While most construction and infrastructure work and associated manufacturing is able to continue despite lockdowns, border closures and other restrictions, COVID-19 is causing havoc and creating volatility with supply chains, labour availability and project scheduling. In this environment, it has never been more important for parties to be on top of the management of their contracts. Now is not the time to be relying on the relationship and not reading the contract.
In this article, we provide some tips on how to protect, manage and enforce your rights and entitlements through the proper and timely issue of contractual claims notices. Failure to issue notices in accordance with the requirements of the contract can result in the loss of entitlements or other extinguishment of rights.
While notices are relevant for a range of contractual issues, in the current environment, particular examples include applications for extensions of time or delay costs, variations and suspensions.
Notices are important for the preservation and exercise of rights under a contract and also serve to provide a formal record of events and a channel to share relevant information between the parties. Notice requirements vary from contract to contract and relevant provisions are likely to be found in different parts of the contract. There are trigger events, timing requirements, substantive content requirements, as well as procedural matters to be followed, so as a starting point, it is essential to ‘know your contract’ – preferably well in advance – and it may be useful to have template forms of notices ready to complete and issue when circumstances arise, often with little warning.
While experienced contractor representatives and principal representatives will usually understand why, when and how to issue claims notices, some useful tips on managing your contracts and getting your notices right include the following:
- Know the circumstances in which notices may be required under your contract – significant examples include delays, variations, suspensions, defaults, force majeure events, changes in law and changes in scope. Every contract is likely to be different, so make sure you know your contract and when you may need to issue a notice.
- Be conscious of time frames for the issue of, or responding to, notices. Failure to meet deadlines may result in the loss of rights. Make sure you know when the clock begins to run and remember that for the purpose of deadlines, ‘delivery’ (or ‘deemed delivery’) is usually the relevant concept not simply ‘sending’.
- Also beware of the differences between ‘days’, ‘Business Days’ and ‘Working Days’ and remember that concepts such as ‘Business Days’ do not have universal definitions and may vary from contract to contract. In some contracts, different concepts are used for different provisions, so it is important to know exactly when a deadline will expire.
- Make sure you know how and where to send notices. It is important to comply with the requirements of the contract, which may be found in a standalone ‘notices clause’ which is usually separate from the clause under which the notice is required to be issued. The official address for notices may not be the same address used for day-to-day communications under the contract. Provided you have sent the notice to the ‘official address’, you may consider providing a copy (or at least ‘notice of the notice’) to other counterparty contacts, if appropriate.
- Get the content right. Make sure you address the substantive requirements of the provisions under which the notice is being sent. In some cases, it may be enough to simply ‘flag’ an issue, often as a precursor to a later more detailed claim, but in other cases, the notice may require more detail, including explanations or even the provision of supporting evidence. Again, the requirements will vary from contract to contract, and even from provision to provision within the same contract.
- Don’t forget updates or further notice obligations. Depending on the circumstances and the specific drafting, some notices may need to be updated periodically. The update obligation may be time based (e.g. every 7 days) or may be triggered by a change of circumstances. Other notices may serve as an initial or interim notice of a more detailed claim to follow, perhaps when facts and circumstances become clearer. In either case, it is important that you do not simply ‘clock off’ after sending a notice and fail to follow up, as the consequences could be the same as failing to send the initial notice in the first place, and are likely to be adverse.
- Keep communicating. While formal notices and claims are important to maintain an appropriate framework and ‘backstop’ position, in many circumstances, issues can be promptly and satisfactorily resolved by direct discussion and negotiation. It is also likely that you will need to keep communication lines open (and continue performance) for matters outside the scope of the relevant notice.
- Even if there is a great and ongoing principal/contractor relationship, the value in giving notices on time and strictly in accordance with the contract is that even if you negotiate an alternate approach later, you have a reference point for demonstrating how much value you are conceding to your counterparty.
We also strongly recommend to our clients to seek professional advice at an appropriate stage. As with many aspects of the law, there are usually significant benefits (and potential cost savings) in obtaining advice up front. In the field of contracts, this means during the negotiation stage or at least before execution. However, even during the performance phase of the contract, there can be major advantages in seeking advice at an early stage, rather than waiting for issues to escalate or reach crisis point.
SWS Lawyers has extensive experience in drafting, reviewing, negotiating and advising on a wide range of commercial contracts. We do both front end and back end work and assist our clients to consider, understand, negotiate and manage, and where appropriate enforce, their contractual rights. If you require assistance regarding a potential or existing contract, please don’t hesitate to contact us.