| Date | 9 March 2005 |
|
|
| Judgment | Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv, House of Lords (1978) |
|
|
| The Issue | Whether a notice requirement under a contract will be treated as condition precedent to the contractor's entitlement. |
|
|
| Implication |
Notice requirements will be treated as a condition precedent to entitlement only if they give clear timescales for the notice and expressly provide for a loss of rights if notice is not given. |
printIn June 2003 I reported the case of City Inn v Shepherd Construction, which considered whether a requirement for a contractor to give notices of delay events to secure its entitlement to an extension of time may be construed as a penalty and unenforceable. The contract in question between the parties was a modified JCT 80 where at clause 13.8.1 the contractor was required to give a notice of any events which might give rise to an entitlement to an extension of time. The clause went on to say, "if the contractor fails to comply with one or more of the provisions of clause 13.8.1 where the architect has not dispensed with such compliance under clause 13.8.4, the contractor shall not be entitlement to an extension of time under clause 25.3". The Inner House of the Court of Session in Scotland, sitting as a court of appeal, held that the clause was to be treated as a "condition precedent" to the contractor's right to be granted an extension of time. If the contractor failed to take the steps specified under the relevant clause, then unless the employer waived the requirements of that clause, the contractor would not be entitled to an extension of time. In making this finding, the court rejected the complaints put forward by Shepherd that the clause amounted to a penalty. Shepherd had maintained that the clause carried consequences with regard to extensions of time which arose from procedural matters rather than from their responsibility as contractors for the rate of progress of the works. The rate of liquidated and ascertained damages (which stood at £30,000 per week) was a pre-estimate of the loss which City Inn might sustain as a result of delay in completion, and not of the loss which it might sustain as a result of Shepherd's breach of this particular clause. The court rejected that argument, noting that the liquidated damages remained payable by Shepherd on the basis that these were based upon a genuine pre-estimate of the loss suffered by City Inn as a result of delay in completion. That loss was not converted into a penalty by the fact that the contractor might have avoided the liability by taking certain steps which the contract obliged it to take. Many standard forms require the contractor to give notice in the event of a delay to the works, but it is rarely the case that this requirement is to be treated in the manner of the City Inn clause. That clause provided for a clear loss of rights if the contractor should fail to notify. By contrast, most standard form contracts, such as the GC Works/1 or the JCT Major Project Form, do not. By way of example, clause 36.4 of the GC Works contract states; "no request for extensions of time may be submitted after completion of the Works". It might be thought that a contractor that fails to notify delay events prior to completion of the works will lose its entitlement for an extension of time in respect of any such events. In other words, the PM would be entitled to disregard any late notices. This however may not be the case. The clause does not clearly provide for a loss of rights. It simply says that no request for extensions of time may be made but does not spell out what the consequences will be. In Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv, the House of Lords said that a notice provision was unlikely to be a condition precedent unless it stated a specific time for delivery of the notice and said clearly that the rights would be lost in the event that the notice was not given. Lord Salmon said, "In the event of shipment proving impossible during the contract period, the second sentence of clause 21 required the sellers to advise the buyers without delay of the impossibility and the reasons for it. It has been argued by the buyers that this is a condition precedent to the seller's rights under that clause. I do not accept this argument. Had it been intended as a condition precedent I should have expected the clause to state the precise time within which the notice was to be served and to have made plain by express language that unless the notice was served within that time the sellers would lose their rights under the clause". Applying that guidance, where a contractor failed to notify delay events before practical completion under a GC Works contract, the contractor would be in breach of a contract but it would not necessarily follow that the PM would be entitled to disregard any notices delivered late. The PM might simply be entitled to take account of the late situation and any disadvantage suffered as a consequence by the employer. The importance of notice provisions in respect of extensions of time are often drafted differently to the notice requirements for reimbursement of loss or expense. Again, by way of example, clause 46(3) of GC Works 1 states that, "the contract sum shall not be increased unless the contractor immediately upon becoming aware that the regular progress of the works has been or is likely to be disrupted or prolonged, has given notice to the PM . . . . and within 56 days of incurring the expense has provided full details." Such a provision would be clearly with the guidelines of the Bremer case and there seems little doubt that compliance with the notice requirements of clause 46(3) would be a condition precedent to any claim the contractor might wish to make under the contract for reimbursement of prolongation and disruption costs.
CJ-0509
|
|||
|
© Brewer Consulting |
|||
 |
|||