It's About Time!
What is delay?
The industry’s holy trinity of time, cost and quality is well known and yet unlocking the treatment of delay remains a continual challenge. At our recent ‘It’s about time’ seminar we provided attendees with answers to some of the most frequently asked questions on time, details of which are summarised in this article.
Delay on construction projects is a common occurrence and the source of many disputes. The term ‘delay’ is not, however, defined with a technical meaning.
It can relate to:
- an incident/circumstance which affects or postpones a particular activity on the project but does not extend the completion date; or
- a project overrunning past the agreed completion date, otherwise known as a critical delay.
Critical Delay can be caused by and/or contributed to by a number of factors and parties. On each project, the parties will need to assess who should be liable for that delay and who is best placed to take the risk.
When Is The Completion Date?
It is pretty rare these days for contracts to be silent regarding a completion date but if that is the case, the contractor is required to complete the works ‘within a reasonable time’[i]. Interpretation of what is ‘reasonable’ is up for debate so parties should where possible have the certainty of an agreed completion date. Most building contracts contain an express provision for completion of the works by a certain date and adjustments to that date in certain circumstances. Although be warned, letters of intent may not expressly include extension of time provisions.
The Prevention Principle
If the contract does include a completion date but does not expressly deal with the consequences of critical delay caused by the employer, then where there is employer delay, time is said to be ‘at large’ and the contractor is required to complete the works within a ‘reasonable time’. In this instance, no liquidated damages can be claimed and any losses must be proved.This is because a contracting party (Party A) may not enforce a contractual obligation against the other party (Party B) where Party A has prevented the Party B from performing that obligation (i.e. if the employer prevents the contractor from completing on time, it cannot then enforce a contractual obligation to complete by that original completion date). This is known as the “prevention principle”.
In order to address this, contracts contain provisions allowing the contractor to apply for more time to complete particular works, commonly known as an ‘extension of time’.However, if there is then an employer delay outside what is stated in the extension of time mechanism, the completion date falls away and again, time is “at large”. The standard forms will therefore usually have “catch all” provisions to allow an extension of time to be claimed in all instances of an employer act of prevention.
Standard Form Contracts And Extension Of Time Entitlements
Generally speaking, the contractor may be able to apply for an extension of time in respect of delays caused by the employer and/or other delays for which the contractor is not responsible under the contract (e.g. force majeure). These provisions will often be heavily negotiated.
JCT contracts provide for an agreed date of completion (or dates for completion of sections where applicable). In addition, the contractor under certain forms has to proceed “regularly and diligently” with the works. Where there is going to be a delay or where it is likely, the contractor must give notice to the contract administrator/employer’s agent of the material circumstances, including the cause or causes of the delay, and must identify in the notice any event which, in the contractor’s opinion, is a Relevant Event. In respect of each event identified in this notice, the contractor must as soon as possible give particulars of its expected effects, including an estimate of any expected delay in the completion of the works.
The contractor is able to claim for extensions of time in certain circumstances, known as ‘‘Relevant Events’’. The employer risk events are “Relevant Events” and include:
- A delay in giving the contractor possession of the site;
- Work carried out by a statutory undertaker;
- Exceptionally adverse weather conditions;
- Civil commotion or terrorism;
- Exercise by Government authority of any statutory power that is not occasioned by a Contractor default;
- Force majeure; and
- Any impediment, prevention or default by the employer or any employer’s person (except to the extent caused or contributed to by any default of the contractor or contractor’s person). This is a catch-all for any event of employer caused delay.
The JCT forms of contract differentiate between Relevant Events, which entitle the contractor to claim additional time, and Relevant Matters, which entitle the contractor to claim additional costs. It is worth nothing that the scope of Relevant Matters is narrower than the scope of Relevant Events.
The effect of this differentiation between Relevant Events and Relevant Matters is to create a category of certain ‘'neutral'’ events where the risks are shared between the employer and the contractor. For example, exceptionally adverse weather and force majeure. On the occurrence of these events, the contractor is awarded an extension of time but not additional money to cover its costs of being on site for a prolonged period.
The NEC contract sets out a series of employer risk events, known as ‘‘Compensation Events’’. The contractor is entitled to additional time and money on the occurrence of one of these Compensation Events. This can be contrasted with the position under the JCT, where only those Relevant Events that are also Relevant Matters entitle the contractor to claim both time and money.
