Many construction disputes involve delay claims. The ‘prevention principle’ operates so that an employer cannot hold a contractor to an agreed completion date if the employer prevented contractor from achieving the date. In such circumstances time becomes at large and the contractor is instead obliged to complete within a reasonable time.
This situation is addressed in the standard form contracts by provisions for an extension of time (EoT), if a contractor can establish that a ‘Relevant Event’ has occurred.
But what if there is concurrent delay (ie a delay has occurred for two reasons, one being the responsibility of the employer and one the responsibility of the contractor)? In general, the contractor will be awarded an EoT, so the employer cannot levy liquidated damages (LADs), but cannot claim additional money through a loss and expense claim.
The case of North Midland Building v Cyden Homes saw an attempt to contract out of the default position. The JCT D&B 2005 was amended as follows:
“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”
In other words, the contract provided that the contractor’s delay forfeited its entitlement to an EoT, even though the employer’s own actions would have prevented the completion date being met in any event.
The contractor sought to challenge the contract on the ground that it was contrary to the public policy (the prevention principle) and also that a term should be implied to prevent the deduction of LADs in the event of concurrent delay. It lost at first instance and appealed.
The Court of Appeal emphatically rejected the contractor’s arguments. It agreed that the wording of the clause was ‘crystal clear’ and the court should give effect to the allocation of risk negotiated by two commercial parties. The court was not persuaded that the prevention principle had any application but, even if it did, there was nothing to stop the parties contracting out of it.
The attempt to resist the application of LADs was equally unsuccessful. The test for implying such a term into the contract was not met and to allow such an implied term would contradict the express terms of the contract.
The decision is significant because clauses such as that seen in North Midland Building are becoming more commonplace. This represents a green light from the Court of Appeal, which is likely to encourage the practice further.