Project managers and engineers are often entrusted with the important task of issuing notices and instruction in construction projects. These notices and communications are frequently issued with little regard to the provisions of the contract, resulting in disputes in many instances as to the validity of such notice or other communication.
The importance of sufficiently detailed contractual notices was once again highlighted in the case of Oil States Industries (UK) Ltd v Lagan Building.[1] concerned the construction of a new product facility and was based on the form of the SBCC’s Design and Build Contract for use in Scotland DB/Scot (2011 Edition). The Parties challenged the validity of the contract notice and instructions provided by the Project Manager.
The contractor (“Lagan Building”) argued that the instructions it was given by the employer (“Oil States Industries”) were invalid because they were not sufficiently clear and unambiguous for the contractor to understand the nature of the issue raised and the particular action required to remedy the issue. Furthermore, the contractor accepted that the contract provided a right to terminate the contract for material breach after a notice of default is provided. However, it argued that the notice did not provide sufficient detail to enable to assess validity of notice and procedure of remedying the breach.
Instruction 67 provided that:
“The Roof has not been constructed in accordance with the contract. We instruct you to carry out any Works necessary to remedy this. Please provide a copy of your proposals together with a Programme for undertaking these works.”
Instruction 68 provided, in relation to “Internal Floor Slabs – Fabrication and Machine buildings” that these works have not been constructed in accordance with the Contract, consequently we instruct you to carry out the necessary Works to remedy this noncompliance. We request that you provide your proposals, together with the programme, for these remedial works.”
In determining the validity of these notices, the court held that the notice must be interpreted as a whole. The notice it must be sufficiently clear and unambiguous to enable a reasonable recipient (i.e. someone having all the background knowledge reasonably available to the recipient at the time of the notice) to understand the contractual basis for the notice and (in the event of a breach) the nature of the breach which is alleged to have occurred, so as to be able to assess the validity of the notice and take such steps as are open to him to remedy the alleged breach.
The court was of the view that the principles which applied to notices applied equally to instructions. In applying those principles, the court was not convinced that instruction 68’s reasonable recipient, having all the background knowledge reasonably available to it at the time of the instruction, would not have understood the respects in which it was said that the slab did not comply with the contract and that the non-compliance had to be remedied. In terms of instructions 67 the court was convinced that it did not contain sufficient detail for the contractor to understand as it contained irrelevant information.
In summation this case confirmed the notion of substance over form. In a South African context the principles above have been similarly applied by the Supreme Court of Appeals in the case of Hawkins Hawkins & Osborn (South) (Pty) Ltd v Enviroserve Waste Management, which concerned the interpretation of the General Conditions of Contract for Works of Civil Engineering Construction.[2] The court, in determining the validity of the notice, placed more emphasis on the substance of the notice rather than the form which the notice took. The court held that “I can find no reason why a notice cannot be in the form of a letter, provided that the letter is so framed as to communicate unequivocally to the addressee that the writer is invoking, or relying upon, the provisions of the contract which provide for the giving of notice. It may do so expressly or by implication. The purpose of the notice is to afford the employer an opportunity to consider other, perhaps less costly, alternatives to deal with the adverse physical conditions encountered by the contractor. On the contractor’s side, the notice enables it to claim additional cost for additional work done which could not have been considered or catered for at the time of tender due to its being unforeseen.”
It is clear from the above cases that in order to be valid, notices and instructions must be sufficiently clear and detailed to allow the party receiving the notice or instruction to understand the contractual right or breach relied on and to act on the notice.
To avoid disputes concerning the validity of contractual notices and instructions, parties are encouraged to ensure that contractual communications are issued in accordance with the provisions of the contract and are clear and unambiguous.
Authors:
Nikita Lalla, Chief Executive, LNP Attorneys Inc.
Zama Ngcobo, Director, LNP Attorneys Inc.
Bongani Memani, Candidate Attorney, LNP Attorneys Inc.
[1] [2018] CSOH 22
[2] 2009 (4) SA 425 (SCA).