REUTERS | Ronen Zvulun

Notice provisions and extensions of time: an inconvenient truth?

How would most contractors receive this piece of drafting?

“The Contractor agrees to pay Liquidated Damages (LDs) for delay to the Employer, even though the Employer caused the delay to the Works to which those LDs relate.”

The answer to the question is pretty obvious. But this drafting reflects the outcome of the notice provisions within many standard form contracts (for example, the FIDIC and NEC forms).

These provisions typically require the contractor to give notice of his intention to claim an extension of time within a specified period. If the contractor fails to give the required notice on time (and the provision is found to be an enforceable condition precedent), it will be unable to claim the extension.

All delays are equal

You can see the commercial rationale for this provision in relation to some categories of delay.

Take weather. This is a neutral event, outside the control of the parties. Depending upon the severity of a weather event and the wording of the contract, the contractor may be entitled to an extension of time.

The employer will not necessarily be aware of the existence of the bad weather, let alone the effect that it might have on the progress of work. To help with proper contract administration, it makes sense for the contractor to give a prompt notice if he wishes to claim an extension for any delay caused by this event.

Contrast this situation with delays caused by the employer’s own breaches or acts of prevention, such as a failure to provide timely access to the site. The employer should know all about this “event”, given that he was the cause of it, so one of the main commercial purposes of a notice provision falls away.

Should some delays be more equal than others?

Standard form contracts do not distinguish between these types of events: between, say, bad weather and a delay caused by the employer. In practice, this means that the following can happen:

  • The employer fails to provide access and causes a delay.
  • The contractor fails to comply with the contractual notice provisions, so the engineer, project manager or contract administrator may not award an extension of time.
  • As a result of the employer’s act of prevention, the contractor fails to complete by the (un-extended) completion date.
  • The contractor then pays liquidated damages in respect of delays that the employer caused.

Is that fair? What really caused the delay?  Was it the employer’s breach or was it the contractor’s failure to operate the contractual machinery, when trying to bring a claim?

Did the parties really intend this outcome when providing for a period of time within which extensions of time have to claimed? The point is at least debatable.

Time at large and the prevention principle

One Australian authority dealt with this situation by placing time “at large” (see paragraphs 69-71 of the judgment in Gaymark Investments v Walter Construction Group).  However, this approach has not been well received by the courts of England and Wales (see Multiplex Constructions v Honeywell Control Systems and Steria v Sigma Wireless Communications).

There is also the problem of the “prevention principle”. This is the rule of English law that has been with us since at least 1838, stating that a party may not benefit from its own breach (see Holme v Guppy (1838) 3 M&W 387). In other words, you cannot insist on the performance of a contractual obligation, when you are the cause of the non performance. Yet, in the above example, this is what the employer is doing.

In these circumstances, the court or tribunal dealing with the point may simply decline to enforce the notice provision. This may prove to be the case in civil code jurisdictions, but not every party will wish to pin their hopes on such an eventuality…

(For more on time at large, the prevention principle, Multiplex v Honeywell and Steria v Sigma, see PLC’s practice note on Time for completion and extension of time.)

Bright line of distinction

Beyond this, is there a better solution?

In his excellent article Can Prevention Be Cured By Time Bars? (2009) ICLR 26(1), pages 57-74, Professor Doug Jones identifies what he calls “a bright line of legal distinction” between the two categories of delay referred to above (that is, between a neutral event, such as the weather, and an act of prevention by the employer). Professor Jones says that “inadequate weight” has been given to this distinction.

He is right. The standard forms do not distinguish between the two categories.

If there was a feeling that the distinction should be acknowledged, could there be two separate regimes for extending time in construction contracts, each having differing notice provisions?

I don’t see why not.

4 thoughts on “Notice provisions and extensions of time: an inconvenient truth?

  1. Michael,

    It seems to me that notice provisions should, first and foremost, provide the employer sufficient opportunity to act in an attempt to mitigate the effect of a delaying event at the time the event arises, regardless of who is responsible. If this is the case, then I am not sure the prevention principle applies because the employer is not necessarily benefiting from its own breach, but is suffering from the Contractor’s inability to provide an opportunity to act. If it can be shown that a delay event claimed by a contractor after a contractual notice period could have been mitigated by the employer if the claim was made within the notice period, then the Contractor should suffer the consequences.

  2. I think the position could be resolved by using the concept of notice rather than requiring notification.

    If notice can be imputed to the relevant party then the situation is already resolved. Of course that then leads to the problem of what constitutes notice, and starts the debate again. However, if this definition is dealt with at the contract stage then the problem again goes away.

    Notice can be deemed if the employer is, or should be, aware of the delaying event, eg by reason of the delay being caused by or at the instigation of the employer, or if the employer has been put on notice by the contractor serving a “Delay Notice”

  3. Once a notice of delay has been issued, distinguishing between the consequences of a neutral event and a contractual risk event on the project completion date requires a reasonable base programme, accurate physical progress reporting, updating the programme to reflect the way in which the project is actually being built and a most likely forecast to complete. Given that this needs to be done in a short period of time, most organisations do not dedicate enough resources to this or provide effective governance around the change management process. If both parties were prepared to estimate consequences and give levels of confidence in the estimate (per the NEC) the estimated impacts might get recognised for what they are rather than wait for better information on whether there was an actual impact or not.

Comments are closed.

Share this post on: