Qatar: Sit Up And Take Notice - Contractual Notices And Practices In Qatar

Last Updated: 24 July 2012
Article by Laura Warren and Alexa Hall

Contractual notices are a double-edged sword. A common requirement by virtue of the conditions of construction contracts, contractual notices are often overlooked, easily forgotten once works commence on site and yet hugely important in terms of proper financial management of a project and in respect of claims for additional time or money. They are frequently contentious. This article examines notice provisions that are most likely to be encountered in practice, by reference to a main construction contract (although notice provisions may be found in sub-contracts, supply contracts and professional consultancy agreements alike), and looks at the legal issues arising from conflicts involving the failure to give proper contractual notices.

The function and contractual status of notices

The function of contractual notices could be said to depend upon your perspective. For a Contractor, a precise and unambiguous notice provision may assist by making it clear what the Contractor must do if it hits problems such as delay and needs to extend the completion date or claim additional money. Equally, a Contractor may likely perceive notices as an Employer's tool for suppressing otherwise legitimate claims for additional time and payment, and resulting in no more than an unnecessary burden on its project team's time and resources.

For an Employer, notices are an essential means of managing finances and budget. Notices assist the Employer with making informed decisions about whether, for instance, to proceed with a variation, a course of action that may cause delay or disruption or a course of action in order to mitigate such effects. Notices afford the Employer more time to react to problems.

The starting point for contractual treatment of notice provisions is that a failure to comply constitutes a breach of contract for which damages are payable. The local courts and, by extension, arbitrators adopt a pragmatic approach to notices – namely that a notice provision constitutes a term of the contract, to be observed and complied with like any other, and, failing compliance, the innocent party should be compensated for breach. Further, a key legal principle, embodied firmly in local law, is that remedy for breach of contract is monetary damages, the purpose of which is to compensate the injured party for the loss sustained. In short, compensation cannot exceed the innocent party's actual proven loss. This is critical to the subject of notices: it is rare, in practice, that an Employer can prove significant, if any, actual loss flowing from its Contractor's failure to observe a notice provision, particularly in the case of ancillary notice requirements such as providing detailed particulars. Consequently, notice givers generally have little incentive contractually to comply with the terms of notice provisions, as the risks of failing to do so can be relatively small.

Employers soon wised up and various measures have been devised to counter this reasoning, which have generally been incorporated into the majority of construction conditions in some form or another. These measures fall into two discreet categories: (1) express provision for the consequences of a failure to comply; and (2) making a valid notice a condition precedent (namely a contractual term that requires compliance with a defined obligation as a precondition to a right or an entitlement arising) to a right to time or money. There is a subtle but important distinction between the two approaches which has consequences for the challenges that can be advanced by a Contractor in response to these efforts to evade the compensation principles applied by local courts which shall be discussed below.

Conditions of Contract for Plant and Design-Build 1999

1. General requirements

There is no prescribed form within the Conditions of Contract for Plant and Design-Build 1999 ("FIDIC Conditions") for a notice. However, there are a number of general provisions of which it is worth taking note. General Condition 1.3 provides that:

"Wherever these Conditions provide for the giving or issuing of approvals, certificates, consents, determinations, notices and requests, these communications shall be: (a)   in writing ...."

This provision explains why the various notice provisions in the FIDIC Conditions do not expressly state that any notice must be in writing. It therefore creates a potential trap for the unwary Contractor as it will not be apparent by looking at the notice provisions in isolation that the notices must be in writing. Note that in accordance with General Condition 1.2(d), "written or in writing means hand-written, type-written, printed or electronically made, and resulting in a permanent record". Presumably this is intended to cover e-mail but that may depend upon ones interpretation of "a permanent record".

2. Key conditions

There are a handful of the FIDIC Conditions that are worth looking at in further detail on the basis that they contain their own internal notice procedure, in addition to compliance with the provisions governing the procedure for claims (discussed below).

  1. Unforeseeable Physical Conditions (GC-4.12): the trigger for the Engineer to determine the Contractor's entitlement to additional time and or money is the initial provision of notice "as soon as practicable" after having encountered the adverse physical conditions.
  2. Contractor's Entitlement to Suspend Work (GC-16.1): the Contractor's entitlement to suspend work following late payment or late interim payment certification is dependant upon the Contractor giving not less than 21 days' notice to the Employer. This notice is then a further prerequisite to the Contractor's right to an extension of time and/ or additional money in circumstances where the Contract suffers delay and/ or incurs costs as a result of such suspension.
  3. Consequences of Employer's Risks (GC-17.4): the Contractor is required to "promptly give notice" to the Engineer in circumstances where any of the Employer's Risks results in loss or damage to the works, goods or contractor's documents. Again, this notice is an additional precondition to recovery of additional time and/ or money in the event that the Contractor suffers delay and/ or incurs costs in rectifying the loss or damage.
  4. Force Majeure (GC-19.2): if a Contractor is, or will be, prevented from performing any of its obligations under the contract by virtue of Force Majeure, it is obliged to give notice setting out the relevant details "within 14 days after the Party became aware, or should have become aware, of the relevant event or circumstance constituting Force Majeure." By implication, this is an additional pre-requisite to the entitlement to claim for additional time and/ or money following sufferance of delay and/ or additional costs as a result of Force Majeure.

