Time Bar Clauses

07/10/2021

For the benefit of anyone not familiar with the phrase ‘Time-Bar Clauses’, they are notice provisions, which typically state that the failure to submit a notification of a claim within a defined timeframe will lead to the loss of right to that claim. I will put my cards on the table from the outset. I don’t like them!

Consider the following: A contractor is instructed to carry out additional work, the nature of which causes completion to be delayed by 50 weeks. His time-related preliminary costs are £10k a week and liquidated damages are £10k a week.

For reasons of ignorance, incompetence or a simple oversight, the contractor fails to raise the requisite delay notice until a week after expiry of the time-bar period. The effect of this failure is to eradicate the contractor’s genuine entitlement to 50 weeks EOT and to be paid £½m prolongation costs.

This is coupled with gifting a further £½m in liquidated damages to the Employer who has effectively just won £1million.

I can hear a chorus of objecting voices. “That’s completely ridiculous, nobody would be so daft. It would never happen.” Well…….

No, it isn’t (completely ridiculous), yes, they would (be so daft) and yes, it would and does happen (remarkably often). Don’t just take my word for it. There are many authorities on this topic with similar observations.

For example; Robert Knutson’s paper “An English Lawyer’s View of the New FIDIC Rainbow – Where is the Pot of Gold?” Whilst discussing clause 20.1 of the FIDIC standard contract (a ‘time-bar’ clause) he states: “Contractors inevitably fail to notify perfectly legitimate claims…..”

Justification for the use of time-bar clauses

There is of course, some justification for the use of time-bar clauses. The NEC Contract is well-known to contain a time-bar provision in relation to notifying compensation events. The NEC explanatory notes state the reason for the time-bar clause is “to avoid having to deal with a compensation event long after it has occurred there is a time limit on notification by the Contractor.” This is intended to fit with the NEC’s overriding objectives of a “stimulus to good management” and to “….minimise the incidents of disputes.” There is also some support from the judiciary. In the case of Multiplex Construction v Honeywell Control Systems1 Mr Justice Jackson held that; “Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.”

Unintended Consequences

Pyments has recently seen of a number of building contracts containing ‘time-bar’ clauses; hence this article! In preparation I did a bit of research……. Within a short period of time I discovered more than 60 legal cases concerning timebar disputes. I also discovered an ocean of academic opinion on whether or not such clauses are enforceable (it seems, as a general rule, the courts have decided they are) and exploring various ingenious strategies to circumnavigate a ‘time-bar’ clause.

My research touched upon various fascinating propositions and legal topics such as:

  • The prevention principle
  • Estoppel
  • Unenforceable penalty clauses
  • Contra proferentem
  • Parallel entitlement by way of damages for breach
  • Forfeiture clauses

To name but a few!

But what does it all mean? To be perfectly honest, it would take a far more agile legal mind than my own to explain it properly. Academics, lawyers, barristers, judges – they couldn’t be happier! Endless hours debating the enforceability of time-bar clauses and potential legal loop-holes to avoid the consequences of same.

Take the time to understand what clauses are included in your contract and the implications. If your contract includes a ‘time-bar’ clause, give the notice or make the application in a timely manner as required by the clause. In fact, why not give the whole ‘programme monitoring and progress reporting’ thing the attention it deserves? After all – prevention is very much better than cure!

Written by Chris Kevis, Senior Consultant
chris.kevis@pyments.co.uk

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