M.SC.

/ PG DIPLOMA IN CONSTRUCTION LAW

AND DISPUTE RESOLUTION

BE 5425- Claims Management

YEAR I - SEMESTER III

ASSIGNMENT

Sampath U.D.N.L (179180K)

Submission Date: 11-08-2018

DEPARTMENT OF BUILDING ECONOMICS

UNIVERSITY OF MORATUWA
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Claims Management

1.0 INTRODUCTION

Construction claims are a fact of life on all projects across the world. In an attempt to
safeguard themselves against the risk of claims, employers utilize time bar clauses in
construction contracts to waive the contractor’s entitlement to any additional costs or time if
a notice of claim is not served by the contractor within a specific period of time (Nemr,
2017).

In line with the Sub-clause 20.1 of the FIDIC Conditions of Contract, as regards claims for
the so called extension of time for completion and claims for any additional payment, under
any Clause of the Conditions of Contract or otherwise in connection with the Contract, the
Contractor shall give notice to the Engineer, describing the event or circumstance giving
rise to the claim – as soon as practicable, not later than 28 days after the Contractor be-came
aware, or should have become aware, of the event or circumstances. Should the Contractor fail
to give notice of a claim within the said 28-day period, he would lose his entitlement to a given
claim, and simultaneously, the Employer would be discharged from all liability in connection
with the claim. As regards other time-limits for claims and notices provided in the FIDIC
Conditions of Contract, the FIDIC Conditions of Contract do not stipulate any sanctions for
failure to meet various specified time limits for notification in the form of loss of a given claim.

Therefore analyzing time bar application in Sub-Clause 20.1 (Contractor’s Claims) of

FIDIC Conditions of Contract for Construction (1999) 1st Edition (Red Book 1999) is
important for all the interested parties to the Contract to know each parties obligations,
rights and entitlements.

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2.0 TIME-BAR APPLICATION TO NOTICE

The contract administration provisions of the FIDIC forms were to be characterized as one
word, the word would be ‘communication’. While failure to observe notice requirements or
other mandatory procedures may have consequences in terms of rights. It is not the primary
purpose of those requirements to deprive the Parties of entitlements through the artificial
creation of procedural hurdles (Kelly,2018).

The purpose of Sub-Clause 20.1 is to give procedures for the dealing with notification of
and justification of extension of time claims and additional payments under the FIDIC
Redbook 1999 form of contract. It also sets out the decision process required to be
undertaken by the Engineer.

In simple terms, pursuant to Sub-Clause 20.1, a Contractor must:

a) Notify the Engineer of a claim within 28 of when the Contractor became

aware of or should have become aware of an event or circumstance
b) Submit within 42 days of when the Contractor either became aware of or
should have become aware of an event or circumstance, a “fully detailed
claim and full supporting particulars”
c) Keep “contemporary records” to support his claim and permit the Engineer
to inspect these records, obtain copies and/or instruct for additional records
d) On the other hand, the Engineer must:
a. Respond within 42 days of receipt of a claim either approving,
disapproving or requesting further particulars, all with “detailed
comments”
e) In any determination pursuant to Sub-Clause 3.5
a. Consult with all parties to attempt to reach an agreement; and
b. Make a determination if agreement cannot be reached in
accordance with the terms of the contract, “taking due regard to all
relevant circumstances”

The first paragraph of Sub-Clause 20.1 stipulates a requirement for notice to be given to the
Engineer. Sub-Clause 1.1.3.9 defines “days” as calendar days. The requirement to submit a
notice as follows,

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The notice shall be given as soon as practicable and not later than 28 days after the
Contractor became aware, or should have become aware, of the relevant event or
circumstance

The wording of Sub-Clause 20.1 suggests that notice should only be given when the event
or circumstance exist in a form that gives the Contractor an entitlement to additional
payment or extension of time and not before. That is the Contractor should not give notice if
a situation exists which may at some time entitle him to additional payment or extensions of
time. If the sub-clause had of only used the term “become aware” then the situation would
be simply that when the Contractor gained actual knowledge of the event or circumstance
they should give note. This could lead to a situation where notice could be given months
after the event or circumstance and the Contractor claiming that they had only just “become
aware”. However the sub-clause is broader than that and includes the phrase “or should
have become aware of”, this adds a new objective standard. As the example given by Baker
(2009), in a situation where a Contractor is feeling the effects of adverse weather and the
precise point of time where this adverse weather gets to a point to be covered under sub-
clause 8.4(c) may not be obvious. The 28 days’ notice period runs from when the
Contractor was aware or should have become aware, not necessarily from when the event or
circumstance commenced.

