Effective contract management can ensure that parties minimise risks and avoid disputes from arising. In this bulletin, we summarise some ‘top tips’ that contract managers should bear in mind when seeking to vary, terminate or invoke contractual provisions.

Notices

• Most contracts stipulate how letters/notices should be issued. It is critical that parties satisfy these provisions when issuing delay, variation, suspension, payment or termination notices.
• Notices should be served as soon as possible. For more information, please see our bulletins on ‘COVID-19: Force majeure in UK construction contracts’ and ‘COVID-19: Legal and contractual implications’.
• In some standard form contracts, such as FIDIC and NEC, failure to serve a delay notice or compensation notice in time may be fatal to getting an extension of time or recovering losses.We recommend making a note at the start of the project of all important time limits.
• Notices should be clear and unambiguous and refer to the relevant contract terms to avoid confusion about their contractual status.
• Tribunals and courts generally expect strict compliance with the provisions of termination clauses because of their significance.Failure to comply can make a party seeking to rely on a termination clause liable to the other party for wrongful termination.

Record keeping

• Keep records of all documentation evidencing the key considerations and justifications of commercial actions/decisions, including project records and events giving rise to delays.
• All amendments, variations, suspensions, delays and terminations must be recorded in writing and be made in accordance with any formal requirements under the contract. Should a future dispute arise, it will be very difficult for one party to rely on an amendment or variation that was only agreed orally or across various emails.

Demand letters and settlement agreements

• Demand letters should be short, clear and factual and refer to the relevant contractual positions concerning performance, payment and the alleged breach. In addition, they should set out what the recipient is required to do (e.g. make payment within a required period of time, failing which proceedings may be issued against them) and be kept separate from other communications if required by the contract.
• Any settlement discussions regarding contracts subject to the jurisdiction of the courts of England & Wales should be kept expressly ‘Without Prejudice’ and ‘Subject to Contract’ until the parties are ready to enter into an agreement. Similarly, in the DIFC (where the courts operate according to a common-law system), the concept of without prejudice communication is upheld and relied on by parties.
• In such jurisdictions, the concept of ‘Without Prejudice’ protection is generally accepted to extend to any dispute whether the subject of litigation, arbitration or other form of alternative dispute resolution (such as mediation).  
• However, it should be noted that the concept of ‘Without Prejudice’ communication is not recognised by many civil law jurisdictions (including the local “onshore” UAE courts or arbitrations seated in the mainland).  Accordingly, documents marked ‘Without Prejudice’ and used for the purpose of settlement negotiations could be submitted to the court or tribunal and later relied on if a settlement is not achieved. Parties should therefore seek advice on this concept if they are unsure of how it may operate in practice, and prior to engaging in settlement discussions.
• Any settlement reached between the parties (e.g. to pay a debt in instalments) should be recorded in writing by way of formal settlement agreement.

Sub-contracts

• If advancing claims to the employer, consider working with the sub-contractors to strengthen such claims by sharing documents, information and, if possible, the cost of retaining consultants and third party advisors.
• If advancing claims downstream to the sub-contractors, or if you are expecting to receive any claims from sub-contractors, check the terms of the sub-contracts as soon as possible in order to pre-empt any such claims. It is often better to tackle these issues sooner rather than later.

Lawyers and consultants  

It is critical that parties instruct lawyers and consultants as early as possible - this will save time and costs and ensure that your interests are protected.