The types of risks identified as Compensation Events are broadly the same as the Relevant Events under a JCT contract. There are therefore a number of events that will entitle a contractor to time and money under an NEC contract, but that would only entitle a contractor to an extension of time under a JCT form. For example, weather conditions that occur less frequently that once in every ten years is a Compensation Event under an NEC contract (entitling the contractor to time and money) but exceptionally adverse weather conditions is only a Relevant Event (and not a Relevant Matter) under a JCT contract, thus only entitling the contractor to additional time, not money.
The Compensation Events under a standard NEC contract include:
- Restricting access to and use of each part of the site by the client;
- The client’s failure to provide information in accordance with the Accepted Programme;
- An instruction to stop or not start any work or to change to a Key Date;
- Physical conditions on site that an experienced contractor would have judged at the contract date to have such a small chance of occurring that it would have been unreasonable to have allowed for them. This can be contrasted with the JCT forms, under which the risk of adverse physical conditions / ground risk always remains with the contractor;
- Weather measurements which occur less frequently than once in every ten years;
- The client’s failure to provide materials, facilities and samples for tests and inspections; and
- Any event which stops the contractor from completing the works which neither party could prevent which would have been judged to have such a small chance of occurring that it would have been unreasonable for the contractor to have allowed for it, and which is not one of the other Compensation Events in the contract.
NEC4 has added to the list of Compensation Events compared to those in NEC3. For example, clause 60.1(20) is a new Compensation Event which provides that the contractor is entitled to additional time and money if the project manager notifies the contractor that a quotation for a proposed instruction is not accepted. This recognises that there is a cost involved in obtaining a quotation for a proposed instruction and is included to ensure that a contractor is compensated for obtaining numerous quotations.
Another new Compensation Event in NEC4 is at clause 60.1(21) and allows for additional Compensation Events to be included in the Contract Data. The benefit of this is that employers can now alter the standard risk profile contained in NEC4 contracts, without the need for amendments to the standard conditions. Any risk event not expressly identified as a Compensation Event is a contractor's risk event and the occurrence of such an event does not entitle the contractor to claim any additional time and/or costs for the completion of the works.
The NEC’s approach is for issues to be raised as they arise (early warnings) and for the parties to work to resolve the same. The effects of a Compensation Event are to be assessed by a combination of retrospective and prospective analysis. The dividing line between the retrospective and prospective analysis is the issue of the relevant instruction etc that caused the Compensation Event or the date of notification of the Compensation Event (as appropriate). Contractors are to include allowances for events at its risk that have a significant chance of occurring in its assessment of the Compensation Event (clause 63.8). However, the assessment of Compensation Events are not subsequently revised depending on the delays or costs actually incurred or whether or not such risk events actually occurred. They are therefore binding on the parties, irrespective of the actual delay and cost incurred as a result of the Compensation Event.
Certain NEC contracts provide for an optional bonus to the contractor if works are completed before the agreed completion date. This could be a useful provision to encourage the contractor to complete the works by an earlier date. In addition, the parties use the contractor’s planned completion date as a base for assessing the extension of time, rather than the contractual completion date. Therefore, the contractor owns the “float” when assessing the extension of time due.
A further key feature in the procedure for applying for Compensation Events in NEC4 is the condition precedent in clause 61.3. If the contractor fails to notify the project manager of the occurrence (or anticipated occurrence) of a Compensation Event within eight weeks of the contractor becoming aware of the occurrence of a Compensation Event, then the contractor loses his entitlement to claim any additional time and money for that Compensation Event, unless it arises as a result of the project manager or supervisor giving an instruction or notification, issuing a certificate or changing an earlier decision.
Generally such “time bars” as they are often known are upheld by the English courts, provided they give a fixed time period and state that the party will lose its contractual right if it does not give notice (Bremer Handelgesellschaft mbH v Vanden Avenne Izegem nv 1978). Civil law jurisdictions often take a different view, with some, including the UAE allowing a less strict interpretation where a contractor may be unfairly prejudiced.
The second edition of the FIDIC ‘Rainbow Suite’ (the Red, Yellow, and Silver books) was published in December 2017 (“FIDIC 2017”). Although it is considerably more detailed and prescriptive than the original Rainbow Suite, it largely follows the same principles and risk allocation.
