Reflection 3 of 14 - Chapter 3 and the formal inception of a Claim

Introduction

Thank you, friends, for subscribing to my newsletter and for your interest in this, Reflection 3 of 14, offering you a glimpse of Chapter 3 of my book.  The later Reflections will guide you through, in ascending order, each of the other 11 chapters of the book.  

Chapter 3 explains, over 27 pages, how the ‘Claim’ (introduced in Chapter 2) is formally notified, initially responded to, and then detailed.  

Many a contractor’s leadership and shareholders will have hoped that its project managers would have better-understood provisions of this kind.

It might be thought that compliance with these processes is, on the one hand, more complicated yet, on the other, not existentially crucial.  The user - either Party seeking to advance a Claim - would do well to avoid reaching the second of those assumptions, or for thinking that the consequences are the same for the Contractor as they are for the Employer, nor for a Claim for any entitlement or relief other than payment and/or an extension versus one for payment and/or an extension.

The philosophy behind the FIDIC Second Edition 2017 appears to have changed from [the] 1999 edition, with the result that significantly greater importance is placed on the issuing of notices throughout the standard form Contract to ensure certainty.’ - Dr. Lukas Klee, International Construction Contract Law, 1st edn. New Jersey, USA: Wiley-Blackwell (2015).

The procedures and timelines

The FIDIC Second Editions lay down procedures and timelines for the notification and submission of a Claim by either Party.  This includes, among other developments, a new procedure for the notification of Claims falling within the catch-all category of ‘any other entitlement or relief’, guidance on the details required to be submitted with the Claim, and (in the case of FIDIC Red 2017 and FIDIC Yellow 2017) the enhanced role of the Engineer.

Clause 20 [Employer’s and Contractor’s Claims] thus offers a more prescriptive and, as it ought to be, a more certain framework for the inception of a Claim than existed in the FIDIC First Editions and indeed most other model contracts.  In scope and effect, it regulates a Party’s ‘secondary’ entitlement arising from a failure or refusal of the other Party to fully discharge a ‘primary’ obligation - in short, a claim for breach of contract.

A momentous shift apparent in the FIDIC Second Editions is the combination of both Parties’ Claims in Clause 20.  With this adjustment, the Employer’s Claim is now subject to the same procedures as the Contractor’s Claim, including time limits and the requisite level of detail.  As a result, both Parties’ Claims stand on an equal footing concerning the Claims process.

The Chapter’s treatment

Chapter 3 examines the formal inception of a Claim under the FIDIC Second Editions, analysing the claiming Party’s procedural obligations, including the procedures and timelines for the notification of a Claim, and the consequences of the late submission of the Notice of Claim.

But first, it considers the concept of the ‘Claim’, including what it is, what are its potential sources generally and under the FIDIC Second Editions in particular.   Briefly, a Claim may be founded on, or limited by, something other than the Contract itself, be it the ‘common law’ or the legislation of a particular jurisdiction, or on some combination of three.  

Second, Chapter 3 considers the consequences of late submission of the Notice of Claim.

Third, it addresses the inclusion of Claim amounts for Claims for payments.

Fourth, it discusses the claiming Party’s obligations concerning the keeping of contemporary records as may be necessary to substantiate its Claims.

Finally, Chapter 3 explores the features of the fully detailed Claim, including its form, delivery, timing, effect, content, interim and final variants, and the articulated and variated consequences of late submission.

Look Ahead

In the fourth edition of this newsletter, I will take you further on this book tour, taking in the amicable resolution of a Claim, including a more fleshed-out form of project mediation.

Thank you for your attention, and feel free to share this content.

Nicholas