Ronan Champion-Variations Time Limits and Unanticipated Consequences

Variations, time limits and unanticipated consequences, Const. L.J.
2008, 24(3), 208-220
For educational use only

Variations, time limits and unanticipated consequences
Ronan Champion
Table of Contents
Prologue
Overview of time-bar provisions--new clauses
Time-bar provisions in practice--application to variations
Impact on the contractor
Engineer, or project manager
The employer
Why have time-bar provisions anyway?
A look to the future
Journal Article
Construction Law Journal
Const. L.J. 2008, 24(3), 208-220
Subject
Construction law
Other related subjects

Contracts
Keywords
Construction claims; Engineering and Construction Contract; ICE conditions of contract; Limitation clauses; Variation
Legislation cited
Unfair Contract Terms Act 1977 (c.50)
© 2021 Thomson Reuters. 1

Variations, time limits and unanticipated consequences, Const. L.J. 2008, 24(3), 208-220
*Const. L.J. 208 Prologue

Short time periods within which contractors are permitted to make claims, coupled with a complete bar on claims if made outside
that limited period, have for many years been features of bespoke construction contracts for large scale projects. More recently,
these provisions have begun to appear in standard forms of construction contracts, most notably the International Federation of
Consulting Engineers (FIDIC) 1999 forms and recently within NEC3.1 Others have commented upon potential difficulties with
enforcement of these provisions as a condition precedent in the event of employer breaches, due to the "prevention principle"2
But what are the practical consequences for different project participants? Do time-bar provisions encourage parties to settle
claims as work proceeds?
After a review and analysis of the FIDIC and NEC3 provisions, this article reviews how variations and claims might arise; and
considers from differing perspectives of the contractor, engineer and employer some potential consequences arising from use
of time limit or "time-bar" provisions, also known as "drop-dead" clauses.3
*Const. L.J. 209 The use of time-bar provisions is of more than academic interest. It has a real and practical influence, all the
more so because the forms in which these provisions now appear were drafted as model forms for use worldwide,4 and have
widespread support.5 Recent endorsement of NEC3 forms by the OGC6 raises the prospect of NEC3 contracts being used on
all manner of UK public sector building projects.7 The potential consequences of use of time-bar provisions in these forms is of
practical relevance to contractors, engineers, contract administrators, project managers, employers and lawyers who will need
to work with these provisions in coming years.
Overview of time-bar provisions--new clauses

Before 1999, standard forms of contract in UK or FIDIC forms had no time-bar provisions. The claim handing process, whether
valuing variations, handling prolongation and disruption claims, agreeing final accounts, handling delay claims and making
extension of time awards, has proceeded independent of the timetable for the works. Parties have been free to deal with these
matters months, even years, after these matters first arose. Some standard forms made limited attempts to require review of
claims within limited periods, but none provided a clear sanction for failure to do so.
Since 1999 changes have been made to the FIDIC forms to encourage settlement of claims as they arise. Clause 20.1 of the
FIDIC standard form8 states:
"If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment,
under any Clause of these conditions or otherwise in connection with the Contract, the Contractor shall give notice to the
Employer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and
not later than 28 days after the Contractor became aware, or should have been aware, of the event or circumstance.
If the Contractor fails to give notice of a claim with such period of 28 days, the Time for Completion shall not be extended,
the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection
with the claim…"
The first and second editions of the NEC forms sought to encourage parties to settle the value of changes as the work proceeded,
but strong anecdotal evidence *Const. L.J. 210 pointed to settlement of claims long after work was completed, to the frustration
of project sponsors, funders and employers. The third edition, NEC3, published in 2005, incorporated a revised and detailed
procedure for handling variations and claims, referred to in that form collectively as Compensation Events. NEC3 incorporated
a time bar at cl.61.3:
"The contractor notifies the Project Manager of an event which has happened or which he expects to happen as a compensation
event if
• the Contractor believes that the event is a Compensation Event and
• the Project Manager has not notified the event to the Contractor

