Ever wondered the best way to respond when your client is late issuing their Notice to Commence works on site?
We’ve put together a real-life scenario where this happened and asked Jason Farnell, Adjudicator and CEDR Accredited Mediator, to provide actionable guidance on how you can best manage this difficult situation. The scenario:
I’m a contractor working on a JCT Contract, latest edition but heavily amended with time-bars on notice giving for relevant events that prevent entitlement to an EOT if missed. The Commencement Date is 1.5 weeks away and the contract says that my client must give 2 weeks’ Notice to Commence.
We asked Jason the following questions:
- What should I do in this situation to ensure I recover all the cost and time lost? The contract says I should notify “as and when reasonably apparent”.
- Do I need to give detailed cost advice now?
- Is it my responsibility to catch up this delay and do I need to accelerate?
- Generally speaking, what are the best procedures to put in place to make sure I always meet my Notice requirements during the project?
Here are Jason’s responses…
Some more context
Before I answer your questions, there is an important point to note which is touched on by your opening scene-setter: “with time-bars on notice giving for relevant events that prevent entitlement to an EOT if missed”.
If I am understanding what you are saying correctly, the Employer is trying to impose a “condition precedent” on you to give notices within a defined timescale, otherwise you will lose your entitlement to the extension of time.
This would deprive you, as the contractor, of a large contractual right because of what might be considered to be a technical, or a relatively insignificant failure or breach (ie: missing the deadline for serving your notice). For a “condition precedent” of this kind to be valid, by which I mean enforceable in law, then it needs to be clearly drafted in terms which express the intended meaning unambiguously leaving you in no doubt as to the consequences of your failure to issue a notice on time.
The purpose of a notice is primarily, I would suggest, to enable people to make informed choices, which is often the reason why time limits are imposed – it is in everyone’s interests to appreciate, as they happen, events and the implications of them, which is why in some contracts the term “early warning notices” is used.
1. What should I do in this situation to ensure I recover all the cost and time lost? The contract says I should notify “as and when reasonably apparent”.
If the contract says “as and when reasonably apparent” rather than giving a prescribed time frame, this is the more usual type of drafting to be found in standard construction contracts and would tend to undermine the intent of a hard, enforceable condition precedent for notices.
Where the commencement date is subject to a notice, as in this instance, then where the time to elapse before the commencement date is less than the period of the required notice, it should already have become apparent to a contractor who is on top of managing the project, that the original commencement date cannot be achieved and that the project timescales will need to be pushed out as a consequence. With only 1.5 weeks remaining to the original commencement date, in absence of a commencement notice, it should already be “apparent” to the contractor that the project may be delayed if it will not commence as planned and I would have expected the contractor to have already issued its notice by now.
At this stage all that is required is notice that the works may be delayed and what has caused the delay. Terms such as “material circumstances” may suggest something complicated but all that is required is for the contractor to describe what has happened and why it is relevant to justify him giving notice of a potential delay either to the progress of the project or its completion.
“Under the contract the employer is required to give two weeks notice in writing that we may commence the project works on site.
The date of possession of the site given in the Contract particulars is “X”, which means that your notice to commence should have been received by “Y” date. We haven’t received your notice and therefore we will be unable to commence the works on the original date of possession.
We therefore notify you that as a consequence of the notice to commence not having been received in time, the date for completion of the contract may be “delayed”.
JCT contracts, and others which follow similar construction formats, require a notice to identify whether the cause of delay is a “relevant event”, which is a defined class of delay event giving rise to an entitlement to an extension of time, if the particular event in question should cause a delay.
The important thing is that the notice should be issued in accordance with the terms of the contract in every respect – timings, method of service, addresses etc.
We each of us now rely heavily on e-mails as our primary written communication method. Even where the contract permits, which even now not all do, service of notice by e-mail, I would still recommend that a notice is properly served and stands out from routine correspondence exchanges, remembering always that the purpose of a notice is to warn someone or at least advise them so that they may take some form of action.
