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Commercial Contracts, Project Management

Time Bars and Their Contractual Implications

Effective construction contract management is a strict discipline and requires absolute adherence to the terms of the contract, including any time limits imposed by the contract. Such time limits are called ‘time bars’ and they usually require actions required by the contract to be performed within a certain time-frame. Typically, time bars operate to limit the time taken by a contracting party to provide notice to the other party of the occurrence of an event that has the potential to extend the contract period and result in a claim for an extension of time or additional cost or both.

For example, AS4000 provides that a contractor is only entitled to have their extension of time (EOT) claim assessed if they submit a written claim within 28 days from the time when the contractor should reasonably have become aware of the possible delay. The word reasonably here means an objective assessment of when the contractor ought to have been aware of the possible delay. In practice, parties to a contract containing a time bar clause would be well-advised to keep accurate records of all discussions and directions, so that there is a traceable communication path documenting any contractual delay.

The purpose of a time bar clause is to ensure that the superintendent of a contract can investigate the validity of any claim as soon as practicable after an adverse event, so that they can take reasonable steps to limit the impact of the event on future contractual performance. It’s easy to imagine how difficult it would be for a superintendent to accurately assess the impact of an adverse event, its extent, and the cost of a potential delay if the claim for such an event is made weeks, months, or longer, after the actual event. The failure to provide notices in accordance with the contract’s time bar clause is likely to result in the claim being disallowed!

In CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] WASC (2015), the Western Australia Supreme Court found that, because CMA did not comply with contractual notice requirements, their claims for an EOT and additional costs were in effect ‘time-barred’. CMA argued that they did not have to provide notice of the delay to John Holland, the contract principal, because John Holland was aware of the claim and had in fact contributed to the contractual delay. The court interpreted the time bar clauses in the contract quite strictly and ruled that the CMA claims were ‘out of time’.

To avoid this scenario, contracting parties are strongly encouraged to understand the terms and conditions of contracts they have signed, keep accurate records of all correspondence, and raise delay claims as soon as possible after they become reasonably aware that the grounds for a delay claim exist. Importantly, any written claims must also be in the prescribed form and contain the information required by the contract.

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