If the Contractor does not notify a Compensation Event within eight weeks of becoming aware of the event, he is not entitled
to a change in the Prices, the Completion Date or a Key Date unless the Project Manager should have notified the event to
the Contractor but did not."
The clause in each form is similarly structured, in that each sets out the need for notice within a limited period and states the
consequence of failure to provide that notice: in the absence of a valid notice claims will be time barred.9 It is the latter element
that is significant. It is significant because both forms were drafted as model forms for use worldwide,10 and hence the potential
impact and influence of these provisions may be widespread. Further, these time-bar provisions are not common throughout
other standard forms. The colloquial reference to these provisions as "drop-dead clauses" is hardly accidental.
Certain elements of the clauses are treated differently in each form. The duty in the FIDIC forms is to notify an entitlement to
either additional time or money. In contrast, the duty under the NEC form is to notify an event that the contractor believes to be a
compensation event. These duties are quite different. An event may occur at the start of the contract (such as a modest variation
on a drawing) that would be a compensable event under each form. Under the NEC form the duty would be to notify within
eight weeks of becoming aware of the event. But under the FIDIC form, the duty to notify only arises when it is perceived that
he may be entitled to additional time or money, which may be months or years later.
Another feature of significance is that the timing of notification is not rigid, but conditioned in both forms on the extent of
awareness of the parties. The NEC form requires notification by the contractor within eight weeks of becoming aware of
the event. Reports from early use of the form indicates, perhaps unexpectedly, that contractors have welcomed this provision
and have been quick to adopt two arguments to circumvent this provision. First, they have argued that they were ignorant
of all changes and have only recently become aware of the *Const. L.J. 211 "events", and hence notification was not late.
Secondly, they argue that they were aware of an event, but they did not have sufficient information to ascertain whether it was
a compensation event, and notified as soon as they became aware that it might be! Quite what evidence may be required to
prove knowledge, or lack of knowledge, could itself be contentious.11 In contrast, FIDIC requires notification of claims when
the contractor is aware, or should have been aware, of a potential claim. How, one might wonder, will the employer convince a
tribunal that the notice should have been issued earlier? Well-advised employers may seek audit type provisions in agreements,
particularly if access to contractor's internal reporting and dealings with subcontractors is required.
The NEC form also contains an innovative provision, placing on the project manager an obligation to notify the contractor of
a compensation event at the time of giving an instruction to the contractor or changing an earlier decision.12 Where the project
manager does not so notify the contractor in circumstances where he should have notified him, the contractor's claim does not
fail for want of a valid notice.13 The intention of these provisions was presumably to avoid a situation where the employer
might have been aware of an event, and benefited from an event, but where the contractor was unable to make any claim for
additional time or payment for want of a valid notice. It is notable perhaps that no such provision appears in the FIDIC form.14
The real significance of this is to make the time-bar of contractor's claim conditional upon performance on the part of the project
manager. By failing to act, the project manager may expose the employer to additional costs that he might not have incurred
had action been taken in time.
Time-bar provisions in practice--application to variations

To assess the impact of time-bar provisions, it is useful first to review the various ways in which variations and claims for
additional payment can arise.15 Consider the following in the context of a requirement for prompt notification of claims:
• Instructions from the project manager or engineer. The perennial difficulty with instructions is that it is rarely clear whether the
instruction *Const. L.J. 212 is confirmation of a contract requirement or a variation. The impact may equally be difficult to
assess, particularly where the instruction relates to the environment in which work is carried out, rather than to the work itself.
• Changes to Drawings. Changes between drawing revisions will not always be immediately evident. Whether the change has
any impact may only be evident after discussion with subcontractors and suppliers, or once the work begins.
• Change to management obligations.16 That these are compensable, or have an impact, may not be immediately obvious.

• Client variations. On the face of it, these should be easily identifiable, but will be less clear when provided as comments in
meetings, in emails, in comments on drawings submitted for approval or given directly by the employer during a site visit.
• Re-measurement and provisional quantities. Where a contract contains provisional quantities the contractor will typically be
reimbursed on the basis of actual quantities for the work involved. Presumably notice will have to be given when any change
from the provisional quantity is a noted possibility.
• Local authority or statutory requirements. It may not be immediately apparent that the particular stipulations of a planning
officer as part of approval of plans during a project may contain additional constraints for which no provision was made at
tender stage.
• Changes in regulations. Changes to regulations during the course of projects can be difficult to detect at the time, but potentially
have a big impact.
• Contractor requests arsing from an interest in carrying out work in a more economic way. It can be difficult to distinguish
design development arising from preferential engineering, contractor proposals, or compliance with authorities (Authority
Engineering), and to assess at the time what, if any part, might be a variation.
• Discrepancies between documents. If contracting on that basis where a discrepancy is deemed to be a variation,17 changes
may be very difficult to detect at the time.
• Tender assumptions defeated. Where a tender assumption is made clear, and incorporated within contract documents,
departures from this should be notified. If the assumptions relate to resource levels, does the contractor have to give notice on
every day thereafter that different resource levels are used?
*Const. L.J. 213 • Package design development. Where work is procured in subcontract packages, a large number of changes
can arise where assumptions made for early packages need later correction in the light of later design development for other
packages.18 Detecting changes, and their prompt notification, may be challenging for some contractors and project managers
alike, particularly where the main contractor is reliant upon information or notifications of changes from subcontractors.
• Ground conditions different from plan. Detailed consideration is frequently given to allocation of risk of adverse ground
conditions. When the existing conditions relate not to the ground, but to the condition of an existing block of flats, or Grade 2
Listed historic building that is to be refurbished, the differences between initial expectations and the actual structure as found
may be far from clear. If the contractor is obliged to notify every divergence from the tender expectations, the project manager
should expect to receive, on a daily basis, notices in respect of each area of the building and each element of work as each new
part of the existing fabric is worked on during the project.
• Other contingent events. Changes to prices can also arise from change of laws, insured events, currency changes, changes to
taxes and levies and price fluctuations. When dealing with provisions of this nature, an obligation to notify changes at the point
where the contractor should have been aware of the change, or where a claim might be made, is potentially very onerous.
From this list, it is evident that variations, changes and other compensable events can arise in a wide range of ways. Some will
be immediately evident. Those dependent upon review of drawings, assessing existing structures or interfaces with third parties
or subcontractors will be more difficult to assess, suggesting that detection of potential changes for which notices must be given
within four weeks under the FIDIC form, or eight weeks with the NEC form will be challenging.
Impact on the contractor

