Time bars in an international context

Under most formal contracts it is necessary for the contractor to give notice of various matters before becoming entitled to extensions of time and loss and expense. As Jeremy Glover discusses, depending on its terms, such a provision may be treated as a condition precedent which if not followed could mean you lose your right to make a claim.

It is fair to say that, increasingly notices clauses are expressed as conditions precedent. In other words, a failure to comply with the requirements of the clause will result in a party being prevented from making what might otherwise be a perfectly valid claim.

The traditional view at common law

Generally, in the UK the courts will take the view that timescales in construction contracts are directory rather than mandatory,[1] unless that is, the contract clause in question clearly states that the party with a claim will lose the right to bring that claim if it fails to comply with the required timescale. In the case of Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv[2] the House of Lords held that a notice provision should be construed as a condition precedent, and so would be binding if:

(i) it states the precise time within which the notice is to be served; and

(ii) 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,[3] Mr Justice Jackson (as he then was) held that:

“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.”

The civil law approach

The position of time bars in construction contracts in civil law countries is different. Unlike common law, where non-adherence to a time bar provision may render a contractor’s claim invalid, many, but not all, civil codes may, take a more lenient approach.

Primarily, parties are to perform their obligations under the contract. To take the example of the UAE, Article 243 (2) of the UAE Civil Code states:

“With regard to the rights (obligations) arising out of the contract, each of the contracting parties must perform that which the contract obliges him to do.”

Further Article 265 (1) of the UAE Civil Code deals with contract interpretation and states:

“If the wording of a contract is clear, it may not be departed from by way of interpretation to ascertain the intention
of the parties.”

From the above and in the absence of any other circumstances, the contractor may be required to conform with any time bars in the construction contract. However, in circumstances where it appears that the strict interpretation and imposition of the time bars would seriously prejudice the contractor, the contractor may rely on certain provisions of the UAE Civil Code to argue a more lenient approach be adopted. These include:

Good faith obligation

Article 246 (1) states, “The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith.”

So for example, if an employer was made aware of the contractor’s intention to claim in such manner, the employer could be seen as acting in bad faith if he later argues that the contractor did not meet the contractual timeframe. Alternatively, a time bar provision may not be relied upon by an employer in circumstances where he is in breach and was fully aware that his breach would cause delay to the project.

Unlawful exercise of rights

Article 106 provides that the exercise of a right shall be unlawful if it is disproportionate to the harm suffered by the other party. In particular, Article 106 (1) states:

“A person shall be held liable for an unlawful exercise of his rights.”

Further Article 106 (2) (c) provides:

“The exercise of a right shall be unlawful: (c) if the interests desired are disproportionate to the harm that will be suffered by others.”

In view of the above and subject to the circumstances of the particular case, it may be unlawful for the contractor’s otherwise meritorious claim to be disallowed on the basis of a purely technical breach. Therefore, the employer's reliance on the technical breach may be seen as an unlawful exercise of his rights.

Unjust enrichment

Articles 318 and 319 provide that unjust enrichment is unlawful. Particularly, Article 318 of the UAE Civil Code states:

“No person may take the property of another without lawful cause, and if he takes it he must return it.”

Article 319 (1) provides:

“Any person who acquires the property of other person without any disposition vesting ownership must return it if that property still exists, or its like or the value thereof if it no longer exists, unless the law otherwise provides.”

Therefore, an employer may be prevented from relying on a time bar provision to avoid payment to the contractor for works performed and for works from which the employer has benefitted particularly if the only reason for withholding payment is the lateness of the contractor’s claim.

However, as with the common law, everything depends on the circumstances of the case. That said, courts in the UAE would be reluctant to uphold strict terms of the contract where it can be seen that either the requirement for a notice was complied with in a different form or that strict imposition of the time bar would be an unlawful exercise of the employer’s rights or cause unjust enrichment.

As noted above, the position can vary from code to code. To take another example: article 2 of the Turkish Civil Code imposes an obligation of good faith, and Article 77 provides that unjust enrichment is unlawful. However, the Turkish Courts tend to take a strict view on time bars by virtue of Article 193 of the of Civil Code,[4] which provides that a party may not initiate a claim in a manner which is not set down in the contact or which is against the manner set out in the contract.

