The Contract Particulars state a “Completion Date” by which the contractor should reach practical completion. If the contractor has not reached practical completion by that date, the employer is entitled to charge liquidated damages (known as “LADs”) pursuant to clause 2.29.2 of the contract.
Clauses 2.23 to 2.26 set out when the contractor is entitled to an extension to the Completion Date, thereby relieving the contractor of its obligation to pay LADs for that period. Clause 2.23 defines terms used in the other clauses, clause 2.24 sets out the information the contractor has to provide to apply for an extension and clause 2.25 explains the mechanism by which the employer assesses the extension of time due. Clause 2.26 sets out the circumstances (“Relevant Events”) which entitle the contractor to an extension of time. There are thirteen Relevant Events, including:
- variations to the scope of the works;
- disruption or impediment by the employer;
- exceptionally adverse weather conditions; and
- specified perils (eg, fire, flood, earthquakes etc which are usually insured under contractor’s all risk insurance).
Importance of Extensions of Time to employers
Although contractors receive the main financial and practical benefit from extensions of time, they also provide important protection of the employer’s contractual rights.
The courts have decided that a party to a contract cannot enforce the LADs provisions of the contract where that party’s acts have prevented the other party from performing its obligations.
How does this apply in the context of the JCT contract? If the contractor’s right to claim an extension of time was deleted entirely from the contract so the contract imposed a fixed Completion Date, and during the course of the contract the employer caused a delay to the works, the contractor would no longer be required to achieve practical completion by the Completion Date.
Instead, time would be “at large” meaning that the contractor would be entitled to a “reasonable period” to complete the works. The employer would therefore not be able to claim LADs as a right and would have to prove (most likely by way of legal proceedings), that the time taken by the contractor was unreasonable and that it had suffered loss as a result.
Clauses 2.23 to 2.26 of the JCT contract are therefore a vital part of the contract mechanism for both parties.
The most common employer amendments to the extension of time provisions are to reduce or modify the list of relevant events (eg, delete some of the “neutral” events such as adverse weather and force majeure). In addition, employers also include wording to transfer the risks associated with concurrent delay on to the contractor. However, case law on concurrent delay has been unsettled by conflicting judgments in the last few years, although two recent cases have helped to clarify the position. We will be reviewing this case law in the autumn edition of Building Blocks.
The next article in our series on the JCT Design and Build Contract 2005 will focus on loss and expense.