The popular Norwegian standard contract, NS 8406, requires both parties to give notices and replies within certain deadlines. Yet, any consequences of failing to meet these deadlines are, in most cases, not stated in the provisions of the contract. This creates uncertainty for many contractors and clients. In this article, we take a closer look at possible consequences for missing a deadline under NS 8406.
Some provisions of NS 8406 express preclusive effects, meaning that the provision explicitly states that a right will be lost if the relevant deadline is not met. However, most of the provisions in NS 8406 are completely silent on the potential legal effects of failing to comply with a deadline. For example, clause 19.3 (3) of the standard contract does not specify any consequences of the contractor failing to issue a change order within a reasonable period.
Most provisions of NS 8406 silently on the potential legal effects of missing a deadline have both advantages and disadvantages. On the one hand, it allows the court to conclude with the solution that appears to be the most reasonable for the specific case. On the other hand, it can create uncertainty, as it may be unclear whether a contracting party has lost a right.
Also read: 7 potential pitfalls of a construction contract in Norway
When a contracting party fails to comply with a deadline set out in a provision expressing a preclusive effect, such as clause 25.1 (5) concerning the final account or clause 27.5 concerning notification of defects, the answer is normally straight forward - the relevant right is lost. However, determining whether a breach of a deadline should have legal consequences is more complex when the missed deadline relates to a provision in NS 8406 that does not explicitly state a preclusive effect.
Clause 3 in NS 8406 says that a contracting party that does not give notices and replies within the notification deadlines specified in the contract, may be liable to lose its rights in accordance with the ordinary rules of Norwegian law. In many cases, the unwritten law of passivity will be the relevant rule for the court to consider when determining whether a breach of a deadline in a provision that does not state a preclusive effect should have legal consequences. For the unwritten law of passivity to apply, a high threshold must be met. Therefore, missing a deadline will normally not result in loss of a right. Nevertheless, an assessment of the individual case must always be made.
Also read: Strict notification deadlines in NS 8405 and NS 8407
Sometimes we encounter cases where two parties have agreed that NS 8406 shall govern their contractual relationship, yet both have repeatedly failed to comply with the deadlines set out in the standard contract. This may occur because, after signing the contract, the parties have found it practical to disregard all or parts of it. However, they may not have explicitly informed each other of this mutual understanding. A legal question that then can arise is whether one party can still rely on the deadlines in NS 8406 as a basis for claiming loss of rights.
Norwegian courts have considered this issue in relation to other Norwegian standard contracts, and the courts’ approach has been to assess whether the parties have acted in such a way that they can be deemed to have agreed that the deadlines in the provisions shall not apply or have given each other reasonable grounds to believe so. When this was the case, the parties have not been entitled to rely on any breach of the deadlines as a ground for loss of rights. The same reasoning should apply under NS 8406.
Although the threshold for losing rights under NS 8406 is high, it is important to be aware that failure to meet a deadline always entails a risk of losing such rights. Missing a deadline can also easily lead to disputes between the contracting parties, which may impede project progress or hinder future cooperation. To prevent such outcomes, it is crucial to understand how to comply with the deadlines set out in NS 8406 and to establish effective routines for notifications and replies.
If you need assistance in understanding how to comply with the deadlines in a Norwegian standard contract, assessing whether a right has been lost, or establishing effective routines for notifications and replies, we are happy to assist.