All FIDIC contracts contain a contractual completion date, with delay damages payable by the contractor in the event of a failure to achieve this date. As with the JCT forms, FIDIC has employer risk events, contractor risk events and neutral risk events although they are not expressly classified as such. Most employer risk events entitle the contractor to claim time and money, whilst neutral risk events often allow claims for extensions of time only (although they sometimes allows claims for cost in certain circumstances). Entitlement to extensions of time are determined by the Engineer in the Red and Yellow Books and by the Employer’s Representative in the Silver Book.
One key feature of FIDIC is the condition precedent to claiming an extension of time. FIDIC 2017 contains potential time bars at clause 20.2.1 and clause 20.2.4. These now apply equally to claims by the employer and the contractor, whereas the time bar provisions in the first edition of the FIDIC Rainbow Suite only applied to claims by the contractor.
However, clause 20.2.5 allows the Engineer to consider a claim submitted after these notice periods taking into account the details included in the fully detailed claim and why late submission may be justified. The factors that may be taken into account when justifying late submission include:
- Whether and the extent to which the other party may be prejudiced by late submission; and
- Any evidence of the other party's prior knowledge of:
- the event or circumstance giving rise to the claim (in the case of the time limit under clause 20.2.1); or
- the contractual or other legal basis of the claim (in the case of the time limit under clause 20.2.4).
This has the potential to create a grey area under English law. If a condition precedent to a claim is capable of being waived, then should it be strictly applied? It will be interesting to see how the Courts interpret these provisions and the standards they require the Engineer / Employer’s Representative to apply when exercising this discretion. For example, to what extent must the condition precedent be waived if it is objectively reasonable to do so?
Changing The Risk Profile Time Under Standard Form Contracts
The JCT, NEC and FIDIC standard forms are often heavily amended. We set out below some common amendments made by employers in relation to the extension of time provisions in these forms.
Employers often amend the Relevant Events so that the risk profile is shifted in favour of the employer. For example:
- A common amendment from employers is to state that the contractor has no entitlement to an extension of time to the extent that the Relevant Event is caused by a contractor’s act, omission or negligence. This is particularly relevant to the Relevant Event for delays caused by Specified Perils (e.g. fire, lightning, escape of water from any water tank, apparatus or pipe). Contractors will typically push back on accepting the risk of delays caused by such Specified Perils, even when they arise from their default. This is because of the potentially catastrophic nature of the loss that could arise from a serious fire or flood that could significantly delay a project. The contractor would be vary wary of accepting the risk of such a delay. A common compromise is to share such a risk such that the contactor would bear the risk of say the first four or six weeks of delay caused by a Specified Peril arising out of its default, with it being entitled to an extension of time for any further delay.
- Employers often seek to remove some of the “neutral” events from the list of Relevant Events. For example, “exceptionally adverse weather”. This may give the employer a greater ability to level liquidated damages in the event of a delay to the project although contractors are likely to build such risk into their price and programme.
- Employers also often clarify certain Relevant Events, e.g. strikes only entitle the contractor to a Relevant Event if they are wider than just the contractor or its supply chain, or delays by statutory undertakers only entitle the contractor to a Relevant Event if the contractor has exercised all reasonable endeavours (including giving the relevant notices) to prevent such delay.
Employers may make the notice provisions regarding delay and potential extension of time claims conditions precedent to the contractor’s entitlement to claim an extension of time. The employer would argue that such extensions of time claims should be dealt with contemporaneously when they arise, so that the employer is not faced with unexpected claims at the end of the project. However, contractors would argue that it would not be fair for it to lose its entitlement (and be subject to potentially significant claims) simply because of an administrative error in not putting in the correct notices, particularly in situations where the employer may be fully aware of the relevant delay and the failure to put in the relevant notice made no difference to the effects of the relevant event.
Employers may include provisions to expressly deal with concurrent delay. For example, they may provide that the contractor is not entitled to an extension of time in the event of concurrent delay. We will address the validity of such clauses later in this note.
As with the JCT forms, employers often seek to delete some of the “neutral” Compensation Events so that the contract bears the risk of such events. Alternatively, employers may amend the Compensation Events so that the contractor is only entitled to time (but not money) for such events (e.g. events of “force majeure” under clause 60.1(19)).