3. Claims procedure

GC-20.1 [Contractor's Claims] is omitted from the list above as GC-20.1 does not, itself, give rise to a claim for time or payment.

In summary, GC-20.1 requires the Contractor, if he considers himself to be entitled to any extension of time and/ or additional payment, to provide notice to the Engineer as soon as practicable, and no later than 28 days after he became aware, or should have become aware, of the event or circumstance giving rise to the claim. This gives rise to debate over the precise moment when the 28-day period begins to run – it is always open to the Employer to argue that the Contractor should have been aware of the event even if, in fact, he was not. GC-20.1 operates as a universal notice provision, adding an additional "notice layer" for the claims highlighted above, and serving as the notice mechanism for the remaining claims provisions, including GC-8.4 [Extension of Time for Completion]. It also introduces a clear and harsh contractual barring provision: if the Contractor fails to given notice within 28 days, he loses his claim entirely and the Employer is released from liability. Further, the condition makes it clear that claims that do survive the barring, will be reduced by the extent to which proper investigation thereof has been prejudiced by a lack of substantiation.

Eluding the contractual notice regime

There are several arguments available, pursuant to a contract and/ or Qatar law, to a Contractor that is found, as a matter of fact, to fall foul of a particular set of contractual notice requirements.

1. Breach of contract only

As stated earlier, failure to comply with a notice provision constitutes a breach of contract, for which compensatory damages become payable. Notwithstanding the fact that the FIDIC Conditions prescribe, in some instances of such failure, consequences that are far harsher than compensatory damages, the "compensatory principle" is still an important weapon for a Contractor. It is therefore always worth checking whether the consequences of a failure to comply are specified or whether this is left to be determined by the "compensatory principle". Notice provisions often comprise many elements. The notice must be given, but it must also be given within the requisite time, to a certain party/ parties, include certain details and in many cases, be followed by further particulars. A time barring mechanism may not cover these ancillary requirements and therefore, a failure to comply with any or all of these components parts may not be fatal to the claim, and may be merely a breach of contract the remedy for which should be a claim for damages alone.

2. Onerous obligations/ Penalty

In accordance with the "General Principle", enunciated in Articles 171 and 172 of Law No. 22 of 2004 ("Qatar Civil Code"), parties shall be bound by the terms they have agreed (provided such provisions are not contrary to public morals or mandatory provisions of local law) unless exceptional, unforeseen circumstances make performance of a particular obligation substantially onerous. Therefore, where the loss of an entitlement to claim is disproportionate to the loss suffered by the party to whom notice ought to be given, a court or tribunal is entitled to construe the notice clauses against the party seeking to rely on them. There might arguably be little or no loss resulting for an Employer from a late or "incomplete" notice, for instance.

By extension, whilst parties are free under local law to agree compensation in advance, the courts retain a discretion to amend the compensation to reflect actual loss. If the effect of the notice provision is to act as a penalty for a failure to serve notice, local law provides a mechanism whereby judges and arbitrators can adjust the effect in order to match the consequences of the failure to give notice to the actual loss suffered by the Employer.

3. Unclear provisions

Where it is arguable that the terms of a contract are unclear or ambiguous, a court or tribunal applying local law has a discretion to "look behind the terms of the contract" in order to assess the intentions of the parties.  Guidance on interpretation of contracts with ambiguous terms is contained in Article 169(2) of the Qatar Civil Code, which provides, "if there is a case for interpreting the contract, the common intention of the contracting parties must be examined without being restricted to the literal meanings of the terms...." Thus, if compliance with a particular notice provision entails an element of ambiguity as to when and how a Contractor must give notice, a discretionary approach may be applied and the notice provision in question may be subject to an interpretation that does not suppress a Contractor's claim entitlement.

4. Notice in Writing?

As set out above, the FIDIC Conditions stipulate that all notices must be given in writing, with "writing" defined as any hand-written, typed-written or printed communication. The question is, what actually amounts to notice in writing and what are the consequences of a failure to comply?

The FIDIC Conditions as discussed above do not specify that notice be given in writing. That is because of the "catch-all" requirement at GC1.3 that requires that where notice is required, this must be in writing. However, GC-1.3 does not specify the consequences of a failure to give notice in writing. Therefore, giving notice in some other form arguably merely constitutes a breach of contract (for which compensatory damages are payable) but is not, necessarily, fatal to a claim.