Are there ways round the condition precedent?

Is there the possibility that a DAB or arbitral tribunal might decline to construe the time bar as a condition precedent, having regard to the particular circumstances of the matter before it and the impact of the applicable Law?[5] On the strict wording of the Contract, the answer is no and contractors should always try and work on this basis.

That said, it is often suggested that in civil code jurisdictions it can be possible to raise a successful challenge to time bars under the mandatory laws of that country on the basis of the time bar being contrary to the notion of good faith[6] or some other similar legal principle. For example, it has been suggested that a German court might interpret the contractor’s duty to give notice not as a condition precedent to give notice but an obligation (“obliegenheit”) of the contractor. This would mean that the contractor does not lose the right to make a claim but that the contractor must prove that his claims are valid and are not affected by his failure to meet his notice obligation in time.[7]

The general point being that it is wrong that a party who has genuinely suffered a loss might be prevented from bringing a claim in respect of that loss for a technical procedural breach. Remember Article 246(1) of the UAE Civil Code says that:

“The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith.”

Indeed most civil codes contain a provision confirming the importance of what has actually been agreed between the parties.

The Scottish case of City Inn Ltd v Shepherd Construction Ltd[8] suggests that there may well be certain ways round the condition precedent. The core element of the dispute was whether or not the contractor was entitled to an extension of time of 11 weeks and consequently whether or not the employer was entitled to deduct LADs. Clause 13.8 (of the JCT form of Contract) contained a time bar clause, requiring the contractor to provide details of the estimated effect of an instruction within ten days.

However, the Scottish courts noted that the Architect and employer had the power, to waive or otherwise dispense with any procedural requirements. This was what happened here. Whilst the employer (in discussions with the contractor) and the Architect (by issuing delay notices) both made it clear that the contractor was not entitled to an extension of time, neither gave the failure to operate the condition precedent at clause 13.8 as a reason.

The point made by the Judge is that whilst clause 13.8 provided immunity, that immunity must be invoked or referred to. At a meeting between contractor and employer, the EOT claim was discussed at length. Given that the purpose of clause 13.8 was to ensure that any potential delay or cost consequences arising from an instruction was dealt with immediately, the Judge felt that it would be surprising if no mention was made of the clause unless the employer, or Architect, had decided not to invoke it. Significantly, the Judge held that both employer and Architect should be aware of all of the terms of the contract. Employers and certifiers alike should certainly therefore pay close attention to their conduct in administering contracts in order to avoid the potential consequences of this decision.

The Inner House agreed with Lord Osbourne saying:

“silence in relation to a point that might be taken may give rise to the inference of waiver of that point. In my view, that equitable principle can and should operate in the circumstances of this case.”

A new approach under common law?

In April 2014 Mr Justice Akenhead had to consider a case arising from disputes relating to a project to build a tunnel at Gibraltar airport. The case, Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar,[9] was unusual because the contract in question was in the FIDIC Form. Usually disputes under the FIDIC Form are heard in private, in arbitration proceedings. Needless to say the case raised a number of interesting issues, not least about the sub-clause 20.1 condition precedent.

Amongst a number of claims, OHL sought an extension of time of 474 days. The Judge decided that the contractor, OHL was entitled to no more than seven days extension of time (rock and weather). However, this was subject to compliance with sub-clause 20. It was accepted by OHL that sub-clause 20.1 imposed a condition precedent on the contractor to give notice of any claim. The Judge held that properly construed and in practice, the “event or circumstance giving rise to the claim” for extension must occur first and there must have been either awareness by the contractor or the means of knowledge or awareness of that event or circumstance before the condition precedent bites. Importantly Mr Justice Akenhead said that he could see:

“…no reason why this clause should be construed strictly against the Contractor and can see reason why it should be construed reasonably broadly, given its serious effect on what could otherwise be good claims for instance for breach of contract by the Employer.”

