South Africa: Time Is Money: Understanding Extension Of Time Claims Under The General Conditions Of Contract For Construction Works

Construction contracts contain a specified date by which the Contractor must complete the works, or face penalties if not complied with.

The "Due Completion Date" in the GCC 3^rd Edition 2015 ("the GCC") is defined as "the date of expiry of the time stated in the Contract Data for achieving Practical Completion of the Works, calculated from the Commencement Date and as adjusted by such extensions of time or acceleration as may be allowed in terms of the Contract."

The Due Completion Date plays a pivotal role in determining penalties, release of retention monies and securities as well as final payment.

Delays in construction projects can have significant consequences for Contractors and Employers alike. As such, it is vital that all parties involved in the project understand the provisions related to delays. This article briefly explores the important concepts of extension of time and penalties for delay under the GCC.

Handling delays: Extension of Time claims

Clause 5.12 outlines the Contractor's entitlement to claim an extension of time. This provision acknowledges that certain circumstances can cause delays which would entitle the Contractor to claim for an extension to the date of Practical Completion of the Works beyond the Due Completion Date. This clause provides that the Contractor can claim additional time in accordance with clause 10.1 for circumstances such as additional work, abnormal climatic conditions and disruptions which are entirely beyond the Contractor's control. The entitlement is not automatic and the procedural requirements must strictly be adhered to.

The clause 10.1 claim procedure

To secure an extension of time or additional payment, the Contractor must comply strictly with the requirements of clause 10.1. The clause details the necessary steps, including serving a written claim to the Employer's Agent within 28 calendar days after the occurrence of the circumstance, event, act or omission which gave rise to the claim. Failure to adhere to these provisions within the specified time periods can result in the Contractor losing its entitlement to the claim.

The clause does, however, allow for an extended period for the Contractor to submit its claim where the circumstances or nature of the claim prevent the Contractor from reasonably complying with the 28 days provision. In such circumstances, the Contractor must within 28 calendar days provide the Employer's Agent with a written notification of its intention to make a claim, comply with such requirements of clause 10.1.1.1 as it reasonably can and fulfil any subsequent requirements as soon as practicable.

If the events or circumstances relating to the claim are of an ongoing nature, the Contractor shall in addition to delivering the notice within 28 days, deliver to the Employer's Agent a written updated particulars in terms of clause 10.1.1.1 each month thereafter and within 28 days after the end of the events or circumstance, deliver its final claim. Contractors should take care and ensure that they deliver these monthly updated particulars without failure.

Another exception to the 28-day requirement exists in instances where the non-compliance is due to the fact that the Contractor was not and could not reasonably have been aware of the implications of the facts or circumstances concerned. The 28-day time period will subsequently commence to run from the date on which the Contractor ought reasonably to have become aware of such facts or circumstances.

Delay Penalties: Consequences of missing the Due Completion Date

The inclusion of pre-agreed penalty provisions in construction contracts serves a dual purpose. Firstly, they incentivize the Contractor to complete the project within the contractually agreed timeframes by attaching financial consequences to delays. This promotes accountability, efficient time management and protects the interests of the Employer who relies on timely completion of the project. Secondly, pre-agreed penalties mitigate the risk of the Employer making unfounded or exaggerated open-ended claims for loss, expenses and damages against the Contractor. Overall, penalties in the GCC strike a balance between accountability and mitigating disputes.

Clause 5.13.1 provides that:

In simple terms, the Employer is entitled to impose penalties for each day that elapses between the Due Completion Date and the actual date of Practical Completion, including special non-working days. Contractors must therefore take extreme caution when claiming additional time and costs as compliance with the contractual provisions is key to any successful claim.

In conclusion, proper claim procedure and management of delays are crucial for the successful completion of construction projects. The GCC's provisions regarding extension of time and delay penalties offer a framework to address delays and their consequences effectively. By understanding and adhering to these contractual obligations, both contractors and employers can navigate delays more efficiently, ensuring projects are completed on time and within budget. Effective management of delays ultimately leads to smoother project execution and enhanced stakeholder satisfaction.

Originally published 13 July 2023

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.