Further, there are certain forms of notice that are less obvious than the letters or faxes that one generally thinks of when faced with a "written notice" requirement and that should not be overlooked:

  • (a) minutes of meeting, particularly if these must be signed and returned to the Engineer (GC1.3 does not specify who must create the communication);
  • (b) material submittals, on which comments and notes are often written and which are exchanged between the parties;
  • (c) priority lists circulated amongst the parties, that indicate which issues, from a Contractor's perspective, the Engineer should treat as priority so as to prevent delay to the impacted works;
  • (d) a statement on completion; and/ or
  • (e) interim payment applications which may include an amount for variations or other financial claims arising during the period covered.

In short, any documented evidence of an event giving rise to a claim that is sent, given or otherwise produced to the Engineer or Employer, may be argued to constitute written notice.

5. Intention to claim

Some forms of contract (for instance, the Fourth Edition of the Conditions of Contract for Works of Civil Engineering Construction published by FIDIC in 1987 or the Red Book) contain an obligation to give notice of an "intention" to claim (to be followed thereafter with detailed particulars). If a Contractor can show that the intention to claim only arose much later than the event giving rise to the right to claim, this will substantially extend the time for giving notice. It appears that the reasoning makes no difference as it is only the intention that counts. However, there are many reasons that may be advanced. A Contractor may not intend to claim because the Employer stated that it would "see him right" and later reneges on that promise. Alternatively, a Contractor may state that it did not have the resources to investigate claims until a much later stage and as a result, it was not aware of its rights and could not, as a result, form an intention to claim.

6. The Employer's Representation

An Employer or Engineer may sometimes state that the receipt of notices of claims are unwelcome, and further, may seek to persuade a Contractor not to issue proper notices in accordance with the contract on the basis that, of course, the Contractor will be treated fairly regardless. In the case where the Employer fails to make good on such promises, a Contractor may be able to rely on the representations that were given in order to prevent the Employer from using the notice provisions to deny liability for claims that were not properly notified.

The difficulty lies in proving, not only that the representations were made, but also that they were made in a sufficiently clear and forceful way as to make it reasonable for a Contractor to rely on the representation. Whilst there may be some provisions of the Qatar Civil Code that may assist, generally arguments on this ground present a Contractor with an uphill struggle. One option, where the representations are made by the Engineer, may be to demonstrate that the representations constituted instructions pursuant to GC3.3 of the FIDIC Conditions (or similar contract).

7. Alternative causes of action

If a claim has fallen foul of a notice provision, it may be possible in certain circumstances, to reformulate it in a way that brings it within less stringent notice requirements. Some standard form contracts incorporate terms that allow claims to be accepted even though notice provisions have not been complied with. A court or tribunal may be prepared to use such terms to assess and award claims previously disallowed by the certifier under the contract. Under the FIDIC Conditions, this means reviewing each individual claim to establish whether the event giving rise to the claim amounts to a breach of the contract.

8. Conflicts with local law

Where a contract is governed by local law, thought should be given as to whether there are any general, overriding provisions that can be used to a Contractor's advantage.

It may be argued, for instance, that an Employer is not entitled to deny a Contractor its claim on grounds of lack of notice in circumstances where to do so would be a breach of the requirements of good faith as required by Article 172 of the Qatar Civil Code and/ or an abuse of rights contrary to Article 63 of the Qatar Civil Code. The circumstances in which this might apply vary and may be limited in scope. By way of example, in the context of an extension of time claim, it may be a breach of the requirement of good faith and/ or an abuse of rights for an Employer to deny the Contractor an extension of time in circumstances where the Employer and/ or the Engineer knew, or ought to have known, that the Contractor's progress had been delayed by matters for which the Employer was contractually responsible.

Finally, there is an overarching provision that will almost always offer a worthwhile fallback. The general principle under Shari'a law (the overarching law in Qatar) is that "a just claim never expires". In circumstances where a Contractor is found to have factually failed to comply with the relevant notice requirements, and that failure is fatal to its claim, these notice requirements are subject to this principle. In applying this principle, a rounded view of the circumstances would be taken alongside a number of considerations, including the parties' intentions and the requirement for trust and good faith in dealings between contracting parties, to reach what is considered to be a fair and just conclusion.

Recommendations

In the event of non-compliance with contractual notice provisions, there are several arguments available to a Contractor both under contract and pursuant to local law. However, ultimately, much will depend upon the sympathy received from a judge or arbitrator and the skill of the Contractor's legal representatives.

The best policy is clearly, therefore, to know your contract and comply with the letter and spirit of its contractual notice provisions. It is, undoubtedly risky and at the least, time consuming and expensive to have to repair the damage of a failure to comply at a later stage. Sit up and take notice of your contractual notice provisions from the outset.

Note: All Qatari Laws (save for those issued by the Qatar Financial Centre (QFC) to regulate its own business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translation and interpreted the same in the context of Qatari regulation and current market practice.

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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