Conditions precedent in construction contracts — ask for permission, not forgiveness

Grace Hopper's famous axiom sprang to mind recently during my son’s birthday party at a local trampoline park.

Having had their hour of jumping, he — along with his sugar-fuelled friends — decided to test the staff by going back for more time, until they were caught.

While the tolerance and kindness of the park staff meant he ultimately was allowed some extra time to play — so it worked out well for them — there are circumstances where you really do need to seek that permission.

FES Limited v HDF Construction Group

One such example is the recent Court of Session decision in the FES limited v HFD Construction Group Limited case.

HFD had contracted FES to carry out a fit-out and some other work at an office in Glasgow. The contract was a Standard Building Contract with Quantities for use in Scotland, with certain specific amendments.

However, while the work was underway, there were a number of delays, not least of which the closure of the site during the COVID-19 pandemic.

A dispute arose on FES’s entitlement to an extension of time and an associated claim for loss and expense under the contract which was referred to adjudication.

One of the issues the adjudicator identified was whether the giving of notice was a condition precedent to FES’s entitlement to a claim for loss and expense.

FES hadn’t given notice in accordance with the contract.

Entitlement to loss and expense

Most standard construction contracts contain loss and/or expense clauses.

My colleague Jennifer Young wrote a post back in 2020 explaining contractors would have to carefully consider how to justify any pandemic-related delays and failures to meet contract requirements.

The second point in her checklist highlights that contractors should give notice of the delay, even if it isn’t a condition precedent — namely that to claim, you’d have to have given notice. Jennifer rightly says doing so regardless can help substantiate a claim.

Condition precedent in this case

And it’s this issue of whether notice was a condition precedent to being entitled to claim that was covered in detail in this case, and a preceding adjudication.

As you’d expect, there were complex legal arguments about the interpretation of various clauses with the court’s role to work out what the parties intended.

Entitlement to loss and expense (under clause 4.20) in the standard contract form used here is “subject to compliance” with clause 4.21. This latter clause said FES had to give notice of a delay as soon as the event became “reasonably apparent”.

Importantly, there was no specific mention of this notice being a condition precedent to being entitled to claim or indeed any detail of the consequences of failure to comply — which we do see in other standard forms such as NEC.

FES maintained because the clause did not spell this out the parties can’t have intended to create a condition precedent.

First the adjudicator and then the court disagreed, saying the wording of the clause makes it clear that, without compliance, the contractor isn’t entitled to reimbursement.

Why is it important?

Timely notice of claims gives both parties clarity and certainty about how much is due — this is particularly important for the contractors as they tend to be impacted more than developers or employers.

Don’t take false comfort that the contract doesn’t set out the consequence for not following the processes either — that could be an expensive assumption on your part.

Make sure too you know the contract terms, and in particular when you should be making claims, and check how you ought to be serving valid notice.

Finally, when you see phrasing such as “subject to” or “as required by” it’s always worth seeking legal clarification to ensure you know exactly where you stand.

In this case, essentially, even though FES may have had a legitimate claim, because it didn’t give notice, as the contract required it to, it lost any entitlement.

It’s clear from this decision that it should have — and to avoid running into issues yourself, it’s worth understanding the rights and remedies in your own construction contracts.