The first potential impact is at tender stage. The estimator will soon learn that where projects with time-bar provision require
considerable commercial support during the course of the project from personnel experienced in handling similar commercial
arrangements. Constraints in staff experience may limit the number of tenders sought.
Upon award of the project, and receipt of the first drawings, the contractor will need to maintain a continuous check over matters
from two simultaneous perspectives: what is the impact on the work to be done of any change or instruction or event, and
whether there is any commercial impact. Are the first construction drawings received the same as tender drawings? Do these
contain features that differ from the specification or bills of quantities? If so, notice *Const. L.J. 214 of a change must be

given promptly, before work has even started. The need to address matters in this way can be expected to bring tension from
the start between, on the one hand, the need to balance good team relationships with the engineer, and the need to serve notices
that will typically be perceived to be adversarial.
From the start, the contractor needs to see that the project is overseen by observant and experienced staff always looking out
for potential variations, both in main contracts and in subcontracts. Subcontractors will need similar notice provisions (and
incentives to respect them) if the contractor is to pass on notice to the employer of variations affecting subcontractors that might
not at first be evident to him. The constant need to be aware of potential variations requires new ways of working. The contractors
quantity surveyor or commercial manager that was in the habit of visiting a site just once a month to carry out a valuation of the
works risks missing some variations: a more frequent visiting regime is needed. Over the course of the project, the inevitable
conclusion is that the contractor will need to provide notices, will need to do so on time, and will need the staff to do so.
But consider the contractor that is not fully aware of the provisions. Five months into the contract, he finds that variations have
arisen for which no notice has been provided.19 He begins to explore what other options might be available to him: framing the
changes under other headings, a claim for damages, a claim outside the contract? This can lead to wider considerations as to
whether the notice provision is invalid under the local law, or inequitable, or whether the notice provision or time limit has been
waived? Considerations of this nature lead also to the need to engage legal advice and tactical considerations such as whether
to address concerns direct to the owner, funders or local sponsor.
It is suggested that one inevitable consequence is argument over the form in which the notice is provided. If the notice has to
be in writing, does it have to be stated to be a notice? If not, presumably a mention of a problem within a contractor's report,
or minutes of a meeting will suffice? Or worse, that a matter was mentioned at a meeting, and the minutes drafted by the
engineer (and received a month later) do not record the so-called notification made. If, as in the FIDIC editions, there is a
provision requiring all communication to be in writing,20 one can anticipate that failure to adhere to this universally, on every
communication from the start of the project, may lead to further waiver arguments. An inevitable consequence of time limiting
provisions is to make essential either timely provision of notices, or evasion of notice requirements, or adjustment of notice
provisions mid-project by agreement, to avoid commercial failure of the project.
*Const. L.J. 215 But the impact can extend beyond notices. If the requirement is to notify additional time when required, there
will be a need to constantly update programmes, incorporating progress achieved, variations, and constraints in order to be in a
position to advise as the job proceeds. Contractors struggle to achieve this.21 The trend, in advising on the cost of compensation
events, has been to note the time impact as "to be advised", and to deal with time on the basis of actual performance at the end
of the project. If this is widespread, contractors will need to significantly change their handling of time matters if reporting of
delays is required within limited time periods. The additional planning support required may be substantial.
The livelihood of their business depends upon profitable execution of projects, and that includes successful settlement of claims.
Some experienced contractors have noted that the entire approach to risk management needs to be changed for projects so
that claims are not lost through time-bar clauses. Traditionally, projects were staffed by experienced tradesmen who had been
promoted to site managers; individuals that typically prioritised resolution of construction issues and left commercial issues to
fester, to be dealt with later by the commercial support team or legal department at head office. Today, the approach will have
to change to have a claims manager or lawyer dedicated to each project to manage the risk of financial loss for want of notice.22
Not surprisingly, as experience of the FIDIC 1999 forms has increased recently, contractors and commentators have noted
potential difficulties with the time-bar provisions.23 Calls have been made for changes, and for the time-bar element to be
withdrawn. Similar misgivings over the NEC provisions have been expressed.24
The potential impact of time-bar clauses for contractors is potentially far reaching, impacting how projects are organised, how
their commercial matters are managed, how their staff are trained and how the in-house legal team supports the project teams.
One wonders how many contractors embarking upon NEC3 work have realised this.
Engineer, or project manager

On one view the use of time-bar provisions has little impact upon the performance of the role of project manager under the
NEC3 form, or of engineer *Const. L.J. 216 under the FIDIC forms. Closer analysis suggests several areas of consequence.

