UK: A Timely Reminder: Termination Notices Must Not Be Given Prematurely Under SBCC/JCT (And Other) Contracts

In a recent case, a question arose as to whether the Employer had given a valid notice of termination of employment to the Contractor under the building contract between them. This was important because, if the notice was invalid, the Employer could open himself up to a possible claim that he had committed a breach of contract, and he could be liable in damages to the Contractor as a result.

In the case of Andrew Bellis v Sky House Construction Limited (23 June 2023), a question arose as to whether the Employer (Mr Bellis) had given a valid notice of termination of employment to the Contractor (Sky) under the building contract between them.

This was an important issue not least because, if the notice was invalid, Mr Bellis could open himself up to a possible claim by Sky that he had committed a breach of contract and, as a result, he could be liable in damages to Sky for that breach.

Background

Mr Bellis had employed Sky to carry out work to extend his property. The contract between them was governed by the JCT Minor Works Contract 2016 (the Contract). Mr Bellis became unhappy with Sky's performance on the project.

Clause 6.4 of the Contract allowed Mr Bellis to terminate Sky's employment in certain circumstances where Sky was in default, and it had been given notice of the default (the specified default). If Sky continued the specified default '...... for seven days from receipt of the notice....', the Employer could '... on, or within 10 days from, the expiry of the seven-day period by further notice to the Contractor terminate the Contractor's employment ...under the Contract'.

Clause 6.2 of the Contract set out certain requirements in relation to the giving of notices as follows:

'Each notice referred to in this section shall be delivered by hand or sent by Recorded Signed for or Special Delivery post..........'

On 1 September 2021, Mr Bellis gave notice, warning Sky that its employment under the Contract would be terminated unless a number of matters were addressed by 8 September 2021. Mr Bellis then purported to give Sky notice of termination of its employment on 8 September 2021 (the notice of termination).

Clause 1.4 of the Contract dealt with 'Reckoning periods of time' and provided:

'Where under this Contract an act is required to be done within a specified period of days after or from a specified date, the period shall begin immediately after that date'.

There were two adjudications between the parties and Mr Bellis sought to challenge an adjudicator's finding in the first adjudication that the notice of termination was invalid because it had been given prematurely.

The question for the court in enforcement proceedings arising out of the adjudications was, on a proper construction of the terms of the Contract, had Mr Bellis issued the notice of termination prematurely?

The decision

The court decided that the adjudicator had been right to conclude that the notice of termination had been issued prematurely and was, as a result, invalid.

It was '... not entirely obvious ...' that clause 1.4 applies to the period between giving a warning notice under clause 6.4.1 and a termination notice under clause 6.4.2. That was because the provisions did not refer in terms to any act which required to be done. However, the judge considered that 'In common sense and commercial terms ... what in substance is being conveyed by a warning notice is that the contractor is required to address the specified defaults'. There was also '... another sense in which clause 6.4.2 might be said to prescribe a period within which an act is required to be done: an employer who has acquired the right to terminate the contract, because defaults have continued beyond the seven-day period ... is required to exercise that right within 10 days from expiry of the seven-day period'.

The judge considered that the wording of the Contract meant that Mr Bellis had to give Sky seven clear days after the warning notice sent on 1 September 2021 before he could issue a termination notice. In other words, Mr Bellis could only serve a valid termination notice from 9 September 2021. The purported notice on 8 September 2021 had been premature.

The judge's reasoning centred on the fact that the Contract gave Sky seven days to put right the specified default. That was a short period, particularly if defaults were extensive. The judge considered that the Contract should be read so as not to reduce the already short period afforded to the Contractor to address the default(s) and also so as to give both parties certainty as to how long the Contractor had to act, and when the Employer's right to terminate would arise. Against that background, the judge did not consider that it was a proper construction of clause 6.4.2 that a notice of termination could lawfully be given less than seven whole days after the warning notice.

Comment

This case stresses the need not to give certain contractual notices prematurely. If Mr Bellis had waited just one more day, it appears his notice of termination would not have been premature.

Accordingly, as a general rule, it is wise for an Employer to err on the side of caution and make sure that the relevant period allowed for remediation of any default has expired before giving a termination notice. Contractual provisions which allow the employer to terminate the Contractor's employment when a notified default has not been remedied within a stated period of time are relatively common and are not limited to the SBCC/JCT suite of contracts. This is, therefore, an approach that should be taken generally when seeking to rely on such termination provisions while also making sure, of course, that any such termination notice is given within any period required by the contract.

The case was not concerned with whether the basis for the alleged default or the alleged lack of remediation upon which any notice proceeded, was well founded. Accordingly, it is necessary for the Employer to be certain that there is a proper basis for the assertion that the Contractor is in default and that the Contractor has failed to remedy it within the period of time allowed by the contract. Those are usually the more difficult matters parties argue about, not the timing of any notice.

While this case deals with the timing of the giving of notice, there was no dispute about the form of the notice or how it was given. Each of the notices was, in fact, given by e-mail and then subsequently delivered by hand on the same day. It should be noted, however, that a contract may stipulate particular requirements in connection with the form of a notice and/or how a notice is to be given to another party. It is important to make sure that any other such requirements are also followed in order to avoid arguments of invalidity where those other requirements have not been met.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.