UK: Making A Claim Under The FIDIC Form Of Contract. What Is Clause 20 All About?

Last Updated: 4 December 2007
Article by Nicholas Gould

Clause 20.1 of the FIDIC form provides a procedure for dealing with the notification of and substantiation of extension of time and additional payment claims, and sets out the mechanics of the decision-making process of the engineer in respect of those claims. Notice is initially required from the contractor "describing the event or circumstances giving rise to the claim". The important time bar provision is that the notice must be given "as soon as practicable" and then more particularly "not later than 28 days after the Contractor became aware, or should have become aware" of the particular event or circumstance. It is then the second paragraph that sets out the time bar provision. If the contractor fails to give notice within the 28-day period the Time for Completion "shall" not be extended, and no additional payment shall be made.

However, that is not the end of the matter. Clause 20.1 requires the contractor to submit other notices if and as appropriate under the contract, in accordance with the other provisions within the contract. Further, the contractor is to keep "contemporary records" in order to substantiate the claim. The engineer may also require further record keeping or the keeping of further contemporary records.

There are then some sensible deadlines placed upon the contractor to provide substantiation of the claim, and also again sensible timescales required within which the engineer is to consider and approve or disapprove the claim. The reasonably tight timescale within which substantiation is made and the engineer either accepts or rejects the claim must be welcomed in the modern context of considering delay and additional costs during the course of a project. Problems need not fester until the end of a project. A dispute can crystallise during the course of the project and then be dealt with by the Dispute Adjudication Board, assuming that the contractor or employer refers the matter to the Board. However, the fact remains that FIDIC anticipates and provides for either party to progress matters to a conclusion during the course of a project rather than wait until the conclusion of the project.

Finally, the final ninth paragraph of clause 20.1 provides that any extension of time or additional payment "shall" take account of any failure, prevention or prejudice caused by the contractor to the investigation of the claim. That proviso only applies where the time bar provision in the second paragraph has not excluded the claim entirely.

Contemporary records

The contractor must keep contemporary records in order to substantiate its claim. The requirement for contemporary records in the FIDIC Contracts has been considered by Acting Judge Sanders in the case of Attorney General for the Falklands Islands v Gordon Forbes Construction (Falklands) Limited (2003) 6 BLR 280. Judge Sanders considered that contemporary records were:

"original or primary documents, or copies thereof, produced or prepared at or about the time giving rise to a claim, whether by or for the contractor or the employer."

The important point then about contemporary records is that they arise at the time of the claim. The emphasis is very much upon the instantaneous keeping of records which document the events and circumstances at the time of, or certainly very close to the time of, the claim.

Judge Sanders held that it was not possible to avoid the contractual requirement of contemporary records by simply producing witness statements at some point after the event. Those witness statements may of course record the recollections of those who were involved at the time, but they are no substitute for the proper keeping of contemporary records at the time of the claim.

Detailed claim submission

The contractor is then required to submit a "fully detailed claim", together with all supporting documentation, in respect of the time or additional payment claim. Sub-paragraph (b) to the fifth paragraph of clause 20.1 expressly requires the contractor to submit these fully detailed claims at monthly intervals. As the contractor is required to give notice not later than 28 days after the "event or circumstance", then it is arguable that, if the event or circumstance continues, the contractor will need to continue to submit notices each month. This is a somewhat unusual requirement in a construction standard form, but one that may have far-reaching ramifications, especially if the contractor submits some notices but not others. In addition, the contractor may need to provide such further particulars "as the Engineer may reasonably require".

Once the delaying and financial effect arising from the event or circumstance has come to an end, then the contractor must within 28 days provide a final claim. Once again, the engineer may require further reasonable particulars.

The interim and final claims are to be considered by the engineer. The engineer has 42 days after receipt of the claim, or the further particulars requested, to respond. This period may be extended, but only with the approval of the contractor. The obligation on the engineer is to respond because of the use of the word "shall". The engineer may approve the claim, or if disapproving the claim must then provide detailed comments. If the engineer considers that further information is required, the engineer still has an obligation to respond in respect of the principles of the claim within the 42-day (or other agreed) period.

This approach is supported by clause 1.3, which requires the engineer not to unreasonably delay the determination of claims.

The "take account of" provision

The final ninth paragraph of clause 20.1 expressly provides that a failure to comply with clause 20.1 "shall" be taken into account in respect of any claim made by the contractor. If a failure of the contractor means that a "proper investigation" of the claim has been prevented or prejudiced, then any extension of time or additional payment shall take account of the extent of that failure. This is unless the claim has already been barred as a result of the operation of the second paragraph of clause 20.1.