In coming to this conclusion, the Judge, made reference to Sub-Clause 8.4 of the FIDIC conditions, which sets out the circumstances, in which the contractor is entitled to an extension of time. Sub-Clause 8.4 states that:

“The Contractor shall be entitled subject to Sub-Clause 20.1… to an extension of the Time for Completion if and to the extent that the completion for the purposes of Sub-Clause 10.1…is or will be delayed by any of the following causes…”

Sub-clause 20.1 did not call for the notice to be in any particular form and it should be construed as allowing any claim provided that it is made by notice in writing to the engineer, that the notice describes the event or circumstance relied on and that the notice is intended to notify a claim for extension (or for additional payment or both) under the contract or in connection with it. It must be recognisable as a “claim”. The onus of proof was on the employer if he should want to establish that the notice was given too late.

An Australian alternative

In Australia the situation might be slightly different. There was a High Court decision, Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, which although it related to the enforceability or otherwise of a banking overdraft facility, caused many commentators[10] to suggest that it might signal a possible end to the use of time bars in construction contracts. At the moment, as far as I understand, it is something that has only been written about, rather than decided in the courts.

The key paragraphs of the decisions were 10 and 12. These stated as follows:

“10  In general terms, a stipulation prima facie imposes a penalty on a party (“the first party”) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.

12   It should be noted that the primary stipulation may be the occurrence or non-occurrence of an event which need not be the payment of money. Further, the penalty imposed upon the first party upon failure of the primary stipulation need not be a requirement to pay to the second party
a sum of money."

In the ANZ bank case, the court said that a clause can still be a penalty even though there has been no actual breach to bring it into effect. So how does that apply to time bars in construction contracts? Well it has not been to date. However the reasoning goes that, with such a short notification period – seven days – a contractor is very unlikely to be able to put together the necessary information to justify the entitlement or even show that the delay is on the critical path in time. Therefore it would be a penalty to enforce the strict condition precedent and deny the contractor’s right to additional time and potential compensation. It would be unfair, especially in circumstances where the actual loss caused by the alleged late notification would be minor in nature, especially in contrast with the delay damages the contractor might become liable for. In fact they may even be nil if the employer has caused the delay in any event.

And that actually brings us back to the Obrascon case and the words of Mr Justice Akenhead who, it will be recalled noted that he could see:

 “…no reason why this clause should be construed strictly against the Contractor and can see reason why it should be construed reasonably broadly, given its serious effect on what could otherwise be good claims for instance for breach of contract by the Employer.”

And what about the employer?

Under the FIDIC form, the employer is treated somewhat differently when it comes to bringing claims. Sub-clause 2.5 states that:

“If the Employer considers himself to be entitled to any payment under any Clause of these Conditions or otherwise in connection with the Contract … the Employer or the Engineer shall give notice and particulars to the Contractor. …

The Notice shall be given as soon as practicable after the Employer became aware of the event or circumstances giving rise to the claim. … The particulars shall specify the Clause or other basis of the claim, and shall include substantiation of the amount and/or extension to which the Employer considers himself to be entitled in connection with the Contract.

The Employer shall only be entitled to set off against or make any deduction from an amount certified in a Payment Certificate, or to otherwise claim against the Contractor, in accordance with this Sub-Clause.”

This in itself is unusual as most contracts do not impose similar restrictions on employers.

That said, there is no similar provision to sub-clause 20.1 which says that any claim to time or money will be lost if there is no notice within the specified time limit.

Therefore it had been considered that unlike with sub-clause 20.1, where a contractor has 28 days to give notice, there was no strict time limit within which an employer must make a claim, although any notice relating to the extension of the Defects Notification Period had of course to be made before the current end of that period. However, employers should take note of a 2015 Privy Council decision[11] where the court said that the purpose of sub-clause 2.5:

“is to ensure that claims which an Employer wishes to raise, whether or not they are intended to be relied on as set-offs or cross-claims, should not be allowed unless they have been the subject of a notice, which must have been given ‘as soon as practicable’. If the Employer could rely on claims which were first notified well after that, it is hard to see what the point of the first two parts of clause 2.5 was meant to be. Further, if an Employer’s claim is allowed to be made late, there would not appear to be any method by which it could be determined, as the Engineer’s function is linked to the particulars, which in turn must be contained in a notice, which in turn has to be served ‘as soon as practicable.”

