Evolution of the Contractor’s Claim Notice Provisions In FIDIC Contracts – 1999 vs. 2017

1. Introduction

The Contractor’s Claim Notices are crucial documents for contract management and dispute resolution. A notice sets forth a party’s contention of its entitlement, provides contemporaneous evidence of the existence of the event(s) giving rise to its entitlement and puts an onus on the Employer to ‘make good’ a situation that is potentially adversely affecting the Contractor and the project. The two main claims that are subject to notices concern a claim by the Contractor for additional payment from the Employer and a claim for an extension to the Time for Completion. Nearly every construction dispute, which arises from a FIDIC-based contract involves arguments in relation to the existence and validity of the Contractor’s Claim Notices. This is because FIDIC makes it clear that if the Contractor fails to notify the Employer of a claim, the said claim will fail. The absence of a valid claim notice could reduce a perfectly good claim for additional payment to ‘nil’, resulting in the loss of millions of dollars. Thus, being acquainted with the provisions regarding the Contractor’s Claim Notice is an indispensable asset for any party dealing with FIDIC contracts.

In light of the above, this article aims to provide an overview of the main characteristics of the Contractor’s Claim Notice for additional payment and extension of Time for Completion in FIDIC Contracts’ 1999 and 2017 versions, specifically for Silver, Yellow and Red Books.

In FIDIC 2017, compared to FIDIC 1999, a greater degree of responsibility is imposed on the Contractor when drafting and submitting its dispute notices. This is clearly an attempt to provide further clarity to the claim notice mechanism in FIDIC 1999. However, this increased responsibility will also inevitably increase the Contractor’s burden in relation to contract management and may extend the avenues for disputes on the validity of the notice for entitlement. Contractors will thus need to be cautious about the approaches taken both internally and formally regarding claims or potential claims to ensure that no entitlements are forfeited by failures in respect of notice provisions under FIDIC 2017.

In this article, we explore the following;

• The differences between provisions regarding the format and content of notices in FIDIC 2017 and 1999
• The time bar provided for the submission of the Contractor’s Claim Notice in both versions of the FIDIC Contracts
• The steps following the Contractor’s claim submission

2. Format and Content of the Contractor's Claim Notices

A “Contractor’s Claim” for the purpose of a FIDIC contract means a claim by the Contractor for additional payment from the Employer and/or extension to the Time for Completion.

2.1. FIDIC 1999

Sub-Clause 20.1 of FIDIC 1999 (in Silver, Yellow and Red Books), sets out the main rules regarding the Contractor’s Claim Notice, as follows:

“If the Contractor considers himself to be entitled to any extension of the Time for Completion and/or any additional payment, under any Clause of these Conditions or otherwise in connection with the Contract, the Contractor shall give notice to the Engineer, describing the event or circumstance giving rise to the claim. The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance.”

Thus, under this sub-clause, in terms of content, the Contractor’s Claim Notice must describe the event or circumstance giving rise to the claim and indicate the Contractor’s intention to make a claim in relation to additional payment and/or extension of time. There is no requirement to include the word “notice” or refer to Sub-Clause 20.1 for the Contractor’s Claim Notice to be valid. However, care must be taken to ensure that although it is not labelled as a ‘notice’ per se, the reader (and any potential third party such as an arbitrator in the future) has absolutely no doubt that the document is a proclamation of the Contractor’s entitlement to a claim. The best way to avoid any ambiguity in this case is to state clearly that the notice is made “pursuant to SubClause 20.1 of the General Conditions of Contract.”

In terms of format and communication method, this sub-clause does not provide much information, other than that the notice is to be sent to the Engineer (or the Employer in case of Silver Book). To understand the format and communication method of the Contractor’s Claim Notice, one must consider Sub-Clause 1.3, which states that all notices shall be:

• “in writing and delivered by hand (against receipt), sent by mail or courier, or transmitted using any of the agreed systems of electronic transmission as stated in the Particular Conditions; and
• delivered, sent or transmitted to the address for the recipient’s communications as stated in the Contract. […]”.

In summary, in FIDIC 1999, the Contractor’s Claim Notice must;

• Describe the event or circumstance giving rise to the claim;
• Indicate the Contractor’s intention to make a claim for additional payment and/or EOT
• Be in writing;
• Be communicated to the Engineer’s communication address stated in the Contract (Employer’s communication address stated in the Contract for Silver Book);
• Be communicated by using the communication method described in the Particular Conditions.

