Extensions of time are again hitting the headlines following the recent Technology and Construction Court decision in Carillion Construction Ltd v Emcor Engineering Services Ltd 1 and others [2016], a dispute in relation to the proper interpretation of a standard form of construction sub-contract provision. Carillion contended that the nature of the particular sub-contract clause warranted a departure from the method by which extensions of time are usually applied.
However, the court rejected this argument, and found in Emcor's favour that an extension of time was to be treated in the ‘usual’ manner. With this in mind, what are the key parameters for determining extensions of time and what is the level of proof required?
Background
Uncertainty is endemic within the construction industry and, through a combination of many factors, construction projects do not proceed as planned with the risk that the contractual completion date will not be met. For contractors this results in a delay to the completion of the works with a corresponding liability to the employer for liquidated damages and the potential of cost overruns due to the increased costs of performance arising from prolongation. For employers, delays result in a loss of profit, loss of revenue and potential liability to the design team and other members of the professional team engaged.
The Construction solutions team at FTI Consulting is regularly engaged to provide expert delay services in relation to formal dispute procedures but also, as a precursor, to prepare or rebut extension of time claims. In these instances contractors will frequently seek assistance in identifying and setting out its entitlement to an extension of time or an employer may seek assistance in assessing the criticality of alleged delays and the appropriate award of an extension of time.
In doing so, the key principles relating to the preparation and award of extensions of time are often misinterpreted or over simplified.
The need for extension of time provisions
The prevention principle, derived from Holme v Guppy [1838]2 where an employer withheld payment following delay even though it had failed to give possession of the site for 4 weeks following the execution of the contract, states that where a contractor is prevented by the act of the Employer, it is not in default.
This position was confirmed in Peak Construction v McKinney Foundations [1971]3 where it was added that if, for reasons within the employer's control, the contractor is prevented from completing the works by the completion date, and there is no mechanism to extend time for performance (or it has not been properly extended), the employer can no longer hold the contractor to the original completion date. Instead there is no firm date from which liquidated damages may be calculated from and, as a result, time is then said to be at large4. In such instances the contractor is granted a ‘reasonable’ time to complete the works.
Therefore the provision to award an extension of time acts as a mechanism to extend the contract completion date thus preventing the