Construction projects are known for their evolving nature and complex dynamics. Modern construction contracts have incorporated different mechanisms to safeguard Contractors and Owners and protect their interests and rights when issues arise, such as early warning notices and time bars. But what is a time bar?
Time bar clauses are contract provisions that set specific timelines for one party to notify the other concerning specific contractual issues or potential disputes, such as a variation claim or an extension of time claim.
In this article, we will explore it further, as well as its importance, enforceability, and other relevant topics, such as conditions and precedents for a claim – keep reading.
What is a Time Bar Clause in a Construction Contract?
A time bar clause is a contractual mechanism that dictates the timeframes within which a party must submit a claim or give notice to be entitled to any relief – i.e. cost and time – related to issues around a construction contract.
Albeit there is a general understanding that applying them might be too harsh, especially when dealing with on small contractors, there have been some cases in which claimants have been barred from proceeding with their claims, such as:
- CMA Contracting Pty Ltd Vs John Holland Pty Ltd in Australia; and
- Sitol Vs Fingolds in the UK;
These clauses were initially designed to ensure that contractual issues were prematurely dealt with and instigate early risk management. However, their use has evolved, and Principals have frequently leveraged these mechanisms to “ring-fence” their commercial exposure, which has caused heated discussions around its enforceability.
Are Time Bars enforceable?
The enforceability of a time bar clause will depend on the law governing the construction contract and the terms of the agreement.
For example, the legal aspects within common law (i.e. US, UK, Australia, Singapore) may drastically vary from the approach taken into civil law (i.e. UAE, Oman, France, Germany, Spain, Portugal, Brazil).
This interesting study published by EL NEMR (2017) from the School of Built Environment of the University of Salford (UK) details a comprehensive comparative analysis of time bar enforceability between the Egyptian Civil Code and the English Law.
As already in the previous, there have been many precedents where court rulings have barred claimants from proceeding with their claims and considering these time restrictions as a condition precedent.
On the other hand, there have also been cases in which courts have found timelines set in the agreement as directive only and considered terms unfair.
Ultimately, failure to adhere to time bar clauses might significantly decrease the chances of a claimant’s success in seeking relief through pre-established contract mechanisms.
Why Time Bar Clauses are Important in Construction Contracts?
These mechanisms offer several advantages contributing to smoother project execution, efficient dispute resolution, and overall risk management, such as:
| Advantages | Rationale |
|---|---|
| Timely Dispute Resolution | Time bar clauses prompt early communication and timely notification of disputes, enabling faster conflict resolution. |
| Efficient Claims Handling | Parties are encouraged to promptly submit claims or notices, streamlining the claims process and gathering evidence. |
| Risk Management | Time bars enhance risk management by providing clarity on potential liabilities and promoting fair risk distribution. |
Time Bar Clauses - Contract Management Challenges
However, the use of time bar clauses also come with some challenges, as follows:
| Challenges | Rationale |
|---|---|
| Rigid Deadlines and Risk of Forfeiture | Time bar clauses establish strict timeframes within which parties must submit claims or notices, potentially leading entitlement issues for non-compliance. |
| Ambiguity in Application and Enforcement | Ambiguities in the language or interpretation of time bar clauses may result in unintentional waivers of rights, while complex legal interpretations could lead to disputes over enforceability, prolonging legal proceedings and increasing costs. |
| Impact on Early Warning Notices (see note below) | Time bar clauses might discourage timely submission of early warning notices, hindering proactive risk management as contractors fear potential claims or disputes within narrow timelines, leading to withheld information. |
Read more about Early Warning Notices in this article (click here)
Time Bar Clause - Examples
Below are some examples of time bar clauses found in construction contracts.
FIDIC - Clause 20.1
The Clause 20.1 of FIDIC Contracts (1999) states that:
“If the contractor fails to give notice of a claim within 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.” (FIDIC Clause 20.1)
An interesting case around this provision in the UK is Multiplex Constructions v Honeywell Control Systems, where the court found Honeywell not entitled to claim an extension of time given non-compliance with the timeframes set in the agreement.
“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” (p. 103 – Multiplex Constructions v Honeywell Control Systems)
NEC3 and NEC4 - Clause 61.3
Clause 61 of NEC3 and NEC4 Contracts deals with notification requirements in relation to compensation events.
More specifically, clause 61.3 states the contractor’s obligation to notify principals of any compensation event within eight weeks of becoming aware of the event, and contractor will be barred if not doing so.
FAQ
What is a Condition Precedent?
Conditions precedent are specific requirements or actions that must be fulfilled or taken before certain contractual obligations come into effect.
In the context of a time bar clause, parties may need to satisfy conditions precedent, such as providing written notice within a specified period, for their claim to be valid.
What is a Moratorium?
A moratorium refers to a temporary suspension or delay of certain contractual obligations or legal actions. In the context of construction contracts, parties may agree to a moratorium on enforcing time bar clauses during particular circumstances, such as force majeure events.
Conclusion
In conclusion, time bar clauses play a crucial role in modern construction contracts, setting specific timeframes for parties to submit claims or give notice of potential disputes.
While they were initially designed to encourage early risk management and swift resolution of contractual issues, their application has sparked debates over their enforceability.
The effectiveness of time bar clauses largely depends on the governing law and the terms of the contract. Therefore, parties must carefully adhere to these provisions to safeguard their rights and interests during the course of construction projects.
Need Help?
Do not hesitate to contact us for specialised advice in construction contracts (click here)
