To the letter

The courts are cracking down. Where it once might have been thought that a notice of claim for loss and expense could be delayed until convenient for the contractor, a number of recent decisions have made it clear that time is often of the essence. Not only that, they have insisted that the letter of the contract must be observed when giving notice. If it says a notice must be given to a particular person between the hours of noon and 1pm, then that is what must be done.

Of course, as in every case involving the interpretation of a contract, it all depends what the contract actually provides. In the Steria case in 2007 the clause said the contractor was entitled to an extension of time “provided [it] shall have given within a reasonable period written notice of the circumstances giving rise to the delay”. Does this mean that if the contractor failed to give notice within a reasonable time, it would be barred from claiming an extension of time?

The court said that the phrase’s meaning was clear. It did not accept the contractor’s line of argument to the effect that further words were required to make the giving of notice a condition precedent to its entitlement. In many contracts, additional wording is often inserted so as to state in clear terms that unless written notice is given within a reasonable time, the contractor will not be entitled to an extension of time. In this case, the notification requirement operated as a condition precedent even though it did not contain express wording as to the consequences of non-compliance. The use of the words “provided that” or even a statement that relief is dependent upon notice being given may be sufficient to ensure that the provisions operate as a condition precedent to relief.

It is, however, possible for these requirements to be more stringently drafted. That was the situation in the case of Education 4 Ayrshire vs South Ayrshire council, decided by the Court of Session (equivalent to the High Court) in Scotland in November 2009. In that case the clause read that notice of claim “must” be given within 20 business days of the relevant event. The parties agreed that this wording was intended to operate as a condition precedent to the right to obtain relief but the matter did not stop there. The contractor had written to say that it anticipated a delay in achieving an availability date. Was the notice given sufficient?

The court held that the same factors that point to the clause being a condition precedent also pointed to the need for any notice served in accordance with the clause to comply strictly with its terms. The notice had to be sent to the chief executive of the authority and not anybody else and email would not suffice. The letter was phrased in the future tense and in effect said to the employer “you work it out for yourself”. It did not amount to a valid notice under the clause.

The contractor had another string to its bow. It said that the situation “on the ground” was significant since a survey report indicating the reason for delay had been sent to the employer. But that was not enough. The clause required that a notice be given at a particular time to a particular person and it was not for the employer to piece together items of evidence from different sources in order to identify a claim.

The decision may seem harsh, but the logic is not difficult to follow. Clauses requiring notice anticipate that one, not several, notices will be given and that the information will all come together in one place. This serves to avoid ambiguity or contradictory statements in different sources of notification.

In the latest case on this topic, WW Gear Construction vs McGhee Group on 21 June, the contract again included before the requirement for notice the words “provided always that”. The court described this as the “strongest sign” that the parties intended the clause to be a condition precedent although perhaps some slight relief was given to the contractor in that it held that the “detail” of the claim required by the clause was not “infinite” detail, not least as further information could be requested by the employer.

When giving notice, contractors should therefore beware of failing to comply with contract requirements no matter how apparently insignificant in an extension of time or loss and expense clause.

Mark Lloyd-Williams is a partner and Michael Mendelblat is a professional support lawyer at Herbert Smith