First, individuals engaged need to be familiar with the time-bar provisions and related provisions relating to forms in which
communications are required to be made. Compliance with the latter is important if waiver arguments are to be avoided.
Responses to claims made bring particular difficulties. The first issue is whether any response should be sent at all: one view is
that no responsive action at all should be taken in the absence of a valid notice in order to avoid waiving the notice requirement.
If a response to claims or particulars is to be given by the project manager and engineer, those responses under NEC and FIDIC
forms, are required to be provided within stipulated periods. Failure to respond within the period can result, under the NEC
form, in a deemed acceptance.25 If the employer incurs loss through a failure to respond in due time to claims made, attempts
to recover those losses from the engineer or project manager might be expected.
Experience from handling claims under the NEC2 forms, where the parties were encouraged to settle claims as the work
proceeded, showed that engineers or employer teams found the preparation of responses to notifications within short periods
challenging, much as Grove reported.26 Eggleston has made similar observations.27 There is no reason to suggest that similar
difficulties will not be experienced under the NEC3 form, particularly on building projects involving existing structures or
projects carried out with large numbers of specialist subcontractors with design responsibility.
A view held by many engineers and project managers is that projects get completed by co-operation between the parties and
by maintaining a working relationship, particular towards the end of a project when parties agree to put aside differences
temporarily to get the job finished. Requirements to serve notice can break that approach. Given that the NEC forms were set
up to promote "good management of the relationship between the parties" it would be the unfortunate consequence of inclusion
of notice provisions if that relationship were to be broken through repeated service of notices.
In both NEC3 and FIDIC there are further provisions relating to submission of claims, each with detailed timetables and
obligations on both parties. Under NEC3, to encourage a prompt settlement of claims, the project manager is encouraged to
assess the cost and time on the basis of assumptions, and to revisit assumptions later if necessary. Experience of NEC2 has
shown that *Const. L.J. 217 parties are more likely to take the more pragmatic route: if they are likely to revisit assessments
later, why bother to make assessments in the first place? The consequence, however unintended, is that compensation events
can pile up toward the end of the project awaiting assessment. With the FIDIC forms there is no forfeiture of claims in the
event of late submittal once a valid notice has been given. But this provides no incentive for either contractor or engineer to
address claims in the short term.28 The likely consequence, again, is that parties will be more inclined to leave settlement of
claims until later stages of the project, if it is possible to do so and will be more interested in getting their position right than
seeking a short solution that misses a key element.
The impact of time-bar provisions on project managers and engineers, with the corresponding obligations to provide responses
within limited periods could prove onerous and difficult to achieve. They require new project management processes internally,
and training for engineers, to ensure timely compliance. In time, some may wonder whether onerous provisions with time limits
are more trouble than their worth, and may prefer to utilise older editions of the standard forms.
The employer
In July 2000, soon after publication of the 1999 edition of the FIDIC forms, Seppälä characterised the time-bar provisions in
cl.20.1 of NEC as favouring the employer.29 No clear view is emerging of employers' experiences of the forms, but anecdotal
experiences are mixed. The main difficulty for employers is lack of certainty over the effect at law of notice provisions. It is
clear that some tribunals have enforced time-bar provisions. Over time, a number of devices have emerged that might allow
the onerous conditions to be avoided.
First, it is arguable that the claims notification provisions acting as a condition precedent to recovery should not apply to breaches
of contract in circumstances where the employer stands to benefit from his own breach either through having the benefit of a
variation or by recovery of liquidated damages, in accordance with the prevention principle.30
Secondly, where the contractor has contracted without any opportunity to negotiate terms on the standard terms, it is possible
that the provisions limiting and barring claims might be found void under local legislation. Whilst the prospect of success in the
United Kingdom under the Unfair Contract Terms Act 1977 may be low, treatment in other countries may provide a different
view, where it may be possible to argue that the mandatory laws of the place of performance cannot be excluded31 or found to
be inconsistent with requirements under the civil code on the basis that one party is proceeding on the basis *Const. L.J. 218

