Ordinarily, a construction contract will specify a completion date by which completion of the works must be achieved. However, it is common for events to occur which delay the progress of the works and affect the critical path.
Examples of such delay events include exceptionally adverse weather, delay caused by statutory undertakers, delay caused by a Local Authority, any act of prevention or interference by the employer or force majeure.
If delays mean that the works are not completed by the completion date and the contractor is not entitled to an extension of time, the contractor will ordinarily be liable to pay liquated damages to the employer for the period from the agreed completion date until the works are completed.
It is important to note that a contractor has no statutory or common law entitlement to an extension of time. Any entitlement is dependent on the specific relevant contractual provisions. All of the standard forms of construction contract include provisions for an extension of time, on specified grounds.
A contractor will seek an extension of time under the construction contract to allow the contractor to complete the works within a set period after the original contractual completion date, avoiding liability to pay the employer liquidated damages (or general damages for delay). Depending on the wording of the contract the extension of time will normally start from the completion date, rather than from when the delay event occurred.
Should an extension of time be granted, common practice is to push back the completion date to a later date. As a result, the contractor will only be liable for liquidated damages if the works are not completed by the amended completion date.
If the contract provides for sectional completion an extension of time might also be granted for the date for completion of a section of the works.
Contractors need to be aware what notice provisions need to be complied with under the contract is order to request and be granted an extension of time. This can include an obligation to notify the employer within a certain period of time from the occurrence of the event in question. In addition, the employer may need to issue certain notices in order to be able to recover liquidated damages for late completion.
If the delay to completion of the works is caused by an act or omission by or on behalf of the employer, the “prevention principle” can mean that the employer will not benefit (for example receive liquidated damages) as a result. In these circumstances, if the contract does not allow for an extension of time for the contractor, then time can be said to be “at large” and the contractor will have an obligation to complete the works within a ‘reasonable time’ rather than by any set completion date and any liquated damages provisions may fall away. It can therefore be for the benefit of the employer, as well as the contractor, to include provisions that deal with the extension of time when the contractor is delayed due to the employer’s default.
