Notice Clauses in International EPC Contracts

1.     Notice clauses are important clauses in construction contracts. These clauses require parties to contracts to notify each other in certain circumstances to make them aware of any problems which might come up. Unlike most of the other contract terms, the notices provision is rarely negotiated, and it isn’t intended to benefit one party or the other. The purpose is to reduce possible disputes by clearly defining what constitutes legally-binding notice.

2.    Notices are a contractual requirement and merely facilitate positive communication between the parties. If you make the other party aware of a potential issue, they may be able to devise a mitigation measure(s) which removes or limits the impact of an issue; after all, forewarned is forearmed. Notices also serve a softer purpose to encourage effective communication between parties. They give the parties a chance to raise issues formally and prompt a response that would otherwise have been avoided or overlooked by the other party.

3.    In many cases, giving notice is a condition precedent for making a valid claim. This will depend on the type of claim and the language of the notice clause. Even if ‘Condition Precedent’ words are not used in the clause, it can still have this effect. Failing to give notice required by the contract may give the other party an opportunity to challenge the notice of claim. This might prevent an otherwise valid claim from being successful.

4.    Understanding the requirements of contract's notice provision before problems arise is vital to preserving rights of parties for unforeseen impacts that may affect your work. While it may seem simple, many contractors fail to comply with contractual notice requirements or to provide any notice of potential claims when they arise, putting recovery for valid claims at risk.

5.    A typical notice clause will state: (1) Language of communication; (2) how the notice should be issued, be it by email, post, or fax. Accordingly, the email address, postal address or fax number should be provided and when the notice is deemed to be received; (3) who is to be the recipient and address; (4) who has the authority to issue Notice and address (5) the purpose of issuing Notice (6) Time limit for taking action in response to the notice (7) Action in case of failure to do so.

6.    The party drafting the notice should also consider including the following details: (1) Relevant Clause (2) Clear description of the event (3) Effects of the event on performance of the contract (4) Mitigation measures required to be taken by the parties (5) Whether meeting of parties required to resolve the issue.(6) The party issuing notice should be aware of condition precedent and should give the best information available at the time of issue of Notice.

7.     It is important that the notice is “effective upon delivery,” and that delivery must be evidenced in some provable manner. When communications are sent between parties, you don’t want the other party to be able to claim that it was not received.

8.    It is therefore important to keep proof of delivery or non-delivery. If there is proof of non-delivery such as the return to the sender of a recorded delivery letter, this will override the deemed delivery. The agents where authorised to give and receive notices on behalf of the party may not have same authority.

9.    A notices clause sets up agreed methods by which the other party can be served under a contract. If that method has been adopted, it doesn’t matter if the notice actually comes to the attention of the party or not.

10. However, unless a particular form of notice or method of delivery are explicitly excluded in the contract or otherwise not permitted by law, it is possible to serve a valid notice by a contractually unspecified means as long as it fulfils its purpose and it is clear to the receiving party that it is given as a contractual notice. In case, the contract clearly express exclusion of certain method of serving notice and the parties chose to adhere to the provision, use of excluded method of serving notice (may be practically effective) may not be held valid by the courts. The courts take a pragmatic approach to considering the validity of notices served by alternative means.

11. Provision of ‘Notice’ in FIDIC Conditions of Contract for Design Build and operate Projects

a.     The term ‘Notice’ is defined “Notice is a written paper original or email sent original are considered the right forms of Notice. A notice shall have effect when it is received (or deemed to have been received) at the recipient’s current address. An electronically transmitted Notice or other communication is deemed to have been received on the day after transmission, provided no non-delivery notification was received by the sender”.

b.    All Notices, and all other types of communication as referred to above, shall not be unreasonably withheld or delayed.

c.     When a Notice or Notice of Dissatisfaction or certificate is issued by a Party or the Engineer, the paper and/or electronic original shall be sent to the intended recipient and a copy shall be sent to the Engineer or the other Party, as the case may be. All other communications shall be copied to the Parties and/or the Engineer as stated under these Conditions or elsewhere in the Contract

d.    Notices can be classified in five categories considering the issuer and the recipient of the Notice. A. Notice issued by any party to other party B. Notice issued by Employer or the Engineer to the Contractor C. Notice issued by the contractor to the Employer or the Engineer D. Notice issued by the Engineer to the Contractor and the Employer. E. Notice issued by either party to the Engineer

      A. Notice issued by any party to the other party

This category is applicable in three situations, 1. Dissatisfaction with the Engineer’s determination or with the decision of DAAB, This is called Notice of Dissatisfaction (NoD) 2. In case of infringement of Intellectual and Industrial Rights 3. In case of Exceptional events.

B. Notice issued by Employer or the Engineer to the Contractor.

The GCC provides several instances when Employer or the Engineer requires to give notice to the contractor, such as:

1) Notice for appointment or replacement of “Employer’s Personnel” means the Engineer, the Engineer’s Representative, the assistants and all other staff, labour and other employees of the Engineer and of the Employer engaged in fulfilling the Employer’s obligations from the Employer or the Engineer to the Contractor.

