Almost every construction contract, and many other types of
contracts, will contain:
A pre-agreed date, or a fixed period of time, for the
completion of the work at hand (the Date for
A clause describing the circumstances in which the contractor
will be entitled to an extension of time (an EOT)
to the Date for Completion; and
A clause stating that, if the contractor fails to meet the Date
for Completion (after accounting for all proper EOTs), then the
contractor must pay or allow liquidated damages
(LDs) to the principal. These LDs are usually
given as a dollar figure per day in the contract and they should
represent a genuine pre-estimate of the principal's loss
flowing from a delay.
These clauses have obvious importance for funding arrangements
(including draw down timeframes), setting critical paths for works,
sequencing works and for giving some certainty as to when a project
can be operational and occupied/ used. The costs (monetary and to
reputation) of failing to meet a Date for Completion can be
significant to both the principal and the contractor. In
construction and property development, the old saying that
"time is money" almost invariably rings true for all
As a case for discussion/ consideration in your quieter moments.
Notwithstanding it is so important to get the Date for Completion
right, do some contractors put forward unrealistically short Dates
for Completion with an aim to "win them the job" or
"keep the principal happy"? Is this just false hope by a
contractor, or do contractors think they can just fix it with an
EOT claim (usually combined with some variations claims) down the
As for EOTs, the general rule is – If works are
delayed by a cause for which the principal is responsible, the
contractor will usually be entitled to an equivalent additional
period of time to complete the works/ extension to the Date for
Completion. As Lord Denning mused, a principal
"cannot insist on a condition if it is his own fault that the
condition has not been fulfilled".
This all seems fair enough. But what if, quite aside from a
delay caused by the principal, the contractor also causes or
contributes concurrently to the delay?
The general rule here is – If delays are caused
concurrently by the principal and the contractor, the contractor
will normally be entitled to an EOT regardless of a concurrent
delay for which the contractor might be responsible.
"[The] rule... is that not only must the contractor
complete within a reasonable time but also the contractor must have
a reasonable time within which to complete. It therefore does not
matter if the contractor would have been unable to complete by the
contractual completion date if there had been no breaches of
contract by the [principal] (or other events which entitled the
contractor to an extension of time), because he is entitled to have
the time within which to complete which the contract allows or
which the [principal's] conduct has made reasonably
The above two general rules represent the two limbs of what is
known as the "prevention principle".
The "prevention principle", as a matter of law,
applies only to entitlements for EOTs and Dates for Completion. It
is not per se a rule regulating LDs. However, if there is a proper
entitlement to an EOT, then it naturally flows that a principal
cannot claim LDs for the extended period. The "prevention
principle" may thereby operate to render void a contractual
entitlement to LDs for delay.
The above is a very brief introduction to the concept of the
"prevention principle". Its application to EOT claims
and/or LD claims is affected by other legal principles and the
terms of specific contracts. As such, it must be considered on a
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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