2.2. FIDIC 2017

Different from the 1999 version, FIDIC 2017 distinguishes between two types of claims under Clause 20:

• Claims for payment and/or extension of time (EOT), stipulated under Sub-Clause 20.1(b) and 20.2; and,
• Claims in relation to ‘any other relief’, as stipulated under Sub-Clause 20.2 (c).

While the Contractor is required to submit a claim notice if it is claiming for additional payment or EOT, no such notice requirement is imposed for claims in relation to other types of relief.

With respect to claim notices for payment and/or EOT, Sub-Clause 20.2.1 states:

“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 DNP for which the Claim is made as soon as practicable, and no later than 28 days after the claiming Party became aware, or should have become aware, of the event or circumstance (the “Notice of Claim” in these Conditions).”

Similar to the 1999 version, under FIDIC 2017, the Contractor’s Claim Notice must describe the event or circumstance giving rise to the claim and must be addressed to the Engineer (or the Employer in case of Silver Book).

Further, again, similar to the 1999 version, the format and communication method of the notice is stipulated in Sub-Clause 1.3 of FIDIC 2017, which states that the notice must be in writing.

However, Sub-Clause 1.3 of the 2017 version is much more detailed compared to its predecessor, as follows: Firstly, it requires the notice to be either “a paper-original signed by the Contractor’s Representative” and/or “an electronic original generated from any of the systems of electronic transmission stated in the Contract Data”. Secondly, it requires the notice to be identified as a “notice”. Thirdly, it requires a copy of the claim notice to be also sent to the Employer (or the Employer’s Representative in case of Silver Book).

The fact that it requires the notice to be identified as a notice reduces the Contractor’s leeway for arguing that any communication could constitute a notice. In this sense, the provisions in FIDIC 2017 are much stricter and aims to reduce disputes on the existence and validity of notices.

In summary, in FIDIC 2017, the Contractor’s Claim Notice must;

• Describe the event or circumstance giving rise to the claim;
• Indicate the Contractor’s intention to make a claim for additional payment and/or EOT;
• Indicate that it is a notice;
• Be in writing;
• Be “a paper-original signed by the Contractor’s Representative” and/or “an electronic original generated from any of the systems of electronic transmission stated in the Contract Data”; and,
• Be communicated to the Engineer’s communication address stated in the Contract Data (or Employer’s communication address stated in the Contract Data in case of Silver Book) with a copy of it to be sent to the Employer (or the Employer’s Representative in case of Silver Book).

3. Timing of the Contractor's Claim Notice

In both 1999 and 2017 versions, the Contractor must submit its claim notice “no later than 28 days” after it became aware or should have become aware of the event or circumstance giving rise to the claim.

In both versions of FIDIC, if the Contractor does not observe the time limit of 28 days, it may lose the right to pursue its claim. This is described as follows in the template contracts:

FIDIC 1999:

“If the Contractor fails to give notice of a claim within such period of 28 days. the Time for Completion shall not be extended. the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. Otherwise. the following provisions of this Sub-Clause shall apply.”

FIDIC 2017:

"If the claiming Party fails to give a Notice of Claim within this period of 28 days, the claiming Party shall not be entitled to any additional payment, the Contract Price shall not be reduced (in the case of the Employer as the claiming Party), the Time for Completion (in the case of the Contractor as the claiming Party) or the DNP (in the case of the Employer as the claiming Party) shall not be extended, and the other Party shall be discharged from any liability in connection with the event or circumstance giving rise to the Claim.”

In any case, it must be noted that depending on the applicable law to the contract, it may be possible to circumvent the time bar provision in FIDIC Contracts. For example, in 2017, the Polish Supreme Court held that the time bar in FIDIC Contracts would not apply to non-contractual claims such as unjust enrichment. (1)

Further, with respect to FIDIC 1999, if the Employer or the Engineer failed to raise an objection in relation to the existence or validity of the claim and only criticised the claim on its merits, the Employer may be prevented from arguing that the Contractor lacks proper claim notice. This is supported by the principle against “venire contra factum proprium” in civil law (2) and the rules in relation to waiver and estoppel in common law. (3)

FIDIC 2017, explicitly covers this issue, as follows:

“If the Engineer considers that the claiming Party has failed to give the Notice of Claim within the period of 28 days under Sub-Clause 20.2.1 [Notice of Claim] the Engineer shall, within 14 days after receiving the Notice of Claim, give a Notice to the claiming Party accordingly (with reasons).

