Expert Chris Binnington this month discusses the contractor’s entitlement to an extension of time and the consequences including the employer’s rights to penalties.
It is most unusual these days to rind conditions of contract which do not deal comprehensively with the contractor’s entitlement to an extension of time for various situations. It may, at first blush, appear that such conditions are for the benefit of the contractor. However, the principal reason for such clauses is to protect the employer’s rights to penalties. In the absence of a provision to grant an extension of time for circumstances which are under the control of the employer, an employer delay event would result in there being no contractual mechanism to allow for an extension of time and, as a consequence, the employer’s rights to claim penalties would be lost. To use the English terminology, time would become “at large”. The corresponding position in South African law is that a debtor is excused from performance when that performance is prevented by an act of the creditor. In this case, debtor would equate to contractor and creditor to employer As a consequence, extension of time clauses have usually had a great deal of thought applied to them in order to ensure that the employer never loses his rights under the circumstances described above and most of these clauses are very widely drafted to encompass virtually every situation that may well be encountered during the course of construction.
However, none of the standard forms of contract address the practical problems associated with concurrent delay. It is a relatively simple matter to deal with a single delaying cause and, even if several delaying causes are occurring at the same time, if there is a single dominant delay which affects the progress of the works, it may still be relatively easy to analyse the situation and grant or refuse an extension of time. Unfortunately, construction contracts are frequently delayed by numerous matters, some at the same time, some overlapping with other delays, some critical, some not critical, some of which will qualify for extension of time and others will be entirely at the risk of the contractor Principal agents, faced with adjudicating claims for extensions of time will frequently encounter these overlapping situations and the standard forms of contract provide little or no guidance as to how to deal with the complications arising therefrom.
Contractors will usually seek to show that delays for which they would be entitled to an extension of time caused delay to the completion of the works and it is not in a contractor’s best interest to consider concurrent delays, which would not qualify for an extension of time.
A secondary issue, as far as principal agents are concerned, is that it is becoming evident from recent developments in the courts that employers are increasingly seeking recompense from their professional advisors if they fail to properly administer the contract. As a consequence, concurrency of delay has become one of the most challenging aspects of retrospective delay analysis and one of the most contentious.
What is a concurrent delay? A true concurrent delay is the occurrence of two or more events simultaneously, one an employer risk event and the other a contractor risk event, the effects of which are felt at the same time.
In the absence of clear guidelines laid down by the relevant contract clause, principal agents, and indeed main contractors when faced with claims for extensions of time from subcontractors, are inevitably left in a quandary as to how to deal with these competing causes of delay. In view of the fact that these situations are encountered so regularly, it is surprising that standard forms of contract have not addressed the issue at all. In the United Kingdom the Society for Construction Law has published a protocol to deal with these situations. The protocol is, however, simply advisory in nature and, unless the parties to a contract were to adopt the protocol through incorporation into the contract, it cannot become binding on the parties. It does however clearly address the issue of concurrency of delays. In the absence of use of the protocol, four approaches have evolved internationally to be used in the evaluation of concurrent delays. These four approaches are:
- The American approach;
- The ‘but-for” test;
- The dominant cause approach;
- The “Malmaison” approach.
Each of these will be briefly described. The American Approach
This may be summarised briefly as follows:
- Where an excusable delay occurs concurrently with an inexcusable delay, neither the contractor nor the employer would be entitled to recover compensation. The contractor would be entitled to an extension of time without financial compensation;
- Where a compensable delay occurs concurrently with a non compensable delay, the contractor would be entitled to an extension of time without financial compensation, Each of these will be briefly described unless he can establish that the compensable delay was the sole cause of the loss.
- Similarly, the employer can only recover to the extent that it is able to demonstrate that the inexcusable delay by the contractor is the sole cause of the delay. The American approach is highly dependent on the terms of contract and risk and allocation within the contract and has not been supported by English courts.
The “But-for” Test
This is based on what a contractor would have achieved but for interference from the employer and/or principal agent. Again, this approach has received unsympathetic responses from English courts. It is perhaps best illustrated by the following:
“A contractor is responsible for overrunning the completion date of the project because of the undue period of time taken to carry out additional work instructed by the principal agent. A contractor would seek to pin the responsibility of the overran on the employer with the argument that the delay would not have occurred but for the principal agents instructions.”
The Dominant Cause Approach
Until recently this has been regarded as the correct approach since it applies the adoption of common sense. The rationale commonly offered for applying the dominant cause is, however, less than wholly persuasive. It is most useful when a delay, at risk of one of the parties, is contained wholly within the start and completion dates of a delay at risk of the other party.
There are obvious and inherent difficulties with this approach where there are two competing causes of equal potency and, in the absence of apportionment, only one claim, to the exclusion of all others can succeed and hence a choice is required.
The “Malmaison” Approach
This is the approach that has been adopted by the protocol mentioned above. It arose out of a decision of the English courts in Henry Boot Construction (UK) Limited v Malmaison Hotel (Manchester) Limited.
This is what the Judge said in regard to concurrent causes of delay:
“It is agreed that if there are two concurrent causes of delay, one of which is a relevant event, and the other is not, then the contractor is entitled to an extension of time for the period of delay caused by the relevant event notwithstanding the concurrent effect of the other event. Thus, to take a simple example, if no work is possible on a site for a week not only because of exceptionally inclement weather (a relevant event), and if the failure to work during that week is likely to delay the works beyond the completion date by one week, then if he considers it fair and reasonable to do so, the architect is required to grant an extension of time of one week, He cannot refuse to do so on the grounds that the delay would have occurred in any event by reason of the shortage of labour,”.
The rationale behind the decision would appear to be that, in allocating risks between the parties within the extension of time clause, the parties may be taken first to have recognised that any one delay or period of delay might well be attributable to more than one cause but, secondly, to have agreed nevertheless that provided one of those causes affords grounds for relief under the contract then the contractor should have his relief notwithstanding the fact that he is himself the author of certain concurrent delays.
This approach has not yet been tested in South African courts but English legal authority on construction cases is frequently very persuasive and it is suggested based upon the “Malmaison” approach may well carry the day for the contract.
The approach has its critics but, until such time as standard forms of contract address this issue, it will remain contentious and those of us who practice in this area will have to make the best of what is, after all, a complicated analysis. “Malmaison” at least points the way forward.
THE CIVIL ENGINEERING CONTRACTOR November 2005