Understanding formal notices of delay and your responsibilities’

Most contracts contain clauses requiring written notification within a specified time period of the occurrence and/or the onset of a delay or when the impact of the delay is known or ought to have been known.

According to Seán McNally, Senior Associate Director at Anvelo Pty Ltd it is important for contracts to recognise the necessity of a contractor formally submitting the required notice(s) under the contract when there is a delay in the progress of the works.

Seán’s considerable claim and dispute resolution related experience has been gained on a wide variety of building and civil engineering projects throughout the UK, New Zealand and Australia. His primary experience has been gained on a number of large-scale civil engineering projects, including roads, tunnels and bridges; together with a variety of building projects, including offices, industrial units and residential developments.

Notice of Delay

Seán says that most contracts contain clauses requiring the contractor to provide written notification to the employer within a specified time period of the occurrence and/or the onset of a delay or when the impact of the delay is known or ought to have been known. Furthermore, there may also be a requirement for a contractor to keep their employers informed throughout the duration of the delay (interim particulars) until it has ceased.

In some cases, the notice provisions are a "condition precedent", and failure to comply will result in the contractor being denied an extension of time. In addition, depending on how the contract is worded, the beginning of the notice period is sometimes subject to dispute.

For example, when does the contractor need to give notice, and how does 'ought to have known' translate into a specific period of time? From the moment the event occurred (in what way is that defined), or from the moment the effects became reasonably apparent.

The purpose of providing Notice of Delay

A Notice of delay gives the party receiving it an opportunity to review, consider, discuss, and make informed decisions in an effort to reduce or avoid the delay.

In Multiplex v Honeywell, the court explained that contractual terms that require a contractor to submit a timely notice of delay serve a valuable purpose.

By giving notice, matters can be investigated while they are still current. If a contractor fails to notify the employer, the employer may not know how or why progress has been slowed or even that progress has been slowed at all. Once the contractor has provided a notice of delay to the employer, the parties involved will have the opportunity to decide on the most appropriate course of action to mitigate or eliminate the delay.

Maintaining good relationships while giving Notice

Subcontractors and contractors should strictly adhere to the terms of their contracts, especially if those terms constitute a condition precedent. If in doubt, the contractor can always give notice, and if the event or issue goes away, the notice can be withdrawn.

It may be better to do this than suffer the potential consequences of not giving notice. Contrary to what contractors perceive, this is just compliance with a contractual mechanism that the parties have agreed to. Notices do not have to be confrontational. If necessary, softer language can be used to comply with notification requirements and maintain good relations between the parties.

Seán says that while projects can be complex, business relationships are even more so. Effective and pragmatic commercial advice will recognise both.

More about Contracts in civil construction

ICI Australia’s course ‘B0419 Contracts for new supervisors/managers: The key issues’ is designed for participants who are unfamiliar with contracts and provides considerable insight into what a contract is, how it is varied, breached, and closed out. While focused on the important legal principles, it applies them in a very practical way and – most importantly – in a civil construction context. This course is suitable for new Supervisors, Engineers, Commercial Managers, Contract Managers and Project Managers.

For those after a deeper understanding of contracts in the civil industry, ICI’s course ‘B0424 Contract management law: What every supervisor/ manager needs to know to manage sites’ focusses on middle level management of contracts and includes the management of others who are delivering civil contracts. Topics covered include: The importance of reporting; Qualifying causes of delay and extensions of time; Compensable causes and delay costs; Time bars; Liquidated damages; Variation Processes; and Payment processes. Participants will learn how to manage direct reports who are involved in managing and delivering contracts.

Both courses are delivered as four hour webinars and more detail can be found at https://iciaustralia.com/Learning-Program-CPD/Course-List

Thanks to Seán McNally bsc(hons)qs, MCIArb, AssocRICS, Senior Associate Director at Anvelo Pty Ltd (www.anvelo.com.au) for his assistance on this article. Seán is an expert in claims management, dispute resolution/avoidance, arbitration support and contract/commercial management.