FIDIC Notice of Contractor Claim under Sub-Clause 20.1 required where Variation procedure not followed

By Philip Hancock, Senior Associate

Last year, I wrote in International Quarterly, Issue 40 about a recent Privy Council decision relating to a FIDIC-based contract and said it was a rare treat (because FIDIC contracts are often considered in confidential arbitrations). Like London buses, another such decision has come in (fairly) quick succession, again relating to a project in Trinidad and Tobago.

This case, Uniform Building Contractors Ltd (Respondent) v The Water and Sewerage Authority of Trinidad and Tobago (Appellant) [2026] UKPC 2, is a helpful discussion of variations and contractor claims under FIDIC contracts. The issues addressed include:

1. Is something a Variation? That depends on the contract terms, and in particular what is/is not included in the Works and Employer’s Requirements, which requires close analysis of the contract documents.
2. A Sub-Clause 20.1 notice of claim may be required where the Contractor claims additional payment, and the Engineer/Employer is not engaging with the contract terms re: Variations or has failed to determine the Contractor’s entitlement. Important to remember that a Sub-Clause 20.1 notice is, generally, a condition precedent to entitlement, so a compliant notice should be submitted within the stated time period.

Facts of the case

WASA (the Employer) engaged UBC (the Contractor) to design, supply and install 28km of pipeline in Southeast Trinidad and Tobago. The contract was based on the FIDIC Yellow Book (1999 edition – the “Plant and Design-Build Contract”) with bespoke amendments. Disputes arose during the works, and WASA terminated the contracts with UBC. Several years later, UBC started a court claim against WASA, and WASA counterclaimed. At first instance, both UBC’s claims and WASA’s counterclaims were dismissed.

UBC appealed the dismissal of its claims relating to four alleged variations, relating to (i) laying pipework in the roadway, (ii) removal of excavated material unsuitable for use as backfill, (iii) importation of suitable backfill, and (iv) night work (the “Alleged Variations”).

WASA disputed these constituted variations and, if they did, argued that UBC had failed to comply with procedural requirements of the contract, negating UBC’s entitlement to additional payment.

There were almost no contemporaneous documents dealing with how the four Alleged Variations arose. However, the Engineer (appointed by WASA) gave evidence on behalf of UBC, asserting that he considered the four items were variations, and that the Parties had impliedly waived the requirements to comply with the procedural requirements of the Contract in relation to them.

Court of Appeal judgment

The Court of Appeal of the Republic of Trinidad and Tobago concluded that the first instance judge “was against the weight of the evidence”, relying in particular on the Engineer’s evidence that the Alleged Variations above were variations. The Court of Appeal also indicated that Sub-Clause 20.1 (Contractor’s Claims) did not apply once the contract had been terminated.

Privy Council judgment

Sir Peter Coulson gave the judgment of the Privy Council. The judgment contains very useful guidance on the nature of the FIDIC Yellow Book, and some issues that frequently arise in relation to FIDIC-based contracts.

1. FIDIC Yellow Book (1999 edition)

First, the court dealt with an argument by UBC that the Contract terms should not apply to them, partly because UBC alleged full site investigations had not been possible before the start of the works. The court described that argument as “radical”, that there was “no legal basis for UBC’s attempt at such a comprehensive re-allocation of risk and reward as between the parties”, and rejected it.

The court explained that under the FIDIC Yellow Book the Contractor is responsible for the design and construction of the works. It is a lump sum contract, and the Contractor is taken to have allowed for all foreseeable risks in the Contractor’s rates: “[The Yellow Book] is designed to provide as much financial certainty as possible for both sides”.

2. Determining whether work is a “variation” under the contract

Second, the Privy Council noted the Court of Appeal did not address the terms of the Contract but instead determined the Alleged Variations were Variations because they were so considered by the Engineer.

The Privy Council explained that “the question whether one or more of the four disputed items is or is not a variation is a function of the contract terms” [emphasis added]. To determine whether there has been a Variation under the Contract, one needs to look at how “Variation” is defined. Under the FIDIC Yellow Book, it is “any change to the Employer’s Requirements or the Works…” (Sub-Clause 1.1.6.9). So, one must determine the scope of the Employer’s Requirements and Works, and whether the Alleged Variations are within that scope, or additional to it.

