Contract Notices & Claims

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

Construction contracts impose strict requirements on when and how contractual notices must be served. Failure to serve a notice within the prescribed time limit — or failure to serve it at all — can forfeit the serving party's right to a remedy, even where the underlying entitlement is clear and well-evidenced. The QS must understand the notice requirements of the contract form being used, maintain a notices register throughout Stage 5, and advise the CA/PM and client on compliance proactively — not retrospectively.

The QS's role in contractual notices and claims management spans four key areas: (1) advising the CA/PM on whether the contractor's notices are validly served and within time; (2) assessing the merits of EoT applications and L&E claims and advising on appropriate responses; (3) administering the employer's own notices (Pay Less Notices, LAD deduction notices, acceleration instructions); and (4) ensuring all assessed claims are reflected in the Forecast Final Cost so that the client's budget position is accurately reported.

RICS Extensions of Time (1st edition, effective 10 February 2015) and RICS Ascertaining Loss and Expense (2nd edition, July 2024) are the primary reference documents. They must be read alongside the specific contract form: a Relevant Event under JCT SBC/Q gives the contractor EoT entitlement but does not automatically give L&E entitlement — only a Relevant Matter does both.

Section 2

Key Principles

RICS Extensions of Time (1st edition, effective 10 February 2015): definition of Relevant Events (JCT) and Compensation Events (NEC4); EoT assessment methodology; concurrency (contractor-caused and employer-caused delay overlapping); float — whether programme float belongs to the employer or contractor (JCT: employer; NEC4: shared).
RICS Ascertaining Loss and Expense (2nd edition, July 2024): Relevant Matters (JCT SBC/Q 2016, Clause 4.21) — the subset of events giving rise to L&E entitlement in addition to EoT; heads of L&E claim (site preliminaries, labour inefficiency, finance charges, head office overheads); evidence requirements; Emden/Hudson formula for HOOH claims.
RICS Damages for Delay to Completion (2nd edition, April 2024): LADs — test for validity (genuine pre-estimate of loss; Cavendish Square [2015] UKSC 67 penalty rule); calculation basis; deduction procedure (Pay Less Notice); prevention principle — employer's own default preventing contractor from completing prevents enforcement of LADs (Multiplex v Honeywell [2007]).
RICS Acceleration (2nd edition, 2024): distinction between acceleration (employer-instructed programme recovery) and mitigation (contractor's duty); constructive acceleration risk — if the employer refuses a valid EoT, the contractor may claim acceleration costs as damages; formal acceleration agreements must set out scope, cost, and programme recovery.
JCT SBC/Q 2016, Clauses 2.24–2.29 (EoT) and 4.20–4.23 (L&E): contractor must give written notice 'forthwith' when it becomes reasonably apparent that completion will be delayed; CA must grant an EoT 'so soon as is reasonably practicable' and not later than 12 weeks after receipt of sufficient information.
NEC4 ECC, Clauses 60.1, 61.3 and 62–65: 21 compensation events; eight-week notification time bar; PM's assessment obligation (within 2 weeks of contractor's quotation); deemed acceptance if PM fails to assess in time.
Contractor insolvency — changes to the notice regime: when a contractor becomes insolvent during Stage 5, the standard contractual notice and payment framework is materially altered and the QS must understand the specific obligations that arise. Under HGCRA 1996 s.111(10), once insolvency is established, the prohibition on 'pay when paid' clauses no longer applies — meaning the employer is no longer required to pay the contractor before the contractor pays its subcontractors; the standard withholding notice requirement under s.111 also changes in an insolvency scenario. However — and critically — a Pay Less Notice IS still required for any payment due date that falls before insolvency is formally confirmed; a QS who stops issuing payment notices prematurely (in anticipation of likely insolvency) risks the full certified sum becoming payable as a default sum under HGCRA. Under JCT SBC/Q 2016 Clause 8.5, certain provisions apply automatically upon contractor insolvency, regardless of whether the employer serves a formal termination notice: no further sums become due to the contractor (Clause 8.5.3) and the employer's obligation to make payments is suspended. If the employer elects to complete the works using a replacement contractor (Clause 8.7), a specific notice is required. The QS must liaise with the client's solicitors immediately on any insolvency event to ensure the correct notices are served and no premature or incorrect payment is made. Cross-reference: GN-FA-00 — Notional Final Account.

Section 3

Practical Application

Step 1

Maintain a notices register: at contract start, set up a register tracking all incoming and outgoing contractual notices. For each notice, record: date received/issued; type; contractual clause; required response date; responsible party; status. Review the register at every site meeting and update within 24 hours of any notice being served or received.

Step 2

Check EoT notifications for validity: on receipt of a contractor's EoT notification (JCT), check: (i) the notice was given 'forthwith' once it became reasonably apparent that completion would be delayed; (ii) the event cited is in the JCT Clause 2.26 Relevant Events list; (iii) the notice identifies the nature of the delay and its likely effect on the programme. A deficient notice is not necessarily invalid — advise the CA to request the missing information rather than reject outright.

