Beware contractual limitations to extension of time entitlements

Bespoke amendments to extension of time provisions in construction contracts are commonly incorporated in order to limit a contractor’s eligibility and entitlement.  In the recent case of North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC) the Court has decided that a clause seeking to exclude a contractor’s entitlement to an extension of time in respect of periods of concurrent delay is binding and this does not impact on the employer’s right to recover liquidated damages for the concurrent delay period if the contractor still fails to complete by the fixed completion date.

It is established law that, if a construction contract identifies a specific date or period for commencement and completion, it must also contain an effective extension of time procedure to extend the completion date in the event that the contractor is prevented by the employer from progressing and completing its works.  Absent such an express term, if such an act of prevention occurs, the contractor’s time obligation is considered to be ‘at large’; it is no longer bound to complete by the specified completion date but must simply complete the works within a reasonable time.

This ‘prevention principle’ is founded at common law on the premise that a party cannot insist upon the performance of another’s contractual obligation when it has prevented such performance, whether by act, omission or default.  Thus, an employer cannot require completion by a fixed completion date if it is responsible for causing the delay to the contractor’s progress.  

The standard forms of construction and engineering contracts therefore contain appropriate extension of time procedures to avoid time under such contracts becoming at large.  However, it is common for bespoke amendments to be incorporated into standard forms which shift the risk, invariably from the employer to the contractor, with regard to both strict compliance with a set procedure for notifying and securing an extension and the grounds on which an extension will be granted.  The Courts have determined that a failure to comply whether in form, content or timing with any express notification procedure could bar the contractor from securing an extension and could permit the employer to claim liquidated damages, despite its own default.

One bespoke amendment which may be incorporated into standard forms is aimed at addressing circumstances where, at the same time as a delay event which gives rise to an extension of time, the contractor was also causing its own critical delay to completion.  In the absence of an express provision to the contrary, the common law position under English Law is that, in such circumstance, the contractor remains entitled to an extension of time notwithstanding its own delay, although it is unlikely to be able to also recover its loss and expense for the period of such concurrent delay.  It was not, however, clear whether an express amendment addressing such concurrent employer and contractor delays could reverse the common law prevention principle and mean that, even though the employer had, by an act, omission or default, prevented the contractor from completing its works, it could still insist on completion by the fixed completion date. 

Such a bespoke amendment has recently come before the Court in North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC).  This case involved an amended JCT D&B 2005 form of contract, which terms included the usual ‘Relevant Events’, including any impediment, prevention or default by the employer, which give rise to an extension of time entitlement, with an additional amendment which read:

“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 Court found that this clause did provide a clear and binding agreement dealing with the proper approach to consideration of the appropriate extension of time in circumstances of concurrent delay and accordingly the common law prevention principle did not apply.

Consequently, if the parties have made the same or a similar agreement addressing the event of concurrent delays, it is binding and enforceable and will mean that, in circumstances where the contractor is responsible for critically delaying its own progress at the same time as or during delay caused by a Relevant Event, including any delay caused by the employer, the contractor is not entitled to an extension of time and must still complete by the fixed completion date.  Further, and as decided by the Court, the employer will still be able to recover its liquidated damages for periods of concurrency even though its act of prevention may have caused or contributed to the delay to completion. 

Emma Judge is a construction solicitor at Turner Parkinson, and specialises in contract interpretation and administration, dispute avoidance and dispute resolution.  For further information please contact Emma on emma.judge@tp.co.uk.

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Emma Judge

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