Where a contract contains time-bar provisions which state that a contractor must submit claims for loss and expense or extension of time ("EOT") in a prescribed format within a certain period of time, then such provisions will be applied strictly where it is clear from the words used in the contract that the parties intended them to be applied strictly. If a contractor fails to comply with the formal requirements of such provisions then he will be unable to claim payment in excess of the contract sum.
Facts
The defendant ground works contractor (the "Contractor") was employed by the claimant developer (the "Employer") pursuant to a contract incorporating the JCT Trade Contract 2002 (with Amendment 1:2003) to carry out works relating to a hotel development near Westminster Bridge. The contract involved a named Construction Manager. Critically, the contract contained bespoke amendments, including a requirement that if the Contractor wanted to claim for loss and expense then the Contractor had to inform the Construction Manager in writing in a specified format within a specified time period. The contract also contained notice requirements for claims for an EOT.
The Contractor made monthly applications for payment during the course of the works, some of which referred to claims for delay and loss of expense, but these references did not satisfy the requirements of time and format as set out in the contract. The parties ultimately fell into dispute as to the sums due to the Contractor and the Employer referred the issue of the proper interpretation of the time-bar provisions to adjudication. The Employer maintained that the Contractor’s failure to comply with the time-bar provisions prevented the Contractor from claiming for EOTs and loss and expense. The adjudicator found against the Employer saying that the key words were "devoid of meaning" and of no effect. The Employer commenced court proceedings seeking final determination of the dispute. The court disagreed with the adjudicator, holding that time-bar provisions should be applied strictly where it is clear from the words used that the parties intended the provisions to be strictly applied.
The judgment
Akenhead J held that:
- The ordinary rules of contractual interpretation should be applied to terms which would have the effect of excluding otherwise perfectly valid claims or entitlements. In interpreting a contract the question that should be asked is what a reasonable person having all the background knowledge available to the parties at the time the contract was entered into would have understood the language in the contract to mean.
- The words used in this contract were clear. They stated that "if" (and only if) the Contractor gave notice in the required format within the agreed time limits then (and only then) he would be entitled to claim for additional payment. In legal terminology, compliance with the time-bar provision constituted a "condition precedent" for an entitlement to claim for loss and expense, which meant that a failure to comply with the provision prevented the Contractor from making such a claim. Indeed, the term "condition precedent" was used in this contract in relation to the time-bar provision.
Implications
If the contract says that the ability to make a claim is dependant on notice being given within a certain time frame and in a certain format then the prudent claiming party should comply with those requirements. This fits in with previous guidance (see our Law Now articles on Steria v Sigma, Multiplex v Honeywell and Waterfront Shipping v Trafigura). As alluded to by the court in Waterfront, the courts seem to be more supportive of time-bar clauses than arbitrators (for which read adjudicators in this case). Thus the adjudicator in the case at hand tried to find a way around the time-bar clause but Akenhead J did not uphold his approach. Arbitrators and adjudicators seem more willing to find ways around applying time-bar provisions strictly.
Concerns about time-bar provisions are, of course, best addressed when contracts are negotiated and drafted. Insofar as time-bar provisions are adopted, contractors should make sure that they comply with the exact requirements, in terms of time for notification, format and effective service. This is vital given that time-bar provisions are a common feature of many standard form contracts, including NEC3 and FIDIC. In particular, contractors should not assume that general references to delay and loss/expense during the course of the works are sufficient to satisfy time-bar provisions.
Reference: WW Gear Construction Ltd v McGee Group Ltd [2010] EWHC 1460 (TCC)
