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ACLN - Issue #48

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Delay

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Effectively Dealing With Time Delays and Extensions Before They Occur

Frank Cahill, Partner, Baker & McKenzie, Solicitors.

WHO SHOULD BEAR THE RISK FOR TIME DELAYS? Modem construction contracts usually contain detailed provisions providing for the granting of an extension of time to the contractor where specified events beyond the control ofthe contractor cause delay to practical completion ofthe works. The extension oftime clause will provide for the extending of the date for practical completion of the works. These provisions regulate the application of damages, usually liquidated damages, for a failure by the contractor to bring the works to practical completion by the date for practical completion. In the absence oftime extension provisions (and subject to the contractor's obligations under the contract) the contractor bears the risk of a delay caused by industrial disputation, inclement weather and other such delays. However, the contractor would not be responsible for delays caused by the principal. Such delays are often referred to as "acts ofprevention" wherein delay is caused by acts (including the ordering of a variation), defaults or omissions ofthe principal or those for whom the principal is contractually responsible. Essentially there are three categories of delay which might be suffered by the contractor: (a) delay caused by the contractor; (b) acts of prevention by the principal; (c) neutral causes of delay, e.g. inclement weather, certain types of industrial disputation. There will be no extension of time granted to the contractor for (a) but there should be for (b). In the case of (c) this is essentially a matter for negotiation. Many construction contracts are based on the view that anything which is beyond the control ofthe contractor should entitle the contractor to an extension oftime. However, the effect of this is that the risk of neutrally-caused time delays is transferred to the principal. The principal has no control whatsoever over such delays. Whilst the contractor also has no control over the cause of certain of these delays, nevertheless, the contractormay be in a position to rearrange the work so that the effect of the delay can be minimised. This suggests perhaps that the time extension clause should

be drafted to reflect the above situation. As a broader proposition however, it would seem that the consequences ofneutral delays should be shared on an equitable basis between principal and contractor, having regard to the nature of the particular neutral delay: (a) inclement weather - the contractor may take responsibility for this provided an appropriate allowance is permitted to be included in the construction program; (b) industrial disputation - it is possible for the contractorto make an allowance in the construction program for a particular number of days of strike action. Beyond that allowance the risk could be shared equally such that the contractor is granted an extension oftime ofone day for every two days lost; (c) loss or damage to the works by fire, etc - an extension of time must be given to the contractor in such circumstance to reflect the reality of the delay suffered. This assumes that the principal will proceed to have the works completed, notwithstanding the loss or damage to the works; (d) authority delays - an authority delay might be avoided by making application for approval at an earlier date: it is suggested that the party most closely involved in the particular approval process bear the risk of an authority delay. The nature of the delay should be assessed to allocate responsibility; (e) neighbour and third party delays - the nature ofthe cause ofthe delay needs to be assessed in order to equitably allocate responsibility. In the case of(d) and (e) it may be appropriate to share the consequences; (f) latent conditions - once again the nature of the latent conditions and the nature of their impact upon the project must be assessed. Where a latent condition is encountered which necessitates a change in the design (in a construct only contract), then the ordering of any necessary variation resulting from the changed design may involve an extension oftime for the benefit ofthe contractor.

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Where a variation is not involved, it may be equitable for the risk to be sharedbetween principal and contractor. It has been suggested by Max Abrahamson (Abrahamson, Risk Management (1984) 1ICLR244) and in the NPWC/NBCC Joint Working Party "No Dispute" paper (May 1990) that a party to a contract should bear a risk where: (i) the risk is within the party's control; (ii) the party can transfer the risk, e.g, through insurance; (iii) the preponderant economic benefit of controlling the risk lies with that party; (iv) to place the risk upon that party is in the interests of efficiency including planning incentive and innovation; (v) if the risk eventuates, the loss falls on that party in the first instance and it is not practicable or there is no reason under the above principles to cause extensive uncertainty by attempting to transfer the loss to the other party. The Joint Working Party considered it important that "... those obligations and risks that are within the control of the Principal should be borne by the Principal, and those obligations and risks that are within the control of the Contractor should be borne by the Contractor." However, this statement does not deal with the category of so called "neutral" risks. Standard form contracts in Australia, New Zealand and internationally deal with the issue of risk beyond the control of both principal and contractor in a number ofrisk areas by providing relieffor the contractor where, for example, delays and additional costs are incurred by the contractor. This "relief' to the contractor effectively places the risk of such occurrences squarely upon the principal. In many instances this does not reflect so much a policy ofrisk sharing as risk transfer. In circumstances where the contractor is delayed and incurs additional expense, the contractor would be fully responsible for such delays and additional expense unless otherwise provided for in the contract. Where the contract does provide for reimbursement and/or relief to the contractor, this may be viewed as a transfer of risk from contractor to principal (or a direct allocation of risk to the principal) for a risk over which the principal may not have any control. In many projects an attempt is made to define risk allocation in the construction contract for delays beyond the control ofthe parties by providing very limited grounds entitling the contractor to an extension of time. In the extreme, a principal may attempt to make the contractor responsible for the consequences of all delays other than those caused by acts of prevention. In the case oftime and delay risks which are beyond the control ofeither principal or contractor, often the principal and contractor can do little more than allow a contingency for the risk. Sometimes a tenderer will refuse to take on the risks proposed under the contract and will decline to tender or will qualify its tender. Sometimes a principal will

