How to draft the perfect notice of delay (and why they’re a lot more important than you think)

Updated: Apr 27

Aside from usually being a precondition to any extension of time (EOT), notices of delay are often helpful in resolving disputes early on

Construction contracts deal primarily with three things – costs, time and risk allocation.

It’s pretty obvious from a plain reading of a construction contract how it deals with time. Usually one part will specify when the works are required to be completed by and another part will set out how the date for completion can be changed.

Construction contracts are, however, more subtle as to how they manage risk. One of the biggest risks for any project is the amount of time that it takes to complete the works.

There are many factors which can affect the timing of the works, such as inclement weather, latent conditions, changes in legislative requirements or design changes.

All well drawn contracts clearly assign the risk of each type of event onto either the contractor or the principal. For example, if works carried out as a result of a latent condition do not entitle the contractor to claim an extension of time, then that risk falls on the contractor.

Good builders and principals deal with time related risks primarily in three ways.

First, they build contingency or ‘float’ into the time estimated to complete the project. That way if there is a delay, it is within the boundaries of what is acceptable to make the project profitable.

Second, they ensure that as much risk as possible is passed down the chain to subcontractors. Over the past 20 years, the risk expected to be taken on by subcontractors has increased significantly. Take civil works for example. In years gone by, every civil subcontract contained a carve out which allowed the subcontractor to claim additional costs for excavating rock compared to soil or other material. These days, with advances in technology and an increasingly competitive market, it is not uncommon for some civil subcontractors to take on the risk of excavating rock entirely.

Third, and most importantly, modern contracts contain mechanisms which force the contractor to provide ‘early warning’ notices of any potential change in time or cost swiftly. If these notices are not provided, then the contractor often risks losing its entitlement to claim extra time or costs altogether.

These early warning mechanisms are designed to allow the principal to become involved in an issue early on and hopefully work with the contractor to resolve the issue with minimal changes to the original budgeted time and cost for the project.

The main notice in the early warning system for time related changes is the notice of delay.

I explained in my article on EOTs that an invalid EOT can result in disaster for a contractor. This is because, failing to secure an EOT can result in a ‘double loss’ for a contractor by not only being liable for liquidated damages, but also losing their entitlement to claim delay costs.

Whilst failing to secure an EOT can result in a double loss, failing to serve a notice of delay can perhaps result in a third loss – being the opportunity to resolve a dispute early.

Often overlooked and ignored, the notice of delay serves a dual purpose in:

  1. serving as a precondition for the contractor being entitled to claim an EOT (or in more simple terms, a hurdle that must be overcome before the contractor is entitled to claim an extension of time); and

  2. giving the principal the opportunity to investigate the delay and adjust accordingly. If the principal is a head contractor, this means preparing and gathering its evidence for a claim up the chain. If the principal is a developer or owner of the project, it gives them the opportunity to refinance or adjust the price for the development.

In Multiplex Constructions (UK) Limited v Honeywell Control Systems Limited (No. 2) [2007] EWHC 447, Justice Jackson described the purpose of notices of delay as follows:

“Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.

Delays can sometimes last for long period of time and it is not often clear when it will end. When a prolonged delay occurs, it can be unfair for the principal to only find out about it at the end (rather than the start) when it may have the opportunity to issue a direction which might minimise the delay altogether.”

Also, a well-drawn notice of delay can often be used as a ‘trial run’ or checklist of issues to be addressed in any other claims such as EOTs.

And herein lies the utility of the notice of delay – it is the first opportunity to avoid a dispute. This is because, a well-drawn notice of delay informs the head contractor of a potential delay, identifies the facts underlying a potential delay and gives the principal an opportunity to investigate and mitigate the effects of the delay.

A notice of delay, however, is not a claim in itself. It is merely a notice to the principal that a delay may occur to any part of the works. Given that it’s not a claim, it is all too often ignored – forcing the parties into dispute when an EOT is finally claimed and it’s too late for the principal to properly investigate whether the EOT should be granted. When this occurs, the principal has no option but to resist the claim or risk losing money on the job.

Below, I set out how to prepare the perfect notice of delay that will not only secure your claims but also, help avoid any dispute before it begins.

Step no. 1 – identify whether a notice of delay is required under the contract

There is no requirement for a contractor to provide any notice of delay outside that which exists in the contract. Most standard form contracts require the contactor to provide a notice of any delay to the works.

Crucially, a notice of delay is usually required to be given for ANY delay to the works, rather than a delay that affects the date for completion.

For example, the Australian Standard Administration Manual provides:

“The notice of delay by the Contractor or the Principal must be given under subclause 34.2 whether or not the party giving the notice believes there will be delay to practical completion as the obligation to notify arises when the party believes that there will probably be a delay to WUC, not whether the party believes practical completion may be delayed.”

In other words, if a contract requires the contractor to serve notices of delay, then they are technically required to provide notice every time there is an event which delays the works – even if the delay doesn’t affect the date for completion. No doubt, this requirement can result in a lot of paperwork being generated, so it is not uncommon under some contracts for there to be no requirement to serve a notice of delay at all.

If there is no requirement to provide a notice of delay, then there is no need to do so. Some contracts merely require the contractor to make an extension of time claim in the event of any delay.

That being said, there is often still merit in providing a notice of delay for the reasons set out above. Should you decide to serve a notice of delay under a contract where you’re under no requirement to do so, then make sure that it’s clear the notice of delay is not your EOT claim.

This is because, most contracts specify exactly what information has to be provided in an EOT claim, which are unlikely to be able to be dealt with in a notice of delay.

Step no. 2 – identify the timing requirements for any notice of delay

Strict contracts usually make the contractor jump through certain ‘hoops’ before they’re entitled to claim a variation or extension of time.

For extension of time claims, the notice of delay is the first hoop – usually making the notice of delay a precondition for the contractor being entitled to claim an extension of time.

In other words, under a tight contract – no notice of delay, no EOT.

Ultimately, the timing requirements for any notice of delay will be unique to each contract.

Under AS2124 and AS4000 series contracts (AS4000, 4901, 4902, 4903, 4905, 4906 etc.), any notice of delay must be given ‘promptly’. There is no consequence stated in the contract for a failure to provide the notice.

That being said, it is important to note that if the Contractor wishes to claim an EOT under AS2124, then it must do so within 28 days pursuant to clause 35.5. It impossible to claim an extension of delay without first providing a notice of delay, or at least, providing enough details in the extension of time claim to satisfy the requirements for a notice of delay.

Under the AS4000 series contracts, clause 41.2 specifically provides that there is no penalty for failing to comply with part of a subcontract, other than entitling the other party to sue for damages.

Clause 41.2 is extracted in full below: