Construction Law/Termination of Contract
QUESTION: As per FIDIC 1987 reprinted 1992 Conditions of Contract: "The Employer may, after giving 14 days' notice to the Contractor, enter upon the site and terminate the employment of the Contractor".
The Employer issued the following letter: "The Engineer has certified that your are not performing as per the requirements of the Contract. Hence this notice is issued to you that after 14 days of issuance of letter, your employment shall be terminated and possession of site shall be taken over as per Clause 63.1 of Conditions of Contract."
Does this letter mean that the Contract has terminated or the Employer has to issue another letter after 14 days to confirm the termination. Few of us are of the opinion that there is no such need of another letter after 14 days, as the word "shall" has been used in the above referred letter and not the word "may". Whereas, few are of the opinion that there is still a need for issuance of termination letter after 14 days.
Kindly comment please.
ANSWER: Dear Salman,
Good day and thanks for your question.
From the tone of the letter you said the Employer issued, it appears that, the intention of the Employer is that (by my literal interpretation) "the Contractor has only 14days more (from the date he received the letter from the Employer) to stay on the project site". However, one key condition that this termination is based upon is that "....Engineer must copy the Contractor of such certification that the Contractor without reasonable excuse has failed to proceed with the Works........pursuant to Sub-Clause 46.1,"....
The emphasis that confirms the intention of the Client here is Contractor receiving a copy of such certified statement from the Engineer. If the Contractor did not receive such copy prior to Employer's notice, such termination would be wrongful and as such, the Contractor can seek for redress...(even though - if it is true that the Contractor has failed...., while the Contractor may get redress in his favour, the Contractor may eventually get terminated and blacklisted by the Employer for future patronage.
Now to the real point, it would be correct to say that "the Employer has by the 14days notice stated in the letter, terminated the employment of the Contractor under the Contract. The Employer may not need to issue another letter by the intent drawn from the wording of the letter and the 14days mentioned in the letter.
The contractual meaning and interpretation of the use of the word "shall" under contract jargons is to qualify actions or responsibility or obligations that is "a must do".
I hope i am clear enough?
---------- FOLLOW-UP ----------
QUESTION: Dear Femi,
Thanks for the prompt reply.
Yes, the Contractor was earlier issued series of notices under Clause 46.1 of Conditions of Contract (CoC) followed by a Final Notice referring the same Clause. Lastly, the Employer was recommended for termination of the Contract with copy to the Contractor. The Employer after necessary evaluation of case at their end, served the notice for termination.
As I understand from your reply, no further notice / letter is required to confirm that the termination has taken in place. However, few of our colleagues are of the following opinion:
"The word 'notice' means only notice of the termination but not a termination itself.
Referring to the Employer's notice which states ".... this notice is issued to you that after 14 days' of issuance of this letter, your employment shall be terminated and possession of the site shall be taken over...". In this sentence the word 'shall be' is used for the event which will take place in future and does not mean the Contract has been terminated. Therefore, the Employer after 14 expiry of 14 days notice shall enter the Site and terminate the employment of the Contractor by issuing letter of Termination."
Can you give further opinion under this context.
Thank you once again.
Let me emphasize to you that the invocation of the provision of clause 63.1 under FIDIC 1987 conditions by serving the 14days notice therewith has sufficiently conveyed the termination of the Contractor's employment on the works. No further notice is required as the condition did not say so. How it operates is that, once the notice is served under the clause 63.1, the terminAtion has already been invoked. It is only that, it would take effect from the 14th day of receipt of the notice. The word "shall" is not interpreted under contract or law as "May be" or "for future event" rather, it is of "legal" or "contractual" meaning for "must" as I said before.
Hope I am clear now?