decide not to proceed with the project because ofthe extent of exposure to risks beyond his control. If, however, the principal or contractor decides to take responsibility for a particular construction risk, it must make reasonable commercial allowance for the contingency. Ifthe allowance is too great the tenderer may lose the project. If the principal allows too great a contingency the project may cease to be financially viable. Sometimes the project can be restructured or the circumstances changed to reduce particular construction risks. At a time where much emphasis is placed upon "partnering" concepts (i.e. the acknowledgement by principal and contractor that cooperative contracting is better than adversarial contracting), it is important that project planners adopt an approach which endeavours to minimise risk to both principal and contractor. In the case of time delay risks, often the allowance of adequate time and an appropriate contracting strategy will reduce the time pressures which sometimes are unnecessarily or unrealistically imposed upon a project.

DRAFTING THE TIME EXTENSION CLAUSE Included in the appendix to this paper are time extension clauses for the following standard form contracts: (a) JCC E and F 1994 (Australia); (b) AS 2124 - 1992 (Australia); (c) AS 4300 - 1995 (Australia); (d) NZIA 7th edition (New Zealand); (e) NZS 3910: 1987 (New Zealand); (f) FIDIC 4th edition 1992 (International); (g) FIDIC Design Buildand Turnkey (December 1994) (International); (h) ICE 6th e4ition (UK); (i) I Chem Eng Conditions of Contract for Process Plant (UK).
From a consideration ofthese standard form contracts, the following criteria emerges in relation to entitlement to an extension of time: (i) the cause of delay generally must be beyond the control of the contractor, although not always expressed as such; (ii) the delay may be expressed as a delay which will or is likely to delay practical completion of the works (e.g. JCC, AS 2124), i.e. a delay essentially which affects the critical path of the project. Alternatively, the test may simply be "if work is delayed" (NZIA). This is a much more "relaxed" test. In some of the forms (e.g. NZS, FIDIC 4th edition, ICE 6th edition), the contract administrator has considerable discretion as to whether the Contractor is fairly entitled to an extension of time, arguably leading to the increased likelihood of disputes; (iii) the cause ofdelay must be one which is specified in the contract; (iv) the contractor and the contract administrator (engineer, architect, superintendent, employer's representative etc) are required to respectively

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claim and to determine the claim within particular time frames; (v) the contractor is entitled to an extension of time for acts of prevention; (vi) in some of the forms the contract administrator may grant to the contractor an extension of time where the contractor has not made a claim (e.g. JCC). This is a mechanism which entitles the contract administrator, inter alia, to grant an extension oftime for acts ofprevention (see Peak Constructions (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111). This keeps the liquidated damages provisions alive; (vii) some of the forms (e.g. FIDIC 4th edition, ICE 6th edition) provide for an interim determination of an extension oftime with provision for a final review. The final review cannot decrease any extension of time already granted. Time means money and the drafting of the time extension clause should be regarded as an extremely important mechanism for the benefit ofboth principal and contractor. The clause should be drafted with specific regard to the project risks likely to be encountered. Clarity ofintent is paramount and the clause should be as free from disputation as possible. An example ofa building contract that arguably did not deal adequately or in sufficient detail with risk allocation for time delays is KBH Constructions Pty Ltd v PSD Development Corporation Pty Ltd (1990) 21 NSWLR 348; 7 BCL 90. The builder sought various declarations for an extension of time of 177.5 days and relief from liquidated damages deducted by the proprietor. The contract form (JCCB 1985) provided that the builder may notify the architect of the nature, cause and extent of any delay if he desired an extension of time. Delay was defined to include any delay caused by circumstances beyond the control ofthe builder, including "any act, default or omission on the part ofthe Proprietor, the Architect, any Separate Contractor, employee or agent ofthe Proprietor". The architect, therefore, had to determine whether an act was beyond the control of the builder and whether an extension of time should be granted. The architect also had power to grant an extension where the builder had not requested one. The main interest in this case for present purposes was the manner in which the contract allocated the risk for delay: by not addressing specific causes of delay and allocating risk for them the parties left the architect with a vaguely defined discretion. The end result was that when the discretion was exercised, one ofthe parties disputed it and they ended up in court. This is a most unsatisfactory way to administer a contract. It is suggested that more specific drafting to suit the project circumstances is called for. The application of time bars continues to be a topical issue: in Opat Decorating Service (Australia) Pty Limited v Hansen Yuncken (SA) Pty Limited (1994) 11 BCL 360, a NPWC3 contract was designated the head contract and an

