10 November 2017

Are time bars enforceable?


Time bars prevent a party from exercising a right under a contract outside a prescribed timeframe. The general rule is that time bars are enforceable, although there can be exceptions.


Examples of time bars

A typical construction contract will require the contractor to complete an agreed scope of works for an agreed price within an agreed period of time.

It will also contain provisions that will allow the contractor to claim adjustments where circumstances change. Classic examples include variations, delays caused by the Principal and the discovery of latent conditions.

To ensure potential adjustments are promptly brought to the principal's attention, most modern contracts contain provisions that require a notice or claim to be given within a specific period of time. (For example, under AS 4000, a notice of delay must be given 'promptly' and a claim for an extension of time must be made within 28 days.)

A time bar is typically an additional clause that bars or invalidates a claim made outside the prescribed timeframe.

What do time bars look like?

Clause 37.2 of AS 4000 is as follows:

 A party becoming aware of anything which will probably cause delay to the work...shall promptly, and in any event, within 5 business days, give...written notice of that cause and the estimated delay

This clause is effectively the opposite of a time bar. Although the contractor is required to give notices and make claims within a prescribed timeframe, the practical effect of this drafting is that a claim will not be barred unless the principal has suffered a loss because of the delay. An example is where the principal would have behaved differently, had it been aware of the claim.

In contrast, a typical time bar will look something like this:

If the Contractor does not give to the Superintendent, within the requirements of the contract, any claim or notice within 14 days of the Contractor becoming aware of the circumstances giving rise to the claim or notice, the Contractor shall not be entitled to the claim or to any claim arising from those circumstances.

The key features of a time bar are that:

  • it expressly bars or invalidates the claim; or
  • it makes the contractor's entitlement conditional upon a notice or claim being given within the required timeframe.

Are time bars enforceable?

The general rule is 'yes'. However it will always depend on the terms of the contract and the circumstances that have arisen.

CMA Assets Pty Ltd v John Holland is a recent example of a fairly extreme set of facts where a time bar was enforced.

In this case, the contractor had to submit an EOT claim every 5 days after the first occurrence of the delay. Further, the contract stated that the contractor would have no entitlement if:

  • it did not give the notices within the required timeframe; or
  • its notices did not contain various prescribed information.

In this case, the contractor did not give the notices required by the contract. It tried to argue that it did not have to give the notices because the principal, John Holland, was aware of the delay. (In fact, not only was John Holland aware of the delay, it was also found to have caused it.)

The court found that, because the notice requirements had not been satisfied, the time bar applied. The judge said:

There is no doubt that the strict application of cl 10.12 and cl 10.13 is harsh. But I am not satisfied that it is without purpose and absurd, so that an alternative construction must be given, notwithstanding apparently clear words.

Exceptions

The CMA case is not an isolated one, and it provides a clear warning to contractors. From a contract administration perspective, the assumption should always be that the time bar will be applied according to its terms.

That said, there can sometimes be exceptions. For example, depending on the terms of the contract and the surrounding circumstances:

  1. The prevention principle can sometimes be applied to avoid liquidated damages, and contractors can occassionally be entitled to EOT without having claimed one.
  2. Principles of estoppel and waiver can sometimes be applied to overcome the words of the contract.
  3. The Australian Consumer Law may be available to provide relief if there has been misleading or deceptive conduct by the principal.
  4. Depending on the value of the contract and the nature of the parties, the clauses may be voidable under unfair contracts legislation.
  5. Where delays and liquidated damages are involved, and depending on how the clause is drafted and the rate of damages being applied, it may be that clause can be characterised as a penalty with the result that liquidated damages may be unenforceable.

There may also be other avenues for relief, depending on the circumstances. 

Even though there may be ways of negating the effect of time bars, the key point remains. In administering the contract, contractors should assume that a time bar will be enforced according to its terms, no matter how harsh the outcome may seem. Accordingly, careful attention needs to be paid to the terms of the contract to ensure all relevant requirements are satisfied.

New call-to-action

About the Author

Greg Henry | Principal

Greg is a principal at Turtons and a senior commercial lawyer who acts for a range of clients mainly in the construction and technology sectors. Greg advises on both transactional and contentious matters.


greg.henry@turtons.com | (02) 9229 2904

About Turtons

Turtons is a commercial law firm in Sydney with specialist expertise in privately owned construction and technology businesses.

Greg Henry | Principal

Author

Greg Henry | Principal

greg.henry@turtons.com

Greg is a principal at Turtons and a senior commercial lawyer who acts for a range of clients mainly in the construction and technology sectors. Greg advises on both transactional and contentious matters.


greg.henry@turtons.com | (02) 9229 2904

New call-to-action

Join our free construction law newsletter.

Monthly insights and practical tips delivered straight to your inbox.

Resources
Careers