Clear drafting of notices and instructions in construction contracts

Clear drafting of notices and instructions in construction contracts

Notices and communications are often issued with little regard to the provisions of the contract, often resulting in disputes as to their validity. The importance of sufficiently detailed contractual notices was highlighted in the case of Oil States Industries (UK) Ltd v Lagan Building[1], which concerned the construction of a new product facility and was based on a Scottish standard form contract. Lagan Building, the contractor challenged the validity of the contract notice and instructions provided by the project manager representing Oil Estates Industries, the employer in the contract.

The contractor argued that the two instructions it was given by the project manager were invalid because there were not sufficiently clear and ambiguous for the contractor to understand the nature of the issue raised and the particular action required to remedy the issue. Furthermore, the contractor accepted that the contract provided a right to terminate the contract for material breach after a notice of default is provided. However, it argued that the notice did not provide sufficient detail to enable to assess the validity of the notice and procedure of remedying the breach.

In determining the validity of these notices, the court held that the notice must be interpreted as a whole. The notice must be sufficiently clear and unambiguous to enable a reasonable recipient (i.e. someone having all the background knowledge reasonably available to the recipient at the time of the notice) to understand the contractual basis for the notice and in the event of breach the nature of the breach which is alleged to have occurred, so as to be able to assess the validity of the notice and take such steps as are open to him to remedy the alleged breach.

Further, the court was of the view that the principles which applied to notices applied equally to instructions. In applying those principles, the court was satisfied of the validity of the second instruction because there was background correspondence (pre and post instruction correspondence) which made the instruction sufficiently clear for a reasonable recipient to understand. In terms of the first instruction the court considered it as invalid because it did not contain sufficient detail for the contractor to understand as it contained only irrelevant information.

In summation this case confirmed the notion of substance over form. In a South African context the principles above have been similarly applied by the Supreme Court of Appeal case in Hawkins Hawkins & Osborn (South) (Pty) Ltd v Enviroserve Waste Management.[2] In this case, the court in determining the validity of the notice ,placed more emphasis on the substance of the notice rather than the form the notice took of which in this case the notice was in the form of a letter.

It is clear from the above cases that in order to be valid, notices and instructions must be sufficiently clear and detailed to allow the party receiving the notice or instruction to understand the contractual right or breach relied on and to act on the notice. To avoid disputes concerning the validity of contractual notices and instructions, parties are encouraged to ensure that contractual communications are issued in accordance with the provisions of the contract and are clear and unambiguous.

 

 

Authors:

Nikita Lalla, Director, LNP Attorneys Inc.

Zama Ngcobo, Director, LNP Attorneys Inc.

Bongani Memani, Candidate Attorney, LNP Attorneys Inc.

[1] [2018] CSOH 22.

[2] 2009 (4) SA 425 (SCA).