Construction law terms: contractual notices and condition precedent notices

This guide examines the meaning of both terms, explains important differences, looks at how these differences have been illustrated in recent case law and offers some key practical takeaways.

Notice clauses are often contained in construction contracts. These require a party to a construction contract to notify the other party in certain circumstances – for example, if they consider extra time or money are due. The rationale for this is that such early warning or notice promotes greater certainty. The requirements of contractual notices also help make communication between the parties clearer on such key issues.

Notice requirements are particularly common in construction contracts, and often stipulate when claims for additional time and money can be made, as well as when litigation or alternative dispute resolution (ADR) procedures can be launched and when a contract can be suspended or terminated. Some types of contractual notices in law are ‘conditions precedent’, which mean that if the notice is not given, the remedy or relief will not apply. These can be hard to spot and have a draconian effect.

What is a contractual notice?

Contractual notices in construction contracts serve a wide range of functions. For example, claim notification provisions in construction contracts almost always, in practise, cover contractual entitlements to time and money. Events and circumstances giving rise to such entitlements include force majeure, change in law, unforeseen physical conditions, variations and a range of other compensable matters.

Read more in our construction law terms series

• Construction law terms: general and liquidated damages
• Construction law terms: design development and design change
• Construction law terms: termination at common law and under contract
• Construction law terms: claims under contract vs breach of contract claims
• Construction law terms: assignment and novation
• Construction law terms: set off, abatement and counterclaims

Sometimes the word ‘notice’ itself is not expressly used. Instead, contracts, such as NEC contracts, may require an ‘early warning’ or, as with JCT contracts, written applications for loss and/or expense. When a contract provides that such notices or applications ‘shall’ be issued, this creates a contractual obligation to do so if those applicable circumstances arise. If that requirement is not complied with, there will be a breach of contract and a non-complying party faces the risk of damages for any losses caused by such breach.

However, unlike condition precedent notices, any failure to comply with a contractual notice provision, although in itself a separate breach, may not preclude the remedy sought. This is because such notices do not establish in law a ‘condition precedent’ that must be satisfied for the remedy to be available.

In practice, there is also a type of ‘halfway house’ between contractual and condition precedent notices. This type of notice exists when a contract does not stipulate that compliance is a condition precedent but does stipulate the remedy for a breach.  For example, a contract might entitle an employer to assess an event as if the notice had been served. In this case, while the contractor is still entitled to the remedy, in assessing the effect or quantity of that remedy, the contract expressly allows the employer to rely on actions it can prove it would have taken to avert or mitigate the effects had such notice been given.

What is a condition precedent notice?

A contractual notice becomes a condition precedent notice when a certain obligation or entitlement under the contract will only come into force if and when specific conditions are met. In other words, the giving of notice is a pre-condition to the entitlement. Thus, if the notice is not provided by a party in accordance with the condition precedent, the right to claim is lost.

Clear words are needed to spell out that the notice obligation amounts to a condition precedent. Perhaps unhelpfully, however, that does not mean that the clause has to include the exact words ‘condition precedent’, or be labelled as such, in order to amount to a condition precedent.

A typical example of a ‘condition precedent’ provision that does not contain that phrase is found in clause 4.19.1 of the 2016 edition of the JCT Design and Build Contract. It states: “If in the execution of this Contract the Contractor incurs or is likely to incur any direct loss and/or expense as a result of…he shall, subject to clause 4.19.2 and compliance with the provisions of clause 4.20 be entitled to reimbursement of that loss and/or expense.”

Clause 4.20 sets out the notification requirements to be fulfilled. It states: “The Contractor shall notify the Employer as soon as the likely effect of a Relevant Matter on regular progress of the likely nature and extent of any loss and/or expense arising from a deferment of possession becomes (or should have become) reasonably apparent to him.”

Case law on contractual notices and conditions precedent

The following cases illustrate the application of contractual notices and conditions precedent notices in practice.

Kajima Construction v Children's Ark Partnership (2023)

The case concerned an alleged condition precedent in relation to referring any disputes to a “liaison committee”, before raising court proceedings. The High Court held that the requirement to refer a dispute to the liaison committee was a condition precedent. This was because it set out a “clear chronological sequence” that the parties had to follow when a dispute arose and before commencing court proceedings.