The time bar provision encourages the contractor to put the engineer on notice of delays or requests for additional payments. This further provision, at paragraph 9 of clause 20.1, encourages the contractor to promptly provide a detailed claim, together with supporting documentation, rather than simply serve notices and then work out the detail of its claim at some later date. The emphasis therefore of clause 20.1 is very much to raise claims during the course of the contract, and also, importantly, to work out the detail of those claims, evaluate them, and certify them (or reject them) during the currency of the contract.

The requirement of the contractor to provide a detailed claim within a 42-day period is not expressed as a condition precedent, unlike the initial notice identifying the event or circumstance or as a footnote. Arguably, if the contractor submits, in good time, notices of events or circumstances giving rise to additional time or money but then fails to provide claims, or properly detailed claims and substantiation in accordance with paragraph 5 of clause 20.1, then paragraph 9 of clause 20.1 allows those effects to be taken into account. For example, if a delay occurs that would have been avoidable, the contractor may still not receive an extension of time. If the employer has lost the opportunity to take some avoiding action that could properly have been instigated, then that may also be taken into account either in the award of an extension of time or in the calculation of additional money.

Notice provisions as a condition precedent

The time bar provisions in the second paragraph of clause 20.1 are intended to be a condition precedent to the contractor’s claim for an extension of time and additional money. Some commentators regard the FIDIC provision as one that will exclude the employer’s liability to the contractor if the contractor first provides the notice within time. Such provisions can be effective under English law.

However, the English courts have taken the view that timescales in construction contracts are not mandatory, but directory.

This is unless the contract clearly states that the party will lose its right, and sets out a specific timescale within which the notice must be served. In other words, it must be possible to identify precisely the trigger point for the notice period and then secondly for the clause to have clearly set out the right that has been lost once the time period has expired.

Awareness

Under clause 20.1, the contractor needs to have "become aware . . . or should have become aware" in order to notify the engineer. There will no doubt be arguments about when a contractor became aware or should have become aware of a particular event, and also the extent of the knowledge in respect of any particular event. Ground conditions offer a good example, see sub-clause 4.12. Initially, when a contractor encounters ground conditions that are problematic, he may continue to work in the hope that he will overcome the difficulties without any delay or additional costs. As the work progresses, the contractor’s experience of dealing with the actual ground conditions may change, such that the contractor reaches a point where he should notify the project manager. The question arises: should the contractor have notified the project manager at the date of the initial discovery, rather than at the date when the contractor believed that the ground conditions were unsuitable?

The answer must be, in line with the words of FIDIC, that the contractor should give notice when he encounters ground conditions that an experienced contractor would have considered at the Base Date to have had only a minimal chance of occurring and so it would have been unreasonable to have allowed for them in the contract price, having regard to all of the information that the contractor is to have taken into account under the contract.

The move towards time-bar provisions

Standard construction contract forms have not traditionally included time-bar provisions. Many standard forms required a notice to be given within a specified period. The pre-1999 FIDIC forms did not include a time bar. The old JCT formulation required a notice to be given within a "reasonable time."

Mr Justice Jackson in the case of Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No. 2). 2007] EWHC 447 (TCC), [2007] BLR 195 concluded that contractual terms requiring a contractor to give prompt notice of delay serve a useful 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. If Gaymark is good law, then a contractor could disregard with impunity any provision making proper notice a condition precedent. At his option the contractor could set time at large."

Equity

The contractor wishing to make a claim for additional time or additional payment, like under a more traditional standard form, may be able to rely upon the equitable principles of waiver and/or estoppel. It may be that the contractor does not serve a formal notice because, by words or conduct, the employer (or indeed engineer) represents that they will not rely upon the strict eight-week notice period.

The contractor would also need to show that he relied upon that representation and that it would now be inequitable to allow the employer to act inconsistently with it. Further, what might be the position if the contract contained a partnering-styled amendment such as the requirement for the parties to act "in a spirit of mutual trust and co-operation"? It would be somewhat ironic if a contractor did not submit contractual notices, in the spirit of "mutual trust and co-operation", but the employer at some much later date relied on the strict terms of clause 20.1.

Conclusion

The time-bar provisions in clause 20.1 of FIDIC 1999 are valid under English law. However, the success of their operation will vary depending on the circumstance of the case. Clauses of this nature are becoming more prevalent in other standard forms, and also in amendments to standard forms and bespoke contracts.

This is an extract from a paper entitled Time Bar Clauses written by Nicholas Gould and given to the FIDIC Contracts Conference 2007: Practical Legal Considerations on Major International Projects. A full copy of the article and other papers given at the conference can be found at www.fenwickelliott.co.uk/pages/news.htm.

To see further articles on matters relating to construction, engineering and energy projects, please visit www.fenwickelliott.co.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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