By Andrew Hickman, Partner & Head of Construction, Else Solicitors
Andrew.Hickman@elselaw.co.uk, 01283 526200
Most contracts for construction projects include a provision that the contractor is entitled to an extension of time beyond the fixed completion date if a delay occurs through no fault of their own. This also provides them with relief from damages too.
However, ‘delay analysis’ is very complicated and often includes difficult concepts relating to the critical path of the project. Generally, if a contractor can show that a delaying event (as defined in the contract) is not caused by themselves but has the effect that the works will go past the fixed completion date, then an extension of time should be allocated with no penalty or cost.
The position is complicated when there is a concurrent delaying event which the contractor HAS caused. These circumstances are more common than might at first be envisaged, and have therefore given rise to a number of recent court cases. The general prevailing view on the standard building contract is that in such circumstances where there are concurrent delaying events, then the contractor is still entitled to an extension of time and thus relief from liquidated damages. However, they cannot claim disruption costs for that period because any resultant loss and expense would have been incurred in any event due to their own delay.
The recent case of North Midland Building Limited –v- Cydn Homes Limited had an additional complication because the contract included an amendment which provided that in the circumstances of a concurrent delay the contractor would NOT be entitled to an extension of time and still be liable for liquidated damages (even though for one reason or another the contractor was delayed through no fault of its own). This amendment was subsequently enforced when concurrent delays occurred during the project. The contractor tried to get this amendment overturned in both the Construction Court and then the Court of Appeal, both of which rejected their arguments.
More details about this specific case are included below, with the main point being that it is important to get legal advice for all construction contracts before a project has been agreed and commenced. Many contractors and sub-contractors do not like to incur professional fees at the start of a project in terms of contracting but this type of case illustrates that getting the contract right and fully understood can save considerable money and time in the future. If advice had been taken here, then it might well be the case that the amended clause would not have been included and in this case the contractor would have been able to get an extension of time and relief from liquidated damages.
Else Solicitors have a dedicated and specialist team of Construction Lawyers, with decades of experience managing all aspects of Construction Law. For more information and an initial discussion please contact Andrew Hickman or Amiee O’Toole by email (firstname.lastname@example.org / email@example.com) or via our main office 01283 526200.
North Midland Building Limited –v- Cydn Homes Limited
As noted above this case revolved around an added clause to a construction contract which provided that in the circumstances of a concurrent delay the contractor would not be entitled to an extension of time and still be liable for liquidated damages even though for one reason or another the contractor was delayed through no fault of its own. It was argued in the Construction Court and in the Court of Appeal that such a term was not enforceable and because under what is known as the “Prevention Principle” there must be an appropriate mechanism for a contractor to obtain an extension of time and relief from liquidated damages where an event occurred which was not of its own fault.
Both the Construction Court and the Court of Appeal rejected this argument. It was considered this was a valid contractual term negotiated and agreed between two commercial entities. Whether the contracting party as a consequence was aware of this and fully understood the contractual term before entering into the contract is not known.
Given there is now a decision by the Court of Appeal, it is likely that in the future solicitors acting for employers and main contracting companies will endeavour to include this type of clause in their amendments to the standard form of building contract. This emphasises the importance for sub-contractors to properly consider and understand all clauses of a contract before committing to it.