Another important lessons in our popular series “Contract Management & Music” is about notification in contracts. Read, listen and reflect with the music of Lilly Wood & The Prick below:
When is the right time for notification in contracts?
Yeah, you never said a word
You didn’t send me no letter
Don’t think I could forgive you
See, our world is slowly dying
I’m not wasting no more time
Don’t think I could believe you
Often, people ask me: “Jan, when is the right time to notify [a claim]? Shouldn’t we wait a bit in order not to upset our counterpart?”
If you never mention a problem, if you didn’t send that letter, how do you think the Employer, or the Contractor as the case may be, can take proper action to either mitigate or budget for the costs of an upcoming claim?
In case you have wasted precious time, the counterpart becomes less receptive to your claim. They will fight against it. They will not believe your supporting data if it has not been made available when the events actually occurred.
Bear in mind that notification isn’t only from the Contractor towards the Employer. An example of a notification from the Employer to the Contractor can be found in FIDIC Rainbow suite Clause 11 regarding a defect or damage during the Defects Notification Period.
What happens if you do not timely notify?
Yeah, our hands will get more wrinkled
And our hair will be grey
Don’t think I could forgive you
And see, the children are starving
And their houses were destroyed
Don’t think they could forgive you
Problems, when pushed under the carpet, rarely disappear. With the passing of time, if problems are not properly and timely notified/addressed/mitigated under the contract, issues grow bigger. On construction projects, this may lead to “buildings being destroyed”, meaning termination and rejection.
In a previous post on “Contract Management & Music“, we have also dealt with the subject of time bars: Time Bar struggle for Muse. A claim being time-barred is the tragic situation where, while you do have a legitimate claim, you have lost your entitlement simply because you have not notified in good time.
And how does this story ends?
Hey, when seas will cover lands
And when man will be no more
Don’t think you can forgive you
Yeah, when there’ll just be silence
And when life will be over
Don’t think you will forgive you
Claims that where not notified in good time become disputes. These may end up in front of an arbitral tribunal. For example in a construction project, final resolution of disputes mostly happens when the project is already terminated (either by completion of the works or by termination for breach of contract). Then, the relevant people with deep knowledge of the circumstances will already have left. You [the claiming party] will not forgive yourself of not having timely treated the subject because:
- You can’t properly make your case anymore because you do not have the supporting data;
- Huge financial losses due to a late resolution of a claim can cause financial distress to your company and may even lead to bankruptcy;
- Your claim may be rejected if time-barred;
You can always find good excuses for not timely doing your notification in contracts:
- Not enough time to build the case now because tied up with operational issues;
- Don’t want to upset your counterpart [usually the Contractor wanting to maintain good relationships with the Employer];
But, let’s face it: untimely notifying issues is what in-the-long-run derails projects, leads to termination for default, bankruptcy, arbitration etc. Better to do a good job by notifying at a time when the problem can still be solved. See also this practical case of a subcontractor being delayed on its site works.
So, next time, just make sure you have learned from Prayer in C[ontracts]: send that notification letter! If your counterpart is upset and asks “why?”, you can provide them a link to this blog post or sing for them.
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