Biggart Baillie Solicitors

Construction Contracts - Do You Have A Record?

Tuesday, March 29, 2005

by Murray Shaw

Most construction contracts require the provision of notices in respect of claims, followed up the provision of information in relation to the time and financial consequences of these claims.  In many instances supporting information and records will be required to substantiate claims.  In reality these type of provisions are commonly ignored by contractors.    Even where the requirement to give a notice is not a condition precedent to a successful claim the failure to keep adequate records may be extremely damaging to the prospects of a successful recovery.

In the absence of necessary records a contractor or sub-contractor may have no choice but to make a “global” claim.  This could be risky – see John Doyle Construction Limited v Laing Management (Scotland) Limited decided in the Scottish Courts in 2004 but under appeal.

Equally the absence of proper records it is likely to mean that the party making a claim will be unable to demonstrate the true loss and expense resulting from events which the contract provides an entitlement to rely on.  Any retrospective exercise of trying to calculate the cost it is likely to be artificial with a consequent lack of credibility and justification.

The consequence of the failure to keep contemporaneous records was recently the subject of a decision in the Falkland Islands concerning the FIDIC conditions of contract.  These require the contractor, if intending to pursue a claim for additional payment, to give notice of that claim and to keep “such contemporary records as may reasonably be necessary to support any claim he may subsequently wish to make”.  The relevant clause goes on to provide that if such records are not maintained then the amount of any entitlement is limited to the amount which may be verified by contemporary records.  In this particular case a contractor sought to support claims by reference to witness statements prepared for the purposes of arbitration.  The court held that “contemporary” meant that the records had to have some relationship in time to the event founded upon and witness statements made some considerable time after the event could not fulfil the requirements of the contract.  The consequence was that as there were no contemporary records available to support the claim, the claim failed to the extent that those contemporaneous records were not available.

While the requirements of this particular form of contract may be more rigorous than those found in the standard forms of contract normally used within the UK it does emphasise the risks of not complying with the contract.  Given the margins available in the market you simply cannot afford the risk of losing money due by simply failing to keep good records or indeed giving the proper notice.  The simple rule is to do what the contract requires.