When a Contract Manager receives a new contract to follow, probably the first thing she/he should look at is this: Is there a time bar for claims?
The answer to this question will dramatically change her/his behavior during the contract execution. Together with Muse and their song “Time is Running Out” (of which we have quoted the relevant lyrics here below), we will analyze the consequences of time bars. You can listen while you read by clicking on the below link:
What is a Time Bar?
Unfortunately, it is a not a pub where your can spend as much time as you want. Many definitions are available all saying more or less the same. I randomly present you the one given by “The Law Dictionary” (https://thelawdictionary.org) : “Stoppage put on exercising a claim or judgment after a period that was established by a law or custom.”
Original justification of Time Bars
Time Bars were introduced decades ago because Contractors / Employers used to pile up potential claims “just in case” to only launch them at a later timing most convenient to their interests. Usually this coincided with the time they had the maximum bargaining power, for example because the project was already built (for avoidance of counter-claims, no more risk of suspension etc).
In accordance with good contracting practice, both parties should be more transparent and should be pushed to table any issues as soon as they are aware of them, as soon as practical. Time Bars became a usual practice … even though one could regret it between mature and reasonable contracting parties.
The consequences of not claiming within the Time Bar
You will be
The death of me
Yeah, you will be
The death of me
I won’t let you bury it
I won’t let you smother it
I won’t let you murder it
When you are beyond that maximum period to formulate your claim, it will simply be barred, not accepted anymore, “buried” with the words of Muse. Anyone can understand that feeling of injustice when the facts objectively show that your claim is valid but the clock says that the time is over. The three last sentences of the above citation show this feeling of resistance, this frustration.
Contractor’s feelings and reactions
Most of the claims barred by this mechanism are Contractor’s claims, so let us see with Muse what reactions this will bring to the Contract Manager.
I think I’m drowning
I want to break the spell
That you’ve created
…I want to play the game
I want the friction
The Contractor will feel asphyxiated, under huge pressure to present its claims in time. The Contract Manager, in order to protect himself, will rather formulate too many claims than too little. She/he wants to play the game.
Our time is running out
And our time is running out
You can’t push it underground
We can’t stop it screaming out
And we end up with a “claim machine”: claims for anything. You never know it will be useful. Umbrella claims, we will always be able to attach something to this.
I wanted freedom
But I’m restricted
I tried to give you up
But I’m addicted
Now that you know I’m trapped
Sense of elation
You’ll never dream of breaking this fixation
You will squeeze the life out of me
These “just in case” claims generate a lot of work for both parties, the one formulating and the one reacting. The involved resources don’t add any value if the claims are not legitimate, not substantiated. Key project players are drawn away from the real pro-active project execution. And, the positive atmosphere of the project is spoiled: “what, another claim! That’s outrageous”, …
Time Bars in FIDIC contracts
FIDIC 99 has the Time Bar in sub-clause 20.1 of Red, Yellow and Silver Books with the following wording: “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.”
This clause clearly spells out the hard consequences. If you are late, you loose it all. Never mind how justified your claim is and how impacting the consequences are. This also applies for late claims related to Employer’s acts and Risks. On top of that, the Employer doesn’t have an equivalent Time Bar in its claims clause, sub-clause 2.5.
Fortunately, the new clause 20 in FIDIC 17 deals with both Contractor’s and Employer’s claims in the same way. The time bar is now in sub-clause 20.2: “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.”
General recommendations about time bars
- Do not set Time Bars too short; the minimum is 28 days. Setting it too short will inevitably lead to a “claim machine” environment where the parties start formulating a continuous stream of claims so that they can always find a way to argue that they started the claim in time. I would recommend time bars not to be below 90 days.
- Make the clause symmetrical / bilateral, meaning that the same time bar and duration should apply to both parties. During negotiations, parties tend to become much more reasonable when they know the same provision will also apply to them.
- Ideally, the entitlement to claim should only be reduced to the extend that the other party was unable to mitigate its losses due the claim being late. This will avoid barring of obvious entitlements that could not be mitigated anyway.
Let us stop with the stereotypes that Contractors are just claim machines and look for the reasons behind it. The vicious circle of ever lower time bars is not going to help. The above post and the music of Muse allow us to rethink our ways of working in a positive atmosphere outside of the rush of day-to-day projects.
This post is part of our series illustrating important contract management subjects by music to make it more fun. You can click here to see other posts of that series.
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