Extension of Time, LADs & Conditions Precedent

This blog concerns the important matter of Extension of Time LADs & Conditions Precedent.

If rules for notifying delay are necessary steps, not following them could be very serious. If the notice requirement is simply a direction of what is to be done, the failure to give notice is not so critical.

In the Scottish case of FES Limited v HFD Construction Group Limited 2024, the judge held that clause 4.20.1 of the Scottish version of the JCT Standard Building Contract was a Condition Precedent to loss & expense.  That decision was surprising and potentially raises issues as to EOT.

Many bespoke amendments to JCT Contracts can result in the time bar provisions being more onerous than the NEC suite of contracts.

Conditions Precedent to Loss & Expense Claims

A condition precedent is a contractual obligation that must be satisfied before an entitlement or obligation comes into existence.

Contractors are good at making timely applications for loss & expense, but not so good concerning Extensions of Time?

Extension of Time & LADs

The main reason a Contractor applies for an Extension of Time is to absolve itself from Liquidated Damages.

See our blog Liability of Sub-Contractors for Liquidated Damages Under JCT here. The blog considered main contract LADs as well as LADs under subcontracts.

The Importance of Extension of Time Clauses in Construction Contracts

Most construction contracts will identify either a specific date for completion of the works or a period in which the works are required to be completed.

If the Contractor fails to complete the works within the stipulated time, it may be liable to pay the employer LADs

The Prevention Principle

Of importance to EOT is the principle of Prevention. An employer cannot delay the Contractor, or do something that delays completion and then complain that the Contractor is liable for LADs.

“a party to a contract is exonerated from the performance of a contract when that performance is prevented or rendered impossible by the wrongful act of the other party”- see Perini Pacific Limited v Greater Vancouver Sewerage and Drainage District (1966).

The act of prevention could be caused by a delay in giving possession, a failure to provide instructions, wrongful interference or variations.

The act of prevention could invalidate the Liquidated Damages provisions and put time at large.

The purpose of the Extension of Time provisions within construction contracts is to ensure that the Liquidated Damages provisions survive.

If employer has caused delay, it will want to award an EOT so that the Prevention principle does not defeat the Liquidated Damages provisions of the contract.

Compensation for Extension of Time

The delay caused by the employer is compensated by an Extension of Time . This EOT ensures that the employer does not fall foul of the Prevention principle and does not claim Liquidated Damages for its delay.

The Contractor benefits from an Extension of Time provision. The Contractor will be hoping for an EOT to absolve itself of liability for Liquidated Damages. The Contractor will also use the EOT as a gateway to claim loss and expense.

What does the NEC4 say about conditions precedent & EOT?

NEC 4 state that unless the Contractor notifies of a compensation event within a specified time, the Contractor is not entitled to an EOT. This is a condition precedent.

What does the JCT DB 2016 contract say about conditions precedent and EOT?

The JCT contract requires the Contractor to give notice of a Relevant Event upon it becoming reasonably apparent that the progress of the works is likely to be delayed.

The Contractor is required to give details the material circumstances of the causes of delay, and provide further particulars of its suspected effects in the completion of the works.

The sanction for non-compliance is not set out in the JCT contracts.

It should be noted that bespoke amendments often seek to impose stringent timelines in respect of the notification provisions within the JCT, similar to the NEC provisions.

The consequences of the Contractor failing to notify of delay.

If the notification provisions are a condition precedent, the failure to give notice required may be fatal to the Contractor’s entitlement to an EOT

How is the Prevention Principle compatible with Conditions Precedent?

 Is a Contractor relieved of liability for Liquidated Damages for employer delay where the Contractor has not given required notice pursuant to conditions precedent? If not then the Employer is benefiting from its act of prevention.

The above point is often referred to as the Gaymark principle. Gaymark was an Australian case where it was held an award of LADS where the employer caused the delay would be unfair.

In Multiplex Construction (UK) Limited V Honeywell Control Systems Limited [ 2007] EWHC 447 (TCC) the court doubted whether the Gaymark principle represented English law.

The court recognised the importance of a contractual provision requiring the Contractor to give notice.

The court considered the failure to give required notice meant a Contractor could disregard a condition precedent with impunity and place time at large. A Contractor would benefit from its own breach!

The Multiplex case was followed by Steria Limited v Sigma Wireless Communications Limited [2008] BLR where HH Judge Davies at [95] said:

“….. Generally, one can see the commercial absurdity of an argument which would result in the Contractor being better off by deliberately failing to comply with the notice condition than by complying with it”.

 And at [96] ….

“I conclude that the prevention principle does not mean that failure to comply with the notice provision of clause 6.1 puts the time for completion at large”. 

Conclusion

Failure to comply with time bar provisions may be fatal to the Contractors’ ability to secure EOT.

The Contractor may incur liability for Liquidated Damages notwithstanding it would, but for the failure to comply with the notice provisions of the contract, have secured an EOT.

Compliance with conditions precedent for securing an Extension of Time are critical.

When negotiating contracts, a Contractor should understand what is required of it, and only agrees a contract provision that it can comply with.

If the Contractor is in delay for no fault of its own but fails to give a delay notice pursuant to any contractual clause which is a condition precedent to an Extension of Time, the Contractor may not be awarded such an Extension of Time.

If assistance is required on any aspect of construction law then please contact Matthew Dillon on 01277 280760.

Matthew Dillon LLB, Solicitor, MCIArb

This article is for information purposes, does not constitute legal advice and should not be relied upon. For terms and conditions of this article please