Contractual time bar provisions – are they enforceable?

It is common for construction contracts to contain provisions specifying that entitlements to, for example, extensions of time and/or additional payment will be lost unless intimated within a specified period of time. But what happens if, for any reason and by any margin, the deadline is not complied with? Are ‘time bar’ provisions of this type necessarily enforceable? If so, clearly, the consequences could be devastating for what may, on the merits, be a valid claim. Here, we briefly address (and contrast) the position in both civil law (UAE and Oman) and common law (English) jurisdictions.

FIDIC (Fédération Internationale des Ingénieurs-Conseils)

Clause 20.1 of the 1999 FIDIC suite of contracts (in widespread use on construction projects in the UAE, and to a lesser extent in Oman) represents a prime example of a time bar provision. It states that a contractor who considers himself entitled to compensation by way of additional time and/or money (whether under the contract “or otherwise” in connection with it) shall give notice describing the event or circumstance giving rise to the alleged entitlement, and do so “not later than 28 days after the contractor became aware or should have become aware” of it. There is no definition of ‘notice’, leading to arguments that ‘notices’ are deemed to have been provided in minutes of meeting, project reports, etc. The clause goes on to provide that, if the contractor fails to provide the requisite notice on time:

Interestingly, under the 2017 edition of FIDIC, the stricture of the notice requirement in (now) Clause 20.2 is somewhat ‘neutralised’ by making it applicable to claims by either party (not just the contractor). Moreover, a ‘failure’ to comply with the specified notice period is no longer to be regarded in such absolute terms. If the engineer considers that the claiming party has failed to comply with the 28 day notice period, he is required to give a notice to that effect, failing which the Notice of Claim is deemed valid (though this is subject to the ability of the other party to issue a yet further notice, disagreeing with “such deemed valid Notice”!). On the other hand, the requirement is rendered more strict in the sense that ‘notices’ are now defined. They must be in writing, signed by an authorised representative, identified as such and expressly do not include notations in progress reports, etc.

The contractor will more usually be the claiming party. But whether the claim is by the contractor (under the 1999 FIDIC suite) or by either party (under the 2017 suite), in civil law jurisdictions, such as the UAE and Oman, the treatment of such provisions may be different (and perhaps more favourable to the claimant – whoever it may be) than in common law jurisdictions, such as England.

Common law

Under, for example, English law, a notice provision will be regarded as a condition precedent and enforced as such if it clearly sets out the time limits for service of the claim and makes it clear that failure to do so within that time would result in a loss of the entitlement. The Clause 20 time bar provision certainly seems to meet those criteria and, indeed, in the case of Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar [2014], the contractor accepted (and so the judge did not need to decide) that Clause 20.1 did amount to a condition precedent.

There may be some ‘wiggle room’ for, say, a contractor in relation to claimed entitlements arising from breach of contract by the employer. After all, it would be manifestly unjust for an employer to escape liability by reason of the contractor having failed to observe the formality of informing the employer what he already knows. In the Obrascon case, Mr Justice Akenhead said that he could see “no reason why this clause should be construed strictly against the contractor and [could] 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”. Nevertheless, a contractor who fails to comply with the requirements of the provision, or of any established or agreed condition precedent runs the risk of losing all rights in intended claims irrespective of their basis (be it breach of contract, or what may be termed ‘neutral’ events, or as a function of the agreed allocation of risk).

Civil law – UAE and Oman

The ‘default’ position under, for example UAE law, may be regarded as not much different. Article 243(2) of the UAE Civil Code (Federal Law No. 5 of 1985) provides that:

“As regards the contract's rights (obligations), each of the contracting parties shall fulfil what the contract has bound him to do”.

The position is the same in the Sultanate of Oman. Article 155 of Sultani Decree 29 of 2013 issuing the Civil Transactions and Procedures Law (Oman Civil Code) contains the following:

“Each contracting party must fulfil its obligations as specified by the contract.”

There are further provisions in both the UAE Civil Code and the Oman Civil Code to the effect that the clear terms of a contract will be binding on the parties. These provisions lend themselves to the view that a claimant party should be required to comply with, for example, the requirements of a freely agreed time bar clause.

However, there are various provisions of both codes that may support attempts by a claimant to circumvent the harshness of a notice provision that is subject to a time bar. They include the following:

Comment

Time bar provisions encourage efficient contract administration, which is in the interest of both parties. Obviously, best practice for contractors (to avoid potential barring of an otherwise valid claim, or even damages as a result of breach of contract) is to comply with such provisions by serving notice of a claim as soon as an event is known and is considered likely to give rise to delay and/or additional cost.

The notice should be served in the form, with the content and within the time specified in the contract. Ultimately, each case will be assessed on its own merits. However, the courts in civil law jurisdictions (at least under UAE and Oman law, based on one or more of the provisions referred to above) may be more likely than their common law counterparts to excuse a claimant for failing to do so.