Notice condition precedent to claim liquidated ascertained damages (LAD)

Abstract

Most forms of building contract include a clause entitling the employer to a specified amount of damages, referred to as liquidated and ascertained damages (LAD) if the contractor is late in constructing a project. This clause sets out the procedure and condition that need to be followed by the employer. Some provision for example in clause 40.1 PWD 203A (Rev. 2007) require the employer to issue notice of intention before claiming LAD. The purpose of the issuance of notice is to inform the contractor about the payment or deduction. However, does the issuance of notice is condition precedent to the said claim? Some provision does not specifically expressly state the requirement to issue notice. So, there is an argument that section 56(3) of Contract Act is effective as an implied term to the contract. Based on the respective situations, question arises whether the employer?s entitlement to liquidated damages is waived if he fails to issue the said notice. This study is carried out to determine whether notice is condition precedent to claim liquidated damages and the legal impact of notice provision for liquidated damages claim. The study was carried out mainly through documentary analysis of law journals. It was found that when the provision expressly state that notice is condition precedent, the failure to comply with notice provision might jeopardize the employer?s claim. However, the employer?s claim is not totally rejected because based on prevention principle, the contractor who caused the delay, cannot benefit from its wrong act. When the provision did not expressly state that notice is a condition precedent, it can be condition precedent by implication. The argument that section 56(3) is an implied term to the contract was wrong because section 56(3) is only applicable when the contract becomes voidable.