Extensions of Time

Gillian Birkby

• Publisher: RIBA Publishing
• Year: 2019
• eBook ISBN: 9781000705188
• Topic: Architecture
• Subtopic: Architecture General

This is a straight forward jargon-free practical guide about all aspects of extensions of time for all construction industry professionals.

An extension of time is an issue which most architects and other construction professionals face sooner or later in their career. It is a complex area where the professional administering the contract must act in accordance with the contract conditions andfailure to do so will potentially land the professional and/or his client in court.

Throughout the guide the information is presented in a way that is immediately accessible, useful and related to the latest JCT Contracts. Tables, graphs and a glossary are used to help the reader navigate through chapters on liquidated damages, terms under standard contracts, notification of delay, supply of information, assessment, concurrent delays and ethical issues.

The authors have clarified potentially complex issues with short, relevant examples drawn from case law and have defined difficult concepts in easy-reference text boxes. This Good Practice Guide is a friendly reference tool for all architects or other professionals charged with assessing extensions of time.

Section 1
Basic principles

In this Section:

• Who decides on the initial contract period? When can the works commence? What happens at completion?
• Does the extension of time clause always apply? Time at large. Making time of the essence
• What if the contractor fails to complete on time? Are there any rules about how progress is to be made during the works? What if the contractor wants to finish early?
• Liquidated damages
• Does a subcontractor have the right to work to a fixed programme?
• Domestic subcontractors. Named subcontractors

Introduction

Time is one of the three crucial elements of a construction contract. The other two are quality and cost. A perfect project would be carried out on time and within budget and be of high quality. It is commonly said, however, that whereas two out of those three can often be achieved, three out of the three cannot. Because of the complexities involved in a construction contract, and in particular the many different trades and professions that are commonly involved in them, construction projects are susceptible to considerable pressure on the ‘time’ element.

The difficulty is that the parties to a construction contract may have conflicting aspirations. Both employer and contractor can usually maximise their potential profit on a project if completion can be achieved early. The sooner the building is finished, the sooner it can be occupied by the employer, or let in order to generate rental income. The sooner the contractor can move people and materials off site, the greater their profit will be where they are working to a fixed-price contract (the most common situation) and the sooner they can begin to earn money on another contract. However, if the project runs into delay for any reason (which is also common) the parties are immediately in potential conflict. The employer will want to offset the costs of their inability to occupy or let the building; the contractor will want both more time to complete and to be paid for the extra expense caused by the delay.

Prevention principle

The prevention principle provides that where one party to a contract has, by any act or omission, prevented the other party from performing a particular obligation under the contract, they cannot insist upon the performance of that obligation by the other party. Therefore, where an employer is responsible for any delay to the project (referred to as an ‘act of prevention’) they cannot hold the contractor to the previously agreed date for completion unless the contract states otherwise.

If there is no written contract between the parties, the position can be unfavourable to the employer. If, in those circumstances, the project suffers delay due (either entirely or in part) to any act or omission of the employer, the prevention principle means that they cannot insist on completion by the agreed date. Unless the terms of any oral contract to the contrary can be proved, the contractor merely has an obligation to complete within a reasonable time, and the employer has no means of forcing the pace. The employer could make time of the essence but often it is not a good idea to do so. If there is a contract, however, it can contain a mechanism by which time can be managed effectively for both parties. This mechanism is the extension of time clause.

See: Making time of the essence, page 10

The extension of time clause works in the following way. Assume that the contract specifies a fixed date for completion. If the contractor fails to complete by that date, they are liable to pay so-called liquidated damages to the employer. This compensates the employer for the contractor’s delay.

However, there may be delay to the project that is not ‘at the risk of’ the contractor: that is, not something for which the contractor has taken on responsibility (typically an act of prevention by the employer such as a variation to the works). In this case, the contractor can apply for an extension of time to complete, if the contract allows for this (the employer’s right to liquidated damages is then preserved, but postponed by the length of the extension granted). Liquidated damages are covered below (see page 15) and in Section 2.

If there is no extension of time clause, the contractor may claim that time is at large and that they have the obligation only to complete within a reasonable time. If time is at large, the employer will lose any right they might have had to liquidated damages. Time at large is explained below.

See Does the extension of time clause always apply? Time at large, page 9

If the contract, unusually, states that ‘time is of the essence’ a different set of rules apply.

See Making time of the essence, page 10

Time of the essence

Making ‘time of the essence’ in a contract means that if the contractor fails to complete on time the employer can say that the contract is at an end and sue for damages for the contractor’s failure to complete on time.

The extension of time clause therefore sets out which of the parties takes the risk when there is delay on a construction project for a particular reason. If the employer takes the risk of that delay, an extension will be granted; if the contractor takes the risk, it will not be.

As highlighted by the judge in Multiplex v. Honeywell (2007), extension of time clauses exist for the protection of both parties. The contractor benefits in that time can be extended for completion of the project where they are not responsible for any delay that has occurred, while the employer can proceed safe in the knowledge that they will not fall foul of the prevention principle in the event that they cause any delay.

This guide focuses on the extension of time clause in more detail, and in particular on how that clause works in the JCT forms. There is also a chapter on how extension of time operates under the New Engineering Contract (NEC).

First, however, the points introduced so far are expanded through a brief look at the basic shape of a construction contract.