inconsistent with good faith. Courts in the United States, for example, have been reluctant to enforce time-bar provisions if the
party entitled to notice has actual notice of a condition or event (and hence notice did not need to follow any specific format
but merely had to make the engineer aware of the differing site conditions) or suffers no prejudice as a result of not receiving a
notice.32 Use of the expression "constructive notice" may be expected to be used outside the United States.
Thirdly, there may be difficulties with enforcement where provisions deemed to have been waived,33 or where work is claimed
to be outside the contract or subject to an implied promise to pay.34
In the light of the above, the employer is likely to face a period of uncertainty over whether the notice provisions can be enforced.
It may be important to secure advice on the likely approach adopted by an adjudicator or Dispute Resolution Board if faced
with resolving issues arising. The real question will then be over the extent of involvement of legal and commercial support
engaged to resolve matters, and over the approach to settlement adopted henceforth. In consequence, given requirements for
contemporaneous resolution of claims, one might expect to see less involvement with claims after project completion, and
greater involvement during projects as part of the project team. Is this really what drafting committees intended?
Why have time-bar provisions anyway?

Notice provisions have long featured in commercial contracts. A timely notice is required in order for a rent review to be carried
out within a prescribed time period. Equally, a notice of referral must be served within a limited time period for an adjudicator
to be empowered to address a dispute. These provisions have been repeatedly enforced rigidly before UK courts.35
The rationale for notice provisions in the case of FIDIC is simple and compelling. They are provided to encourage prompt
resolution of claims.36 The rationale behind changes to notice provisions in FIDIC 1999 has been explained by several
members of the drafting committee. As Seppälä explained, the committee seemingly thought that work would be undertaken by
international contractors with staff on the lookout for claims, and who should have no *Const. L.J. 219 difficulty providing
notice.37 It is by no means clear that contractors have shared this view, particularly as early resolution of claims can prejudice
contractors if settled without a full understanding of time impacts and of impact on subcontractors.
Wade noted in 2004 that there was trouble with mismanagement of contractor's claims due to lack of accurate records and loss
of the chance to make other arrangements due to lack of advance warnings of claims. Hence, contractors were required to give
a bare notice of a claim, and details later. Equally, it was noted that a difficulty from the contractor's point of view was delays
in providing a response and to address this a time limit was imposed.38 This seems somewhat misguided. Unless the notice is
provided within a few days of an event, what room is there for mitigation? The NEC's early warning procedure,39 which is not
linked to forfeiture and which encourages discussion, seems more appropriate.
It is not clear why the NEC drafting committee adopted similar provisions to the FIDIC. In the case of the NEC form the impetus
for the introduction of strict time limits appears consistent with a desire to move away from a tradition of settling claims long
after work was completed, noted as a desirable aim in the Government's Modernising Construction report.40 It is also consistent
with a core characteristic of the NEC family of standard contracts: to stimulate good management of the relationship between
the two parties to the contract and, hence, of the work to be carried out under the contract.41 But with the draconian effect of
the failure to serve a timely notice, where does this leave the requirement in clause 10.1 that employer, contractor and project
manager are to work in a spirit of mutual trust and co-operation?
What is not at all clear is the rationale for forfeiture of claims in the event of failure to provide timely notice. Grove noted in
1998, following a detailed review at the time of the FIDIC, Australian Standard, FAR, ENAA, Singapore, GC/Works, JCT and
ICE forms that only two had time-bar provisions, and others gave time limits without stating sanctions. It was recommended
that the forfeiture provisions of the Hong Kong form be replaced with damages. What *Const. L.J. 220 was needed instead
was prompt and effective communication of problems, their impact, their mitigation and contractual consequences.
A look to the future

There is, it is suggested, a balance to be struck between early resolution of claims and providing time to the parties to assess
the position, gather evidence, present the claim and evaluate the claim. One might consider what prejudice the employer might
suffer if the period for notice was extended from four weeks to three months, and if the period for presentation of claims was

extended to six months. This would allow short contracts to be progressed and completed without workflow being interrupted
by the need for either party to deal with claims. The case for early notification, and forfeiture of claims outside short time limits,
has not been clearly articulated. They are draconian, a likely source of contention and represent a shift away from collaborative
working.42 In the view of this author, time bars are more trouble than their worth.
If employers do pursue use of the FIDIC and NEC3 forms, they should understand that a natural consequence of this is that the
contractor may seek to negotiate away these provisions, to manage risks by assigning lawyers or claims managers full time to
each project and may flood the team with notices from the very start to protect his position.
In the meantime, parties can expect contention to continue over the time impact of events and evaluation at the time; over the
form, adequacy and timing of notices43; and over waiver,44 prevention, "constructive notice" or any other device that might
avoid the need for notices. Professionals can expect more challenges and claims arising form failure to deal in a timely way
with notices from contractors. And FIDIC and NEC can expect debates to continue over the fairness of time-bar provisions.
<FNTI> This article is based upon a paper awarded second prize in the Society of Construction Law's Hudson Prize competition
in 2007.</FNTI>
Director, Acutus, London.
Footnotes
1 FIDIC forms are published by

