It is a fundamental principle of property law that agreements must, as a general rule, be complied with in accordance with the content agreed by the parties and that one party cannot unilaterally amend the agreement.
In construction contracts, the contractual basis is usually AB 18 (general conditions for works and supplies in the construction industry) or ABT 18 (general conditions for turnkey contracts in the construction industry).
These sets of rules include the so-called "right to make changes." The reason for this right to make changes is that construction contracts are often dynamic and extend over a long period of time. This often makes it difficult to foresee and describe all the conditions and terms relating to the construction project at the time the agreement is entered into between the parties. These special circumstances necessitate the need for the so-called "right to make changes."
With regard to the right to make changes, if one of the parties to the agreement has requested a change to the agreement in terms of price, time, or security, the other party must notify the requesting party in writing "as soon as possible" whether the request is accepted, and if not, must justify this decision.
General information about the content of the deadline
According to the report on the two sets of rules, when assessing whether a party has responded "as soon as possible," consideration must be given to, among other things, the party's need to consult with others. This could be, for example, the party's advisors, subcontractors, and the like.
When a response will be given "as soon as possible" and under what circumstances such a response is considered timely is not elaborated upon in the report, nor is it specified in the wording of the two respective provisions (AB 18 § 25 and ABT § 25).
However, relevant legal literature indicates that the term "as soon as possible" does not constitute a long period of time and that any complaint (i.e., the notification that must be given) must be given immediately after the complaint period begins. This will typically be from the time when the respective party becomes aware of the circumstances giving rise to the complaint.
What is certain, however, is the legal consequence of late notification, as the party risks losing its claim in such cases.
According to case law, this must be determined on the basis of several specific factors, in particular whether the party should have known that a claim existed, including whether there was a clear basis for this, and whether the outcome is reasonable, etc.
An example from case law: The deadline was exceeded
The Danish Arbitration Board for Building and Construction (VBA) recently had occasion to consider the precise meaning of the deadline "as soon as possible." The case is discussed in TBB 2021.210 VBA.
The case concerned, among other things, a turnkey contractor's claim for contribution margin as a result of the client's decision to remove a service relating to the facade from the agreement. It was undisputed in the case that this part of the contract had been omitted pursuant to the client's right to make changes, which meant that the turnkey contractor would, in principle, be entitled to lost contribution margin for this item. However, the client argued that the turnkey contractor's claim for lost contribution margin had been submitted too late – i.e., not "as soon as possible" – and that the claim should therefore be dismissed.
In its ruling, the arbitration tribunal found that the general contractor did not submit its claim until more than 10 months after the client had announced that the service would be discontinued.
In the assessment, importance was attached to the fact that ABT 18 § 25 contains a clear statement of the obligation to submit a claim, a clear indication of the deadline for submitting the claim, and a clear indication of the circumstances triggering the obligation to submit it. Weight was also given to the fact that the deadline had been exceeded by a very significant margin.
The assessment also took into account that, in connection with the change, the client had clearly expressed an expectation that the change – the omitted service – would result in a complete reduction of the contract sum for this work and would therefore not give rise to any claim for compensation.
Based on an overall assessment, the arbitration tribunal subsequently found that the turnkey contractor's claim for contribution had lapsed as a result of inaction.
In other words, a claim made more than 10 months after a party has been notified of a change in the agreement cannot, as a starting point, be considered to have been made "as soon as possible" unless there are clear grounds for believing otherwise.
Whether "as soon as possible" should be interpreted as a deadline shorter than 10 months has not been decided in the aforementioned ruling. Nor has it been decided whether the term "as soon as possible" should be interpreted in the same way in relation to other requirements within construction law.
If you have any questions regarding the decision or construction law disputes in general, you are always welcome to contact attorney (Supreme Court) Hammer Westmark or one of CLEMENS Law Firm's other specialists in construction law.
