Contractor not required to notify claim for EOT until delay has started

By Gerlando Butera

Summary and implications

The FIDIC Conditions require the contractor to give notice of a claim for extension of time
(EOT) not later than 28 days after the contractor became aware, or should have become
aware, of the event or circumstances giving rise to the claim. The Technology and
Construction Court (TCC) in London has recently adopted a relaxed interpretation of this
requirement.

 The TCC's decision provides authority for a position which offers some respite to
contractors from the onerous (and often criticised) provisions that debar a claim
from being pursued if it is not notified within the stated period.
 As decided by the TCC, the 28-day period for notifying a claim for EOT only begins
following the onset of actual delay flowing from the event or circumstance which
caused it.
 By analogy, the TCC's decision supports the argument that the case is similar where
the contractor's claim is not for EOT but for additional payment.
 However, the decision also gives unquestioning support to the proposition that a
contractor's claim cannot be pursued if it has not been notified within the relevant
period.

Take notice – contractors' claims under the FIDIC Conditions

Construction projects almost invariably give rise to claims by one party or the other. The
claims do not necessarily give rise to conflict and disputes, but that something unexpected
will occur during the course of a project is to be expected as the norm. Most often, it is the
contractor which has claims for additional payment or EOT, but the employer may also have
claims in respect of delayed completion or defective work. However, the FIDIC Conditions
are very one-sided in the way that they treat claims by the contractor and claims by the
employer respectively.

As regards an employer's claim, sub-clause 2.5 merely requires that notice of the claim be
given to the contractor "as soon as practicable after the employer became aware of the
event or circumstance giving rise to the claim".

However, under sub-clause 20.1, the requirements for notice in respect of a contractor's
claim are significantly more onerous:

 the requirement to give notice is triggered not only upon the contractor becoming
aware of the relevant event or circumstance, but also when the contractor should
have become aware of it;
 there is a set deadline of 28 days from that point within which the notice must be
given; and
  the giving of notice before that deadline is a condition precedent to the contractor's
entitlement to pursue the claim. If notice is not given within that period, a guillotine
falls and (subject to possible arguments that the employer has waived the
requirement for notice) the
contractor's claim is debarred.
The contractor's position is somewhat
improved under the DBO (Gold Book) version
of the FIDIC Conditions. That version contains
an added proviso to the effect that the
contractor may refer the matter to the DAB in
the event of late submission of a notice,
whereupon the DAB may overrule the 28-day
limit if it considers that it is fair and
reasonable in all the circumstances to accept
the late submission. It remains to be seen
whether a similar relaxation will be adopted
by FIDIC when the revised editions of the
Construction (Red Book), EPC Turnkey (Silver
Book) and Plant & Design Build (Yellow Book)
versions of the FIDIC Conditions are eventually
published. However, for the time being,
contractors operating under those versions of
the conditions face the strict time bar on
claims that is set out above.
The OHL case
Contracts based on the standard FIDIC
conditions do not frequently come before
courts, so considerable interest should be
attracted within the international contracting
community by the recent decision of the TCC
in Obrascon Huarte Lain SA v Attorney General
for Gibraltar [16 April 2014].
FIDIC sub-clause 20.1
Sub-clause 20.1 of the standard FIDIC
Conditions includes the following
provisions:
“If the Contractor considers himself to be
entitled to any extension of the Time for
Completion and/or any additional payment,
under any Clause of these Conditions 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. 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 event or
circumstance.
"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 following
provisions of this Sub-Clause shall apply…”

This case arose out of contract by which the claimant contractor (OHL) agreed to undertake
the design and construction of a road and tunnel under the runway of Gibraltar Airport. The
contract was based on the Plant & Design Build (Yellow Book) version of the FIDIC
Conditions, which so far as relevant to this briefing were not amended. The overriding issue
in the case revolved around the termination of the contract, which will be the subject of a
future briefing. However, the court also had to address questions relating to the
contractor's claims for extensions of time in respect of various matters which delayed the
completion of the Works.

The contractor's claims were largely unsuccessful, because the court found that the causes
of delay were mostly matters for which the contractor was responsible. However, subject to
whether the requirements of sub-clause 20.1 had been met, the court accepted that the
contractor was entitled to an extension of one day on account of unforeseeable physical
conditions (rock in areas to be excavated), plus an extension of six days on account of
exceptionally high rainfall.