Under the NEC forms, the contractor “owns” the float in its programme, as clause 63.5 provides that the delay is assessed by reference to the “planned Completion”. This is a reversal of the position under contracts which are silent regarding float (e.g. the JCT forms), where the project “owns” the float and therefore it is used up by the first relevant delay, irrespective of whether that was an employer or contractor risk event. The employer may therefore amend this provision so that the project “owns” the float and any Compensation Event is assessed by reference to the Completion Date, rather than “planned Completion”.
As with the JCT forms, the NEC forms are silent on concurrent delay and employers may therefore seek to introduce provisions expressly dealing with concurrent delay.
Employers amend FIDIC contracts in similar ways as they would JCT or NEC forms. However, as with any form of contract used internationally, there is no standard or market practice approach to amending the risk profile of a FIDIC contract. For projects in the Middle East and Africa it is common for the risk allocation to be skewed in favour of the employer, with the contractor taking the risk for events which are employer’s risks in the unamended contracts. For example, contractors will often be expected to assume full liability for unforeseen physical conditions.
Employer risk events are sometimes amended so that the contactor can claim time but not money. One example of this which is seen frequently is clause 13.7, which deals with changes in legislation during the works.
Similarly it is not unusual for clause 18, force majeure under FIDIC 1999 and “Exceptional Events” under FIDIC 2017, which allows the contractor to claims extensions of time where certain “neutral” events occur, to be amended so that some of these events do not allow the contractor to claim an extension of time at all. These events are likely to vary in different jurisdictions, for example “strikes” may be deleted in jurisdictions with no collective bargaining so that contractors take this risk. Similarly, when dealing with government clients in unstable countries, contractors often seek to benefit from extensions of time where they are prevented from performing because of a change of regime or Government volatility.
As mentioned above, the time bars in clause 20 are a key issue for the parties to consider when agreeing amendments to the FIDIC forms of contract. For example, employers may amend this time bar so that it only applies to contractor claims. Further, it may be amended to increase certainty by specifying what would be the acceptable grounds for the Engineer to waive the time bar or by removing the Engineer’s ability to waive the time bar altogether.
Best Endeavours To Prevent Delay
Some contracts require contractors to constantly use their best endeavours to prevent delay. For example clause 220.127.116.11 of the JCT D&B 2016 states that:
“the Contractor shall constantly use his best endeavours to prevent delay in the progress of the Works”.
What is meant by ‘best endeavours’ has been the subject of numerous cases:
It generally requires the contractor "to take all those steps in their power which are capable of producing the desired results… being steps which a prudent, determined and reasonable [contractor], acting in his own interests and desiring to achieve that result, would take".[ii]
However, a best endeavours obligation is not the next best thing to an absolute obligation.[iii]
Best endeavours only requires a party to do what was commercially practicable and what it could reasonably do in the circumstances.[iv]
Best endeavours therefore generally means that a party must take all steps to achieve the objective and is an important qualification to the right to an extension of time. It means that it might be the contractor’s duty to reprogramme the works to prevent or reduce delays. However, Keating suggests that this does not contemplate the expenditure of substantial sums of money[v] - this is particularly so where the delay arises as a result of an employer risk event.
What Is Concurrent Delay?
The definition of concurrent delay that was approved in Adyard Abu Dhabi v SD Marine Services[vi]was that:
“A useful working definition of concurrent delay in this context is a ‘period of project overrun which is caused by two or more effective causes of delay which are approximately equal causative potency’.”
This definition was also expressly adopted by the Court of Appeal in the recent case of North Midland Building Limited v Cyden Homes Limited[vii] (see below).
This appears to be potentially wider than the narrower definition of concurrency (also known as “true” concurrency) that was adopted in The Royal Brompton Hospital NHS Trust v Hammond[viii]. This narrower definition had required the two events in question to occur at the same time and for their effects to be felt at the same time.
It therefore appears that two events (i.e. the contractor risk event and the employer risk event) can be concurrent if they arise at different times, provided the delaying effects of the events occur at the same time. However, it is important that each event needs to have caused critical delay in its own right.
What Happens When There Is Concurrent Delay?
In circumstances of concurrent delay, a situation arises where:
- The contractor can potentially argue that it is entitled to an extension of time in respect of an employer risk event; and
- The employer can potentially argue that it is entitled to liquidated damages in respect of a contractor risk event.
There is clearly a conflict between these arguments, which the Court has had to seek to resolve by reference to the relevant construction contract.
