Extension of time – principles
Extensions of Time: Principles
We know that where there is a fixed completion date but the party to the contract who is said to benefit from that provision, let us call that party the Employer, makes some act of prevention that causes the other party, let us call that party the Contractor, to fail in that obligation, then time becomes ‘at large’. The obligation becomes to complete in a reasonable time. However linked to the completion date in most construction contracts is the right of the Employer to recover from the Contractor a pre-agreed sum for damages for any inexcusable delay. We know these as liquidated and ascertained damages or ‘LAD’s’. If the Employer himself delays completion and there is no facility in the contract to adjust the required completion date for that, then the LAD provision no longer bites1, instead the Employer has to prove the actual damages incurred.
Accordingly the principle purpose of an extension of time provision in a contract is not as may be thought to facilitate the proper running of the project but to preserve the Employer’s rights to levy liquidated and ascertained damages.
So what are the principles? The problem with giving a catch-all formula for dealing with extensions of time is that not all contracts say the same. There is also a clear difference of approach either side of the English/Scottish border2. However, here we will concentrate on the English jurisdiction. English Court judgments often referred to and relied upon contracts using a variety of published standard forms, many long superseded, and in some cases, bespoke forms. However, remember that the extension of time provisions to have the effect of preserving the Employer’s right to deduct LAD’s must allow the completion date to be adjusted in his default. Accordingly where rules are set, and often they are not, they tend to follow much the same practice, commonly that upon notice from the Contractor or on his own initiative, the Employer’s Architect/Project Manager/Engineer or, in some cases, the Employer himself must ascertain the effect of the matter in the notice upon the completion date and revise the date accordingly, by giving an extension of time.
That sounds straightforward but delays to a project can be complex, caused by a combination of matters for which an extension is due under the contract (sometimes called ‘relevant events’) and the contractor’s own problems all within a complex matrix. Rules have to be set but most standard forms shy away from any such attempt. So for the most part we have to revert to the common law to decide how to deal with this.
The first case to consider is Fairweather v Wandsworth3. This concerned a contract using the JCT’63 standard form but the principle should be of general application. From this we derive authority that when considering extensions of time the first-in-time test (rather than the dominant test) is to be used. To explain what that is, if I negligently damage your car causing the bumper to be damaged and subsequently, but before it is replaced, somebody else collides with it and causes damage that would have also on its own required its replacement, I am still liable for 100% of the cost of replacement and the second person none4. If the damage I caused required re-spraying only but the second collision required replacement I am still liable for the now theoretical cost of re-spraying and the second person the cost of replacement less the cost of re-spraying5. This is the ‘first-in-time’ rule.
The second case to consider is Balfour Beatty v Chestermount Properties6 (on a contract using JCT’80 but again probably of general application). This set two principles. The first was that the contractor was not entitled to an extension of time for matters, such as variations, when he was already in delay and the variation did not cause further delay – an end to the entitlement approach. Secondly a variation issued during a period of contractor culpable delay would not cause an extension, by reference to the actual date of issue of the instruction, which would have the effect of giving an extension for the preceding period of contractor culpable delay, but by ‘dotting on‘ an appropriate period of extension onto the original or previously extended completion date.
The third case to consider is Henry Boot v Malmaison7 (again under JCT’80 but again probably of general application). There Dyson J decided firstly that the Architect when arriving at his determination of the extension of time arising from a relevant event can also take into account other matters, including the Contractor’s own delays. If that was otherwise then of course this article would lose its relevance. Secondly it decided that where there are two concurrent delays, one a Relevant Event and the other not, the Contractor should get his extension but not necessarily his costs.
That was further developed in Royal Brompton Hospital v Hammond8, again a contract using the JCT’80 standard form. HHJ Thornton quite rightly observed that situations where two delays operate concurrently as hypothesised by Dyson J are rare. However despite HHJ Thornton’s judgment being described as exemplary in the Court of Appeal9, there is some conflict within parts of his judgment. He firstly stated in very simple terms what is required to evaluate whether a relevant event requires the completion date to be extended:
i. that a Relevant Event has occurred; and
ii. that that Relevant Event is likely to cause the completion of the works as a whole to be delayed beyond the Completion Date then fixed under the contract, whether as a result of the original agreement between the contracting parties or as a result of the grant of a previous extension of time
The particular point to note is that the assessment is to be made against the contractual completion date, not the anticipated actual completion. This goes against previous statements that contractor’s own delays are to be taken into account when assessing the effect of Relevant Events. However later he seems to correct this:
‘It does not mean, in my judgment, a situation in which, work already being delayed, let it be supposed, because the contractor has had difficulty in obtaining sufficient labour, an event occurs which is a Relevant Event and which, had the contractor not been delayed, would have caused him to be delayed, but which in fact, by reason of the existing delay, made no difference. In such a situation although there is a Relevant Event,
“the completion of the Works is [not] likely to be delayed thereby beyond the Completion Date.”
The Relevant Event simply has no effect upon the completion date.’
So what principles can be derived:
1. The first-in-time principle applies to extension of time considerations. Therefore when considering a number of delaying events their effect should be considered sequentially as they occurred. The approach of determining what is the dominant cause is not correct.
2. Matters other than Relevant Events can be taken into account when considering the effect of Relevant Events upon the completion date.
3. If the Relevant Event occurs on a contract already in delay, if the Relevant Event does not cause further delay then no extension of time is due.
4. When there is true concurrency between delaying events one of which is a Relevant Event, an extension of time is due.
5. A Relevant Event occurring during a period of Contractor culpable delay does not cause an extension up to the date of the Relevant Event but a relevant additional period added to the contractual completion date.
These derived principles can be applied to the particular events to arrive at an extension of time. The methods available to assess periods of delay are discussed in a later article.