Unlike main contracts, which usually have a start and completion date, subcontracts usually have set periods for completion. If a subcontractor is entitled to an extension of time, how should this be treated? If the subcontract was in delay when the event occurred, do you add this delay on to the end of the original subcontract period or does it become a standalone period separate from the original subcontract period? If the latter, any claim by the main contractor against the subcontractor for loss and expense in respect of the delay period would then be in respect of the period when the subcontract was actually in delay.
In Carillion Construction Ltd v Woods Bagot Europe Ltd,  EWHC 905, where the subcontract form used was DOM/2, the court ruled that any extension of time under the relevant clause should be added to the end of the current period for completion. This interpretation was practicable and workable and what a reasonable person with all the parties' background knowledge would have thought the clause meant when the contract was entered into.
Arguments were raised that there were factual scenarios where this interpretation could relieve a subcontractor of liability to an extent that did not truly reflect the consequences of its breach in failing to complete on time, but this did not affect what the court considered to be the obvious interpretation of the clause. These were only potential factual scenarios that would not necessarily arise and the extent to which they could influence the interpretation must consequently be limited. The difficulty with these arguments was that they created a distinction not made in the subcontract between responsibility for delay and contractual liability. The subcontractor was contractually liable for delay only if it failed to complete the subcontract works within the period or periods for completion, so the key issue was what the contract provided in respect of those periods.
Where parties enter into subcontracts on terms similar to those used in this case – where the subcontractor has a period of time to complete rather than a definitive start and completion date – in assessing the liability of the subcontractor for delays caused to parties, the culpable delay will be assessed only from the end of that period rather than from any earlier date. This has the potential to diminish the liability of the subcontractor for delay-related damages.
For further information on this topic please contact Chris Fellowes at Mayer Brown International LLP by telephone (+44 20 3130 3000) or email (email@example.com). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.
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