2) For agreeing or objecting to the appointment of the Contractor’s Representative by giving a Notice to the Contractor objecting to the proposed person or replacement.

3) Before issuing a Payment Certificate which includes an amount payable to a nominated Subcontractor, the Engineer shall give a Notice to the Contractor stating the amount paid directly to the nominated Subcontractor by the Employer and, in the next IPC after this Notice, shall include this amount as a deduction.

4) For an error or defect (whether of a technical nature or otherwise) in a document which was prepared by (or on behalf of) the Contractor for use in the execution of the Works.

5) ‘Notice of No-objection’ when the Engineer has no objection to the Contractor’s Documents, or works submitted or proposed or done by the Contractor to be used for the Works.

6) The Engineer shall Review the initial programme and each revised programme submitted by the Contractor and may give a Notice.

7) If the Employer’s ability to pay the part of the Contract Price remaining to be paid has changed due to financial situation.

8) For the change in original survey control points, lines and levels of reference (the “items of reference”).

9) Notice to Correct: A Notice to the Contractor requiring the Contractor to make good the failure and to remedy it within a specified time.

10) If the consent to the appointment of contractor’s representative is withheld or subsequently revoked, or if the appointed person fails to act as Contractor’s Representative.

11) A Notice to the Contractor stating the amount paid directly to the nominated Subcontractor by the Employer.

12) If, at any time actual progress is too slow to complete the Works or a Section (if any) within the relevant Time for Completion.

13) The Engineer may Review the Quality Management System and may give a Notice to the Contractor stating the extent to which it does not comply with the Contract.

14) If, as a result of an examination a work is found to be not in accordance with the Contract, the Engineer shall give a Notice to the Contractor describing the item that has been found to be defective.

15) Engineer may instruct the Contractor to repair or remedy or remove from the Site and replace any Plant or Materials which are not in accordance with the Contract.

16) A Notice from the Engineer to proceed with the suspended work at the time stated in this Notice (if not stated, immediately after the Contractor receives this Notice).

17) Tests on completion: The Engineer may Review the proposed programme for Tests on Completion and may give a Notice to the Contractor stating the extent to which it does not comply with the Contract. The Engineer shall review certified report of the results of these tests and may give a Notice to the Contractor stating the extent to which the results of the tests do not comply with the Contract.

18) Delayed Completion Tests: If the Tests on Completion are unduly delayed by the Contractor, the Engineer may by giving a Notice to the Contractor require the Contractor to carry out the tests within 21 days after receiving the Notice.

19) Defects during Defect Notification Period: If a defect appears or damage occurs during the relevant DNP, a Notice shall be given to the Contractor accordingly, by (or on behalf of) the Employer.

20) Failure to Remedy Defects: If the remedying of any defect or damage is unduly delayed by the Contractor, a notice shall be given to fix a date to remedy the defect or damage.

21) Adjustments for changes in laws: If any adjustment to the execution of the Works becomes necessary as a result of any change in Laws the Engineer shall promptly give a Notice to the Contractor to instruct a Variation.

22) Variation by Instruction and variation for proposal:  The Engineer may instruct a Variation by giving a Notice (describing the required change and stating any requirements for the recording of Costs) to the Contractor.

23) The Employer shall give a notice with the intention to terminate the contract for the failures constituting breach of the contract by the contractor without reasonable excuse.

24) The Employer shall be entitled to terminate the Contract at any time for the Employer’s convenience, by giving a Notice of such termination to the Contractor.

C. Notice issued by the contractor to the Employer/ Engineer.

Progress Report is not Notice: Each progress report shall include copies of quality management documents, inspection reports, test results, and compliance verification documentation (including certificates of Materials). However, nothing stated in any progress report shall constitute a Notice under a Sub-Clause of these Conditions.

1) “Contractor’s Notice” means the Notice which shall state that the relevant Contractor’s Document is considered by the Contractor to be ready for Review and for use, and that it complies with the Employer’s Requirements and these Conditions, or the extent to which it does not do so.

2) Delegation of Power by Contractor’s Representative: The Contractor’s Representative through a notice to the Engineer may delegate any powers, functions and authority to any suitably competent and experienced person and may at any time revoke the delegation.

3) Ambiguity or discrepancy in the documents: If the contractor finds an ambiguity or discrepancy in the documents, he will promptly give a Notice to the Engineer, describing the ambiguity or discrepancy.

 4) Errors in the Employer’s Requirements: If the Contractor finds an error in the Employer’s Requirements, the Contractor shall give a Notice to the Engineer within the period stated in the Contract Data (if not stated, 42 days) calculated from the Commencement Date.

5) Employer’s Financial Arrangements: If the Contractor receives an instruction to execute a Variation with a price greater than ten percent (10%) of the Accepted Contract Amount, or the accumulated total of Variations exceeds thirty percent (30%) of the Accepted Contract Amount or does not receive payment or becomes aware of a material change in the Employer’s financial arrangements, the Contractor may request and the Employer shall, within 28 days after receiving this request, provide reasonable evidence that financial arrangements have been made and are being maintained which will enable the Employer to pay the part of the Contract Price remaining to be paid at that time (as estimated by the Engineer).

