RECORDS, RECORD, RECORDS - importance for contract claim

Construction legal adviceContract Requirements
Max Abrahamson in his book Engineering Law and The ICE Contract wrote

" A party to a dispute, particularly if there is an arbitration will learn three lessons (often too late) the importance of records, the importance of records and the importance of records". This quotation came to mind recently when I read the judgement in the case of Attorney General for the Falkland islands v Gordon Forbes construction (Falklands) Limited. A contract was let for the construction of the infrastructure of the East Stanley Housing Development in the Falkland Islands using the FIDIC 4th Editions conditions. These conditions, like most standard forms, provide a procedure which requires the contractor to follow in the event of him submitting a claim. Clause 53.1 states that the contractor if he intends to claim any additional payment must give a written notice of his intention to the Engineer within 28 days after the event giving rise to the claim has first arisen. In addition the contractor is obliged by clause 53.2 to keep such contemporary records necessary to support the claim. The contract goes one stage further in requiring the contractor in clause 53.3 to send to the Engineer within 28 days of the written notice a detailed account of the claim. If the contractor fails to send in a written notice and detailed account there is a fall back position in clause 53.4 which states that in the event of the contractor failing to comply with what after all are very simple obligations his entitlement to payment will not exceed the amount the Engineer or an arbitrator could consider verified by contemporary records.

Contractor's Mistake with Contract Claim

It would seem that contractor in considering that he was entitled to additional payment made his first mistake in failing to send a written notice and detailed account as required by clauses 53.1and 53.3. As to whether there was sufficient contemporary record to satisfy the requirements of the fall back position became the subject of a dispute which was referred to arbitration and subsequently to the court. It would seem that the contemporary records were somewhat lacking and didn't prove sufficiently convincing as far as the Engineer was concerned to merit payment. The contractor felt this approach unjust as he considered he was able to fill in the gaps where the contemporary records were lacking with verbal testimony from those within his organisation able to provide the necessary information. It was the Engineers view that this type of verbal evidence did not amount to contemporary records.

This proved somewhat critical as both parties were agreed that if the contractor failed to comply with these conditions his rights to payment was lost and therefore everything hung on the matter of contemporary records.

Intention of the Clause in Contract

The judge considered that the requirements of the contract set out a clear and ordered way of dealing with any claim for an additional payment. Claims have to be notified at the time they arise, contemporary record have to be kept and regular accounts rendered. The whole contractual system is aimed at the early resolution of any queries at the time the claim arises.

He then had to decide what was meant by the word contemporary and felt there was little difference between contemporary and the word contemporaneous i.e. occurring the same time. Examples were given by the judge to illustrate the point. If there was a dispute as to whether labour was employed on site during a particular date it would be acceptable to produce time sheets showing the hours worked or even a statement by the contractor stating that this is what had taken place. It would be exceptional if the record were made more than a few weeks after the event took place. The judge posed something of a conundrum. What would the position be if the contractor wished to claim for labour costs for a four-week period? He had time sheets for weeks 1,2 and 4 but the records for week 3 were missing. Could the court accept verbal evidence concerning week 3, the judge felt that such verbal evidence would not be acceptable.

Verdict of Claim

The judge found in favour of the authority in deciding that to constitute contemporary records they must be prepared at or about the time the events occurred which give rise to the claim. Where there is no contemporary record the claim will fail. Where there are contemporary records to support part of the claim the claim may succeed on that part of the claim which is supported by the contemporaneous records but not otherwise. If however the contemporary records are ambiguous or unclear as to their meaning then verbal evidence will be accepted to provide clarification. The contractor probably unaware of Max Abrahamson's words of wisdom found out when it was too late the importance of keeping proper records.

Moral

The lessons to be learned from this decision is that where a contract provides a procedure to be followed if the contractor or for that matter the subcontractor intends to claim additional payment, a failure to comply will result in a loss of the entitlement. Where records are to be contemporaneous or submitted within a specified time scale it is crucial for them to be properly made at the time the event giving rise to the claim is occurs.

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