Building contracts are at their best when they run, and complete on time. Profitability often comes with contracts that are free from delay however it is a fact of life that everything does not always run to plan.

Most in the industry know that time is money and for that reason, both contractors and employers have a huge interest in the time which a building project will take to perform. Time over-runs are often costly but unfortunately not uncommon. Delay often costs money with both parties to the contract suffering some financial loss. This article covers, albeit briefly, certain aspects of time obligations and remedies from their breach under the following headings:

• Fixed Completion Date – extension of time clauses

• Time ‘at Large’ – how/when does that happen?

• Non Completion – Employer’s Remedy – liquidated damages / general damages / termination, time of the essence

• Delay – Contractor’s Remedy – under the contract / breach of contract.

Fixed completion date

Most standard contracts have fixed completion dates – JCT, ICE, etc.

Completion usually means practical/substantial completion and most standard contracts provide a mechanism for extending the date for completion known as extension of time clauses.

Time at large

If a contract has no fixed completion date then there is an obligation on the party undertaking the works to complete them in a reasonable time. In the industry this is sometimes known by the term ‘time is at large’.

The contractor’s obligation to complete within a reasonable time is a question that often leads to disagreement and sometimes leads to debate.

Time can also become at large if the contract has a fixed completion date but the employer causes delay to the contractor, eg by ordering extra work and there is no extension of time clause in the contract or there is such a clause but it is not properly operated by the employer/architect or does not apply to the delaying event in question. In these circumstances both parties are best advised to try to agree the extended completion date as soon as possible after the act.

Non-completion – employer’s remedy

1. Liquidated damages

Most standard contracts contain a provision that delayed completion is to be paid for by the contractor at a fixed rate (usually weekly). If that provision is in the contract, and subject to the court being satisfied it is a genuine pre estimate of loss, it is likely to be held to be the employer’s exclusive remedy for delay. It is important to set the right date. Also the law of penalty clauses must be borne in mind, filling in the amount of the LADs as £nil may well mean the employer has no remedy at all for delay.

2. General damages

If there is no extension of time clause in the contract or no fixed completion date (eg time becomes at large) then an employer can claim general damages for delay subject to proof. The proof of loss can be difficult in such cases, hence the widespread use of LADs.

3. Termination – time of the essence

Unless the contract so states or time for completion is of the essence and a valid notice to complete has been given, a failure to complete on time will not normally justify terminating a contractor’s contract. That is why standard forms provide a termination right if work is delayed. Time can be made a condition of the contract also called of the essence by serving an appropriate notice to complete within a (further) reasonable time. If the notice is not complied with, then termination will be justified.

Delay – contractor’s remedies

1. Under the contract

Most standard forms of contract provide for extra costs caused by delay for which the contractor is not responsible to be paid as a contractual entitlement. The contractual route must be strictly complied with and proved. This remedy is additional to any legal claims for breach of contract, eg failure to co-operate which the contractor may also be able to claim but double recovery cannot, of course, be permitted. These claims are complex to prove and can often give rise to further issues.

2. For breach of contract

The usual rules of proof, causation, etc apply to these claims. Again, they can be complex and difficult.

Contractors who are skilled at claiming against employers have highly developed systems for document control and claim generation, which should not be underestimated.

Conclusion

It is hoped this overview will, at least, indicate the basic principles behind this part of the law of building contract disputes, however if you do have any further questions you should seek legal advice.

Disclaimer

The content of this article does not constitute legal advice. You should always consult a suitably qualified lawyer for professional advice about any specific legal matter of concern to you. George Davies Solicitors, its partners and staff do not assume any responsibility for information contained within this article and disclaim all liability relating to such information.

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