6) Engineer’s Instructions: If an instruction of the Engineer’s Representative states that it constitutes a Variation by Instruction or it does not comply with applicable Laws or will reduce the safety of the Works or is technically impossible, the Contractor shall immediately, and before commencing any work related to the instruction, give a Notice to the Engineer with reasons.

7) Sub Contractors’ work: The Contractor shall give a Notice to the Engineer not less than 28 days before the intended date of the commencement of each Subcontractor’s work, and of the commencement of such work on the Site.

8) Objection to nomination of sub contractor: The Contractor shall not be under any obligation to employ a nominated Subcontractor whom the Engineer instructs and against whom the Contractor raises reasonable objection by giving a Notice to the Engineer, with detailed supporting particulars, no later than 14 days after receiving the Engineer’s instruction.

9) Quality Management System: If the Contractor is required by the Contractor’s quality assurance certification to be subject to external audit, the Contractor shall immediately give a Notice to the Engineer describing any failing(s) identified in any external audit.

10) Unforeseeable Physical Conditions: After discovery of unforeseeable physical conditions, the Contractor shall give a Notice to the Engineer as soon as practicable, describing the physical conditions, setting out reasons why the conditions are unforeseeable and their adverse effect on the progress and/or increase the Cost of the execution of the Works.

11) Transport of goods: The Contractor shall give a Notice to the Engineer not less than 21 days before the date on which any Plant, or a major item of other Goods (as specified in the Employer’s Requirements), will be delivered to the Site.

12) Archaeological and Geological Findings: The Contractor shall give a Notice to the Engineer in good time to give the Engineer opportunity to promptly inspect and/or investigate the any archaeological or geological finding before it is disturbed. This Notice shall describe the finding and the Engineer shall issue instructions for dealing with it.

13) Technical Standards and Regulations: If changed or new applicable standards come into force in the Country after the Base Date, the Contractor shall promptly give a Notice to the Engineer and (if appropriate or requested by the Engineer) submit proposals for compliance.

14) Inspection: The Contractor shall give a Notice to the Engineer whenever any Materials, Plant or work is ready for inspection, and before it is to be covered up, put out of sight, or packaged for storage or transport.

15) Testing by the Contractor: The Contractor shall give a Notice to the Engineer, stating the time and place for the specified testing of any Plant, Materials and other parts of the Works.

16) Prolonged Suspension: If the suspension   has continued for more than 84 days, the Contractor may give a Notice to the Engineer requesting permission to proceed and the Parties may agree the EOT and/or Cost Plus Profit arising from the total period of suspension; and if the Parties fail to reach agreement after giving a second Notice to the Engineer, treat the suspension as an omission of the affected part of the Works and the Contractor may give a Notice of termination.

17) Notice for commencing Performance tests: During trial operation, when the Works or Section (as the case may be) are operating under stable conditions, the Contractor shall give a Notice to the Engineer that they are ready for any other Tests on Completion, including performance tests to demonstrate whether the Works or Section comply with the performance criteria specified in the Employer’s Requirements and with the Schedule of Performance Guarantees.

 18) Taking Over the Works and Sections: The Contractor may apply for a Taking-Over Certificate by giving a Notice to the Engineer not more than 14 days before the Works will, in the Contractor’s opinion, be complete and ready for taking over.

19) Interference with Tests on Completion: If the Contractor is prevented, for more than 14 days from carrying out the Tests on Completion , the Contractor shall give a Notice to the Engineer describing such prevention.

20) Cost of remedying defects: All work for remedying defects shall be executed at the risk and cost of the Contractor. If the Contractor considers that the work is attributable to any other cause, the Contractor shall promptly give a Notice to the Engineer.

21) Remedying of Defective Work off Site: If, during the DNP, the Contractor considers that any defect or damage in any Plant cannot be remedied expeditiously on the Site the Contractor shall give a Notice, with reasons, to the Employer requesting consent to remove the defective or damaged Plant off the Site for the purposes of repair. This Notice shall clearly identify each item of defective or damaged Plant, and shall give details.

22) Further tests after Remedying Defects: Within 7 days of completion of the work of remedying of any defect or damage, the Contractor shall give a Notice to the Engineer describing the remedied Works, Section, Part and/or Plant and the proposed repeated tests.

23) Right of Access after taking over: Whenever the Contractor intends to access any part of the Works or such records during the relevant Defect Notification Period the Contractor shall request access by giving a Notice to the Employer, describing the parts of the Works and/or records to be accessed, the reasons for such access, and the Contractor’s preferred date for access.

24) Right to vary: The Contractor shall be bound by each Variation instructed and shall execute the Variation with due expedition and without delay, unless the Contractor promptly gives a Notice to the Engineer stating with detailed supporting particulars the reasons not to comply.