the International Federation
of Consulting Engineers,
1999. NEC3 is a collection
of standard forms published
by NEC group in 2005. NEC
group is a wholly owned
subsidiary of the Institute
of Civil Engineers in the
United Kingdom. This article
explores provisions within its
Engineering and Construction
Contract, 3rd edn.
2 See particularly the Norman
Royce Prize 2006 paper, H.
Lal, "The Rise and Rise of
"Time-Bar' Clauses: The
"Real Issue' for Construction
Arbitrators" (2007) 24 I.C.L.R.
118; and more generally on
the prevention principle papers
by Smith, "The "Prevention
Principle" and Conditions
Precedent: relevant Australian
developments" (2002) I.C.L.R.
397; I.N. Wallace Duncan,
"Liquidated Damages Down
Under: Prevention by Whom?"
(2002) 7 Construction and
Engineering Law, Issue 2, 23;
E. Baker, J. Bremen and A.
Lavers, "The Development
of the prevention principle
in English and Australian
Jurisdictions" (2005) I.C.L.R.
197.
3 See for example E. Corbett's
paper delivered to the FIDIC
IBC contracts seminar 2005

at: http:www1.fidic.org/
resources/contracts/
corbett_short_oct05.asp
[Accessed February 28, 2008];
or R. Knudson in "An English
lawyer's view of the new
FIDIC rainbow--where is
the Pot of Gold" at: http://
www.robertknutson.com/
downloads/
Analysis_of_English_construction_law.doc
[Accessed February 28, 2008].
4 The forward to the NEC3
forms note that one of their
characteristics is that they "can
be used in a wide variety of
commercial situations, for a
wide variety of types of work
and in any location."
5 The FIDIC forms are used
for world-bank funded
development projects
worldwide. NEC3 contracts
have been endorsed by
the Office of Government
Commerce (OGC) for use on
publicly funded projects in
the United Kingdom and have
suggested that use of NEC3
is preferred as it supports the
Government's Modernising
Construction agenda.
6 Office of Government
Commerce, a UK government
agency.
7 Anecdotal reports range
from refurbishment of local
authority housing stock to
construction of venues for the
2012 Olympics in London.
8 See FIDIC's Conditions of
Contract for Construction
(Red Book) 1999, Conditions
of Contract for Plant and
Design-Build (Yellow Book)
1999, Conditions of Contract
for EPC/Turnkey Projects
(Silver Book) 1999, all of
which contain identical
provisions at cl.20.1.
9 There are additional provisions
relating to time limits within
which claim details are
to be provided, but the
consequences of failure to
comply within the periods
are less severe. Under FIDIC
cl.20.1 the contractor is
required to send to the
engineer a fully detailed
claim within 42 days after the
contractor became aware, or
should have become aware,
of the event or circumstance
giving rise to the claim (unless
the engineer approves a longer
period). If the contractor
should fail with this latter
requirement, any extension
of time and/or additional
payment must be adjusted to

take account of the extent to

which the failure may have
prevented or prejudiced proper
investigation of the claim.
10 The forward to the NEC
forms note that one of their
characteristics is that they,
"can be used in a wide variety
of commercial situations, for a
wide variety of types of work
and in any location."
11 Indeed, in a commentary on
the new NEC provisions under
cl.61.3, it has been suggested
that time period within which
notice should be served
should run from the time that
an experienced contractor
should have become aware
of the event that will start
the eight-week period, on the
basis that contractors relying
upon pleading ignorance
of events (and hence late
notification) are unlikely to
receive sympathy from either
the project manager or an
adjudicator: see NEC Users'
Group newsletter issue No. 37,
Dec 2006, pp.4-5.
12 See cl.61.1: "For
compensation events which
arise from the Project Manager
or the Supervisor giving an
instruction or changing and
earlier decision, the project
manager notifies the contractor
of the compensation event
at the time of giving the
instruction or changing the
earlier decision…."
13 See cl.61.3.
14 It is also noted that the
provision is limited to
compensation events arising
from a project manager's
instruction. Quite why the
provision does not extend to
other compensation events is
not clear.
15 The conventional, if somewhat
simplistic view, is that
variations arise from differing
ground conditions, variations
by the engineer, and variations
proposed by the contractor
that are approved by the
engineer. That group, whilst
representative of the body of
sources on civil engineering
type projects needs extending
if dealing with building
projects, work where the
contractor has significant
design responsibility, work
being procured sequentially in
packages, or work involving
interaction with authorities.
16 It is not unusual, during the
course of the works, for the
parties to put in place different

