The High Court has confirmed that risk of concurrent delays in a construction contract can be specifically allocated to the contactor.
In an important decision on concurrent delay and the prevention principle, Mr Justice Fraser has seen fit to reinforce the general principle under English law that "contracting parties can allocate risk as they see fit".
The general position in England and Wales is that a contractor is entitled to an extension of time where two causes of delay to a completion deadline concurrently, often from a contractor risk event and an employer risk event. However, the ruling by Mr Justice Fraser in North Midland Building Ltd v Cyden Homes Ltd [2017] EWHC 2414 (TCC) confirms that contracting parties may expressly agree the opposite (or any other variation for that matter).
The case in question involved the building of a substantial house in Lincolnshire (reported by the Claimant to be "the most important private house to be constructed in this country for many years"). The Claimant (contractor) and the Defendant (employer) had agreed certain bespoke amendments to the JCT Design and Building Contract (2005), with one such amendment concerning the way in which extensions of time would be dealt with in certain circumstances. It should be noted that this amendment is fairly typical in construction contract negotiations, the pertinent provision being clause 2.25.1.3(b), amended as follows:
"2.25.
- any of the events which are stated to be a cause of delay is a Relevant Event; and
- completion of the Works or of any Section has been or is likely to be delayed thereby beyond the relevant Completion Date,
- and provided that
(a) the Contractor has made reasonable and proper efforts to mitigate such delay; and
(b) any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account
then, save where these Conditions expressly provide otherwise, the Employer shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable."
The Claimant sought a declaration that this provision (despite having acknowledged in the proceedings that the parties had agreed this amendment) was not enforceable in light of the 'prevention principle', (i.e. if an employer has prevented its contractor from carrying out works "on time" according to the original contractual completion date (and the contract does not include an express right for the contractor to be given an extension of time in circumstances where the delay is caused by the employer's breach or other act of prevention) then the employer cannot insist that the contractor meets the original date for completion.
In making the aforesaid arguments to the court, the Claimant sought to rely on several cases which have held that when there is a concurrent delay, the contractor shall remain entitled to an extension of time to complete its works, notwithstanding its own culpability with regard to that delay. The Claimant also alleged that the time was 'at large' meaning they were only obliged to complete the project within a reasonable time, with the Defendant (employer) being unable to claim liquidated damages if the Claimant (contractor) failed to do so.
In his judgment, Mr Justice Fraser saw things differently, ruling, perhaps robustly, that the meaning of the disputed provision was "crystal clear" with the parties free to agree whatever they liked in terms of how the risk of concurrent delay should be allocated.
The court further held that there is no general rule of law which prevents parties from agreeing that concurrent delays ought to be dealt with in a certain way and that the prevention principle and the case of Multiplex Construction (UK) Limited v Honeywell Control Systems Limited [2007] had no bearing on the true issue of this case, with prevention simply not being triggered here.
The decision will certainly provide encouragement to the employer when negotiating and applying these concurrent delay provisions, however, it will come as a warning to the contractor simply agreeing to the amendment in the hope that concurrent delay either does not occur or that the clause is not enforceable. It will be enforceable and the wording of the contract will be interpreted as agreed between the parties – therefore careful consideration should be given when negotiating such amendments, particularly in respect of the contractor.
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.