25) Suspension and Termination by Contractor: The contractor may after giving notice to the Employer suspend the work unless and until the Employer remedies the default.

26) Liability for care of the Works: For the loss or damage to the Works, Goods or Contractor’s Documents caused by exceptional events or defaults/infringement of the Employer. the Contractor shall promptly give a Notice to the Engineer. Thereafter, the Contractor shall rectify any such loss and/or damage that may arise to the extent instructed by the Engineer and seek payment under Variation by Instruction.

D. Notice issued by the Engineer to the Contractor and the Employer.

1) Engineer’s appointment/replacement: Where the Engineer is a legal entity, the Engineer shall give a Notice to the Parties of the natural person (or any replacement) appointed and authorised to act on its behalf. The authority shall not take effect until this Notice has been received by both Parties. The Engineer shall similarly give a Notice of any revocation of such authority.

2) Appointment/Absence/Replacement of Engineer’s Representative: The Engineer may appoint an Engineer’s Representative and delegate to him/her the authority necessary to act on the Engineer’s behalf at the Site.

3) Delegation by Engineer to Assistant: The Engineer may from time to time assign duties and delegate authority to assistants, and may also revoke such assignment or delegation, by giving a Notice to the Parties.

4.1) If agreement is achieved within the time limit for agreement, the Engineer shall give a Notice to both Parties of the agreement, which agreement shall be signed by both Parties. This Notice shall state that it is a “Notice of the Parties’ Agreement” and shall include a copy of the agreement.

4.2) If, no agreement is achieved within the time limit for agreement or both Parties advise the Engineer that no agreement can be achieved within this time limit, whichever is the earlier, the Engineer shall give a Notice to the Parties accordingly.

4.3) Engineer’s Determination: The Engineer shall make a fair determination of the matter or Claim, in accordance with the Contract, taking due regard of all relevant circumstances and he will give a Notice to both Parties of his/her determination. This Notice shall state that it is a “Notice of the Engineer’s Determination”, and shall describe the determination in detail with reasons and detailed supporting particulars.

4.4)Notice of Corrected agreement or Determination:  If, within 14 days after giving or receiving the Engineer’s Notice of agreement or determination, any error of a typographical or clerical or arithmetical nature is found by the Engineer, the Engineer shall within 7 days of finding the error, or receiving a Notice give a Notice to both Parties of the corrected agreement or determination. After receiving a fully detailed Claim, the Engineer shall proceed to agree or determine the additional payment and the EOT and that the notice of claim is valid or not.

5) Engineer’s Notice to claiming Party: If the Engineer considers that the claiming Party has failed to give the Notice of Claim the Engineer shall give a Notice to the claiming Party accordingly with reasons.

E. Notice issued by either party to the Engineer.

1) Claims : if either Party considers that he/she is entitled to another entitlement or relief against the other Party and other party disagrees with requested entitlement, then claiming party may give notice to the Engineer as soon as practicable after the claiming party becomes aware of the disagreement and shall include details of the claim as well as that of disagreement.

2) Notice of Claim: The claiming Party shall give a Notice to the Engineer, describing the event or circumstance giving rise to the cost, loss, delay or extension of defect notification period for which the Claim is made as soon as practicable. Within the prescribed period the claiming Party shall submit to the Engineer a fully detailed Claim.

12. Notice Provision in CPWD General Conditions of Contracts for EPC Projects

The CPWD GCC for EPC Projects provides for provision regarding Notices in following situations:

A.   Notice issued by any party to the other party

a)    Closure of the work if not started: In case, the work cannot be started due to reasons not within the control of the contractor within 1/8th of the stipulated time for completion of work or one month whichever is higher, either party may close the contract by giving notice to the other party stating the reasons. This clause is not applicable for any breach of the contract by either party.

b)    Notice for appointment of arbitrator: The party invoking arbitration shall give a list of disputes with amounts claimed, if any, in respect of each such dispute along with the notice for appointment of arbitrator and giving reference to the decision of the Additional DG/ Special DG on the finding / recommendation of Dispute Resolution Committee.

B.   Notice issued by Employer or the Engineer to the Contractor.

In case, the contractor does not achieve a particular milestone mentioned in the contract, the amount shown against that milestone shall be withheld, to be adjusted against the compensation levied; automatically without any notice to the contractor.

a)    Claim under Performance Guarantee: The Engineer-in-Charge shall give a Notice to the Contractor to make a claim under the performance guarantee in the event of failure by the contractor to pay any amount due, either as agreed by the contractor or determined under any of the Clauses/Conditions of the agreement.

b)    Determination of the Contract: The Engineer-in-Charge may, by notice in writing absolutely determine the contract in case of failure to rectify defects, unreasonably suspending the work, failure to complete the work, breach of contract or unauthorizedly subletting the work to the Contractor.

c)     Taking possession of T&P and Stores of Contractor: In the event of the determination of the Contract by the Engineer-in-Charge, he may, after giving a notice in writing to the contractor, take possession of or use as on hire all or any tools, plant, materials and stores, at current market rates or sell them by auction or private sale on account of the contractor and his risk in all respects.