arrangements to those first

planned or to make changes
as work proceeds, whether in
arrangements for copying and
distributing drawings, working
hours on site, union rules, use
of site accommodation, site
access, progress reporting.
17 Different forms deal with
discrepancies in different
ways. Under the FIDIC forms,
a discrepancy is resolved
by hierarchy of documents
and following an instruction.
Under JCT forms in contrast, a
discrepancy is deemed to be a
variation.
18 Similarly, additional work can
arise from the need to provide
for work needed to fill work
gaps between packages or
to resolved inconsistencies
between contractor design
packages and employer
designed work.
19 This, it appears, is all too
common. At a recent FIDIC
conference in London, two
speakers (both of whom
were lawyers experienced
in handling claims under
FIDIC contracts) observed
in identical terms that, in
their experience, contractors
habitually did not give notices
on time. Other speakers and
conference attendees endorsed
the observation; Knudson
also remarks "Contractors
inevitably fail to notify
perfectly legitimate claims."--
see R. Knudson in "An
English lawyer's view of the
new FIDIC rainbow--where
is the Pot of Gold" at: http://
www.robertknutson.com/
downloads/
Analysis_of_English_construction_law.doc.
20 See FIDIC cl.1.3,
Communications: "Wherever
these Conditions provide
for the giving or issuing
of approvals, certificates,
consents, determinations,
notices and requests, these
communications shall be (a) in
writing and delivered by hand
(against receipt), sent by mail
or courier, or transmitted using
any of the agreed systems
of electronic transmission
as stated in the Appendix to
Tender…"
21 Given the need to use the
programme in this way, parties
can expect an increase in
contention over the form, basis
and detail of programmes
during the project, and over
the potential impact of each
and every change. Experience

and anecdotal evidence

of projects under NEC2
indicates the contractors
rarely manage to agree an
accepted programme at the
commencement of work, and
rarely manage to maintain
updated programmes as
work proceeds in a form that
can be used as a working
model. Eggleston notes that
"the accepted programme
which acts as a base for the
calculations cannot always
be updated as fast as the
compensations events are
flowing in for assessment":
B. Eggleston, The NEC3
Engineering and Construction
Contract: A Commentary, 2nd
edn (WileyBlackwell, 2006),
pp.211.
22 Points noted during a panel
discussion at the FIDIC/IBA
conference in Brussels, Oct
2006.
23 Kennedy described the
provisions as unduly harsh, in
"EIC Contractor's Guide to the
FIDIC Conditions of Contract
for EPC Turnkey Projects
(The Silver Book)" (2000)
I.C.L.R. 504 at 531; Egglink
of the Netherlands Association
of International Contractors
takes issue with the imbalance
between provisions for
contractor claims and
employer claims and lack
of a fatal consequence for
employer claims: presentation
to FIDIC Users Conference,
London, Dec 2006.
24 Pickavance notes time-bar
provisions as providing
"draconian results": Delay and
Disruption in Construction
Projects, 3rd edn (Informa
Professional, 2005), para.5.30.
25 NEC3, cl.61.4.
26 Grove noted in 1998: "The
problem is that contractors
understandably overact
to time bars by "flooding'
the employer with (form
letter) notices about every
conceivable claim trigger.
It is then impossible to
sensibly evaluate and follow
up on every such notice and
the entire notice process
is defeated of purpose."
Consultants Report on Review
of General Conditions of
Contract for Construction
Works for The Government
of the Hong Kong Special
administrative Region, 1998,
(The Grove Report) para.18.6
by Jesse B. Grove III, Thelen
Reid and Priest LLP at:

http//:www.constructionweblinks.com/
Resources/
Industry_Reports_Newsletters/
Nov_6_2000/
grove_report.htm.
27 Eggleston notes that:
"compensation events are
not rare events or occasional
events… but common events,
frequently running to hundreds
of events… The standard
assessment procedure requires
however requires detailed
calculations, supported by
programmes of forecast
events. These can be time
consuming both in their
preparation by the contractor
and consideration by the
project manager even when
infrequent. When frequent
they can collapse the system
by overload": Eggleston,
The NEC3 Engineering and
Construction Contract, 2nd
edn (2006), pp.211.
28 As one panellist remarked
at a recent conference when
discussing this point, "why
settle claims under the first
few notices received, when
you know you are about to
receive a lot more of these?":
International Bar Association/
FIDIC Conference in Brussels,
Nov 10, 2006.
29 C. R. Seppälä (July 2000),
legal advisor to FIDIC,
expressing his personal
views in a paper at: http://
www1.fidic.org/resources/
contracts/seppala.asp
30 See Lal, "The Rise and Rise
of "Time-Bar' Clauses" (2007)
24 I.C.L.R. 118. See also V.
Ramsey and S. Furst, Keating
on Construction Contracts, 8th
edn (Sweet & Maxwell, 2006),
9-025.
31 Dr. Götz-Sebastian Hök points
to potential invalidity of a
time-bar provision under
para.307 of the German Civil
Code: Publication dated March
10, 2005, "Are Germans fit
for FIDIC", at: http://www.dr-
hoek.de/EN/beitrag.asp?
t=Germans-fit-for-FIDIC
32 See Ace Constructors, Inc v
United States, 70 Fed.Cl.253
(2006), a decision of the Court
of Federal Claims.
33 See particularly City Inn v
Shephard Construction Ltd
[2003] S.L.T. 885 where
the point was raised and
dismissed, albeit on the facts.
34 See Keating on Construction
Contracts, 8th edn (2006),

