There are very few construction disputes where delay is not an issue. The process of establishing entitlement to an extension of time can be both time-consuming and costly. It is necessary for any party to establish the extent of its legal responsibility for delay. This is often a complex and uncertain process, with numerous competing and interacting causes of delay being put forward by the parties.
Extensions of time (EOTs)
In the unlikely event that the contract does not provide for a contractual date for completion, a term is implied into the contract requiring the contractor to complete the works within a reasonable time. However, in most construction contracts, a contractor is contractually bound to complete by a particular date. If it is late, it bears the risk of liquidated and ascertained damages (LADs) being levied against it unless it is entitled to an EOT. An EOT both relieves the contractor from LADs and gives the contractor more time to carry out the work.
When is a contractor entitled to an EOT?
Most standard form contracts provide that the contractor is only entitled to an EOT when one of the 'relevant events' it sets out is likely to delay the completion of the works beyond the completion date - often referred to as 'critical' delay. There are two types of delay for which a contractor may be able to claim an EOT. The first is delay caused by the employer and the second is other delays that are not the contractor's responsibility under the contract, such as those caused by strikes. There must be contractual provision for an EOT in such circumstances otherwise they will be at the contractor's risk.
A contractor will not be entitled to an EOT unless the delay is:
- caused by a relevant event; and
- is likely to delay completion of the works beyond the completion date.
So far so good, but what happens when there is more than one delaying event? This is known as 'concurrency' or 'concurrent delay'. It is a complex area with a variety of approaches being put forward such as the 'first in time' and the 'dominant cause'. The difficulty is created where one event is a relevant event and the other is not. Should the contractor be entitled to further time?
The 'Malmaison' approach
This is considered to be the leading modern approach to concurrency. Put succinctly, if the contractor suffers a delay of a week because of exceptional weather (a relevant event) but also suffers the same period of delay because of a shortage of labour (not a relevant event), the contract administrator (acting fairly and reasonably) cannot refuse to grant an EOT because of the concurrent effect of the non-relevant event. However, the contract administrator can consider the effects of non-relevant events.
What about City Inn?
The high-profile Scottish case of City Inn v Shepherd has proved to be controversial because the court seems to have favoured a more practical assessment of the effect of delaying events. The court advocated an "apportionment" exercise of delay (in the absence of a dominant cause) where one delaying event is a relevant event and the other is not.
In fact, one of the three judges rejected the concept of apportionment on the basis that the contract administrator is only required to consider the effect of the relevant event and not the effect of non-relevant events. Scottish decisions, although persuasive, are not binding in England and Wales. The concept of apportionment is not consistent with English law so we will have to wait and see what impact City Inn has in England. Already one English court decision has not followed City Inn.
Evidence in EOT claims
It is the contractor or sub-contractor who must prove that a relevant event caused the delay. Interestingly, all three judges in City Inn agreed that a critical path analysis, although relevant, was not essential. However, they also indicated that the judiciary is concerned about the use of computer programmes – the data used needs to be accurate and the logic links need to be explained. The court also urged parties not to be overly reliant on technology and to provide a clear explanation of the causes and effects of delaying events.
What if the contract is silent and does not make provision to grant an EOT?
There are two effects. Firstly, if the employer caused the delay then the time for completing the works becomes "at large". This simply means that the contractor's obligation becomes to complete the works within a reasonable time. Secondly, the employer cannot recover LADs.
So, what steps do you have to take to be entitled to an EOT?
The contract usually provides the necessary steps. This can cause problems if the provisions include strict notice requirements. If no notice is given, or it is given late, then the right to an EOT might be lost even if completion has been prevented by the employer.
Points to consider
- Negotiate a level of LADs and agree a cap on liability.
- Know your contract, including the dates for any sectional completion, the final date for completion and events that entitle you to an EOT. It is assumed that contract administrators and the parties know the terms of their contract. Ignorance of the contract terms is not a defence!
- A contractor will not automatically be entitled to an EOT where a relevant event occurs. Cause and effect must always be proved. Similarly, an entitlement to prolongation costs does not automatically follow an award of an EOT.
- Issue notices of delay and apply for EOTs within the times stated in the contract or, better still, as soon as you are aware of a delaying event.
- Make use of delay analysis tools focusing on clarity and logic (effective does not always mean highly technical) and keep planning tools and programmes updated.
- Delay is a question of fact so keep contemporaneous records, notes and diaries.
- As an employer, consider collating relevant evidence from the contract administrator or other decision-maker to allow the court to review 'common-sense principles'.