d)    Reduction in scope of the work: If at any time after acceptance of the tender or during the progress of work, the purpose or object for which the work is being done changes due to any supervening cause and as a result of which the work has to be abandoned or reduced in scope the Engineer-in-Charge shall give notice in writing to that effect to the contractor stating the decision as well as the cause for such decision and the contractor shall act accordingly in the matter.

e)     Access to Engineer in Charge for inspection: The contractor shall, at all times, at which reasonable notice of the visit has been given to the contractor, be present to receive instructions.

f)     Damage done to the work or adjoining property: If the contractor or his people shall damage the work done or the adjoining properties or if any defect, appear in the work within twenty four months after a Completion Certificate given by the Engineer in- Charge; the contractor shall upon receipt of a notice in writing from Engineer In Charge make the same good at his own expense or in default the Engineer-in-Charge cause the same to be made good by other workmen and deduct the expense from any sums that may be due or at any time thereafter may become due to the contractor.

g)    Compliance with Labour Regulations: Should it appear to the Engineer-in-Charge that the contractor(s) is not complying with the provisions of the Labour Regulations for the protection of health and sanitary arrangements for work-people employed by the contractor(s) and huts, the Engineer-in-Charge shall give notice in writing to the contractor(s) requiring that the said Rules be complied with and the amenities prescribed therein be provided to the work-people within a reasonable time to be specified in the notice.

h)    Deployment of certified tradesman: The contractor shall, at all stages of work, deploy at least 20% of the skilled/semi skilled tradesmen certified by the reputed and recognized Institute managed by State/Central Government. If the tradesmen are found to have inadequate skill to execute the work of respective trade, the contractor shall substitute such tradesmen within two days of written notice from Engineer-in- Charge.

i)      Safety, quality and soundness of the buildings: The contractor shall be responsible for safety, quality and soundness of the buildings including structural elements beyond maintenance period. The contractor shall have obligation to rectify such defects minimum up to 5 (five) years from the date of completion of work. The defects have to be rectified within a reasonable time not exceeding forty five days after issue of notice by Engineer- in- Charge.

j)      Transgression by the Contractor: If the Bidder(s)/Contractor(s), either before award or during execution of Contract has committed a transgression to put his reliability or credibility in question, the Principal/Owner after giving 14 days notice to the contractor shall have powers to disqualify the Bidder(s)/Contractor(s) from the Tender process or terminate/determine the Contract, if already executed or exclude the Bidder/Contractor from future contract award processes.

k)    Occupation of Completed Building: If the building constructed by the Contractor though completed is occupied illegally, then the Engineer-in-Charge shall have the option to refuse to accept the said building/buildings in that position. The Superintending Engineer/ Chief Engineer, through a notice, may require the contractor to remove the illegal occupation any time on or before construction and delivery.

C. Notice issued by the contractor to the Employer/ Engineer.

a)    Work delayed due to Force Majeure: If the work(s) be delayed by force majeure or the like events , in the reasoned opinion of the Engineer-in- Charge is beyond the Contractor's control, then the Contractor shall give notice thereof in writing to the Engineer-in-Charge but shall nevertheless use constantly his best endeavours to prevent or make good the delay and shall do all that may be reasonably required to the satisfaction of the Engineer- in-Charge to proceed with the works.

b)    Measurements before covering up the items: The contractor shall give not less than seven days' notice to the Engineer-in-Charge of the work before covering up or otherwise placing beyond the reach of checking the measurement of any work.

c)     Completion of Work: Within ten days of the completion of the work, the contractor shall give notice of such completion to the Engineer-in-Charge and within thirty days of the receipt of such notice, the Engineer-in-Charge shall inspect the work and if there is no defect in the work, shall furnish the contractor with a final certificate of completion, otherwise a provisional certificate of physical completion indicating defects (a) to be rectified by the contractor.

d)    Price escalation: The contractor shall, within a reasonable time of his becoming aware of any alteration in the price of any such materials and/or wages of labour, give notice thereof to the Engineer- in- Charge stating that the same is given pursuant to this condition together with all information relating thereto which he may be in position to supply.

e)     Suspension of Work: If the works or part thereof is suspended on the orders of the Engineer-in-Charge for more than three months at a time, the contractor may after receipt of such order serve a written notice on the Engineer-in-Charge requiring permission to proceed with the work or part thereof in regard to which progress has been suspended and if such permission is not granted within that time, the contractor, if he intends to treat the suspension, where it affects only a part of the works as an omission of such part by Government or where it affects whole of the works, as an abandonment of the works by Government, shall within ten days of expiry of such period of 15 days give notice in writing of his intention to the Engineer-in-Charge. 

f)     Change in Law/Taxes: The contractor shall, within a period of 30 days of the imposition of any such further tax or levy or cess, or variation or repeal of such tax or levy or cess give a written notice thereof to the Engineer-in-charge that the same is given pursuant to this condition, together with all necessary information relating thereto.

