Litig8: Contract drafting: Time-bar take-outs

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By Stephen Dickens, Partner

Each month as a part of Mills Oakley’s Litig8, we bring to you snapshots of eight key cases, legislative changes or other legal events. The summaries are not comprehensive and do not constitute legal advice. You should seek professional advice before taking any action based on the content of this email.

Part 3 of the May edition of Litig8

Mills Oakley recently presented a seminar on the drafting and implications of time bars in commercial contracts. Here are some highlights from that seminar.

A time bar clause provides for the time in which a party must give notice of a claim. Courts are generally cautious when interpreting time bars in commercial contracts because there is no conclusive authority on the meaning of a particular clause in a contract.

In the recent case of CMA Assets Pty Ltd formerly known as CMA Contracting Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC 217, CMA’s otherwise reasonable claim was rejected by the Court because of its failure to comply with notice the provisions in a time bar clause in a subcontract between CMA and John Holland.

In the case, John Holland had hired CMA under a subcontract to carry out demolition and associated works on a wharf in Port Headland, Western Australia.

CMA was delayed in carrying out the works under the subcontract due to John Holland’s failure to remove a ship loader from the wharf as well as an unexpected amount of concrete reinforcing on the structure.

Under the time bar in the subcontract, in order to make an effective claim in the event a delay, CMA was required to notify John Holland in writing under the contract of:

  1. the prospects of delay as soon as CMA became aware of the chance of delay in the works;
  2. CMA’s intention to claim an extension of time to carry out the works within 7 days after the delay causing event; and
  3. CMA’s claim for an extension of time within 14 days after the commencement of the delay.

CMA provided John Holland with several written notices which did not comply with the time stipulations in the time bar clause. CMA claimed that given the delay was entirely within John Holland’s knowledge and control, CMA’s notices should be held to be effective in the context of the project.

The Court accepted that John Holland ought to have been aware of these issues and their likely effects, including delaying CMA’s works.

The Court did distinguish this case from earlier authorities in which the subject time bar clause did not prescribe the form and content of the notices in question and held that John Holland was entitled to reject CMA’s claim on the grounds that CMA did not provide John Holland with the prescribed information pursuant to the time bar, nor did it comply with the time stipulations set out in the clause.

When drafting or reviewing time bars in commercial contracts, practitioners should keep in mind:

  1.     when properly drafted, time bar clauses are effective and enforceable;
  2.     a clause that merely requires a notice to be given within a period of time will generally be interpreted as factitive rather then mandatory;  and
  3.     for a clause to amount to an enforceable time bar it should, at the very least:
    1. ensure time limits for notices of claim are a condition precedent; and
    2. specify that a claim will be barred if not made in time.

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