The progress of a contractor’s works is often a key factor in a construction project completing on time. Construction contracts usually include terms that specify the progress required and the consequences if that progress is not achieved.
However, what is the position when the contract only gives the employer a right to terminate for the contractor’s failure to progress the works? Is the contractor obliged by an implied term to proceed regularly and diligently?
The TCC’s view
The Technology and Construction Court (TCC) considered this question in Leander Construction Ltd v Mulalley & Company Ltd. In the judge’s view, the test of whether a term should be implied is one of necessity, as Lord Clarke emphasised in Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc. That is, is the implied term necessary to make the contract work?
The judge decided that an implied term that the contractor, Leander, would proceed regular and diligently with the works was not necessary to “make the contract work”. Leander was under an obligation to complete by a single completion date and the judge decided it was unnecessary and unhelpful to impose other interim progress obligations upon Leander (for example about its rate of progress and its detailed performance).
While there was a right to terminate if Leander failed to proceed regularly and diligently with the works, the judge emphasised that the courts have been reluctant to imply additional terms on timing and regularity of a contractor’s performance prior to the contract completion date. In GLC v Cleveland Bridge and Engineering (1984) 34 BLR 50, both Staughton J and the Court of Appeal refused to imply a term of regular and diligent progress, even though there was a right to terminate for a failure to proceed on that basis. Here, the judge saw no reason to reach a different conclusion to that of the Court of Appeal in GLC.
Practical implications
With no express or implied obligations as to progress, it is a matter for the contractor to plan and resource the works appropriately, so that it can achieve the specified completion date. Its obligation to progress is limited to getting all its work done by the contractual completion date. A contractor could therefore fall behind the contract programme with impunity, provided that it continues to comply with its other contractual obligations.
While it would depend upon the other terms of the contract, if a contractor’s slow progress amounts to a breach of that freestanding obligation to complete by a given date and the employer suffers losses as a result of that breach, then those losses could form the basis of the employer’s withholding for delay-related matters (see Jonathan Cope’s post from last week).
Interestingly, such a stand-alone obligation is not included in the JCT Standard Building Sub-Contract, yet it does appear in the JCT Standard Building Contract (2005 and 2011 editions) at clause 2.4. While it is not expressly included in the NEC contracts, there are other ways in which a properly managed NEC contract discourages the contractor from progressing slowly with its works.
Therefore, it is essential that the parties’ contract specifies the progress the contractor’s work is required to make, as this will provide a disincentive for the contractor to progress the works slowly.
And finally
If the contractor is required to progress the works regularly and diligently, there’s another question that needs to be considered: what does the term ‘regularly and diligently’ mean?
Andy acted for Leander Construction Ltd in the TCC.
Although as suggested by this blog, the court has held the phrase ‘regularly and diligently’ to be elusive and ‘of little help on the question of how much activity, progress and so on is to be expected’ (Hounslow v Twickenham) it also said that regularly means daily attendance with sufficient plant, materials and labour to progress the works substantially; and diligently requires that physical capacity to be applied industriously and efficiently to complete the works (West Faulkner v Newham). Taken together the phrase imposes an obligation on the contractor to proceed ‘continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion in accordance with contractual requirements’.
(Independent law report at http://www.independent.co.uk/news/world/case-summaries–building-1390118.html)
The contract is the ultimate management tool that the client has to incentivise a contractor to complete a project to time cost, quality and safety. Failure at the end of a project resulting in litigation is of no benefit to the actors on stage. It is imperative that the contract is a living document used throughout the project where necessary to chivvy along not just the contractor but also the client and design team. What you cannot measure you cannot manage (Deming et al).
This phrase illustrates the contractual significance of the words, progress regularly and diligently. Sarah’s cogent exposition can be developed to define how we can measure progress simply by referring to empirical measurements from previous similar projects. So if it takes 1 day to drive a pile over the tube in Vauxhall than prima facie it will 1 day north of the river in Westminster. If, for some reason, it takes 2 days then it must be justified, agreed and recorded as per Latham’s continuous dispute resolution ethos.