13. Engineering and Construction Contract NEC 3 for the appointment of a contractor for engineering and construction work, including any level of design responsibility

This document provides following Notice/Notification clauses:

Communication: Each  instruction, certificate, submission, proposal, record, acceptance, notification, reply and other communication written in the language of contract, which the contract requires is communicated in a form which can be read, copied and recorded. A communication has effect when it is received at the last address notified by the recipient for receiving communications or, if none is notified, at the address of the recipient stated in the Contract Data. A notification is communicated separately from other communications. The notification should be replied within a period of reply, which can be extended if mutually agreed between the Project Manager and the contractor and duly notified so.

A.   Notice issued by any party to the other party

1)     Early Warning System:

a.     The Contractor and the Project Manager give an early warning by notifying the other as soon as either becomes aware of any matter which could  increase the total of the Prices, could delay Completion, delay meeting a Key Date or impair the performance of the works in use.

b.     The Contractor may give an early warning by notifying the Project Manager of any other matter which could increase his total cost. The Project Manager enters early warning matters in the Risk Register. Early warning of a matter for which a compensation event has previously been notified is not required.

2)    Ambiguities between documents: The Project Manager or the Contractor notifies the other as soon as either becomes aware of an ambiguity or inconsistency in or between the documents which are part of this contract. The Project Manager gives an instruction resolving the ambiguity or inconsistency.

3)    Tests and Inspections: The Contractor and the Supervisor each notifies the other of each of his tests and inspections before it starts and afterwards notifies the other of its results. The Contractor notifies the Supervisor in time for a test or inspection to be arranged and done before doing work which would obstruct the test or inspection. The Supervisor may watch any test done by the Contractor.

4)    Termination of Contract: If either Party wishes to terminate the Contractor’s obligation to Provide the Works he notifies the Project Manager and the other Party giving details of his reason for terminating. The Project Manager issues a termination certificate to both Parties promptly if the reason complies with this contract.

5)    Pay Less Notice: If either Party intends to pay less than the notified sum, he notifies the other Party not later than seven days (the prescribed period) before the final date for payment by stating the amount considered to be due and the basis on which that sum is calculated. A Party does not withhold payment of an amount due under this contract unless he has notified his intention to pay less than the notified sum as required by this contract. 

6)    Notice of Adjudication: Before a Party refers a dispute to the Adjudicator, he gives a notice of adjudication to the other Party with a brief description of the dispute and the decision which he wishes the Adjudicator to make. If the Adjudicator is named in the Contract Data, the Party sends a copy of the notice of adjudication to the Adjudicator when it is issued. Within three days of the receipt of the notice of adjudication, the Adjudicator notifies the Parties that he is able to decide the dispute in accordance with the contract or that he is unable to decide the dispute and has resigned.

B.   Notice issued by Employer or the Engineer to the Contractor.

1)     Delegation and replacement:

a.      The Project Manager and the Supervisor, after notifying the Contractor, may delegate any of their actions and may cancel any delegation. A reference to an action of the Project Manager or the Supervisor in this contract includes an action by his delegate.

b.     The Employer may replace the Project Manager or the Supervisor after he has notified the Contractor of the name of the replacement.

2)    Programme of Work: Within two weeks of the Contractor submitting a programme to him for acceptance, the Project Manager either accepts the programme or notifies the Contractor of his reasons for not accepting it. A reason for not accepting a programme is that the Contractor’s plans which it shows are not practicable, it does not show the information which this contract requires, it does not represent the Contractor’s plans realistically or it does not comply with the Works information.

3)    Tests and Inspection: The Contractor does not bring to the Working Areas those Plant and Materials which the Works Information states are to be tested or inspected before delivery until the Supervisor has notified the Contractor that they have passed the test or inspection.

4)    Defects:

a.     Until the defects date, the Supervisor may instruct the Contractor to search for a Defect. He gives his reason for the search with his instruction. Searching may include uncovering, dismantling, re-covering and re-erecting work, providing facilities, materials and samples for tests and inspections done by the Supervisor and  doing tests and inspections which the Works information does not require.

b.     Until the defects date, the Supervisor notifies the Contractor of each Defect as soon as he finds it and the Contractor notifies the Supervisor of each Defect as soon as he finds it. The Contractor corrects a Defect whether or not the Supervisor notifies him of it. The Contractor corrects a notified Defect before the end of the defect correction period. The defect correction period begins at Completion for Defects notified before Completion and when the Defect is notified for other Defects. The Supervisor issues the Defects Certificate at the later of the defects date and the end of the last defect correction period. The Employer’s rights in respect of a Defect which the Supervisor has not found or notified are not affected by the issue of the Defects certificate.

c.     If the Contractor is given access in order to correct a notified Defect but he has not corrected it within its defect correction period, the Project Manager assesses the cost to the Employer of having the Defect corrected by other people and the Contractor pays this amount. The Works Information is treated as having been changed to accept the Defect.

d.     If the Contractor is not given access in order to correct a notified Defect before the defects date, the Project Manager assesses the cost to the Contractor of correcting the Defect and the Contractor pays this amount. The Works information is treated as having been changed to accept the Defect.

