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.
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.
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.