October 4, 2022
When challenges arise on construction projects (think, for example, delays, latent conditions, force majeure events, and Pandemic Relief Events), one clause may start the clock ticking when it comes to exercising certain rights and recovering entitlements under a construction contract – time bar. As the second part of the series, this article will explore the purpose, advantages, pitfalls, and enforceability of time bar clauses.
Time Bar – What Is It?
A creature of contract, a time bar clause serves to facilitate the timely notification of events which are likely to impact a project, ensuring issues are promptly investigated and overcome as they arise. In its simplest form, a time bar clause will bar (prevent) a party from recovering its entitlements under a contract where that party fails to give its contractual notices and/or claims within a timeframe stipulated under a contract.
Time bars are contemplated in some of the widely used Australian standard form construction contracts. It is worth noting the differences between the contracts, in their unamended form, as they impose different obligations in respect of the notification of claims (see summary in Table 1 below).
Table 1
| Australian Standard Form Contract | Clause | Requirements for Notification of Claims |
| AS 2124 | 46.1 | 1. (in respect of any claim arising out of a breach of the contract): the Principal will not be liable upon any claim by the Contractor unless the Contractor gives the Superintendent a prescribed notice within 28 days of becoming aware of a breach.
2. (in respect of any other claim for any extra cost or expense arising from a direction or approval by the Superintendent): The Principal will not be liable upon any claim by the Contractor unless the Contractor gives the Superintendent a prescribed notice within 42 days of becoming aware of the entitlement to make a claim. |
| AS 4300 | 46.2 | The failure of a party to comply with the notice provisions of clause 46.1, or in accordance with the relevant provision of the contract, will entitle the other party to damages for breach of contract, but shall not be grounds for invalidating the claim. |
| AS 4000 | 41.2 | The failure of a party to comply with the notice or claim requirements of clause 41.1 will entitle the other party to claim damages for breach of contract, but will not bar nor invalidate a claim (subject to some exceptions). |
| AS 4902 | 41.2 | The failure of a party to comply with the notice provisions of clause 41.1, or, in accordance with the relevant provision of the contract, will entitle the other party to claim damages for breach of contract, but will not bar nor invalidate a claim (subject to some exceptions). |
Project participants should be aware that although some of the Australian standard form contracts do not appear to contain express time bars, there are a number of clauses that each have their own specific notification requirements that, if not met, may prevent a Contractor from making a claim (for example, in the event of a qualifying cause of delay).
Who Benefits from a Time Bar Clause?
On the one hand, a time bar clause may favour Principals or Head Contractors by:
- Enabling the prompt investigation and assessment of claims;
- Enabling the opportunity to take mitigatory steps (such as directions or variations) to reduce impacts to the project;
- Enabling the monitoring of a party’s overall downstream exposure;
- Preventing an accumulation of claims being submitted by a Contractor at the end of a project; and
- Improving administration and management of issues as, and when, they arise.
On the other hand, Contractors are susceptible to harsh outcomes (often impacting their bottom line) when claims are rejected on the basis of non-compliance with a time bar provision. Where notices or claims are not submitted in either strict, or substantial, compliance with the terms of a contract, Contractors face a real risk of otherwise valid claims being rejected. Put simply, Contractors should not assume that a time bar clause will not be enforced according to its terms.
Enforceability
Generally, a court will uphold a clearly drafted time bar clause, despite the harsh consequences that a strict application of the provision may produce. This position was affirmed in the decision of CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC 217 where the Supreme Court of Western Australia disallowed otherwise valid claims for extensions of time (EOTs) due to CMA’s non-compliance with strict notice requirements.
The court found that, although a strict application of the time bar clause was harsh, the clear language of the clause stipulated certain conditions precedent that CMA was required to meet in order to enliven its entitlement to claim an EOT. In failing to adhere to the strict requirements of the clause, CMA lost its entitlement. This decision serves as a clear reminder to all Contractors to submit their notices in time.
Although a time bar clause may sometimes seem to hang over a claim like the sword of Damocles, not every purported reliance on a time bar clause will be valid. Principals and Head Contractors should carefully consider their own conduct before seeking to reject a Contractor’s claim for non-compliance. A party may be estopped from relying on a time bar clause where, through a course of conduct, it has waived its right to insist on strict compliance with a time bar clause, in circumstances, for example, where:
- A party has made a representation to the other party that it would not require, nor enforce, strict compliance with a time bar clause;
- A party proceeds to consider the merits of a claim, notwithstanding non-compliance with notice and time provisions of a contract, over a substantial period of time, without:
- Expressly notifying the other party that a claim was time-barred; and
- Expressing its intention to strictly rely on the time bar clause;
- A party requests a Contractor to submit numerous claims notwithstanding non-compliance with a time bar clause; and
- A party has failed to adhere to its own obligations with respect to time related provisions under a contract.
In Civil Mining & Construction Pty Ltd (CMC) v Wiggins Island Coal Export Terminal Pty Ltd (WICET) [2017] QSC 85, CMC brought claims against the principal’s (WICET’s) representatives on the basis that a succession of directions entitled CMC to variations and EOTs. WICET argued that CMCs claims for EOTs were out of time (which they were) and were, ultimately, time barred. In considering WICET’s conduct, Justice Flanagan held that WICET had acted in a manner inconsistent with its right to insist on strict performance of the time and notice requirements of the contract, and had therefore waived that right. CMC was held to be entitled to its claims.
Lamont Project & Construction Lawyers
We have the industry knowledge and experience to assist both Principals and Contractors in all major construction projects. If you would like to discuss any of the matters raised in the above article or the forthcoming series as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The content of this article is for information purposes only; it does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
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