5)    Compensation Events: For compensation events which arise from the Project Manager or the Supervisor giving an instruction, issuing a certificate, changing an earlier decision or correcting an assumption, the Project Manager notifies the Contractor of the compensation event at the time of that communication. He also instructs the Contractor to submit quotations, unless the event arises from a fault of the Contractor or quotations have already been submitted. The Contractor puts the instruction or changed decision into effect.

6)    Variations:

a.     The Project Manager may instruct the Contractor to submit quotations for a proposed instruction or a proposed changed decision. The Contractor does not put a proposed instruction or a proposed changed decision into effect. If the Project Manager decides that an event notified by the Contractor arises from a fault of the Contractor, has not happened and is not expected to happen, has no effect upon Defined Cost, Completion or meeting a Key Date or is not one of the compensation events stated in this contract, he notifies the Contractor of his decision that the Prices, the Completion Date and the Key Dates are not to be changed. If the Project Manager decides otherwise, he notifies the Contractor accordingly and instructs him to submit quotations. The Project Manager notifies his decision to the Contractor and, if his decision is that the Prices, the Completion Date or the Key Dates are to be changed, instructs him to submit quotations before the end of either one week after the Contractor’s notification or a longer period to which the contractor has agreed.

b.     If the Project Manager decides that the Contractor did not give an early warning of the event which an experienced contractor could have given, he notifies this decision to the Contractor when he instructs him to submit quotations. If the Project Manager decides that the effects of a compensation event are too uncertain to be forecast reasonably, he states assumptions about the event in his instruction to the Contractor to submit quotations. Assessment of the event is based on these assumptions. If any of them is later found to have been wrong, the Project Manager notifies a correction. A compensation event is not notified after the defects date.

c.     Quotations for compensation events comprise proposed changes to the Prices and any delay to the Completion Date and Key Dates assessed by the Contractor. The Contractor submits details of his assessment with each quotation. If the programme for remaining work is altered by the compensation event, the Contractor includes the alterations to the Accepted Programme in his quotation. The Contractor submits quotations within three weeks of being instructed to do so by the Project Manager. The Project Manager replies within two weeks of the submission. His reply is an instruction to submit a revised quotation, an acceptance of a quotation, a notification that a proposed instruction will not be given or a proposed changed decision will not be made or a notification that he will be making his own assessment. The Project Manager extends the time allowed for the Contractor to submit quotations for a compensation event and the Project Manager to reply to a quotation if the Project Manager and the Contractor agree to the extension before the submission or reply is due. The Project Manager notifies the extension that has been agreed to the Contractor.

d.     The Project Manager notifies the Contractor of his assessment of a compensation event and gives him details of it within the period allowed for the Contractor’s submission of his quotation for the same event. This period starts when the need for the Project Manager’s assessment  becomes apparent.

e.     Implementing compensation events: A compensation event is implemented when the  Project  Manager  notifies  his  acceptance  of  the  Contractor’s quotation, the Project Manager notifies the Contractor of his own assessment or a Contractor’s quotation is treated as having been accepted by the Project Manager.

7)    Termination:

a.     The Employer may terminate if the Project Manager has notified that the Contractor has defaulted in one of the following ways and not put the default right within four weeks of the notification. Substantially failed to comply with his obligations. Not provided a bond or guarantee which this contract requires . Appointed a Subcontractor for substantial work before the Project Manager has accepted the Subcontractor.

b.     The Employer may terminate if the Project Manager has notified that the Contractor has defaulted in one of the following ways and not stopped defaulting within four weeks of the notification-Substantially hindered the Employer or Others. Substantially broken a health or safety regulation.

c.     The Employer may use any Equipment to which the Contractor has title to complete the works. The Contractor promptly removes the Equipment from Site when the Project Manager notifies him that the Employer no longer requires it to complete the works.

8)    Change in Law: A change in the law of the country in which the Site is located is a compensation event if it occurs after the Contract Date. The Project Manager may notify the Contractor of a compensation event for a change in the law and instruct him to submit quotations. If the effect of a compensation event which is a change in the law is to reduce the total Defined Cost, the Prices are reduced.

9)    Payment to Suppliers: The Contractor includes in his contracts with Named Suppliers the arrangements in this contract for the operation of the Project Bank Account and Trust Deed. The Contractor notifies the Named Suppliers of the details of the Project Bank Account and the arrangements for payment of amounts due under their contracts. The final date for payment is fourteen days or a different period for payment if stated in the Contract Data after the date on which payment becomes due. The Project Manager’s certificate is the notice of payment to the Contractor specifying the amount due at the payment due date (the notified sum) and stating the basis on which the amount was calculated.

C.    Notice issued by the contractor to the Employer/ Engineer.

1)     Illegal or Impossible requirement: The Contractor notifies the Project Manager as soon as he considers that the Works Information requires him to do anything which is illegal or impossible. If the Project Manager agrees, he gives an instruction to change the Works Information appropriately.

