The Importance of Timely and Proper Notice of a Claim Under a Contract
Contractual notices can be complicated and their importance cannot be understated.
Most construction contracts contain a requirement for certain communication to be issued as notices by one party to the other (or the other’s representative) to notify of particular events,
facts or circumstances. These may be such things as a notice of delay, a notice of payment, a notice of the incurring of additional costs or a notice of early warning of an increase in risk.
Their intention is to give the recipient (or both the sender and the recipient) the opportunity to proactively address the notified matters in order to reduce the impact upon the parties or the project.
Construction Contract expert, Steven C Evans says “The most important advice I can give is to read the contract and understand your obligations as regard to notices”.
Generally, a contract may contain two types of notices:
Advisory notices are issued to inform, give advice or instructions. The relevant party is contractually obliged to issue a notice, but the contract does not expressly state the consequences if a notice is not issued. A failure to issue a notice would be a breach of contract, but, generally, the injured party’s remedy would be a claim for damages (if any).
Mandatory notices on the other hand are of significantly greater importance as the contract will expressly state that a party will lose certain rights (such as the payment of additional money for variations, or an extension of time) if a notice is not correctly issued when it should be. These tend to be called ‘condition precedent clauses’ in that satisfaction of the notice condition is a requirement before (or precedent to) an entitlement (to, for example more time or money). Because of the draconian consequences of any failure to properly issue a notice, the courts have set strict rules on the interpretation of condition precedent clauses including that the relevant clause should be specific, clear and unambiguous, state the time within which it must be sent and clearly state that rights will be lost for non-compliance.
Method of Delivery
Often the contract will specify the method of delivery and that method must be employed (or a similar method of equivalent or better speed of communication). The onus will be on the sender to prove that the notice was received by the recipient and, on that basis, the sender should employ a delivery method that can later be demonstrated, on the balance of probability, to have delivered the notice effectively.