However, the court also held that the clause was ultimately unenforceable because it lacked detail and did not provide a “meaningful description” of the steps that the parties had to take in the liaison committee process. The Court of Appeal upheld the High Court’s findings and emphasised that where one party cannot commence court proceedings until a particular process is concluded, the contract drafting needs to be sufficiently clear as to how that process is to be concluded for such a condition precedent to be enforceable. 

Heritage Oil v Tullow Uganda (2014)

This case concerned claims for indemnities which were subject to a notice provision. The contract expressly stated that the indemnities “shall not apply unless notice of the indemnified party's claim or demand…is given to the indemnifying party…in writing within 7 (seven) years of the Closing Date”.

The Court of Appeal concluded that there was a ‘conditional link’ between the obligation to give notice and the’ obligation to pay the claim. In other words, the notice provision did impose a condition precedent.

Lord Justice Beatson, who gave the leading judgment, said: “The words ‘conditions precedent’ are often expressly used in notification of claims clauses. But it is clear that other words can have the same effect, so long as the clause is apt to make the effect the ‘clear intention of the parties’”.

Obrascon v HM Attorney General for Gibraltar (2014)

This construction case concerned, among other things, notice provisions in the FIDIC Yellow Book standard from of contract. Clause 4.12 stated: “If the Contractor encounters adverse physical conditions which he considers to have been Unforeseeable the Contractor shall give notice to the Engineer as soon as practicable.”

Clause 20.1, also stated: “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.”

Clause 20.1 continued: “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…”

The court stated that clause 20.1 was a condition precedent because: “It is clear and indeed was unequivocally and properly accepted” by the contractor that this clause imposed a condition precedent, notwithstanding the absence of express wording identifying it as such.

The court held that, in interpreting clause 20.1, regard must be had to clause 8.4, which provided that an extension of time (EoT) will be granted if completion "...is or will be delayed". This wording suggests that the EoT can be claimed either when it is clear that there will be delay – a prospective delay – or when the delay has at started to be incurred – a retrospective delay.

The 'event or circumstance' can either mean the incident which causes delay, such as a variation or excessive rainfall, or when the delay which results, or will result, from the incident occurs. The judge helpfully gave an example to illustrate when a contractor would have to give notice:

• A variation instruction is issued on 1 June to widen a part of the dual carriageway well away from the tunnel area in this case.
• At the time of the instruction, that part of the carriageway is not on the critical path.
• Although it is foreseeable that the variation will extend the period reasonably programmed for constructing the dual carriageway, it is not foreseeable that it will delay the work.
• By the time that the dual carriageway is started in October, it is only then clear that the works overall will be delayed by the variation. It is only however in November that it can be said that the works are actually delayed.
• Notice does not have to be given for the purposes of clause 20.1 until there actually is delay (November) although the contractor can give notice with impunity when it reasonably believes that it will be delayed (say, October).
• The "event or circumstance" described in the first paragraph of clause 20.1 in the appropriate context can mean either the incident – variation, exceptional weather or one of the other specified grounds for extension – or the delay which results or will inevitably result from the incident in question.

The judge concluded: "The wording in Clause 8.4 is not: ‘is or will be delayed whichever is the earliest’. The above interpretation does not in practice necessarily involve a difficult mental exercise on construction projects where, as here, a critical path programme, invariably electronic, is used which can determine when delay is actually being suffered."

Key takeaways

Construction contracts almost always contain obligations to give contractual notices or to make written applications or give ‘early warnings’, for a variety of events and remedies. Failure to comply with those requirements can have serious legal and commercial consequences. It may prevent an otherwise valid claim from being successful.

This is particularly the case if that notice requirement is a condition precedent to the remedy or relief sought. It is therefore important to be aware of and comply with the requirements which are set out in the contract to avoid later disputes as to the validity or effect of a notice. The specific use of the words “condition precedent” within a notice clause are not absolutely required for a notice to be held to be a condition precedent.

Co-written by Rebecca Hutson of Pinsent Masons.