The Building Contractor’s obligation is to bring the Works to practical completion by the Date for Practical Completion. A failure to bring the Works to practical completion by that date will usually expose the Contractor to a claim for damages (usually “liquidated damages”) by the Principal.
The requirement to bring the Works to practical completion are generally to be found in this form in such major standard form contracts as AS2124 or AS4000.
For example, clause 35.2 of AS2124-1992 provides:
“ 35.2 Time for Practical Completion
The Contractor shall execute the work under the Contract to Practical Completion by the Date for Practical Completion. Upon the Date of Practical Completion the Contractor shall give possession of the Site and the Works to the Principal.
Delays enabling the Contractor to claim an extension of time under the Contract could usually be characterised as follows:
Principal Caused Delays
Certain delays under a construction contract are caused by the Principal.
Such delays might include, for example:
- delays in providing clear access to the site
- delays in providing detailed drawings and specifications
- errors in the drawings and specifications
- failure to provide certain matters to be provided under the Contract by the Principal (for example, water, electricity, gas...)
Where the Principal delays the Contractor in the performance of the Works, the Contract should expressly provide that the Contractor is to be entitled to an extension of time (as, for example, in paragraph (b)(i) of clause 35.5 set out above).
The Contract also should provide that the Contractor is expressly entitled to payment for the costs associated with that delay, usually referred to as “delay costs”, in the absence of such an express provision the Contractor will have a claim for damages for breach of contract in any event.
In brief, where the Principal prevents the Contractor from performing his contractual obligations, and the Contract provides no mechanism to extend the time under the Contract (sometimes referred to as the “prevention principle”), the Principal is unable to enforce his contractual remedies against the Contractor in respect of the Contractor’s failure to perform the works by the time under the Contract.
Alternatively time is said to be “set at large” (meaning no more than that, in the absence of a contractual mechanism to extend time, the Date for Practical Completion has no contractual effect). This does not have the result that the Contract has no completion date, rather the Contractor is required to complete the work under the Contract within a reasonable time.
In practice, modern construction contracts always expressly provide an entitlement in the Contractor to both an extension of time (and to delay costs), where delays are caused by the Principal to the Contractor in the performance of the Works.
Contractor Caused Delays
Certain delays are caused by the Contractor. Such delays might include, for example:
- where the Contractor is late in arriving on site;
- where the Contractor performs the Works at too slow a rate to complete the Works by the Date for Practical Completion (or has allowed insufficient time in his tender);
- where the Contractor perform the Works in a defective manner, and the work has to be rectified.
In such circumstances, the Contract should not (and rarely does) provide that the Contractor is entitled to an extension of time and/or additional payment in respect of those delays.
These are all matters for which the Contractor is contractually responsible.
External Factors for Delay
Certain delays which occur on major building and engineering contracts are not caused through the fault of either party but are referred to, from time to time as “force majeure” delays or events. Such delays might include, for example:
- inclement weather;
- industrial stoppages;
- Acts of God, civil wars.
It is a price-sensitive commercial matter for negotiation by the parties, at the time of entering into the Contract, as to whether particular force majeure events will or will not entitle the Contractor to an extension of time, and/or an adjustment of the Contract Sum, under the Contract.
Where the Contract expressly provides that the Contractor is to be entitled to an extension of time for such events, one might expect lower tender prices. Where the Contract does not expressly provide for an extension of time in such events, one might expect higher tender prices.
The entitlement to, and assessment of, claims for extension of time is a major area of potential dispute under major building and engineering contracts.