The Court of Session in Scotland has recently provided welcome guidance on a issue which regularly causes disputes between Employers, Contractors and Sub-contractors – in a standard form of JCT contract, are the notice requirements conditions precedent to recovery of loss and expense?
Commentators have long debated whether the wording of the JCT and SBCC contracts impose such a condition precedent. In FES Ltd v HFD Construction Group Ltd [2024] ScotCS CSOH_20, the Court decided that the giving of a clause 4.21 notice is a condition precedent for recovery of loss and expense and that without such a notice, the entitlement is lost.
Background
The parties entered into a contract for fit-out works based on the Standard Building Contract with Quantities for use in Scotland (SBC/Q/Scot) (2016 edition), which was based on the JCT Standard Building Contract 2016. A dispute subsequently arose as to FES's entitlement to an extension of time and its associated claim for loss and expense.
Clause 4.20.1 provided that FES was entitled to loss and expense “subject to clause 4.20.2 and compliance with the provisions of clause 4.21”. Clause 4.21.1 required FES to notify the Contract Administrator as soon as the effect of the delay became (or should have become) reasonably apparent.
Judgment
Lord Richardson concluded that: “the language used in clause 4.20.1 is clear and straight-forward. It indicates that that the contractor's entitlement to reimbursement is ‘subject to ... compliance with clause 4.21’.” It is difficult to construe this language other than that it creates a condition precedent.
FES’s argument that clause 4.20.1 did not spell out the consequences of non-compliance and therefore the parties could not have intended to create a condition precedent failed to take account of the fact that its entitlement was dependent on compliance. The wording of clause 4.20.1 made it clear that without compliance, FES was not entitled to reimbursement of loss and expense.
Comment
This Judgement comes at a time when we are seeing an increasing number of disputes arising from condition precedent clauses generally, following a period in which parties were more willing to take on such onerous terms.
Whilst the Judgment offers clarity regarding the need for a notice and should be a reminder for parties to ensure that regular delay notices are issued, we expect that we will continue to see disputes relating to whether the specific requirements of clause 4.21 have been complied with.
A full copy of the Judgment can be accessed here.
