Construction Solicitor Abbie Chisnall and trainee construction law solicitor Alicia Hilton, look at how to spot condition precedents and how best to deal with them in your construction contracts.
A common topic our Construction Division advises clients on is condition precedents and their impact. This article discusses the legal principles of condition precedents including what condition precedent clauses are, how to spot them in your contracts and how to deal with them when identified.
A condition precedent is a clause in a contract that requires an action to be taken within a certain timeframe. It relates to a contractual right or obligation, and it will only come into force when the specified conditions set out in the clause are met. Essentially, they are clauses which state “if you don’t do X, you won’t be entitled to Y.”
Condition precedents are notorious in construction contracts, and to the untrained eye, may be difficult to spot. However, they are extremely important. If something is not done e.g. making a notification in a certain time period, you may lose an entitlement, such as an entitlement to payment for a variation.
Condition precedent clauses used in construction contracts commonly relate to:
As an example for extension for time, a clause might say it is a condition precedent that the sub-contractor must notify the main contractor of an event which requires an extension of time within 7 days of the event occurring and if they fail to do so, the sub-contractor will lose their contractual entitlement to that extension of time claim.
However, in practice, condition precedents are not necessarily so clear cut because a condition precedent clause does not need to expressly state that it is a condition precedent in order to be one.
For a condition precedent to operate, there must be a conditional link. This means that there is a duty to do something, and the contractual right is conditional on that duty being carried out. Therefore, the most important thing to look out for is the duty to do something and whether a contractual right is conditional on that duty being carried out.
These clauses can be onerous and completely outlandish. For example a contract might require payment applications to be made on pink paper and if they are not, you could lose your entitlement to payment for that application.
So, what can you do if you spot a condition precedent in your contract, especially an overly onerous one?
Negotiate
If you have not yet agreed the contract, you have an opportunity to negotiate terms and you should try to get the condition precedent clause struck out in the first instance. We understand that this is not always possible and therefore you could suggest amending the time frame under the condition precedent clause. For example, if we refer to the earlier example of an extension of time claim, instead of having 7 days to notify, a longer timescale can be requested, for instance 14 days. Allowing more time to notify means that you are less likely to miss notifying the relevant party in the relevant timescale. We understand the party you are contracting with may not always accept this, but it is worth a try.
Operational check list
If you are unable to negotiate the contractual terms or if you have already agreed to the contract, it is a good idea to create an operational check list. An operational checklist can contain all the relevant timescales under the project. Using the same extension of time example, if you give a checklist to all relevant personnel involved in the project so that they know extension of time events have to be notified with 7 days, this should ensure that the date to notify does not get missed. This will be a useful tool to ensure you do not miss any of the deadlines and lose out as a result.
Condition precedent clauses are very important, and all contractors should be looking out for them when reviewing contracts. If you do not follow the contractual timescales, it could result in you losing certain entitlements under the contract. The Holmes & Hills Construction Division offer ‘in-house’ training and often cover condition precedents in these sessions. We would be more than happy to host a training session at our Commercial Hub in Colchester, attend your offices in person or remotely to offer training on a variety of topics.
Please do not hesitate to contact our team of construction lawyers if you would like to discuss anything in this article further or have any construction law or construction dispute queries that you would like to discuss.
Call us on 01206 593933 today to speak with one of our construction solicitors. Or complete the form below.
Other articles in the series:
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