Conditions Precedent

Let us identify two competing interests present in every construction contract:

  • The employer wishes the highest specification for the lowest cost; &
  • The contractor wants to build only the minimum work in the design for the maximum profit (not cost).

This tension gives rise to conditions precedent. Let us imagine that a variation has been instructed:

  • The employer wants to be certain as to the time and cost impact immediately (indeed he may even wish to withdraw the variation if it is too costly); &
  • The contractor, on the other hand, doesn’t mind doing the work, but would rather be paid his actual cost than his best guess at the outset.

In construction contracts, conditions precedent essentially say the following: “unless you (1) do this (2) by then, (3) you lose that.” In our defects example, the clause might thus say; “unless the contractor notifies that it will suffer a time and/or cost impact within five days of any instruction to vary the Works, he will not be entitled to do any extra time and/or cost” (but will still do the varied work).

This may seem grossly unfair to the contractor; after all he is busy on site and may not have the resource to submit the necessary paperwork on time, or he may not be certain immediately the instruction is given that the time and/or cost will in fact increase.

Worse, it is often argued that the condition precedent is buried within a clause; for example somewhere within the variation mechanisms in our example above.

The courts, however, generally uphold condition precedent clauses, as the employer can always explain the need to be certain as to the (varied) time and cost of his project. Unlike consumer contracts, where consumers can say that a business should do enough to bring a difficult clause to their attention, commercial entities rarely have such benefit when contracting (i.e. commercial (or even private) employer to commercial contractor).

The advice to contractors is thus to be absolutely certain to identify every single condition precedent in your contract.

The wording needs to be carefully agreed; for example:

  • Who can the employer communicate with (for fear it lands on a site desk and gets covered in PPE and missed);
  • Do you act within five days of the instruction or within five days of it first becoming apparent to you that there will be a time and/or cost impact;
  • Do you notify the actual impact (even by way of a forecast) so that it can be agreed in advance or do you merely notify the possibility for later assessment;
  • Do you have to submit an updated programme; and/or
  • Do you start the varied work before you are told that your time and/or cost are agreed?

During the contract, compliance with the condition precedent is thus paramount. Don’t leave it to chance; refer to the relevant clause in your communication and say: “I got this instruction on this date. Clause x says that I have to notify that there is a (potential / actual) time and/or cost impact within five days of the instruction. I am thus notifying you today; which is day four.”

Equally, check the contract mechanism for the giving of such notices. Very rarely contracts are explicit that notices must only be by registered post deemed to arrive two working days after they are sent. So for a five day deadline, you would have to post your notice by the prescribed method by day three, if it is to arrive by day five. Can you use email and is it deemed received immediately? Does an email sent after 5:00pm arrive the next working day?

Also, check the format and content requirements of the notice that you give; is a programme showing an impact to the critical path enough without further explanation? Is a site meeting (for which minutes are produced) enough to be the required notice?

A condition precedent is not to be feared; but it is to be complied with.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.

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