Construction projects can quickly go sideways, often requiring one party to terminate the contract. But rushing into termination without checking the notice requirements can backfire badly, as one employer recently discovered.
The employer in this case had a Minor Works Building Contract with a contractor. After some defaults by the contractor, the employer served a warning notice giving 7 days to rectify. The contract said that if the default continued for 7 days after the warning notice, the employer could terminate.
Seems straightforward. But the termination notice was served too soon.
The Critical Importance of Notice Periods
This case highlights how crucial proper notice is when terminating a construction contract. The contract stated that time periods start after the date the notice is served. However, the employer miscalculated and terminated too early.
This premature termination was found to be unlawful. By not following the notice requirements exactly, the employer had actually repudiated the contract instead.
The contractor accepted the repudiation, terminated the contract, and successfully claimed the payment owed. All because the termination notice timing was off by just one day.
Avoid Costly Missteps with Careful Contract Review
Before serving any termination notice, carefully review the notice periods and requirements stated in the contract. Seemingly small details, such as when the clock starts, can make all the difference.
We advise ensuring proper service of notices in the method and to the address specified, as defective service may invalidate the termination.
Getting notice periods wrong is an easy but costly mistake. Having an expert review the contract and draft the notices can prevent major issues down the road.
Seek Early Guidance When Issues Arise
As soon as problems emerge on a construction project, engage expert legal advice to advise on the available options. They can provide guidance on proper notice procedures, help negotiate a resolution, or start building a case for termination if needed.
The modest upfront cost of legal advice is minor compared to the potential liabilities of wrongful termination. Plus, prompt advice gives more chances to resolve disputes before positions harden and costs escalate.
Read one of our latest blogs: “Why do I Need an Expert for My Dispute?” for greater insight. Click here to read.
Follow Termination Notices Precisely
If termination is necessary, strictly adhere to every contractual detail regarding the notices. Leave no room for arguments over technical defects.
Identify the proper notice periods, method of service, and parties to be notified. Then, double-check compliance at every step.
With careful planning and precise execution, terminating a construction contract can be smooth. But small mistakes can derail the entire process, as the employer in this case learned the hard way.
Follow proper procedures to the letter to avoid an outcome no one wants.
For expert legal advice and representation in construction and commercial property matters, contact Barton Legal.
Please note, this article and any accompanying video or presentation are for educational and marketing purposes only. It must not be used for giving advice in any shape or form, and it is not a substitute for legal advice. The author does not accept responsibility for loss howsoever occasioned to any person or persons acting or refraining from action as a result of this material.