Step 3

Assess EoT entitlement: review the contractor's programme analysis; trace the delay event through the critical path; assess the period of critical delay attributable to the Relevant Event. Consider float — if the contractor has programme float, the delay may absorb into the float without affecting the contract completion date. Address concurrency — where contractor and employer delays overlap, the employer does not owe additional L&E for the concurrent period (Malmaison principle).

Step 4

Assess L&E entitlement: confirm the event cited is a Relevant Matter (JCT Clause 4.21 — a narrower list than the Relevant Events). Confirm the contractor has made an application within the required timescale (Clause 4.20.1 — forthwith upon it becoming apparent that regular progress has been or is likely to be affected). Assess each head of claim independently: time-related site preliminaries (using contemporaneous cost records); labour inefficiency (measured mile or global assessment); finance charges (at contractual rate); HOOH (Emden formula only where actual cost basis is unavailable).

Step 5

Deduct LADs for culpable delay: if the contractor is in culpable delay (overrunning the contract completion date without an EoT covering the overrun), advise the client on the right to deduct LADs. Calculate the LAD accrual from the contract completion date (or the extended date if any EoT has been granted) at the weekly rate in the Contract Particulars. Deduct only via a valid, timely Pay Less Notice — deducting without a Pay Less Notice is an HGCRA breach.

Step 6

Consider acceleration: where the employer wishes to recover programme time (rather than accept delay), obtain from the contractor a priced acceleration quotation specifying the proposed measures and costs. Evaluate against the cost of delay (extended preliminaries, LADs forgone, third-party completion consequences). If proceeding, issue a formal acceleration instruction and document the agreed programme recovery and cost.

Step 7

Monitor the prevention principle: if the employer or CA issues instructions that prevent the contractor from completing the works by the contract completion date, and no EoT is granted, time may be set 'at large' — meaning the contractor's obligation reduces to completing within a reasonable time, and LADs become unenforceable. Advise the CA to grant any valid EoT promptly, even where the contractor is also in concurrent delay.

Step 8

Include claims in the FFC: assessed EoT, L&E, and acceleration costs must be reflected in the Forecast Final Cost — do not exclude them pending formal agreement. The FFC must represent the QS's best estimate of the total project cost including all likely claims. Include a commentary in the monthly cost report on the status of each significant claim.

Step 9

Contractor insolvency — notice obligations: if signs of contractor insolvency emerge (see GN-CP-04 Step 8), take the following immediate steps in relation to notices and payments: (i) continue issuing Payment Notices and Pay Less Notices in strict compliance with HGCRA and the contract until insolvency is formally confirmed — do not withhold payment prematurely, as this could constitute a breach giving rise to a contractor's claim; (ii) upon formal confirmation of insolvency (winding-up order, entry into administration, or CVA), liaise immediately with the client's solicitors to confirm whether a termination notice under JCT Clause 8.7 needs to be served or whether the automatic Clause 8.5 provisions are sufficient; (iii) verify whether any payment is due under an outstanding Payment Notice — under JCT Clause 8.5.3, no further sums become due to the contractor upon insolvency, but sums already due under a valid Payment Notice before insolvency must be reviewed with solicitors before withholding; (iv) issue a retention withholding notice to any retention bank account trustee where applicable; (v) document the state of the site, all materials on site, and all payments to date — these records form the foundation of the Notional Final Account that will be prepared at Stage 6 (GN-FA-00). Seek legal advice before taking any unilateral action.

Section 4

Common Mistakes to Avoid

Missing the NEC4 eight-week compensation event notification time bar — once the time bar has expired, the contractor loses all entitlement; the CA/PM must actively monitor the register of compensation events and prompt the contractor if a notification appears late.
Confusing Relevant Events with Relevant Matters — a Relevant Event gives EoT entitlement; only a Relevant Matter (a subset of the Relevant Events list) also gives rise to L&E entitlement. Granting an EoT for a Relevant Event that is not a Relevant Matter does not automatically entitle the contractor to loss and expense.
Not issuing a Pay Less Notice before deducting LADs — a LAD deduction from a payment without a valid, timely Pay Less Notice is a breach of the HGCRA payment obligations; the employer must pay the full certified sum and pursue the LAD deduction separately.
Accepting head office overhead claims without scrutinising the formula — the Emden formula requires the contractor to demonstrate actual overhead contribution earned during the period; where the contractor's other work absorbed overheads, the Emden formula may overstate the claim.
Excluding material claims from the FFC pending formal agreement — the cost report must include the QS's best assessment of all likely claims, including those not yet formally agreed; excluding them understates the FFC and misleads the client about the budget position.
Stopping Payment Notices or Pay Less Notices prematurely when insolvency is suspected but not confirmed — a QS who withholds payment notices in anticipation of likely insolvency (before it is formally established) exposes the employer to an HGCRA breach and a contractor's claim. Payment notices must continue to be issued correctly until the insolvency event is formally confirmed. Equally, do not make any payment to the contractor after the insolvency event without legal advice — under JCT Clause 8.5.3, the employer's obligation to make further payments is suspended upon contractor insolvency.

