Conditions Precedent and Obrascon

Posted on Behalf of Patrick Wisheu

Parties can easily fall foul of condition precedent clauses in relation to delay/extension of time claims preventing them from exercising certain rights under the contract - as seen in Obrascon Huarte Lain SA v Her Majesty's Attorney General for Gibraltar [2014].

Akenhead J in Obrascon decided that such condition precedent clauses should be interpreted reasonably broadly to prevent parties from being barred from bringing otherwise good claims for failing to comply with stringent notice provisions.  It appears that this remains good law as the Court of Appeal recently dismissed the appeal against Akenhead's decision (although the appeal was limited to other grounds of dispute). 

A clause similar to that in question in Obrascon appears in the NEC3 suite of contracts in relation to Compensation Events: the Contractor is required to notify the other party within 8 weeks of believing that a compensation event has occurred otherwise it loses its right to claim for an extension of time or for any costs.  As seen in Obrascon there are grounds for this type of provision to be interpreted reasonably broadly.  It is arguable that for limited categories of compensation events that this time limit will begin to run from when the consequences of the event have become apparent rather than from the happening of the event itself.  This may give a Contractor additional time if they failed to give notice within 8 weeks of the event.

However, this may be difficult and uncertain to argue and as adjudicators and the courts can only go so far in interpreting the contract, Contractors should remain careful when dealing with compensation events and ensure that notices are given to the Project Manager within the required time periods to avoid falling foul of such condition precedent clauses.