No Notice, No Claim: the conditions precedent in JCT forms of contract

The Scottish case of FES Ltd v HFD Construction Group Ltd [2024] CSIH 37 provides a reminder of the importance of timely notices, otherwise the right to recover loss and expense may be lost.

In FES v HFD, the court concluded that given the common JCT standard form wording that the contractor shall notify the architect/CA as soon as the likely effect of a Relevant Matter on regular progress or the likely nature and extent of any loss and/or expense becomes reasonably apparent and provide updates, (in this case at clauses 4.20 and 4.21 of the JCT Standard Building Contract (SBC/Q/Scot 2016)), it was “difficult to construe the language other than it creates a Condition Precedent”.

Contractors and subcontractors wishing to claim loss & expense must ensure compliance with notification provisions, particularly if JCT forms of contract are used (or similar wording adopted).

Case summary

FES and HFD entered into a contract for fit out works for a commercial office building in Glasgow in February 2020. The contract was based on the Standard Building Contract with Quantities for use in Scotland (SBC/Q/Scot) (2016 edition).

During the course of the works, FES encountered delays which it attributed to the Covid-19 pandemic.
A dispute arose around FES’s entitlement to its claim for an extension of time and associated claim for loss and expense.

FES ultimately referred the dispute to adjudication in October 2022 and the adjudicator found that FES was not entitled to reimbursement of loss and expense under clause 4.20 due to its failure to give notice under clause 4.21 of the contract.

Clause 4.20 of the unamended SBC/Q/Scot provides that “If in the execution of this Contract the Contractor incurs or is likely to incur any direct loss and/or expense … because regular progress of the Works … has been or is likely to be materially affected by any Relevant Matter, he shall, subject to … compliance with the provisions of clause 4.21 be entitled to reimbursement of that loss and/or expense.”

Clause 4.21 requires the contractor to notify the architect/CA as soon as the likely effect of a Relevant Matter on regular progress or the likely nature and extent of any loss and/or expense, to be accompanied or followed by an initial assessment of loss and expense.

It was generally thought that this wording constituted a condition precedent, as in the case of Walter Lilly v Mackay [2012] where both parties had accepted that similar wording constituted a condition precedent.

FES challenged the adjudicator’s decision in the Court of Session, arguing the “subject to” language of the 2016 contract should not amount to a condition precedent. It included an article and comments from Suzanne Reeves, a member of the JCT drafting sub-committee, suggesting that the new wording was not intended to create a condition precedent.

Lord Richardson in the Court of Session rejected the arguments, reasoning that clause 4.20.1 was drafted by skilled professionals and the language used was unambiguous, i.e. the need for notification of a potential liability within a limited time span is a reasonable condition before a claim could be considered and determined. There was no need to apply interpretive tools such as commercial common sense to these clauses.

What does this mean for you?

The crucial takeaway for any contractor or subcontractor seeking to claim loss and expense is to ensure that notices are given in a timely fashion, taking care to comply with any contractual stipulations concerning the form and content, including where, and to whom, they are to be given.

For employers and main contractors and consultants who might be determining loss and expense claims, compliance with the contract conditions precedent will be a primary consideration.

Also, where standard wording affords some flexibility and issues for interpretation, such as what amounts to “as soon as possible”, bespoke amendments to set stipulated deadlines, e.g. 28 days, might be considered.

Weightmans’ national construction team can offer services to support your business in relation to the issues raised, including contract drafting, negotiation and management, as well as dispute management and resolution.