Construction of the sub-clause 20.1 time requirement

As regards the requirements of sub-clause 20.1, the opening remarks of the learned judge,
Akenhead J, included two key points:

 Firstly, that it was clear (as accepted by the contractor's legal counsel) that sub-
clause 20.1 imposes a condition precedent.
 Secondly, he could see no reason why the clause should be construed strictly against
the contractor, but "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".

Applying a broad construction, the judge held that notice of a claim for EOT does not have
to be given for the purposes of sub-clause 20.1 until there actually is delay, although the
contractor can give notice when it
reasonably believes that it will be delayed.
Hypothetical example
The judge gave the following hypothetical
example as an illustration:

(a) A variation instruction is issued on 1 June

to widen a part of the dual carriageway well
away from the tunnel area in this case.

(b) At the time of the instruction, that part of

the carriageway is not on the critical path.

(c) Although it is foreseeable that the

variation will extend the period reasonably
programmed for constructing the dual
carriageway, it is not foreseeable that it will
delay the work.

(d) By the time that the dual carriageway is

started in October, it is only then clear that
the works overall will be delayed by the
variation. It is only however in November that
it can be said that the works are actually
delayed.

Applying his construction of sub-clause 20.1

The judge's reasoning that led to his to that example, the judge said that notice
conclusion is interesting: does not have to be given for the purposes of
sub-clause 20.1 until there actually is delay
 The judge considered that, at least in (November), although the contractor could
the context of extension of time, give notice with impunity when it reasonably
regard must be had to sub-clause 8.4 believes that it will be delayed (October).
which identifies when and in what
circumstances extension will be granted.
 The judge noted that under sub-clause 8.4, the entitlement to extension arises if and
to the extent that the completion “is or will be delayed by” the various listed events,
such as variations or “unforeseeable” conditions. In the judge's view, this suggested
that the extension of time can be claimed either when it is clear that there will be
delay (a prospective delay) or when the delay has been at least started to be
incurred (a retrospective delay).
 The judge noted that the “event or circumstance” described in the first paragraph of
sub-clause 20.1 in the appropriate context can mean either the incident (variation,
exceptional weather or one of the other specified grounds for extension), or the
delay which results or will inevitably result from the incident in question. Also, it was
relevant that the wording in sub-clause 8.4 is “is or will be delayed by”, not: “is or
will be delayed whichever is the earliest”.
 Accordingly, applying a broad construction, the contractor could validly give the
notice after the onset of the delay within 28 days after it became aware (or should
have become aware) of it.

The sub-clause 20.1 requirement as to form FIDIC sub-clause 8.4

of notice
Sub-clause 8.4 of the FIDIC Conditions
The judge remarked that no particular form is includes the following provisions:
called for in sub-clause 20.1 and that one
should construe it as permitting any claim "The Contractor shall be entitled subject to
provided that it is made by notice in writing Sub-Clause 20.1…to an extension of the Time
to the engineer, that the notice describes the for Completion if and to the extent that the
event or circumstance relied on and that the completion for the purposes of Sub-Clause
notice is intended to notify a claim for 10.1…is or will be delayed by any of the
extension (or for additional payment or both) following causes…”
under the contract or in connection with it. It
must be recognisable as a “claim”.

The judge also stated that the onus of proof is on the employer to establish that the notice
was given too late.

Application to the facts of the case

It is instructive to see how the judge's interpretation of the requirements of sub-clause 20.1
were applied by him to the facts of the case.
With respect to the rock claim, the contractor relied on a letter to the engineer dated 14
July 2010 which related to rock encountered on 18 May 2010, and which stated: “In our
opinion the excavation of all rock will entitle us to an extension of time…” In relation to this:

 the judge considered that the letter was a “claim” as such, albeit that it was widely
drawn;
 the judge remarked that he did not have to determine whether it was too late for
any rock that had previously been encountered. However, it follows from his ruling
on the meaning of sub-clause 20.1 that the claim was too late in respect of the
occurrence on 18 May 2010 if the rock encountered on that day caused immediate
delay; and
 however, the letter had been sent before the occurrence of the later problems with
rock for which the judge had found that there was critical delay, and he held that the
letter therefore satisfied the requirements of sub-clause 20.1 in respect of that later
delay.