If the Engineer does not give such a Notice within this period of 14 days, the Notice of Claim shall be deemed to be a valid Notice. If the other Party disagrees with such deemed valid Notice of Claim the other Party shall give a Notice to the Engineer which shall include details of the disagreement. Thereafter, the agreement or determination of the Claim under Sub-Clause 20.2.5 [Agreement or determination of the Claim] shall include a review by the Engineer of such disagreement.

If the claiming Party receives a Notice from the Engineer under this Sub-Clause and disagrees with the Engineer or considers there are circumstances which justify late submission of the Notice of Claim, the claiming Party shall include in its fully detailed Claim under Sub-Clause 20.2.4 [Fully detailed claim] details of such disagreement or why such late submission is justified (as the case may be).”

Therefore, under FIDIC 2017, if the Engineer (or the Employer in case of Silver Book) fails to raise an objection in relation to the validity or timing of the notice within 14 days, it will be prevented from relying on this argument during the later stages of the dispute resolution mechanism.

In addition to the above, it is also worth noting that in some legal regimes (e.g., Qatar law), the use of time bars for bringing claims, such as the one in FIDIC Contracts, is banned. (4) This is because the time bar for bringing the claim is interpreted as amending the legal limitation period, which usually derives from mandatory legal rules.

Nevertheless, it is worth noting that the time bar for the Contractor’s Claim Notice in FIDIC Contracts (both in 1999 and 2017 version) is usually observed strictly by local courts and arbitral tribunals. Accordingly, the parties to a FIDIC Contract should pay specific attention to the timing of the Contractor’s Claim Notice.

4. Steps Following the Contractor's Claim Notice

After the Contractor submits its claim notice, FIDIC Contracts provide for additional steps for the parties to follow in order to resolve the disputes arising from the Contractor’s claim.

Under FIDIC 1999, the following steps should normally be taken to resolve the dispute:

• The Contractor should submit the particulars of claim, with supporting evidence, to justify its claim.
• The Engineer (or the Employer, in case of Silver Book) should consult with the parties and give a determination on the claim.
• If the parties disagree with the Engineer’s determination (or the Employer’s determination, in case of Silver Book), either party may refer the dispute to the dispute board.
• After the dispute board decision is obtained, the party unsatisfied with the dispute board’s decision should give a notice of dissatisfaction.
• The parties, then, should engage in amicable settlement discussion, or wait for 56 days before commencing arbitration.
• Finally, if the dispute is still unresolved, either party may commence arbitration.

Delays to the above-described steps under FIDIC 1999 usually does not affect a party’s right to pursue or challenge a claim.

Under FIDIC 2017, the dispute resolution mechanism essentially contains the same steps. However, the provisions contained therein are much more detailed. Further, FIDIC 2017 imposes strict time limits for the Employer and the Engineer’s notices and determinations as well. In this sense, it could be said that FIDIC 2017 strikes a fairer balance between the contractor and the employer in terms of the right to pursue claims.

Accordingly, under FIDIC 2017, if either party fails to adhere to the steps in the dispute resolution mechanism, the probable outcome is that the failing party will lose their right to pursue or challenge a claim. Thus, parties which prefer to use the 2017 version of FIDIC will need to have a strong project management team which are well-versed in FIDIC dispute resolution steps, in order to effectively make use of the dispute resolution process.

References

1. Judgment of the Polish Supreme Court of 23 March 2017, Case no. V CSK 449/16

2. Prof. Dr. Ziya Akıncı, Milletlerarası İnşaat Sözleşmeleri (On İki Levha Yayıncılık, 2023. Ed., 1), p. 296-301; Michael E. Scheider and Matthias Scherer “Switzerland”, in FIDIC – An Analysis of International Construction Contracts, (Kluwer Law International, 2005), p. 327-328.

3. City Inn Limited v. Shepherd Construction Limited [2007] CSOH 190; City Inn Limited v. Shepherd Construction Limited [2010] CSIH 68

4. Myriam Eid, Danah Mohamed, "Construction Arbitration: Qatar", Global Arbitration Review, 06 July 2022,

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