Extension of time regimes



There are many circumstances that will cause delay to the works, some of which may be beyond the control of the contractor. If the contractor is delayed by certain agreed categories of event, it may be entitled to an extension of time (EOT). Usually a contractor will need to comply with a notification regime as set out in its contract to claim an EOT.

There is a general legal principle that a party may not benefit by relying on its own breach of the contract. This is referred to as the prevention principle.

Some delays may occur because of acts or omissions by the principal. Where there is no mechanism to extend time due to delay caused by the principal, the prevention principle may cause the date for practical completion to be ‘set at large’.

This means that:

  • The contractor only has to achieve practical completion within a reasonable time, and not by the contractual date for practical completion. Furthermore, the principal cannot rely on its entitlement to liquidated damages.
  • The principal may still be able to claim for actual damage suffered if the contractor fails to achieve practical completion within a reasonable time.

CASE STUDY



Peak Constructions (Liverpool) Ltd v McKinney Foundation Ltd

(1970) 1 BLR 111 (English Court of Appeal)



Facts


  • The contractor, Peak was contracted to build a 14-storey block of flats. Peak subcontracted to McKinney for the piling works.
  • The completion date under the head contract was 17 February 1966. McKinney completed the piling in July 1964. In October 1964, defective work was discovered due to a breach by McKinney. Liverpool Corporation delayed in issuing instructions to proceed with the rectification work until August 1965.
  • McKinney's rectification work commenced promptly on receiving instructions from Liverpool Corporation. Six of the 58 weeks of delay were taken up with this rectification work.

Result


  • The court held it would be 'beyond all reason' to hold McKinney responsible in damages for the entire 58-week delay.
  • Where acts of the principal have prevented completion, the only way to preserve the principal's right to liquidated damages is for the contract itself to allow the date for completion to be extended for those very acts.
  • In addition to the contractual right to extend time for acts of prevention, an extension of time must actually be granted for the relevant delay.
  • As no extension of time had been granted for the principal's delay, there was no date under the contract to measure McKinney's liability to pay liquidated damages and therefore none were payable.


Causes of delay



Most extension of time regimes seek to allocate responsibility between the parties to the contract according to the cause of the delay.

The contract will deal with which party bears the risk of delay according to different kinds of events, such as:


  • delays caused by the principal or its representatives (including the superintendent);
  • weather and nationwide industrial disputes, (generally referred to as neutral delays);
Causes of delay can generally be classified in one of the following ways:

  • delay caused by the principal;
  • delay caused by the contractor; or
  • delay due to causes outside the control of either party or 'neutral' delay.

Ideally, the party best able to control a risk should bear the time and cost consequences of delays occurring which are attributable to that risk.

A 'qualifying' cause of delay is one that will entitle the contractor to an EOT under the contract. To avoid the operation of the prevention principle, delays caused by the principal will be a qualifying cause of delay, together with other events as agreed between the parties. The contract may impose procedural constraints on the contractor's entitlement (see time bars). Delays caused by the contractor will not normally be qualifying delays.

Since neither party can control 'neutral' delays, these are often the subject of
negotiation about whether they should be a qualifying cause of delay.

A
concurrent delay is where two different causes of delay may be affecting the progress of the works at the same time. One of the causes may entitle the contractor to an extension of time, the other may not.


Contractor's obligation to minimise loss



There are three options for dealing with concurrent delays:

  • the contractor has no entitlement to an extension of time;
  • the contractor has an entitlement to an extension of time; or
  • causes of delay are apportioned between the parties and the contractor receives an extension of time equal to the apportionment.

Standard form contracts impose an obligation on a contractor to take all reasonable steps to prevent delays and minimise their consequences. The extent to which a contractor is required to minimise the loss is a question of fact. Generally, it is limited to the contractor taking reasonable steps having regard to its ability and resources.

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