Any undertaking to perform construction work must come with a time for such work to be completed. This obligation could be expressly stated in the contract, or it can be implied. If the contractor fails to complete its work on time, the contractor may be in breach of contract and may become liable to the principal in damages, if the principal is able to prove it has suffered losses as a consequence of the contractor’s breach.
Most standard form contracts make provision for a set date by which the work is to be completed. If the contract is not properly completed to include a start and completion date, then the contractor’s obligation would be to complete the work within a reasonable time.
Express completion date
Where the completion date is expressed in the contract, the contractor is not entitled to seek as of right an extension unless there is an extension of time clause in the contract allowing the stated time to be altered. Commonly, these clauses provide that the contractor is entitled to an extension of time due to an event that occurs which causes delay and for which the contractor is not at fault.
Most contracts express what the contractor is entitled to claim an extension of time for. This could be additional works, variations that the contractor is required to perform, or an unforeseeable event such as COVID-19, or a force majeure event such as the recent flooding New Zealand experienced. For example, the NZIA SCC 2018 contract provides that the contractor is entitled to an extension of time under the following circumstances:
- A delay in the issue of a consent or approval that the principal had to obtain.
- Unforeseeable physical conditions on site which materially differ from the physical conditions which an experienced contractor should have reasonably seen at the time of tender. They do not include climatic conditions on the site.
- The contract works are suspended in a way allowed under the contract.
- The architect does not give a direction within a reasonable time after being asked by the contractor in writing to do so.
- The principal does not supply materials, work or services on time.
- A separate contractor’s act or omission.
In order to claim an extension of time, contractors must ensure that they follow the process set out in the contract in seeking to extend the deadline. This may include providing relevant information to the principal to support the claim.
It is common for contractors to make claims for an extension of time late and they are often poorly documented. Contemporary evidence of matters that give rise to a delay are the best source of evidence to support a claim for an extension of time. This could include, inter alia, instructions, communications between the parties, site notes, photographs, minutes of meetings, and timesheets. Any approval should be in writing to prevent disputes.
Other instances
Where there is no express contractual right to extend time, or where the clause does not apply in the claimed circumstances, a stated time for completion would be replaced by a reasonable time for completion, if:
- The parties agree.
- If the principal waives the obligation to complete by the stated date.
- If the principal prevents completion within the stated time by some act or omission caused by the principal.
Prevention principle
The latter is also known as the prevention principle. It is based on a common law rule that creates an implied obligation on a contracting party to not impede another contracting party from achieving a condition that some contractual outcome or benefit depends on. In the context of construction contracts, where a party to a construction contract has been prevented from fulfilling its contractual obligations as a result of the conduct of the other party, the preventing party cannot insist upon strict contractual times for performance.
If the prevention principle applies, time in the contract becomes “at large” and is replaced by whatever is reasonable in the circumstances. What is reasonable depends on the circumstances of each case such as the nature of the work, the necessary time to do the work and the ability of a reasonable contractor to perform. The prevention principle does not prohibit the contractor from seeking damages against the principal.
Additionally, if time is “at large”, the principal cannot rely on its entitlement to liquidated damages. However, the principal is able to claim for actual damage suffered if the contractor fails to achieve practical completion within a reasonable time.
Peak Constructions (Liverpool) Limited v McKinney Foundation Limited
In Peak Constructions (Liverpool) Limited v McKinney Foundation Limited (1970) 1 BLR 111, Peak was contracted to build a 14-storey block of flats. The piling works were subcontracted to McKinney. The completion date was 17 February 1966. McKinney completed the piling work in July 1964. In October 1964, defective work was discovered due to a negligent work by McKinney. The principal delayed issuing instructions to proceed with the rectification work until August 1965. Once issued, McKinney commenced rectification works promptly. Six of the 58 weeks of delay were taken by McKinney for the rectification work.
The English Court of Appeal held that it was not reasonable to hold McKinney responsible in damages for the entire 58-week delay. Where acts of the principal have prevented completion, the only way to preserve the principal’s right to liquidated damages is for the contract itself to allow the date for completion to be extended for those very acts. As no extension of time had been granted for the principal’s delay, there was no date under the contract to measure McKinney’s liability to pay liquidated damages and therefore, none was payable.
Summary
The purpose of extension of time regime is to allocate risks and responsibility between the parties to the contract.
Generally, the causes of delay can be classified into one of the following categories:
- Caused by the principal.
- Caused by the contractor.
- Caused by factors outside of the control of either party.
When negotiating the terms of a construction contract, it is important that the party best able to control the relevant risk should bear the time and cost consequences of delay. Failure to do so could result in unintended consequences.
Contact us if you have experienced delays in your construction project. Our lawyers at Norling Law can review your delay circumstances and discuss strategies on how to progress your project as part of our no obligation legal consultation. To book a free 30-minute consultation please click this link.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
Anna practices in the area of commercial litigation and has appeared as Counsel in the District Court, High Court and the Court of Appeal, having successes in all Courts. Anna has a special interest in corporate, insolvency and relationship property law.
Wendy has over 20 years’ experience in civil litigation in New Zealand with a main focus on construction, insolvency and debt recovery and security enforcement.