Substance is key in Notifications of Claims

  • SumoMe

The main role during the execution of the agreement as “Engineer” (under the GCC) or “Principle Agent” (within the JBCC) demands frequent decisions and rulings relating to the actions on-site. This function can be often overlooked and might draw in significant liabilities.

Professionals in the development and engineering industry are usually hired as the Engineer or Principle Agent. It is required of the professional satisfying this essential function to be au fait not just with the contract terms, but the execution thereof.

Consider some of the implications of bad decision making by the Engineer or Principle Agent under these kinds of construction agreements? One instance where the courts talked about the yardstick with which the Engineer or Principle Agent is to be assessed is inside the case of Hawkins & Osborn (South) (Pty) Ltd vs Enviroserve Waste Management. The decision not only sets the current standard in this regard, but in addition appears to be a reminder to Engineers and Principle Agents to behave in a reasonable manner whenever conducting themselves as the Employer’s representative on location.

In cases like this, as in various other instances in the building and engineering sector, the Employer (Enviroserve Waste Management) concluded an oral agreement with the Engineer. The Engineer was employed to monitor and manage a number of contract functions.

The Employer then signed a written contract with a Builder to complete digging on a certain site. The written contract involving the Employer and the Builder contained the General Conditions of Contract for Works of Civil Engineering Construction – 6th edition.

The contractor raised a disagreement in terms of a “notification” of possible claims communicated to the Engineer inside a letter. The Engineer did however not consider the letter as proper notice. The results of the Engineer’s decision would be a deadlock between the Employer and the Builder that had to get remedied by an Arbitrator. The Arbitrator ruled that the letter was definitely adequate notice and therefore the service provider was allowed to lay claim as informed therein.

Resulting from the Arbitrator’s judgment, the Employer had to pay for the Contractor’s claim, but then claimed damages for breach of agreement from the Engineer in the High Court. The Employer based its claim on an accusation that the Engineer breached the contract by neglecting to construe the Contractor’s letter as an acceptable notice of the intent to get payment for extra work as considered in clause 50(1) within the GCC.

The original court identified that no breach of agreement had transpired as the Contractor’s letter failed to constitute adequate notice as considered in clause 50(1) within the GCC.

Nevertheless, it was held by the Supreme Court of Appeal that:

“…there was no reason at all why the notice contemplated in GCC 50(1) cannot be in the form of a letter granted the letter was so framed as to communicate unquestionably to the addressee that the author was invoking, or counting upon, the provisions of the agreement which provided for the providing of notice. It could do so expressly or by insinuation. In the present case, the contents of the final paragraph of the Contractor’s letter were so closely connected with the substance of clause 50(1) that it completely satisfied that standard. The letter furnished information needed by clause 50(1) (a) and (b).”

The Contractor’s letter did comply with the specifications of the contract because it contained all the info which was needed to represent a notification as required by clause 50(1) of the GCC. The technical approach adopted by the Engineer in dealing with the “notification” by the Contractor wasn’t viewed as justifiable by the Court of Appeal. On the flip side, the Court found that the Engineer’s behavior in connection with this hadn’t been satisfactory as assessed against the standard of the “reasonable engineer”.

The letter therefore constituted a notice which any reasonable professional would’ve construed as such. The Engineer’s inability to do so therefore constituted a violation of the Engineer’s obligation of care and, thus the contract with the Employer. The Engineer was found liable to the Employer in the amount owed and payable to the Contractor under the award of the Arbitrator in the first settlement between the Employer and the Builder.

Focussing exclusively on particular legal fields, Dirk is able to make early and accurate assessment of merits and manage legal disputes effectively. His specialist practice areas include construction law and engineering law, insurance law, property law, medical law and product liability law.

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