Concurrent Delay In Standard Form Contracts
Concurrent delay is not expressly dealt with in the standard JCT or NEC forms. This has left parties using these forms of contract not knowing how to respond to concurrent delay and having to rely on the Court’s decisions in this area.
The new FIDIC 2017 Editions do mention concurrent delay. For example, the FIDIC Yellow Book 2017 includes the following in clause 8.5:
“If a delay caused by a matter which is the Employer’s responsibility is concurrent with a delay caused by a matter which is the Contractor’s responsibility, the Contractor’s entitlement to EOT [extension of time] shall be assessed in accordance with the rules and procedures stated in the Special Provisions (if not stated, as appropriate taking due regard of all relevant circumstances).”
The above clause, however, gives little guidance as to how the parties should approach concurrent delay. It raises the issue of concurrent delay and as such reminds the parties that this is something they should deal with when negotiating the contract. The parties are free to agree the rules that will apply if concurrent delay actually occurs and amend the contract accordingly in the Special Provisions. FIDIC has said that the provision has been drafted in this way because a standard approach in relation to concurrent delay has not yet been adopted on an international basis and because different jurisdictions have different rules and procedures. However, FIDIC does suggest that the approach adopted by the SCL’s Delay and Disruption Protocol is increasingly being adopted internationally.
Court’s Approach To Concurrent Delay
There is a distinction between the English and Scottish Courts’ approach to concurrent delay.
The approach in the English Courts
The main authority from the English Courts on concurrent delay is the approach set out in Henry Boot Construction Ltd v Malmaison Hotel (Manchester) Ltd[ix](the “Malmaison Approach”).
Under the Malmaison Approach, where there is a concurrent delay the contractor would be entitled to an extension of time even though the employer risk event relied on is not the dominant cause of delay (because it is concurrent with a contractor risk event), provided that it has at least “causative potency” with all other matters causing delay. Dyson J (as he then was) said:
“…if there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of the other event.”
The contractor would therefore be entitled to an extension of time as a defence to the employer’s claim for liquidated damages but it would not be entitled to recover any time-related costs. This approach is often described as “time but no money”. This is because a contractor receiving an extension of time under the Malmaison Approach would not automatically be entitled to loss and expense for the same period, as they generally could not satisfy the “but for” test of causation with regard to such a loss and expense claim. In particular, they could not say that the relevant prolongation costs would not have been incurred “but for” the employer’s risk event (assuming it carried an entitlement to money as well as time). The contractor would only be entitled to loss and expense for those costs that were incurred as a result of the employer’s risk event and that would not have been incurred if only the contractor’s risk event had occurred.
For example, if it is not possible for a contractor to work on a site for a week because the works had been suspended due to a discovery of an antiquity (a relevant event and relevant matter), but also because the contractor has a shortage of labour (not a relevant event):
- If the cause of delay is equal, and the contract is silent in relation to concurrent delay, the contractor would be allowed to claim an extension of time but not loss and expense for that period of delay (e.g. for its general site preliminaries costs, such as the cost of hoardings and its site hut).
- However, if there are costs that are specifically incurred as a result of the suspension of works due to the discovery of the antiquity that would not also have been incurred due to the contractor’s shortage of labour, the contractor would be entitled to claim such costs as loss and expense.
The Scottish Courts subsequently followed a different approach of apportionment to concurrent delay in City Inn Ltd v Shepherd Construction Ltd[x] (see below). This led to questions whether the English Courts would continue to follow the Malmaison Approach or whether they would follow the Scottish Court’s apportionment approach.
However, the English Courts subsequently re-affirmed that the Malmaison Approach was the correct approach in English law in Adyard Abu Dhabi v SD Marine Services[xi] and Walter Lilly v Mackay.[xii]
The approach in the Scottish Courts
In City Inn v Shepherd Construction, the Scottish Court held that where events operated concurrently such that there could not be said to be any one dominant cause, it was ‘fair and reasonable’ to carry out an exercise of apportionment. What would be a ‘fair and reasonable’ apportionment would turn on the exact circumstances of each case, and the contract administrator would have a broad discretion in coming to its decision.
City Inn applied the apportionment approach to claims for both an extension of time and loss and expense.
Therefore, in a period of eight weeks concurrent delay, the contractor may be entitled to an extension of time and loss and expense for a period of say five weeks. This can be contrasted with the Malmaison approach of time but not money for the full eight week period of concurrent delay.
