The ‘notices’ provision
by Dennis Brand
Many of you will deal with industry-standard form contracts, while others will deal with company standard or even bespoke forms; whatever the form of contract, the notices provision contained in the conditions of contract is probably one of the least-read provisions. The notices provision does not attract the same degree of interest as, say, the variation or change order provisions, or provisions which deal with certificates of completion, suspension or even termination, but in each case a notice is required.
Let me be clear: a notice provision in a contract is not the same as where a contract includes the term ‘notify’; a requirement that one party must inform the other of a thing or matter. A notice provision is where the contract includes the term ‘shall give notice’ (or something similar), which usually requires a formal written notice to be issued by one party and delivered to the other.
For example, a ‘Notice to Proceed’ is a formal notice issued under many forms of industry-standard contracts. The issue of a ‘Notice to Proceed’ is the confirmation that the contractor or supplier of a service is to start work. To proceed on the basis of simply being notified, which could be a phonecall or even a text message, without a formal notice in writing, would be risky in the extreme for the contractor or supplier.
From the employer’s side, such a notice is equally important because, by issuing the formal ‘Notice to Proceed’, he knows that, regardless of what discussions or communications he may have had with the contractor or supplier, they will only start work, and thereby incur cost to his account, once the employer has issued the ‘Notice to Proceed’, and not before.
When one is involved in the preparation of a contract and the subject of the notices provision is to be addressed, there are really six points or matters to be considered:
1. How many days?
The first thing is that the period of notice should be expressed in days rather than weeks. Notice periods will differ depending upon the reason for the notice. When determining the number of days, the period should be reasonable, not too long and not too short, and must be workable. Many contracts contain provisions that, where a contractor seeks additional money or a variation, the contractor must give notice within a limited number of days following the event which resulted in the request. Some contracts go further and provide that, if the notice is not given within the specified time, the contractor loses his right to claim a variation. You may think this pretty harsh, and indeed it is not one that courts or arbitrators like to enforce, but if the period for the notice is reasonable, the contractor should not have any difficulty in complying with it.
2. In what form?
There is no standard form for a notice. The important thing to bear in mind is that it is a standalone document which advises the other party of something or requires the other party to do something. It should contain all the relevant information, including reference to the provision of the contract and relevant clause, so the recipient can be under no misapprehension as to the purpose of the notice and what is required. For example, FIDIC requires that, in the event of a dispute which is referred to the engineer for a decision, the notice must provide a description of the dispute and confirmation that a decision of the engineer under the relevant clause is required. Failure to give that information will likely mean that the notice is considered invalid.
3. Who should sign them?
Due to the importance of a contractual notice, it should only be signed by someone in authority. Rarely will the contract state who should sign the notice. Therefore it should be signed by the same person who signs all other contract correspondence, such as the contractor’s or employer’s nominated representative.
4. To whom should they be sent?
Due to the importance of such a notice, it is important it is brought to the attention of the senior management of the contractor or employer. However, for those large organisations where the head office might be in another country, a notice sent to the head office will not be acted upon at site level until it has been received and site management informed. In order to avoid attendant problems, it is not unusual to see a notice provision which requires the notice to be addressed to a named individual in the head office, with a copy sent to the project manager on-site. I have seen this put to good effect where the employer, who was not getting the required action from the site, issuing a notice, which required the original to be sent to the head office.
5. How should they be delivered?
Usually a notice provision provides for notices to be delivered by one of three methods: by hand, by mail or by fax. To deliver a notice by hand means exactly what is says; it also includes delivery by courier. To include a provision allowing the delivery of a notice by mail, consideration must be given to the delivery point, which could be another country. Often a number of days are added in case of delay, with an overall number of days agreed upon when delivery will be considered as having taken place. For delivery by fax, the sender’s fax report confirms the delivery.
6. Is an acknowledgement needed?
In my view never … that simply invites problems!
CW