With respect to the weather claim, reliance was placed on the contractor's progress reports
for November and December 2010 and a letter to the engineer in January 2011. In respect
of these:

 the November 2010 report related to a period before which the exceptionally
adverse weather occurred, in December; while the December report only and
blandly stated: “The adverse weather condition (rain) have [sic] affected the works”,
which, the judge found, was clearly nowhere near a notice under sub-clause 20.1;
 the January letter to the engineer referred to rainfall in December which it said had
flooded the site and thus “come into contact with the contaminated ground… and
we are unable to discharge this rainfall from site… In our opinion the foregoing will
entitle us to an extension of time…” The judge considered that this was not a notice
of claim about being delayed by weather actually whilst working in December 2010
(i.e. by the rain actually falling), which is what the six days allowed related to; rather,
it related to future delay caused by the effect and impact of weather on the
contaminated material on site;
 the judge remarked that the January letter would have been a good notice for any
critical delay caused or to be caused by the contaminated ponded water, but there
was in fact no critical delay caused by ponding; and
 the contractor was actually delayed in critical work in late November and early
December 2010 by the unusual weather, and accordingly had failed to give notice of
this within 28 days of becoming aware, or of when it should have become aware, of
it.

It followed from the above that the contractor was only entitled to one day’s extension of
time, on account of the rock delay, because the six days of critical delay caused by the
impact of the rainfall in December on progress at that time was not the subject matter of
any timely notice under sub-clause 20.1.

Relevance to claims for additional payment

Although the OHL case was not concerned with claims by the contractor for additional
payment, the reasoning that was applied by the judge to the contractor's claim for EOT
would appear to lead to a similar conclusion in respect of a contractor's claim for additional
payment.

The starting point is the judge's finding that sub-clause 20.1 should be given a reasonably
broad construction. This must apply just as much to claims for additional payment as it does
to claims for EOT. In the same way, it should be appropriate to have regard to other
provisions of the contract which identify when and in what circumstances additional
payment may be claimed.

In that regard, the provisions of the FIDIC Conditions that entitle the contractor to claim
additional payment generally adopt the same formula as follows:

"If the Contractor… incurs Cost as a result of [event which is the Employer's responsibility],
the Contractor shall give notice... and shall be entitled subject to Sub-Clause 20.1
[Contractor's Claims] to:

"…

"(b) payment of any such Cost [and, in most cases, plus reasonable profit,] which shall be
added to the Contract Price."

For example, under sub-clause 2.1, the contractor is so entitled if the right of access to, and
possession of the site, is not given within the time stated in the Particular Conditions.

Applying the reasoning in the OHL case, the “event or circumstance” described in the first
paragraph of sub-clause 20.1 in respect of a claim for additional payment can mean either
the incident (e.g. late access to the site or one of the other specified grounds entitling
additional payment) or the cost which results from the incident in question; and, on a broad
construction of the provision, the contractor should not be required to give the notice until
after incurring the cost within 28 days after it became aware (or should have become
aware) of it.

Example: FIDIC sub-clause 2.1

Sub-clause 2.1 of the FIDIC Conditions
includes the following provisions as regards
additional payment:

"If the Contractor … incurs Cost as a result

of failure by the Employer to give any such
right [of access to] or possession [of all parts
of the Site] within [the time or times stated
in the Particular Conditions], the Contractor
shall give notice to the Employer and shall
be entitled subject to Sub-Clause 20.1
Conclusion [Contractor's Claims] to…
In the writer's experience, the requirement to "(b) payment of any such Cost plus
give notice within 28 days from (actual or reasonable profit, which shall be added to
deemed) awareness of "the event or the Contract Price."
circumstance giving rise to the claim" has
generally been interpreted as meaning 28 days from awareness of "the incident" (using the
terminology in the OHL case), rather than 28 days from awareness of the actual occurrence
of the time or money consequences of the incident as found in the OHL case. As the
consequences will usually come at a later time than the incident itself, the interpretation
applied in the OHL case will generally allow the contractor a longer period to give the
requisite notice.

The OHL case will thus be welcomed by contractors as providing authority for a position
which gives them some relief from the harshness of the strict time bar on claims that is
provided for in sub-clause 20.1 of the 1999 editions of the FIDIC Conditions.

Other important aspects of the case will be dealt with in future briefings.