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Where a claim arises during the course of a construction
project, the party making the claim must provide the other party
with timely and proper notice, or risk the claim being dismissed in
its entirety.
Claims in the construction context can arise for any number of
reasons. These include delays in approvals, access to the site or
general delays in progress, unforeseen conditions causing changes
in the planned work methods, adverse weather conditions, deficient
work and labour shortages among many other reasons.
Many construction contracts contain detailed requirements for
submitting a claim, whether by a contractor against an owner or
vice versa, including a requirement that notice of the
claim be submitted within a certain time period. Details or
particulars of the claim may be required to be provided at the
outset, or within a subsequent timeframe. Even where there are no
notice requirements set out in a contract, a claim by one party for
additional time or costs may ultimately be reduced or dismissed if
no notice is given and this causes prejudice to the other party,
such as their being unable to investigate the matter, consider
their position and potentially reduce their costs or mitigate their
damages. All parties to a construction contract should ensure that
they understand the contractual provisions governing the resolution
of disputes relating to a project.
Contractual notice provisions
In 1982, the Supreme Court of Canada in Corpex (1977) Inc v
Canada, [1982] 2 SCR 543, considered a case involving a
contractor claim for additional costs resulting from substantially
different conditions on site. In its decision, the Supreme Court
set out that the purpose of a notice provision is to ensure that
parties are in a position to consider the claim near in time to its
occurrence and then to take mitigating steps to protect their
position. As a result, compliance with the requirements of a
contractual notice provision will often be interpreted as
mandatory.
Courts in Canada continue to follow Corpex in requiring
strict compliance with the timing and form requirements concerning
notice of claims. Therefore, a consultant on a project, or
ultimately a Court, may outright reject a claim if it is not made
in accordance with timing requirements.
Whether the form requirements of notice will be strictly
enforced will depend on the facts of the case, and particularly on
the language of the contract. If the contractual language is clear
that claims that do not comply with notice requirements will be
barred, a Court will be more likely to strictly enforce the
language in the agreement. However, Courts do not always require
strict compliance with form requirements for notice of a claim.
Rather, if the form of a claim does not strictly conform to the
contractual requirements but contains enough information to satisfy
the purpose for which notice is required (being to provide the
other party enough information to consider the claim and protect
its position), the Court may find that the notice was
sufficient.
To be clear, an owner’s knowledge that the contractor is
experiencing difficulties is not the same as having knowledge that
the contractor is intending to make a claim for costs or an
extension of time in relation to those difficulties. The nature of
the information provided by the claiming party in the notice
provided is key to determine if sufficient notice of a claim has
been given.
Waiver of notice requirements
A common response to the argument that a notice provision was
not complied with is that the notice requirements were waived by
the conduct of the other party, such as by engaging in negotiations
despite not having received “formal” notice of the
claim.
Construction industry players should be aware that a waiver of
notice by conduct may only be found if the alleged waiving party
had full knowledge of the deficiency that might be relied on and
demonstrated by its conduct or communicated (whether formally or
informally) an unequivocal and conscious intention to abandon the
right to rely on it. However, no waiver by conduct will be found
where the contract requires that any waiver be in writing or
stipulates that conduct cannot be used as evidence of a waiver.
Even if it seems obvious that the other party knows of
conditions that could give rise to a claim, or that a party has
been incurring increased costs or delays, it is critical that
formal notice be given in order to protect the claiming party’s
rights. Engaging in negotiations over a potential claim does not
relieve a party of its obligation to provide formal notice. This is
why parties should be mindful of the need to provide formal notice
of a potential claim within the contractual timelines, even while
the parties may otherwise be engaged in “without
prejudice” discussions that could resolve the issue.
Conclusion
Given the potentially severe consequences for not providing
adequate notice of a claim, parties to a construction contract
should be extremely familiar with the dispute resolution processes
set out in the governing contract, and should consider seeking
legal advice regarding the timing and format requirements with
respect to claims being advanced.
Providing proper notice certainly does not preclude the parties
from working together to negotiate a resolution satisfactory to
both parties. Giving that notice merely protects the claiming party
from having its claim refused in its entirety for failing to
provide the required notice.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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