REUTERS | Kim Kyung-Hoon

The right extension

There has been some controversy over the decision of the Court of Appeal in Carillion v Emcor in February. The case broke new ground in that it was contended (apparently for the first time) that an extension of time clause could result in a non-contiguous extension of time being granted. This phrase refers to an extension of time for a period which is not adjacent to the then current completion date but rather relates only to a later period. It would therefore leave the contractor (or in this case the sub-contractor) liable for the period of delay between the completion date and the start of the extension period.

It is curious that this argument has not been raised before but the answer appears to lie in the difference between main and sub-contracts. As explained by Lord Justice Jackson, a main contractor is not really concerned whether an extension of time is contiguous or non-contiguous as it will normally be liable for liquidated damages for the period of culpable delay whenever it occurs. However, it had generally been accepted since at least the Chestermount case in 1993 that extensions of time should be granted on a contiguous basis. The parties agreed this in Chestermount and all subsequent cases on the point and it appeared to be a result which flowed naturally from the usual wording of extension of time clauses.

Of course, the position may be different for sub-contractors. Their liability may not be liquidated in respect of delay and therefore it may be very significant to them which period is or is not culpable. There may be something of a paradox, in that the sub-contractor may receive an extension of time in respect of a period for which it is in culpable delay and no extension where the  delay is the employer’s fault.

However, the court cannot consider this issue in a vacuum and seek to find a reasonable result. If the wording of the contract points clearly in a particular direction, then it must be followed even though the result may have some element of un-commerciality. Even if the court had concluded that the sub-contract’s provisions offended against commercial common sense, such a finding would only have assisted Carillion in exceptional circumstances in the face of the natural meaning of the words used.  Here, the wording of the sub-contract could readily be given effect, thus precluding any consideration of “common sense” issues.

So is there any prospect for a “non-contiguous” argument succeeding in future cases? The answer is likely to depend upon the wording of the particular extension of time clause and it may be that main contractors will seek to draft their way into what might be for them a desirable position. The court is clearly very reluctant to reach such a conclusion unless very clearly stated and it remains to be seen whether any drafting stratagems can avoid this conclusion. For the present, therefore, the Chestermount approach supported by the Carillion decision remains authoritative.

Herbert Smith Freehills LLP Michael Mendelblat

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