July 2012: Do you know the difference between a Notice and a Time Bar?
|It is essential to have a thorough understanding of the difference between a notice and the time bar, writes Chris Binnington.
Most standard forms of contract and especially the CIDB forms contain time bars which will disentitle Contractors from succeeding with a claim if they notify outside the time period provided. Typical of these are Clause 20.1 of FIDIC and Clause 29 of JBCC.
However, a number of other time periods are linked to either the requirements for notice alternatively to requirements for actions. Thus for example FIDIC requires an initial notice to be given within a 28 day period of when the Contractor became aware or ought to have become aware of his entitlement to claim. The Contractor, having complied with this requirement is required to submit the particulars of his claim within 42 days from the same trigger date.
Whilst the consequences of NOT complying with the 28 day notice are specified in the 2nd paragraph of clause 20.1, there are no consequences specified where the Contractor fails to submit the details of the claim within the 42 day period. So, what is the difference and what are the consequences for a Contractor who submits his claim particulars well outside the 42 day period?
Our contract law rules provide that where a remedy is specified in the contract the parties are obliged to follow that remedy. Thus for example if a penalty for late completion of R5 000 per day is specified but the Employer’s actual losses are running at R20 000 per day, the Employer cannot abandon the penalty and try and recover the actual loss suffered. He is bound by the remedy in the contract.
However, where no remedy is to be found in the contract then the common law rules will apply and the remedy is to be found in the general common law. Herein lies the answer to the conundrum, what happens if you are out of time but there is no remedy in the contract clause itself.
A failure to comply with the 42 day time period, to stick with my FIDIC example above, will be a breach of contract, but the breach does not have a remedy in the contract. In the common law the innocent party suffering from the breach will always be able to recover damages to the extent it can prove those damages have been incurred and that the damages flow naturally from the breach and were reason ably foreseeable at the time of entering into the contract. Importantly those common law rules do not provide that the guilty party will lose his rights under the contract. Thus if the Employer could demonstrate that the Contractor’s failure to provide particulars within 42 days’ had caused the Employer to incur costs which he would not have incurred had the particulars been provided timeously, the Employer would be entitled to recover those costs by way of damages. The Contractor however would not lose his rights to claim simply because he was out of time.
The same principle applies to the Engineer’s response. Under FIDIC the Engineer has 42 days to respond to a claim but the contract is silent on the consequences of him not responding in time. Accordingly a late response from the Engineer will be a breach of contract but is still a valid response.
This principle was well stated in the House of Lords decision in the Bremer case where Lord Salmon had the following to say in regard to time bars:
“In the event of shipment proving impossible during the contract period, the second sentence of Clause 21 requires the seller to advise the buyers without delay of the impossibility and the reasons for it. It has been argued by the buyers that this is a condition precedent to the seller’s rights under that clause. I do not accept this argument. Had it been a condition precedent, I should have expected the clause to state the precise time within which the notice was to be served and to have made plain by express language that unless the notice was served within the time, the sellers would lose their rights under the clause.”
From what Lord Salmon has said it seems clear that for a notice to be a condition precedent to a right for more time, the wording of the clause would need to be such that a failure to serve notice would result in loss of rights. .
Time bars were also the subject of a Constitutional Court decision in South Africa in Barkhuizen v Napier when the Constitutional Court confirmed that time bars will be upheld providing the notice period is clear and the actual period is “reasonable”.
Contractors will not be able to use an argument based upon the fact that the principal agent must have known that the Agent’s actions in, say, instructing a major V.O, particularly late in the construction period, would inevitably delay completion and accordingly notice was unnecessary. The simple rule is, where a time bar is involved, NO notice, NO claim! The “prevention principle” is not applicable to this situation. That is, advancing an argument that the Agent’s VO prevented completion. As a fact it may well have done so but neither the Agent nor the Employer prevented the Contractor from claiming its entitlement to an extension of time.
Time bars are accordingly likely to be strictly applied and will be upheld by adjudicators, arbitrators and the Courts. The only possible relaxation might be where there is doubt as to when the trigger date occurred in those time bar clauses that refer to “ when the Contractor knew, or ought to have known” about a possible claim.
At BCA we see millions of Rands lost annually by Contractors who fail to follow the contract and get caught out by the time bar. Employers are entitled to take the benefit of the time bar to the detriment of the Contractor, and Contractors will have only themselves to blame if they do not comply with notice provisions.
C D Binnington Pr Eng