Are Time Bars enforceable in Construction Contracts?

Navigating through contractual obligations is one of the biggest challenges for contract managers. Construction Agreements are typically governed by strict requirements, which must be adhered to ensure contractual compliance and protect/reserve each party’s rights.

Time bars are one of the most common requirements included in construction contracts. But are they enforceable? Overall, yes, provided they are unambiguous and clearly articulated in the agreement. However, the enforceability of time bars might depend on jurisdiction, governing law, and specific case conditions, as detailed below.

In this article, we will revisit the time bar definition, discuss their importance, understand the distinctions between civil law and common law systems,, and real-world case studies. Furthermore, we’ll discuss related legal concepts such as conditions precedent and provide illustrative clause examples.

What is a time bar? A Quick Recap

Construction and Engineering Agreements typically include clauses requiring that one party notify the other within specific timelines regarding a claim or the likelihood that an issue might evolve into a claim (also known as early warning notices).

Some agreements establish these strict timelines for notification as a condition precedent to any compensation entitlement (i.e. time or cost) – a.k.a “Time bars”.

Accordingly, if a party (typically, the Contractor) fails to notify the other (Client/Owner) within the specified time, it can be barred from making any claim.

Suggested Article: What is a Time Bar Clause? (And Why it is so Important!)

Why Construction Contracts contain time bars?

Time bars were included in construction contracts to create clear, strict deadlines for parties to communicate project-related issues. Among many benefits, it helps with:

Timely Communication: Time bars ensure that parties promptly report issues, such as early warning notification or notice of delays, which help contractors and owners manage risk more efficiently.
Accountability: Parties are held accountable for adhering to contractual obligations within specified time frames.
Dispute Prevention: By addressing concerns promptly, time bars reduce the likelihood of disputes arising later in the project.
Transparency: Clear deadlines create transparency and prevent surprise claims that catch parties off guard.

Are Time Bars Enforecable or Not?

As briefly discussed in the introduction, typically, time bars are enforceable when are clearly articulated, univocal and explicit.

However, there have been many legal disputes related to time bar enforceability for extension of time claims and/or variation claims. Overall, the enforceability of time bars will depend on:

Jurisdiction in which the contract is executed,
Governing law, and
Specific Case Conditions.

In the next two sections below, we will detail cases in which courts have enforced time bars and examples where they have not.

Cases when time bars were enforced

In CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] (2015), the Supreme Court of Western Australia (Australia) held that CMA (the Contractor) was not entitled to seek time and cost compensation because of late submission of the required contractual notices.

A quick case summary is detailed in the table below.

Case	CMA ASSETS PTY LTD Formerly Known as CMA Contracting Pty Ltd -v- JOHN HOLLAND PTY LTD [No 6] [2015] WASC 217 (19 June 2015)
Location	Western Australia (Australia)
Background	BHP Billiton contracted John Holland to deliver an upgrade and extend a wharf at Finucane Island, on the western side of the Port Hedland harbour John Holland subcontracted part of works to CMA, which include berth demolition, berthing dolphins, and mooring dolphins.
Disputes	CMA claimed that John Holland caused delays to their works because of variation orders issued, restricted site access, and delays in moving an existing ship loader on the wharf.
Court Decision	Even though the Court found that John Holland had indeed caused delays to CMA, CMA had timely failed to notify John Holland. Therefore, John Holland was entitled to REJECT the extension of time claims (and associated costs) raised by CMA
Time bar enforceability?	YES

Extracts from Court Decision:

“CMA also argued against a construction that would result in absurdity. There is no doubt that the strict application of cl 10.12 and cl 10.13 is harsh. But I am not satisfied that it is without purpose and absurd, so that an alternative construction must be given, notwithstanding apparently clear words. In approaching cl 10, I believe it is appropriate to have regard to the fact that it is part of a Subcontract, designed to mirror obligations in the Head Contract. The nature of the information required to be given by the Subcontractor may be relevant to John Holland meeting its own obligations to its principal.“

(Paragraph 375)

Other relevant cases:

Australian Development Corporation Pty Limited v White Constructions (Australia)
Multiplex Constructions v Honeywell Control Systems (United Kingdom)

Cases when time bars were NOT enforced

In Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 2) [2021] NSWCA 93, the Supreme Court of New South Wales (Australia) (Court of Appeal) decided that even though Valmont Interiors did not comply with the relevant timeline requirements under the contract, it was entitled to be paid for a variation based on the estoppel principle.