Although no definition of “as soon as practicable” was provided, this decision suggests that employers too might to subject to a time bar, under the FIDIC form at least. employers should further note that the case also highlights the requirement to provide particulars or other substantiation: again the absence of these could prove fatal to the right to assert a right of set-off.


There are a number of steps parties can take to avoid the adverse effects of time bars. They include the following:

(i)   Parties should take care when concluding contracts to check any time bar clauses governing claims they might make;

(ii)  Parties should appreciate the risks they then run of not making a claim (even if to maintain goodwill) unless the other party agrees to relax the requirements or clearly waives them. This is perhaps especially the case where time bar clauses, if cautiously operated, may generate a proliferation of claims;

(iii)  Remember that the courts see the benefits of time bar provisions and support their operation. A tribunal might bar an entire claim for what seems like a technical reason by which time it will usually be too late to make a new, compliant claim; and

(iv)  Indeed even where the contract contains a clause such as sub-clause 20.1(a) of the FIDIC Gold Book 2008, potential claimants should not necessarily rely upon the other party already having the information they are required to provide.

Equally those considering making claims, should consider the following:

(i)    When is notice required?

(ii)   Who has to give notices?

(iii)  To whom should notice be given?

(iv)  In what form must the notice be given?

(v)   What information must be provided with the notice?

(vi)  What are the response times?

(vii)  Are there any continuing notice obligations?

(viii) Is there an agreement in place not to serve notices?

(ix)   What happens if you fail to serve a notice?

1. Temloc v Errill Properties (1987) 39 BLR 30, CA per Croom LJ.
2. [1978] 2 Lloyd’s Rep. 113
3. [2007] EWHC 447 (TCC). The Judge’s words were endorsed in the Scottish case of Education 4 Ayrshire Ltd v South Ayrshire Council [2009] ScotCS CSOH 146 where Lord Glennie was wholly unsympathetic to the suggestion that allowance should be made for the fact that notices given in compliance with conditions precedent might have been drafted by businessmen rather than lawyers, noting that: “It is within judicial knowledge that parties to contracts containing formal notice provisions turn immediately to their lawyers whenever there is a requirement to give notice in accordance with those provisions. But even if that were not the case, there is nothing in clause 17.6.1 [of a Public Private Partnership or PPP Contract] that would not readily be understood by a businessman unversed in the law”.
4. Freedom of contract rules: Article 26 says that parties may freely determine the contents of a contract within the limits prescribed by law.
5. It is my own experience that a DAB is more likely of the two to try and find a way round the condition precedent. Of course, it would be dangerous to rely on this.
6. See for example the comments of Michael E. Schneider and Matthias Scherer (taken from the Switzerland Chapter of FIDIC – An Analysis of International Construction Contracts- www.lalive.ch/files/mes_msc_analysis_of_construction.pdf) who note that by the adoption of Article 2 of the Swiss Civil Code (Good Faith Rule) and the principle of “venire contra factum proprium” the employer could be deemed to have waived his right to insist on the 28-day rule if he has not clearly insisted on a strict adherence to the rule in a consistent manner.
7. FIDIC’s clause 20.1 – a civil law view, Mauro Rubino-Sammartano, Construction Law International Volume 4 No 1 March 2009.
8. [2007] CSOH 190 and, on appeal, [2010] ScotCS CSIH 68. The dispute related to the construction of a hotel under a contract incorporating the JCT Standard Form (Private Edition with Quantities) 1980 as amended.
9. [2014] EWHC 1028 (TCC). The case was considered by the Court of Appeal in 2015, but the appellate court made no comment on this part of Mr Justice Akenhead’s decision, [2015] EWCA Civ 712.
10. See for example Philip Davenport, ‘Andrews v ANZ and Penalty Clauses’ (2012) 147 ACLN 32, 35.
11. NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd (Trinidad and Tobago) [2015] UKPC 37.

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