As set out above, since City Inn was decided, the English Courts have re-affirmed the Malmaison Approach in English law. It will therefore be interesting to see whether the Scottish Courts continue to follow the apportionment approach.
Concurrent Delay In An Amended Contract
In the recent case of North Midland Building Limited v Cyden Homes Limited[xiii], Cyden Homes Ltd (the employer) engaged North Midland Building Ltd (the contractor) to design and build a substantial residential property under a JCT Design and Build Contract 2005, with bespoke amendments.
The bespoke amendments included changes to the extension of time provisions so that clause 18.104.22.168(b) allocated the risk of concurrent delay to the contractor. The clause stated as follows:
“any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account”.
The clause sought to reverse the Malmaison Approach so that in the event of concurrent delay, the contractor would not be entitled to an extension of time.
The works were delayed and the contractor claimed an extension of time. The employer allowed a partial extension of time. However, the employer cited clause 22.214.171.124(b) in order to reject other elements of the contractor’s claim on the basis that those elements were caused by employer delays that were concurrent with contractor delays. The contractor commenced Court proceedings seeking a declaration that this clause 126.96.36.199(b) was in breach of the prevention principle because it allowed the recovery of liquidated damages for a period where the employer was preventing completion. The contractor argued that:
- The prevention principle was a rule of law, so that where circumstances arise which would trigger the clause, the extension of time and liquidated damages mechanisms fall away, time is set at large and the employer must prove any actual losses. In the alternative, the prevention principle is an implied term in the contract giving rise to the same consequences, on the basis that it would otherwise be ‘absurd’ that an employer could recover damages for delays which it had caused.
The case ended up before the Court of Appeal, who upheld the clause. In particular, the Court held that:
- The prevention principle is not an overriding rule of public or legal policy.
- Instead, the prevention principle operates by way of an implied term. However, as the express terms of the contract dealt fully with all employer delay events, there was no room for an implied term of prevention.
The case turned on the interpretation of clause 188.8.131.52(b), which was described as unambiguous and “crystal clear”. The bespoke clause raised no issues of contractual interpretation and so should be given effect.
There was no authority to suggest that parties could not contract out of the prevention principle.
How Will The Position Change Following North Midland Building Limited V Cyden Homes Limited
The decision in North Midland Building v Cyden Homes Limited is in line with the Court’s approach in cases such as Arnold v Britton[xiv], where the court has placed a strong emphasis on the parties’ intentions as set out in the contract. It is worth noting that in general express terms of a contract are likely to ‘win’ over a common law doctrine (in this case the ‘doctrine of prevention’) because of the Court’s emphasis on the parties’ freedom of contract.
It is clear now that parties can expressly allocate the risk of concurrent delay to one party or another.
The judgment in North Midland Building v Cyden Homes Limited effectively approved the wording of the bespoke clause 184.108.40.206(b). As a result, employers are now likely to regard this wording as a safe way to achieve protection from having to give an extension of time to the contractor in the event of concurrent delay.
However, if the employer seeks to include this type of clause in a contract, it may send a message to the contractor that the employer is shifting more risk onto it. The contractor may then either decide to work with more collaborative employers or apply a premium to its contract price.
This is something for employers to consider in the round on a project to project basis. It may not always be worth including this type of clause, but this will, of course, depend on the circumstances!
Nevertheless, the recent decision should encourage parties to consider in more depth the consequences of any concurrent delay and more complex drafting may result.
Overall, the decision in this case is likely to encourage a surge in the popularity of concurrent delay allocation clauses in construction contracts over the coming years.
However, where the case raised some question was in relation to the Malmaison Approach (as affirmed in Walter Lilly v Mackay) where the contractor is entitled to time but not money in the event of concurrent delay. The Court of Appeal noted that the Scottish courts had a different approach of apportionment (see above) and indicated that the issue was not entirely free from doubt. It noted that there was no Court of Appeal authority on the issue but that it did not need to resolve the question for the purpose of the appeal.
Considerations For Applications For Extensions Of Time
The contractor must comply with the terms of the contract setting out the procedure for claiming an extension of time. This usually requires the contractor to submit an application for an extension of time, together with explanations and evidence substantiating an event that it considers has caused or is likely to cause delay.