The Privy Council considered that all four of the Alleged Variations were part of the Works. On proper analysis of the Employer’s Requirements and other Contract documents, the Alleged Variations were (or should have been) in the contemplation of UBC, and so within the fixed lump sum price. The court relied on several provisions (including certain bespoke terms), which supported the premise that the Yellow Book transfers full design and build responsibility to the Contractor.

3. Requirement for a Sub-Clause 20.1 Notice of Claim

Third, the Privy Council explored the contractual process for Variations and effectively concluded that none of the contractual process had been followed by either party (not an uncommon situation!). Broadly, the process entails an instruction, or request for proposal, initiated by the Engineer, ultimately leading to a determination by the Engineer under Sub-Clause 3.5 (Determinations) of the Contractor’s entitlement to additional payment.

Importantly, the court explored the relevance of Sub-Clause 20.1 (Contractor’s Claims) to Variations. This was a situation where there had been no engagement by the Engineer in relation to the Alleged Variations; there had been no notice or request under Sub-Clause 13.1 (Right to Vary), nor any determination under Sub-Clause 3.5. In the circumstances, if UBC wanted additional payment, it was necessary to submit a claim under Sub-Clause 20.1.

Sub-Clause 20.1 directs that the Contractor must submit a notice of claim “as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance [giving rise to the claim]”. If the Contractor fails to do so, the Sub-Clause expressly states that the Contractor loses its entitlement to an extension of time/additional payment. On this point, the judge also cited a book co-authored by my colleague Jeremy Glover (together with Simon Hughes KC) on this point – Understanding the FIDIC Red and Yellow Books, 3^rd Edition – confirming that the Sub-Clause 20.1 notice of claim is treated as a condition precedent and failure to comply can provide a counterparty a complete defence to the claim.

The Privy Council found that UBC’s failure to submit a Sub-Clause 20.1 notice of claim was “fatal” to its claim.

The Privy Council also found that, because the claim regarding the Alleged Variations arose prior to termination of the Contract, Sub-Clause 20.1 applied (thereby rejecting the Court of Appeal’s finding that Sub-Clause 20.1 did not apply due to the termination).

4. Waiver, estoppel, fairness and acquiescence by silence

UBC argued that it was entitled to additional payment partly because to find otherwise would be unfair, in circumstances that the Engineer agreed the Alleged Variations were Variations, and WASA had the benefit of the additional work. UBC relied on arguments including waiver and estoppel.

The Privy Council disagreed with UBC. Their key conclusions included that:

1. The fact that UBC got on with the works and did not make a contemporaneous claim for the Alleged Variations indicated there was no reliance on a positive statement by WASA, or detriment to UBC (which are necessary ingredients of estoppel).
2. To override clear written requirements for a claim, there would have to have been some words or conduct unequivocally representing the Variation was valid (relying on MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] UKSC 24, at paragraph 16).
3. UBC conflated/equated the Engineer with the Employer. Whilst the Engineer acts with the Employer’s authority, carrying out duties specifically delegated to him, the Engineer expressly does not have authority to vary or waive terms of the Contract (Sub-Clause 3.1 – Engineer’s Duties and Authority – “The Engineer shall have no authority to amend the Contract.”). The Engineer could not waive the Contract requirement that certain procedures – e.g. a Sub-Clause 20.1 notice of claim – must be followed for the Contractor to be entitled to additional payment.
4. UBC asserted that because WASA did not object to UBC carrying out the Alleged Variations, WASA evidently accepted that they constituted Variations. The Privy Council disagreed: “that misses the point: under a design and build, lump sum contract, it is not for the employer to object to any particular element of the work being undertaken unless there is a concern about how that work is being carried out, or the employer has received notice from the contractor that the work is said to be a variation, and the employer disagrees”.

Conclusions

This might seem to some quite a harsh result, given the Engineer considered the Alleged Variations were indeed variations. However, it is a useful reminder that one must first understand the original scope of Works to determine if there has been a variation to them. It is also important to follow the processes and procedures under the Contract, at the time particular issues arise, so that parties do not lose their entitlement over a procedural non-compliance.

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