The recent Australian court decision in Champion Homes Sales Pty Ltd v DCT Projects Pty Ltd1 is a useful illustration of the issues that arise in relation to contractual notice provisions when assessing the merits of extension of time (EOT) claims.
DCT Projects Pty Ltd (DCT) engaged a builder, Champion Homes Sales Pty Ltd (Champion), to build eight townhouses in Sydney. The works were delayed and Champion made a number of claims for variations, which led to disputes between the parties. As a result, Champion suspended work. These disputes were settled, but further disputes arose and Champion suspended work on another three occasions. The relationship between the parties broke down completely, with both parties arguing that the other had repudiated the contract.
There were a number of issues arising in this dispute. Champion claimed that it was entitled to EOTs for the variations it had carried out, whilst DCT claimed liquidated damages for delay. Under the contract, Champion was entitled to an EOT if the works were delayed by a cause beyond its sole control. However, the contract required Champion to give written notice to DCT of the cause of delay (and the EOT claimed) within 10 working days of becoming aware of both “the cause and extent of the delay”.
DCT had two main defences:
- That Champion had failed to comply with the contract’s notice requirements and the claims were therefore time-barred.
- That in any event, EOTs should be calculated by reference to the critical path but, since the contract program had been abandoned, this was not possible.
The New South Wales Supreme Court largely sided with Champion. It decided that in respect of many of the EOT claims reliant on variations, Champion had complied with the contractual notice requirements. The contract required Champion to claim an EOT within 10 working days of becoming aware of both the cause and extent of the delay. Although some notices may have been issued 10 days after Champion had known the cause of the delay, it may only become aware of the extent of the delay after the varied work was completed. It also concluded that since the question of whether delay occurred, and who was responsible for causing it, is a factual issue - it is not necessary to have a program in order to make an assessment.
The case highlights the importance of reviewing the precise contract terms when it comes to considering the merits of EOT claims. Although under many standard form contracts Champion’s claim for an EOT would have failed because the notices were late, under the terms of this contract the contractor was given greater leeway. The contract allowed a notice of a claim to be given a significant time after the variation was instructed and indeed after the varied work had begun. Consequently, the employer was deprived of the benefit of the notice provision, even though the purpose of such a provision is to give an employer the opportunity to assess the effect of the variation instruction from both a cost and time perspective before it is confirmed.
Employers would be best advised to draft their contracts to require contractors to make EOT claims as early as practicable or at least to require a contractor to give notice when it becomes aware that the variation may cause delay. The employer would then have an opportunity to consider the effect of any variation in context and either reconsider or instruct delay mitigation measures.