As stated earlier in this paper, certain contracts may include a condition precedent to entitlement for an extension of time, most commonly a time period for which the application for an extension of time must be submitted by the contractor. Failure to satisfy the conditions precedent will usually result in the contractor losing its entitlement to claim an extension of time.
Building contracts usually require the employer’s agent/contact administrator to make a fair and reasonable assessment. However, whether or not a particular event causes actual delay to the completion date is a matter of fact. The assessment should focus on relevant critical delay rather than an “impressionistic general assessment”[xv].
Set out below is a suggested starting point for information and documentation that may assist when making or assessing an application for an extension of time:
- Terms of the building contract.
- Programmes – contractor’s original programme, any revised programmes and the as built programme (if available).
- Drawings – original method statements and drawings, all variations and change orders including drawing submissions.
- Payment – all previous payment applications, copies of valuations and payment certificates, breakdown of the rates and prices.
- Evidence – site diaries, log books, progress reports, minutes of progress meetings and photographs.
- Delay – copies of any delay notices and extension of time awards.
The contractor’s programme will likely be the starting point when assessing delay. However the programme is an estimation and could be inaccurate. The programme should be regularly updated throughout the project to reflect changes in circumstances as the project evolves.
The as-built programme should be referred to where available and should be supported by site diaries, progress reports, and minutes of progress meetings. An as-built programme can be prepared retrospectively by reference to contemporaneous records and input from key personnel.
In practice, contractors tend to keep more records that the employer. Parties should consider whether the terms of the contract should prescribe which records should be kept and how they are recorded. Records are crucial for delay analysis.
The Society Of Construction Law Delay And Disruption Protocol
The Society of Construction Law published the first edition of its delay and disruption protocol in 2002. A second edition was published in 2017. This has built upon its predecessor’s foundations and provides helpful guidance on delay and disruption issues that may arise on construction projects.
It is not a contractual document, nor does it take precedence over governing law. Parties are also not required to have regard to it. Instead it provides useful guidance on some of the most common delay and disruption issues that arise in construction projects.
It sets out a summary of possible delay analysis methods and recognises that there are a variety of methodologies that may be appropriate for delay analysis. No single method takes precedence, unlike the first edition where time-impact analysis was preferred. It recognises that the key issue is to explain why the project is delayed and that different methodologies may be more appropriate in different circumstances.
The Second Edition sets out the factors that should be taken into account in selecting the most appropriate form of delay analysis, as well as providing an explanation of many of the delay analysis methodologies currently in common use.
In choosing a delay analysis method the following should be considered:
- The contract terms;
- The circumstances of the project;
- The nature of the relevant or causative events;
- The claim or dispute;
- The value of the project;
- The time available;
- The available project records; and
- The need to ensure that a proportionate approach is taken.
There is an emphasis on what actually happened and a recognition that a theoretical delay analysis which is divorced from the facts and common sense can be unhelpful. This is why record keeping is so important.
Core Principle 1 of the Protocol notes that:
- Contracting parties should reach a clear agreement on the type of records to be kept and allocate the necessary resources to meet that agreement; and
- Good record keeping requires investment of time and cost, and the commitment of staff resources by all project participants. It is therefore recommended that, prior to preparing the tender documents, the Employer considers its requirements of the Contractor in relation to record keeping and includes these within the tender documents.
[i] Supply of Goods and Services Act 1982, section 14
[ii] IBM UK Ltd v Rockware Glass Ltd
[iii] Midland Land Reclamation Ltd v Warren Energy Ltd
[iv] Terrell v Maby Todd & Co.
[v] Keating on Construction Contracts, Tenth Edition, paragraph 20-152
[vi]  EWHC 848 (Comm)
[vii]  EWCA Civ 1744
[viii] (2001) 76 Con. L.R. 148
[ix] (1999) 70 Con LR 33
[x]  ScotCS CSIH_68
[xi]  EWHC 848 (Comm)
[xii]  EWHC 1773 (TCC)
[xiii]  EWCA Civ 1744
[xiv] UKSC  36
[xv] John Barker Construction Ltd v London Portman Hotel Ltd 83 BLR 31
News & Insights
Haliburton v Chubb: The final say on an arbitrator’s duty of disclosure
We consider some of the key points when appointed arbitrators do not agree on the appointment of the third arbitrator as chairman.
‘Subject to contract’ – The effect of these words in settlement negotiations
The importance of the ‘subject to contract’ label during settlement negotiations and communications.