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3.0 ‘TIME-BAR’ APPLICATION TO CLAIM PARTICULARS

Submittting a claim notice withing 28 days when the Contractor was aware or should have
become aware, is a condition precedent under this Contract. If the Contractor fails to give
notice of a claim within such period of 28 days, the Time for Completion shall not be
extended, the Contractor shall not be entitled to additional payment, and the Employer shall
be discharged from all liability in connection with the claim. Otherwise, the provisions of
Sub-Clause 20.1 shall apply

According to (Seppala,2005), submitting a claim notice within 28 days when the Contractor
was aware or should have become aware, is important that it is understood that compliance
with the notice provisions is intended to be a condition precedent to recovery of time and/or
money. This therefore potentially provides the Employer with a complete defence to any
claim for time or money by the Contractor if it is not started within the required time-frame.
Certainly parties, particularly the Contractor should treat the sub-clause in this way.

In the case of Bremer Handelgesellschaft mbH v Vanden Avenne Izegem the House of
Lords held that a notice provision should be construed as a condition precedent, and so
would be binding if,

a) It states the precise time within which the notice is to be served, and
b) It makes plain by express language that unless the notice is served within that time
the party making the claim will lose its rights under the clause.

Here, sub-clause 20.1 expressly makes it clear that:

“If the contractor fails to give notice of a claim within such period of 28 days, the
Time for Completion shall not be extended, the contractor shall not be entitled to
additional payment, and the employer shall be discharged from all liability in
connection with the claim.”

Further the English courts have confirmed their approval for conditions precedent, provided
they fulfil the conditions laid out in the Bremer case. For example, in the case of Multiplex
Construction v Honeywell Control Systems, House of Lord held that,

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“Contractual terms requiring a contractor to give prompt notice of delay serve a

valuable purpose; such notice enables matters to be investigated while they are still
current. Furthermore, such notice sometimes gives the employer the opportunity to
withdraw instructions when the financial consequences become apparent.”

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4.0 SUMMARY

Sub-Clause 20.1 of the FIDIC Conditions1 provides for a period of 28 days for the contractor to
give notice to the engineer about the circumstances giving rise to a claim for extension of the
time for completion of works or any additional payment. This period is counted from the
moment the contractor became aware or should have become aware of the circumstances giving
rise to the claim. Pursuant to the second paragraph of Sub-Clause 20.1, if the contractor fails to
give notice of a claim within the 28- day period, the time for completion shall not be extended,
the contractor shall not be entitled to additional payment, and the employer shall be discharged
from all liability in connection with such a “delayed” contractor’s claim.

When analyzing the Sub Clause 20.1 very closely, a person identified the applicability of time
bar for the notice and the time bar for the application to claim particulars. The notice shall be
given as soon as practicable and not later than 28 days after the Contractor became aware,
or should have become aware, of the relevant event or circumstance is the time bar for the
notice and the if contractor does not performed that it will automatically discharge the
Employer form all the liabilities related to that claim and it’s particulars. Therefore when
submitting a claim by a contractor or when analyzing a claim by the Engineer, these two
situation should be carefully examined.

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REFERENCES

Baker E (2009), “FIDIC Contracts: Law and Practice”, pp 320 Informa.

FIDIC (1999). Conditions of Contract for Construction: For Building and Engineering
Works By The Employer, ISBN 2-88432-022-9

Jayalath C. (2013). Arguing Construction Claims. S.Godagae and Brothers (Pvt) Ltd,
Colombo.

Kelly D. (2018). FIDIC Sub-Clause 20.1. Available at:

https://www.linkedin.com/pulse/fidic-sub-clause-201-david-kelly/.[Accessed
17 July 2018].

Macdonald G. (2017). When Is A Claim Not Claim Not A Claim? When It’s A Variaiton,
Hill International.

Nemr W,E. (2017). THE ENFORCEABILITY OF TIME BAR CLAUSES IN

CONSTRUCTION CONTRACTS: A COMPARATIVE ANALYSIS
BETWEEN THE EGYPTIAN CIVIL CODE AND THE ENGLISH AND
WELSH COMMON LAW JURISDICTIONS, School of Built Environment,
University of Salford.

Papworth J. (2017). Claims Under The New Fidic Conditions Of Contract, John Papworth
Limited, UK.

Seppala C. (2005), Contractor’s Claims Under the FIDIC Contracts for Major Works,
International Construction Contracts and Dispute Resolution Conference in
Cairo

Sergent M. (2015). Claims vs variations. Available at:

http://constructionblog.practicallaw.com/claims-versus-variations. [Accessed
28 June 2017].