditions precedent. For example, in Scottish Power UK plc v BP Exploration Operating Co Ltd, the court found such wording created a contractual duty but did not bar substantive claims. For our Law-Now on that case, please click here.
Less clear is the effect of clauses which use “if … then” type formulations. An example is clause 2.21 of the JCT DB 2016 Sub-contract which provides that “if the Contractor gives [a notice of non-completion] to the Sub-Contractor within a reasonable time of the expiry of the period or periods [for completion], the Sub-Contractor shall pay or allow to the Contractor the amount of any direct loss and/or expense suffered or incurred by the Contractor and caused by that failure”. In Yuanda (UK) Company Ltd v Multiplex Construction Europe Ltd, a TCC judge noted that the wording of clause 2.21 “suggests that it is not such a condition precedent”, but the question was not considered in any detail. A recent Court of Appeal decision has now provided greater clarity on these types of clauses.
Disclosure and Barring Service v Tata Consultancy Services Ltd
The Disclosure and Barring Service (“DBS”) engaged Tata to build a digital platform to streamline DBS's criminal record checks process. The project was heavily delayed.
Tata brought a claim against DBS for approximately £125 million. DBS defended the claim and counterclaimed for over £100 million. DBS claimed delay damages from Tata, who contested the claim on the grounds that the contract between the parties required DBS to promptly issue a Non-Conformance Report (“NCR”) to Tata before the right to claim delay damages arose.
The relevant clauses read as follows:
“6.1 If a … Milestone is not Achieved due to the CONTRACTOR’s Default, the AUTHORITY shall promptly issue a Non-conformance Report to the CONTRACTOR …. The AUTHORITY will then have the options set out in clause 6.2.
6.2 The AUTHORITY may at its discretion (without waiving any rights in relation to the other options) choose to … require the payment of Delay Payments….”
Tata argued that DBS’s entitlement to recover Delay Payments pursuant to clause 6.2 was conditional on DBS’s compliance with the obligation in clause 6.1 to provide an NCR. DBS pointed to the extension of time provisions of the contract, which contained strict claims notification provisions expressly stated to be conditions precedent, to argue that clause 6.1 could not have been intended to have the same effect.
The TCC held that clause 6.1 was a condition precedent and that, in the absence of an NCR, DBS’s claim for Delay Payments failed. DBS appealed.
Condition precedent upheld
The Court of Appeal dismissed the appeal. Lord Justice Coulson found that the "if .., then .." structure in clause 6.1 was clearly intended to be conditional and that the steps in clause 6.1 were required to be fulfilled before the options in clause 6.2 could be exercised. He emphasised the fact that the clause covered not only delays to milestones but also a failure to pass acceptance tests, and that an NCR was necessary for the application of some of the options provided under clause 6.2.
DBS had contended that the comma immediately preceding the reference to an NCR indicated that the provision of the NCR was not part of the “if … then” structure within clause 6.1, and thus not a condition precedent. The Court disagreed, with Lewison LJ noting that the comma merely served to break up the sentence given its length of approximately 13 lines in the original text. In his view, this reading was:
“reinforced by the fact that the opening part of clause 6.1 is split into two sentences. That, to my mind, emphasises the point that the first sentence must be satisfied before the second sentence takes effect. The word "then" also has a temporal connotation, namely that the steps in the first sentence must be taken before the second sentence takes effect.”
The Court also rejected the contention that the absence of a rigid deadline for delivering an NCR suggested that the requirement was not intended to be a condition precedent. In the Court’s judgment, the term "promptly" carried adequate certainty. This was supported by previous cases where requirements to notify “as soon as possible” and “within a reasonable time” had been held to be conditions precedent.
However, in an important qualification, Lewison LJ noted that a notice which was issued late (i.e. not “promptly”) may nonetheless satisfy the condition precedent:
“I consider that there is considerable force in the proposition that until a Non-conformance Report is given the clause cannot be relied on; but once it has been served, it can be. If further damage occurs because the Non-conformance Report, although served, has not been served promptly, then that can be compensated in damages.”
There was no need to make a ruling on this point as DBS had not issued an NCR at all.
Conclusions and implications
This is a significant Court of Appeal decision which provides guidance as to the interpretation of claims notification provisions using “if … then” language. The Court’s decision indicates that clauses framed in these terms are likely to be construed as giving rise to conditions precedent. The Court’s judgment reflects the modern approach to such clauses, giving effect to the natural meaning of the language used by the parties, and underscores the importance of drafting notification provisions with precision.
Notification clauses are not interpreted in isolation but are considered within the wider context of the contract as a whole. Their construction may be influenced by the surrounding obligations, the overall structure of the agreement, and the underlying commercial purpose. While it is not essential for a condition precedent to specify an exact timeframe for compliance, the inclusion of deadlines may serve to reinforce the conditional nature of the provision.
At first glance the Court’s decision may seem significantly more liberal than that adopted in previous cases, given the use of express condition precedent language elsewhere in the contract and the TCC’s comments on a similar “if … then” clause in Yuanda. However, the qualification expressed by Lewison LJ (with Snowden LJ agreeing) suggests that the ratio of the case does not extend beyond the requirement that the relevant document or notice must actually be submitted as a condition precedent to entitlement. The much more common question of whether a notice can be validly served late under such a clause will need to await further judicial consideration in the future.
References:
WW Gear Construction Ltd v McGee Group Ltd [2010] EWHC 1460 (TCC)
Scottish Power UK Plc v BP Exploration Operating Company Ltd [2015] EWHC 2658 (Comm)
Yuanda (UK) Company Ltd v Multiplex Construction Europe Ltd [2020] EWHC 468 (TCC)
Panther Real Estate Development LLC v Modern Executive Systems Contracting LLC [2022] DIFC CA 016
Disclosure and Barring Service v Tata Consultancy Services Ltd [2025] EWCA Civ 380