2)    Compensation Event:

a.     The Contractor notifies the Project Manager of an event which has happened for which he expects to happen as a compensation event if the Contractor believes that the event is a compensation event and the Project Manager has not notified the event to the Contractor. If the Contractor does not notify a compensation event within eight weeks of becoming aware of the event, he is not entitled to a change in the Prices, the Completion Date or a Key Date unless the event arises from the Project Manager or the Supervisor giving an instruction, issuing a certificate, changing an earlier decision or correcting an assumption.

b.     If the Project Manager does not notify his decision, the Contractor may notify the Project Manager of his failure. A failure by the Project Manager to reply within two weeks of this notification is treated as acceptance by the Project Manager that the event is a compensation event and an instruction to submit quotations. If the Project Manager does not reply to a quotation within the time allowed, the Contractor may notify the Project Manager of his failure. If the Contractor submitted more than one quotation for the compensation event, he states in his notification which quotation he proposes is to be accepted. If the Project Manager does not reply to the notification within two weeks, and unless the quotation is for a proposed instruction or a proposed changed decision, the Contractor’s notification is treated as acceptance of the quotation by the Project Manager.

c.     If the Project Manager does not assess a compensation event within the time allowed, the Contractor may notify the Project Manager of his failure. If the Contractor submitted more than one quotation for the compensation event, he states in his notification which quotation he proposes is to be accepted. If the Project Manager does not reply within two weeks of this notification the notification is treated as acceptance of the Contractor’s quotation by the Project Manager.

3)    Objects of Historical Value: The Contractor has no title to an object of value or of historical or other interest within the Site. The Contractor notifies the Project Manager when such an object is found and the Project Manager instructs the Contractor how to deal with it. The Contractor does not move the object without instructions.

4)    Payment to Suppliers: The Contractor includes in his contracts with Named Suppliers the arrangements in this contract for the operation of the Project Bank Account and Trust Deed. The Contractor notifies the Named Suppliers of the details of the Project Bank Account and the arrangements for payment of amounts due under their contracts. The Contractor submits proposals for adding a Supplier to the Named Suppliers to the Project Manager for acceptance. A reason for not accepting is that the addition of the Supplier does not comply with the Works Information. The Employer, the Contractor and the Supplier sign the Joining Deed after acceptance. On or before each assessment date, the Contractor submits to the Project Manager an application for payment, and shows in the application the amounts due to Named Suppliers in accordance with their contracts.

5)     Early Warning Failure: If the Project Manager has notified the Contractor of his decision that the Contractor did not give an early warning of a compensation event which an experienced contractor could have given, the event is assessed as if the Contractor had given early warning. If the Adjudicator does not so notify within three days of the issue of the notice of adjudication, either Party may act as if he has resigned.

6)    Notice of Adjudication: Within seven days of a Party giving a notice of adjudication he refers the dispute to the Adjudicator, provides the Adjudicator with the information on which he relies, including any supporting documents and provides a copy of the information and supporting documents he has provided to the Adjudicator to the other Party. Any further information from a Party to be considered by the Adjudicator is provided within fourteen days of the referral. This period may be extended if the Adjudicator and the Parties agree.

7)    Within the time set out in the banking arrangements to allow the project bank to make payment to the Contractor and Named Suppliers in accordance with the contract, the Employer makes payment to the Project Bank Account of the amount which is due to be paid under the contract and the Contractor makes payment to the Project Bank Account of any amount which the Employer has notified the Contractor he intends to withhold from the certified amount and which is required to make payment to Named Suppliers.

From the above, the importance of notices in Construction Contracts is amply reflected. The FIDIC Conditions of Contract meticulously lay down procedures regarding needs of giving notices, and the time limits for compliance of the notice. Main events for need of giving notice by the Client, the Engineer or the Contractor are appointment, delegation of power and replacement of representatives and Engineer; information exchange, handing over site, taking over works and archaeological findings; subcontractors and nominated subcontractors; defects in documents; quality, safety, tests and defects in works; programme, delay and suspension of works; payments, claims and variations; breach of contract, termination of contracts and arbitration. However, it should be kept in mind that the aim of all actions of the parties and Engineer is successful delivery of end product within the time limits, within the budget and as per the quality envisaged. The aim of the communications and notices is to provide credence to the actions taken by the stakeholders at the time the events take place. Although, the notices and communications help justify the claims, basic purpose thereof remains facilitating success of contracted project. Actual use of such notices and there compliance shall highlight early warning and also documentation of various important events. The notices can, in fact, be used as problem-solving tools to reduce disputes and effective risk-sharing, if used in right earnest.

References:

1. FIDIC Conditions of contracts for Design Build and Operate Projects, 2008

2.NEC3 Engineering and Construction Contract for the appointment of a contractor for engineering and construction work, April 2013

3. CPWD Conditions of Contracts for EPC Projects, 2020