The time is right

One of the most important provisions in building subcontracts is the extension of time provision. This allows a subcontractor to claim a time extension in which to complete the works if delay occurs.

When claiming an extension of time for completion, the subcontractor is usually obliged to serve a formal notice of delay. The purpose of the notice is simply to warn the main contractor of the situation, who in turn can take remedial action and forewarn the employer.

In many delay situations, however, subcontractors adopt a ‘wait and see’ attitude. A subcontractor’s failure to deal promptly, or at all, with extension of time provisions can have devastating financial effects.

Failure to give notice would technically be a breach of contract, and allow the main contractor to take the breach into account in making the extension of time.

A notice may well be interpreted as a condition precedent to the grant of an extension of time, so that failure to give notice means the subcontractor loses any entitlement. This issue came before the courts in the case of Steria v Sigma Wireless Communications (2007).

A fiery customer

Steria entered into a heavily revised version of the standard MF/1 form of subcontract with Sigma to install a computer-aided despatch system for the fire and ambulance services in the Republic of Ireland.

Sigma, in paying the final sums due under the subcontract to Steria, withheld monies by way of damages for delay in completing subcontract works.

There was a substantial dispute between the parties as to the proper meaning of the extension of time provision, and in particular, whether or not the requirement for giving written notice of delay was a condition precedent to Steria’s entitlement to an extension of time.

Provisional licence

Steria argued that all that was required of the provision was for it to notify Sigma that particular relevant events had caused delay.

Sigma disagreed with this and argued that (a) the notice must make it clear that it was a request for an extension of time under the provision; (b) the notice must explain how and why the relevant circumstances had caused delay; (c) the notice must estimate the delay.

The notification requirement was a condition precedent, even though it did not contain any warning as to the consequence if Steria failed to comply with it.

Judge Davies agreed with Steria. He said Sigma’s case would involve reading into the provision words that were not there. It was simply necessary for Steria to notify Sigma that relevant events had occurred, and that those events had caused a delay to the execution of the subcontract works.

The judge also said the written notice must actually come from Steria. So, for example, an entry in a minute of a meeting which recorded that there had been a delay, by itself, would not amount to a valid notice under the provision.

This is an important point to note because, in many instances, subcontractors report delays in site meetings under the misapprehension that it serves as proper notice of delay.

Provided for Steria argued that clear words were required to make the notice provision a condition precedent. It said that the provision did not make it clear that, unless it complied with the provision, Steria would lose its right to an extension of time.

Sigma again disagreed. It said that the use of the word ‘provided’ imposed a clear and unqualified condition precedent, the purpose of which was to enable it to take appropriate action to alleviate any delay.

This time Judge Davies agreed with Sigma. He said the wording of the provision was clear in its meaning. What Steria was required to do was give written notice within a reasonable period.

He considered that the notification requirement was a condition precedent, even though it did not contain any warning as to consequences if Steria failed to comply with it.

Extend your knowledge

This case highlights that it is important for the subcontractor to understand the meaning of extension of time provisions and to comply with them.

Failure to give notice in time or at all could prevent it from being able to obtain a time extension, even in circumstances where a subcontractor is not responsible for the delay.

This could leave a subcontractor open to a claim for damages from a main contractor.