Creating and sending contract cancellations always makes me nervous. There are so many things that can be done wrong: is it on time, where should I send it, to whom, how should I send it? Not to mention the actual content of the reference.
For those of you like me, the recent Transport for Greater Manchester v Kier Construction Ltd case shows that we are right to be concerned about these things. Notes are important and getting them wrong has serious consequences.
The facts – a brief summary
Transport for Greater Manchester (TfGM) commissioned Kier Construction Ltd to design and build a bus station in Bolton under an amended NEC3-ECC contract.
Unfortunately, what happened next is a familiar story. The work was delayed, TfGM deducted a contractual penalty, Kier appealed and issued a judgment demanding an extension of the completion date and repayment of the contractual penalty. The judge ruled in Kier’s favor.
Pursuant to Clause W2.4 of the NEC3 ECC, the adjudicator’s decision now becomes final and binding, unless a party submits a statement of dissatisfaction within four weeks of receiving the adjudicator’s decision. Within four weeks of the decision, the TfGM’s lawyers sent Kier’s lawyers an email stating that the judge had made a legal and interpretative error. It also reserved TfGMs:
“Right and intention to seek a formal solution in order to reverse the outcome of the decision.”
TfGM’s lawyers sent the notice to Kier’s lawyers by email and post.
On the back of this announcement, TfGM published a Part 8 demand calling for the final resolution of the disputes and for the adjudicator’s award to be set aside. Kier tried to prevent the lawsuit. It was said that the court did not have jurisdiction because TfGM had not delivered a valid dissatisfaction notification according to Section W2.4, in particular the notification:
- was sent to the wrong address;
- included messages on other topics; and
- did not provide that TfGM intended to refer any particular matter to court.
Let’s look at each of these points in turn.
Where should the message have been sent?
In accordance with section 13.2 of the contract between the parties, a notification is effective if it is received at the address last communicated by the recipient for the receipt of notifications or, if no notification is made, at the address of the recipient specified in the contract data.
In the contract data, the registered address of Kier was specified as the address for communication within the framework of the contract. Further contractual provisions stipulated that all communication must take place via the project extranet. Kier argued that the dissatisfaction notice was invalid because it was sent to their lawyers rather than their registered address or the project’s extranet.
TfGM disagreed, saying the notice was correct because:
- Kier had approved communications regarding the decision through his attorneys; and
- For the purposes of the case law, Kier gave the contact details of his lawyers in the notification and the referral notice and the lawyers of the TfGM had done the same. None of the parties raised critical objections to this approach.
Ms. Justice O’Farrell disagreed with Kier’s argument, arguing that the information exchanged between the parties’ lawyers for the purposes of the decision was the “last communicated address” under Clause 13.2 of the contract. Had Kier been right and had it not been permissible to deliver communications to the parties’ lawyers, his own notices of service would also have been invalid.
What should the notice have included?
Kier said that the TfGM’s communication was invalid because it was not precise enough and therefore did not meet the requirements of Section W2.4. Justice O’Farrell again disagreed that the TfGM notice was a valid dissatisfaction notice for the purposes of Section W2.4. The main takeaway here is that, to be valid, the notice should be clear and precise to alert the other party that the decision is being contested. However, the reasons for the dispute do not need to be stated in the notification.
Should the notification have been sent separately?
Another argument made by Kier was that the notice contained other matters and was therefore inconsistent with Section 13.7, which said:
“A communication required by this contract will be sent separately from other communication …”
Again, Mrs. Justice O’Farrell Kier disagreed. The letter consisted of only three paragraphs, each dealing with the contested award decision. The fact that the TfGM referred to its intention to pay the adjudicator’s disputed amounts is not a separate notification that requires a separate notification.
This case underscores the importance of the care that is required in handling communications. For those of you who get nervous about sending out notifications, I offer this checklist:
- The basic starting point is that a communication should make it clear that it is a communication and what it is communicating.
- Start with the notice period. Identify:
- Who should the message be sent to?
- Who should send it?
- Where should it be sent?
- How should it be sent there?
- When does it have to be sent?
- When is it considered to have been received?
- Do I have to state the clause to which the communication relates? Note that some contracts such as the FIDIC Red, Yellow and Silver Forms 1999 and 2017 require that certain notices relate to specific clauses (e.g. DAAB decision) on the 2017 forms. Although this is not always mandatory, you can if you want to communicate something under a certain contractual clause, explicitly refer to this clause in your communication in order to avoid future disputes about its validity.
- What information do I have to provide in the notification?
- When sending a message by email:
- First, check whether the contract provides for this type of service;
- address the message to the correct email address. Do not put your intended recipient in CC or BCC;
- to avoid any doubt as to whether the recipient received the email, phone, and check (and make a note of that call).
Finally, when in doubt, cover all the basics and send to more than one recipient in more than one way. It’s the little things that count.
This article first appeared on the Practice Law Construction blog on June 2, 2021.