Section 5

APC Competency & Quick Reference

Contract Practice Level 3 — EoT, L&E, LADs, Pay Less Notices, acceleration, insolvency notice provisions
Conflict Avoidance, Management and Dispute Resolution Procedures Level 2 — claims management, constructive acceleration, prevention principle
Legal and Regulatory Compliance Level 2 — HGCRA payment notices, s.111(10) insolvency exception, JCT Clause 8 automatic provisions

What is the difference between a Relevant Event and a Relevant Matter under JCT SBC/Q 2016?

A Relevant Event (Clause 2.26) entitles the contractor to an Extension of Time — it extends the contract completion date and prevents the employer from deducting LADs for the extended period. A Relevant Matter (Clause 4.21) is a narrower list of events entitling the contractor to Loss and Expense in addition to EoT. For example, exceptionally adverse weather is a Relevant Event (gives EoT) but is NOT a Relevant Matter (no L&E entitlement) — the contractor bears the financial risk of weather delays. Employer risk events such as late instructions and employer-caused variations are both Relevant Events and Relevant Matters, giving rise to both time and money claims.

What is the NEC4 compensation event notification time bar and what happens if it is missed?

Under NEC4 ECC Clause 61.3, the contractor must notify the Project Manager of a compensation event within 8 weeks of becoming aware that the event has occurred. If the contractor fails to notify within 8 weeks, the contract treats the event as if it were not a compensation event — the contractor loses all entitlement to both additional time and additional money for that event, regardless of the merits. The PM must also act promptly: after instructing a change, the PM should notify it is a compensation event; failure by the PM to assess within 2 weeks of the contractor's quotation results in deemed acceptance of the contractor's quotation.

What is constructive acceleration and when does it arise?

Constructive acceleration arises when the employer refuses to grant a valid Extension of Time, effectively requiring the contractor to complete by the original (or previously extended) completion date despite being entitled to additional time. The contractor is then effectively instructed to accelerate without an express agreement and without payment. If the contractor complies and incurs additional cost (overtime, additional resources, revised sequencing), those costs may be recoverable as damages for breach of contract or in restitution. RICS Acceleration (2nd edition, 2024) advises that employers should grant any valid EoT promptly to avoid constructive acceleration exposure.

How does contractor insolvency affect the QS's notice and payment obligations under the building contract?

Two distinct phases apply. Before insolvency is confirmed: all HGCRA Payment Notice and Pay Less Notice obligations continue in full — premature withholding is a breach. After insolvency is formally confirmed: (i) under HGCRA 1996 s.111(10), the 'pay when paid' prohibition no longer applies in insolvency situations; (ii) under JCT SBC/Q 2016 Clause 8.5.3, no further sums become due to the contractor — the employer's payment obligations are automatically suspended; (iii) if the employer elects to complete the works using a replacement contractor, a specific notice under JCT Clause 8.7 is required. Legal advice must be taken immediately on any insolvency event before any unilateral notice or payment decision is made. The QS's primary role at this stage is to document all payments made to date accurately, as these form the basis of the Notional Final Account (GN-FA-00).

Section 6

Contract Notices & Claims Checklist

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Task

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Notices register established at contract start; reviewed at every site meeting

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EoT notifications checked for timeliness and validity on receipt; CA/PM advised immediately

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EoT entitlement assessed via critical path analysis; float and concurrency considered

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L&E applications checked for timeliness; Relevant Matter entitlement confirmed

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L&E heads of claim (prelims, inefficiency, finance, HOOH) assessed with supporting evidence

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LAD deductions calculated correctly and deducted only via a valid Pay Less Notice

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Prevention principle monitored; CA/PM prompted to grant any valid EoT before time set at large

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Acceleration: quotation obtained, economics evaluated, agreement documented in writing

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All assessed EoT, L&E, and acceleration costs included in the Forecast Final Cost

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Claims status commentary included in monthly cost report

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If contractor insolvency suspected: Payment Notices continued until insolvency formally confirmed; solicitors notified immediately; state of payments documented; correct JCT Clause 8 notices served on legal advice

Section 7

CPD Learning Outcomes

Distinguish between Relevant Events (EoT entitlement) and Relevant Matters (L&E entitlement) under JCT SBC/Q 2016, apply the contractual notice requirements for each, and advise the CA/PM on the merits and quantum of contractor claims.
Apply the NEC4 compensation event notification time bar (Clause 61.3) and advise on the consequences of missed notification, the PM's assessment obligations, and the risk of deemed acceptance.
Assess loss and expense claims using accepted methodologies (Emden/Hudson formula for head office overheads; time-related preliminaries for prolongation), scrutinise the evidential basis, and include the assessment in the Forecast Final Cost.
Apply the contractor insolvency notice framework under HGCRA 1996 s.111(10) and JCT SBC/Q 2016 Clause 8.5 — distinguishing the notice obligations before and after formal insolvency confirmation, avoiding premature payment withholding, and ensuring accurate payment records are maintained as the foundation for the Notional Final Account at Stage 6.

Section 8