Our Ask the Expert function will be available for you to use shortly. In the meantime, here is a question which was recently posed to us, that we thought you might find interesting.
Question: I’m a contract manager for the prime contractor on an African project for which we are using a relatively unamended FIDIC Red Book 1999 form. We’ve recently been plagued by weather which I and my colleagues think is completely out of the ordinary and which has delayed our work on site to a degree. In the last couple of project meetings I mentioned that the rain is causing us some problems and that was recorded in the minutes. I also made sure that in our last progress report I put in a reference to the weather under the “Causes of Delay” section. In our last project meeting the engineer on the project told me that rain like this at this time of year isn’t exceptional – we strongly disagreed on the point.
We’re thinking of putting together a claim in any event for extension of time, as we have liquidated damages on the project for late completion. Have you got any tips about what we should be keeping in mind to give us the best chance of success?
Answer: I’m sure as a contract manager using the FIDIC Red Book 1999 form you are well aware of the very strict notice requirements for submitting a claim which a contractor has to comply with and that failure to do so can debar you from claiming. However, for everyone else reading this I will explain anyway. Clause 20.1 (Contractor’s Claims) of the Red Book provides that a contractor has to give notice to the Engineer “describing the event or circumstance giving rise to the claim”. Your notice has to be given as soon as is practicable and not later than 28 days after you became aware of (or should have become aware of) the event giving rise to the claim. Failure to do so in 28 days will disbar you from any entitlement (and the wording is intended to capture not just claims under but also in connection with the Contract).
There are also other procedural requirements set out in clause 20.1 that you need to make sure you are complying with from the outset in preparing your claim (such as following up with more detail within 42 days of the event). If you aren’t totally familiar with clause 20.1, I would encourage you to go away and read it before you do anything else.
So, have you given sufficient notice under the contract? I would say at the moment that this is questionable – you have not written directly to the Engineer using the formal notice procedures under the contract. You have mentioned it to him orally and it has been recorded in minutes and in a progress report, neither of which are necessarily delivered in the proper way to the Engineer. Arguably you also haven’t sufficiently described “the event or circumstance giving rise to the claim”. Without knowing how long this weather has persisted (and when you were first aware – or should have been – that weather will delay completion (i.e. your basis of claim)) or exactly what your notice requirements are, I would advise you to submit formal notice at your earliest possible opportunity, just to be on the safe side. Note that if your minutes of meeting are countersigned however, in my experience your case would be stronger – as that could be considered as adequate evidence of sufficient notice.
Under the FIDIC Red Book you should be able to claim an extension of time for “exceptionally adverse weather conditions” (clause 8.4(c)). The FIDIC form itself (unlike NEC which applies a test of a less than once in 10 years limit), does not provide guidance on what constitutes “exceptionally adverse”. It will therefore be a matter of judgement, looking at the current weather conditions in comparison with historical weather data for the location of the Project to see whether (1) exceptional and (2) adverse.
As a lawyer I can’t stress enough how important it is for you to keep detailed records about how the rain is affecting your works (cause and effect), details of any mitigation and of every single conversation your team has with the project owner, the Engineer and with your subcontractors so that you maintain good records – not least to comply with your continuing obligations under 20.1.
Note that there is a less likely chance for you to claim under clause 17.3/17.4 (Employer’s Risks) for operation of the “forces of nature which is Unforeseeable or against which an experienced contractor could not reasonably have been expected to have taken adequate preventative precautions.” Unforeseeable is defined as not reasonably foreseeable by an experienced contractor by the date of submission of their tender for the contract. Firstly, I doubt rain would be considered unforeseeable (though of course I don’t know where in Africa your project is based) so again, the amount of rain would need to be so exceptional as to not be “foreseeable”. Secondly, delay to the Works alone would not suffice – to claim under this clause you would need to show actual loss or damage to the Works, Contractor’s Documents or Goods. I don’t think this is necessarily the clause that could apply to the scenario you describe.
And some final thoughts and tips:
1. Governing law may affect enforceablity of Clause 20.1 notice bar
You have not mentioned what is the governing law of the Contract. The enforceability of the condition precedent clause in 20.1 can depend upon what is the governing law. For example, in some civil code jurisdictions such notice bar clauses have in the past been successfully challenged under the mandatory laws of that country on the basis of being contrary to the notion of good faith. You would also have some ammunition here given that you can argue that the Engineer has known for some time, however informally, that you are suffering due to the weather.
However, under English law and other common law jurisdictions, the clear wording of Clause 20.1 is likely to be given effect.
2. Attracting privilege early on
If it is already apparent that there is likely to be a dispute which may end up in legal proceedings (because of the potential sums involved) there are some practical tips on how you ensure that appropriate correspondence (discussing the prospects of or preparing the claim) as opposed to administering the Contract (which is obviously ongoing) are protected by legal professional privilege:
– Discourage emails between your company’s team and other members of the project team about this subject;
– Direct that all emails on this subject be sent to a specific member of your legal team (and copied to your operational personnel to avoid any inconvenience). It might be wise to head all such emails, notes etc. “Strictly Privileged and Confidential – Prepared for Legal Advisers”
– You may also wish to head any reports etc you prepare for internal purposes in relation to your claim “Strictly Privileged and Confidential – Prepared For Legal Advisers” and send them to your legal team for the files.
I appreciate that this advice may appear to be a little heavy handed for this early stage in the claim but if the dispute develops into a full blown dispute then your bosses are going to be grateful that you took all these precautionary steps early on.