Who decides on the initial contract period?

Most construction projects have two phases: the design and the work on site. Early in the design phase a decision should be made about the appropriate form of construction contract. Before the tender documents are sent out, the time period needed to complete the project should be assessed. This is usually done by the quantity surveyor and the architect, who try to come to a realistic assessment, based on the design itself and on their experience. The client, of course, is likely to want an early date for completion.

The information about the length of the construction period is sent out to contractors as part of the tendering process. The aim of this process is to provide contractors with information about the project on which to base their price. It is good practice to have the contract agreed and executed, with the date for completion inserted, before work on site begins. The contract will usually set out either a date for completion or the length of the construction period.

The contractor will also usually be informed at the tender stage of the anticipated date for starting work on site. This, together with the contract period, will be important in calculating the tender sum, because of the need to assess possible rises in the cost of labour and materials and to ensure that both can be made available at the appropriate dates.

A reasonable time period should be set for completing the works. If the period is short considering the amount of work to be done, the employer should expect the tenders submitted to be higher, and quality standards may also suffer.

In practice, the design phase will generally overlap with the construction phase. In recent years, in particular, there has been an increase in the use of contract forms that are fast track (that is, which shorten the overall period from starting design work to practical completion), and this is generally achieved by overlapping the design and construction phases. This does, of course, leave the problem that speed is not always compatible with quality, and it is certainly not compatible with tight financial constraints. Even where traditional forms are used, such as SBC2005, design and construction will often overlap, which can cause delay to the contractor.

When can the works commence?

Once a contractor has been selected, they will need possession of (or at the very least access to) the site in order to start work. Where the work is to be carried out in sections, they may only be given possession of those parts of the site that relate to the first section. Where the contract is carried out in phases or sections, the date on which the contractor is expected to start each of the phases or sections should also be recorded. See Section 2, page 20 for further discussion of sectional completion.

Deferring possession

Under the JCT forms, apart from MW2005 and MP2005, the employer is entitled to defer the contractor’s possession of the site for up to 6 weeks beyond the contractual date of possession. In MP2005 the contractor is given access but not possession.

Where the project is notifiable under the CDM Regulations (likely to last more than 30 days or involve more than 500 person days on site), work cannot start on site until the client, as defined by the Regulations (usually the employer), has agreed that the construction phase plan is ready and there are suitable welfare provisions in place, as required by Schedule 2 of the CDM Regulations. It is now therefore more likely than in the past that the date of possession will be recorded as part of the administration of the CDM Regulations.

It is important not to commit the employer contractually to a start date until the construction phase plan and welfare facilities are, in fact, ready. The start date can be stated in the contract as ‘[date X] or the date on which the construction phase plan is ready for work to start on site and the Schedule 2 requirements have been met, whichever is the later’. The contractor is responsible for preparing the construction phase plan and organising welfare facilities, and should therefore take the risk that they may not be ready on time. This can be achieved, in the example above, by calculating the date for completion by reference to date X, and not to the date on which the contractor actually starts work on site, if delay in producing a satisfactory construction phase plan and non-compliance with Schedule 2 is the reason why the start on site is later than anticipated.

The tender information should state the date on which it is anticipated that the contractor can gain possession of the site.

The date on which the employer is ready to give possession can be later than the date in the tender documents for many reasons: for example, failure to obtain the necessary planning permission or delays in the tendering process. This is part of the reason why contractors usually state in their tender that it is open for acceptance for a certain number of weeks.

If the date of possession is later than the date given in the tender documents, the actual date of possession should be recorded.

The date of starting on site may be important for various reasons. The date for completion may be calculated by reference to the commencement date (for example, the contract may state that completion shall be ‘X weeks from commencement on site’). Also, the operation of the extension of time clause usually depends on an undisputed initial contractual date for completion.

The date of possession should also be distinguished from the date on which off-site work commenced, such as prefabrication or the ordering of long delivery items.

It is quite common for the contractor to be allowed on site ‘early’ in order to set up site huts, etc. and, again, it is helpful if there is some record of whether this period is to be considered part of the contract period.

Ideally, the construction phase plan (if the project is notifiable under the CDM Regulations) should be ready some days before work is due to start on site. The contract can then be completed with the date for possession inserted, and the contract documents signed by both parties before work starts on site. This ideal is not always achieved. The work on site might start on the basis of a letter of intent or it might just start without either a signed contract or a letter of intent. It is good practice to have, at the very least, a letter of intent before work starts on site, and preferably a signed contract. If there is a letter of intent, the architect should check whether any start date set out in that document is the same as the date on which work actually started on site. If the dates are not the same, or if there is no date in the letter of intent (or no letter of intent at all), the architect should make sure that a written record is made of the correct date. This can either be by letter or in the minutes of the next site meeting. It is important that the date is recorded as soon as possible after work has started on the site, to avoid arg...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Series foreword
• Preface
• About the authors
• Acknowledgements
• Contents
• Section 1 Basic principles
• Section 2 Liquidated damages
• Section 3 Grounds for extension of time under the standard forms
• Section 4 Notification of delay
• Section 5 Supply of information
• Section 6 Assessing an extension of time
• Section 7 Concurrent delays
• Section 8 Ethical issues
• Section 9 The NEC provisions for extension of time
• Glossary
• Table of cases
• Bibliography and websites
• Index