At this stage all that is required is to give notice of the likely delays, this can then be followed with further specific details of the expected effects arising from the cause of the delay including an estimate of the likely delay.
A key requirement for being able to supply these further details is to be able to demonstrate that the event has actually caused a critical delay to the completion of the activity, or project, or affected its regular progress. This will usually mean that the contractor will have to have prepared, before starting the project, a properly considered and logically linked programme, showing the critical path through the project, against which the project can be properly managed and monitored.
2. Do I need to give details cost advice now?
Under the JCT Contract the regime for loss and expense is similar to that for delay. The contractor is required to “notify” as soon as it is reasonably apparent that it has incurred or is likely to incur loss and/or expense.
The contractor is then required to give its assessment of the loss and expense as soon as it is able to do so and also provide all information reasonably necessary for the Employer to “ascertain” the loss and expense.
The purpose of loss and expense is to put the contractor back in the position it would have been prior to when the event (or breach) which has caused the loss occurred. The term “ascertain” means: “to find out definitely; to make certain; to determine”.
This means that the contractor should provide as much information, which will usually be demonstrable cost information or fact based assessments, to enable the “ascertainment” to be carried out.
3. Is it my responsibility to catch up this delay and do I need to accelerate?
This is where we enter the wonderful world of subjectivity.
In the un-amended contract “the contractor shall constantly use his best endeavors to prevent delay…..” this is a high threshold, but the contract does acknowledge that where there is a delay “the contractor shall do all that may reasonably be required to………proceed with the works”.
In practice this may be taken to mean that the contractor is expected to be efficient and manage his resources effectively so as to complete the project by the required completion date. However, where the project is delayed by events outside his control, which would otherwise breach the contract, he is entitled to extra time for completion of the project.
The Employer is entitled to expect the Contractor to be able to demonstrate that he is working efficiently and managing resources to avoid delays and to be responsible for any delays of his own making.
I have seen various arguments for “constructive acceleration” along the lines that if an extension of time has not been awarded then the obligation remains to complete by the original completion date. Although creative, I do not believe that this was intended by the contract drafting committee. Rather, it is for the contractor to demonstrate that despite his efficient working and effective management the project has been delayed by an event outside his control which gives an entitlement to additional time for completion and relief from damages, for a period that he is able to determine with certainty.
4. Generally speaking, what are the best procedures to put in place to make sure I always meet my Notice requirements during the project?
This is where I will start to sound like an old cracked record, but here goes!
In the first place understand the contract that you have entered into; your rights and obligations; and the scope of the works, quality and design responsibilities. Prepare a proper logic linked, critical path programme for managing the works and measuring progress.
- Monitor progress against the programme daily, weekly and monthly and record deviations from the planned progress and interrogate the reasons for them.
- Review correspondence (emails and letters), instructions and drawing issues as they are received and consider whether there have been any changes or potential changes which affect, or may affect, the progress of the works. Hold regular meetings with the construction team and talk about the job – what’s going well, what isn’t and why.
- Carry out look ahead reviews – What activities are due to start in the next 3 months/2 months/1 month and do we have everything we need for an effective start.
- Prepare a detailed information release schedule and monitor receipt of information against it. This should be a proper view of when information is required to build the job based on lead-in periods and procurement timescales – saying “everything is required on day 1” may not be helpful.
- Hold appropriate meetings with the right attendees, prepare reports to inform people and minute outcomes and actions (Client; Design Team; Sub-Contractors; off-site manufacturers).
If there is anything that may affect the programme for the job then write a letter which notifies the client as to the reason why it is being written – because you have genuine concerns and you wish to communicate them at a time when something might be done about it.
It is often a good idea to have an objective input from someone outside the site team as part of the business’ governance procedures.
In short there is no magic formula. It is a matter of doing what it is appropriate to the particular project in a measured professional manner.
This piece was contributed by J P Farnell, FRICS, FCIArb, Adjudicator, CEDR Accredited Mediator March 2018
Image credit: Snail by Eli Duke used under CC BY-SA 2.0
About Paul Heming
Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.