pp.127-130; and Lal, "The

Rise and Rise of "Time-Bar'
Clauses" (2007) 24 I.C.L.R.
118.
35 It is of interest to note two
consequences arising from
notice provisions in each
of these contexts: (a) a
significant body of litigation
with respect to the form in
which notices must be made,
the timing of notices and
possible exceptions; and (b)
losses incurred arising from
failure to serve the correct
rent review notice has also
been a significant source of
litigation against surveying
professionals.
36 According to Chris Wade,
Chairman of the FIDIC
Contracts Committee
1999-2006, one of the more
important current trends
across FIDIC's new forms is
in tightening up the claims
procedure for contractor
claims with notice within
28 days or the claim is lost,
trying to have possible claims
sorted out as early as possible
instead of festering (cl.20.1)
and making the employer
follow a proper procedure for
Employer's claims: Paper on
FIDIC developments for the
FIDIC International Users
Conference, IBC/FIDIC
London, Dec 2006.
37 "After much reflection, the
conclusion of the FIDIC
drafting committee was that
there must be a notice of claim
within 28 days for there to be
a valid claim so that all are
aware that there is an event
or circumstance where extra
payment or time may be due
to the contractor. Twenty-
eight days appeared to us
to be a reasonable period.
International contractors tend
to be fairly large companies,
or consortia of companies,
that employ a staff that is
experienced in claims and,
therefore, are fully capable of
recognizing a claim situation
when it arises. Consequently,
if the contractor has a bona
fide claim, there would seem
to be not good reason why he
should not be required, under
pain of forfeiting the claim, to
give a notice of claim within
28 days (or 4 weeks) of the
event or circumstance giving
rise to the claim…. When
claims are notified early, they
may be resolved early in the
interests of both parties.": C.

Seppälä, "Contractor's claims

under the FIDIC Contracts
for Major Works", (2005) 21
Const L.J. 278.
38 He added: "it is hoped that
the new stricter rules, with
the requirement for both the
contractor and the employer to
follow a specified procedure,
will reduce some of the
difficulties currently being
met" with regard to claims.
Underlying this was an
understanding that it was
the contractor "who is in the
driving seat… and has the
organisation that is on the
look-out for matters causing
him extra time or cost". C.
Wade, Chairman of FIDIC
Contracts Committee, paper on
Claims Procedures, March 2,
2004.
39 NEC3, cl.16.
40 See Modernising
Construction, a report by
National Audit Office
published in 2001: http://
www.nao.org.uk/publications/
nao_reports/00-01/000187.pdf
41 The NEC's three
characteristics are set out in
the on the second page of the
form, before the contents page.
42 See also the Public Works
suite of Contracts published
in Ireland by Department of
Finance, August 2007.
43 See recent decisions in
Multiplex Construction
(UK) Ltd v Honeywell
Control Systems Ltd [2007]
EWHC 447 (TCC) and
Steria Ltd v Sigma Wireless
Communications Ltd [2008]
C.I.L.L. 2544.
44 See City Inn Ltd v Shepherd
Construction Ltd [2007]
CSOH 190; [2008] C.I.L.L.
2537.

Ronan Champion-Variations Time Limits and Unanticipated Consequences

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Variations, time limits and unanticipated consequences, Const. L.J.

2008, 24(3), 208-220

For educational use only

Overview of time-bar provisions--new clauses

Time-bar provisions in practice--application to variations

Impact on the contractor

Engineer, or project manager

Why have time-bar provisions anyway?

A look to the future

Construction Law Journal

Const. L.J. 2008, 24(3), 208-220

Other related subjects

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*Const. L.J. 208 Prologue

Overview of time-bar provisions--new clauses

• the Contractor believes that the event is a Compensation Event and

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Time-bar provisions in practice--application to variations

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Impact on the contractor

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Engineer, or project manager

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Why have time-bar provisions anyway?

A look to the future

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1 FIDIC forms are published by

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take account of the extent to

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arrangements to those first

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and anecdotal evidence

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pp.127-130; and Lal, "The

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Seppälä, "Contractor's claims

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