Estoppel is a legal principle that prevents a party from asserting a claim or right that contradicts their previous actions or statements (for further details and examples of the estoppel principle, read the FAQ section below).

In this case, Armani had previously paid Valmont for other non-compliant variation orders, which led Valmont to believe they would be entitled to receive an extra amount for supplying part of the joinery that a third party did not deliver – see case summary in the table below.

Case	Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 2) [2021] NSWCA 93
Location	New South Wales (Australia)
Background	Giorgio Armani (Principal) contracted Valmont Interiors (Contractor) for the construction and fit-out works in one of its stores, located at Sydney Kingsford Smith Airport. Giorgio Armani held the responsibility of Joinery Supply (via another contract with a third party – Sun Bright Construction Co Ltd) Given supply delays by Sun Bright, Giorgio Armani directed Valmont Interiors to supply the remaining joinery
Disputes	Valmont provided the balance of the joinery, but Armani refused to proceed with the payment for it on the basis that Valmont had failed to comply with the variation procedure detailed in clause 15 of the contract. Armani contended that Valmont had relinquished or waived the entitlement to any potential claim. Valmont had previously been paid for other variations without complying with the requirements of clause 15 of the contract.
Court Decision	Even though Valmont had not complied with contract requirements and timelines detailed in the agreement, the court decided that Valmont was entitled to the payment based on the estoppel principle (see below)
Time bar enforceability?	NO

Extracts from Court Decision:

“These emails constituted further encouragement to Valmont that additional payments in respect of the joinery work would be made. These encouragements came at a time when the new premises were open but further work was still being done. If Armani is correct in its submission that a large part at least of the claimed joinery costs were incurred after 11 April 2016, they were incurred in a context where, as the string of emails on 17 and 18 May 2016 show, Armani was positively encouraging Valmont to complete outstanding works in relation to essential joinery which Armani knew that it had originally undertaken to procure from Sun Bright.“

(Paragraph 104)

Time Bars – Civil Law vs Common Law

The treatment of time bars differs between civil law and common law jurisdictions. Overall, civil law systems generally emphasize strict adherence to contractual obligations, making time bars more enforceable (this might vary on each jurisdiction).

In contrast, common law systems may subject time bar clauses to more rigorous scrutiny. Understanding a contract’s jurisdiction’s legal landscape and precedents is vital for drafting adequate time bar provisions.

FAQ and Related Questions

What are Conditions Precedent?

Conditions precedents are specific requirements or actions that must be fulfilled or taken before certain contractual obligations come into effect.

For example, a Contractor must satisfy all conditions precedents, such as notifying a client as soon as it becomes aware of a potential issue to ensure its entitlement to seek cost and/or time recovery.

What is a Waiver?

A waiver is the intentional relinquishment of a legal right or claim under a contract.

In a construction agreement, a waiver might occur:

Intentionally –> when one party explicitly and formally gives up the right to enforce a specific provision; or
Unintentionally –> when one of the parties fails to enforce their rights, which might be understood as an acceptance of f a lack of compliance (deviation) with a specific contract requirement.

What is an Estoppel?

Estoppel is a legal principle that prevents a party from asserting a claim or right that contradicts their previous actions or statements.

In construction contracts, estoppel might arise if one party leads another to believe that certain contractual requirements will not be strictly enforced, only to later rely on those requirements.

For example, imagine a scenario where a project owner consistently accepts and approves work progress from a contractor even though it occasionally exceeds the agreed-upon timelines stated in the contract.

Over time, the owner’s actions create a belief that strict adherence to the timeline is not a significant concern.

Later, when a delay occurs, the owner seeks to enforce the original timeline, causing financial strain for the contractor.

In this case, the contractor might assert an estoppel defence, arguing that the owner’s consistent behaviour led them to believe that time constraints were flexible. The principle of estoppel prevents the owner from enforcing the original timeline, as their prior actions contradicted their current views.

Conclusion

Navigating the complexities of time bars in construction contracts demands a clear understanding of the circumstances and context around the agreement.

As this article demonstrates, several aspects, such as jurisdiction and governing laws, might influence its enforceability.

Ultimately, both Principals/Owners and Contractors should use their best endeavours to comply with contract requirements and closely pay attention to estoppel and waiver principles to preserve and protect their respective rights.