In the Appendix to the JCT Standard Form of Building Contract 1998 edition 2003, against the words "dates for completion of section", the parties inserted "see attached sectional completion details". A separate document entitled "Details of the Sectional Completion Arrangements" provided, for each section, the date of possession, date of completion and the amount per week of liquidated damages. Section 1 was delayed by 8 weeks. The defendant was granted an extension of time of 4 weeks and liquidated damages for the remainder 4 weeks was levied as the contractor was culpable for the delay. Due to the delay, the dates of possession of sections 2-5 were delayed by 8 weeks. The contractor was then 8 weeks late in completing each of these sections. The employer levied 4 weeks liquidated damages in respect of each section.
The contractor argued that because possession of sections 2-5 were delayed by 8 weeks, it was entitled to an 8 week extension of time for these sections. This was rejected by the judge because the dates in the schedule were actual dates for possession. The judge acknowledged that the contract did not expressly state that the culpable delay to section 1 would automatically cascade down resulting in culpable delay to the other sequential sections. However, both sides were aware, at the time the contract was entered into, that this was the consequence and it was the parties' intention that this would be the case. The contractor also argued that the liquidated damages constituted a penalty because the defendant was repeatedly penalised for the same delay by deducting liquidated damages in respect of each section. The clause was not a penalty because it was the contractor's default that caused the delay to completion of section 1 and the sequential sections.
Things to consider
Care must be taken when agreeing liquidated damages for delay in a project when there is sectional completion. If actual dates for possession and completion are given (rather than the number of weeks for the section to be completed from the date of possession) and those dates are missed due to earlier culpable delays, the contractor will be liable for the delay to sequential sections unless there is an express term in the contract to the contrary.
Liberty Mercian Limited v Dean & Dyball Construction Limited  EWHC 2617 (TCC)