SCNPWC3 contract was the sub-contract. The issue in this case was whether the giving of notice within the time limit was a condition precedent to the granting (or perhaps more accurately "the consideration of the claims for an extension oftime") ofan extension oftime. The Court held that such exclusion clauses should be construed strictly (Port Jackson Stevedoring Pty Limited v Salmond & Spraggon (Australia) Pty Limited (1978) 139 CLR 231); that the purpose of such clauses is to ensure that notice is given at an early stage so that the party in receipt of the notice can inspect and investigate promptly the events or circumstances and consider their position (Jennings Constructions Limited v QH & M Birt Pty Limited (1986) 8 NSWLR 18); and that such a failure to give notice as required by the contract was destructive ofthe claim made (Wormald Engineering Pty Limited v Resources Conservationists Company (1989) 8 BeL 158). Further in Leighton Contractors Pty Limited v South Australian Superannuation Fund Investment Trust (1996) 12 BCL 38 a modified standardjoint construction agreement form contained detailed clauses regarding claims for delays, variations, extensions and time adjustments. There it was also held that "the giving ofnoticeprior to commencing the work is a condition precedent to claimingfor the work as a variation... The stipulation is mandatory and the right to claim for a variation is contingent upon compliance." (per King CJ at 47). WHO SHOULD BEAR THE COST OF DELAYS? If the risk allocation for delays is properly allocated in the contract along the lines set out in section A above, the costs of delays suffered by the contractor should automatically follow and be so reflected in the drafting. However, unless the contract specifically deals with the question of allocation of delay costs, a court will not imply a provision to the effect that a contractor will be automatically entitled to delay costs as a consequence of having been granted an extension of time for a particular delay. Harwood v Civic Constructions Pty Ltd (unrep, NSW Supreme Court 11812/1990, Cole J, June 1, 1990) involved a building contract that arguably did not deal adequately with risk allocation for delay. Harwood (the sub-contractor) contended that certain terms be implied into four sub-contracts between he and Civic Constructions Pty Ltd (the contractor) to the effect that any additional costs incurred by the sub-contractor because of delays occurring in the normal building process would be underwritten by the contractor. Further, Harwood contended for an implied warranty that the various contract works were capable of being completed within their nominated times for completion. None ofthese matters were the subject ofagreement in the sub-contracts, although there was provision in three sub-contracts for a fair extension oftime to be granted for "delays not caused or contributed to by act or default ofthe sub-contractor". Harwood sought damages for delay and argued that Civic was in breach of the implied terms because Civic failed to progress the main building works and this made

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timely performance ofthe sub-contract works impossible. Cole J refused to imply any terms in the sub-contract. The effect ofthe judgment was that the question ofwhether or not works can be completed within a nominated time is one for the business judgment ofthe sub-contractor and hence there is no room, in the absence of express provision, for any warranty from the contractor. If a sub-contractor wishes to protect himself against unforeseen contingencies, he should ensure that proper provision is made. to this effect in the contract. As mentioned above, in three of the contracts under consideration, the parties had dealt with delays beyond the control ofthe sub-contractorby a provision for "reasonable extension of time". The parties could have provided for reimbursement for costs occasioned by such delay, but had not done so. In the light ofthese circumstances, Cole J was not prepared to supply the parties' omission. The fourth contract had express provisions: (i) obliging the contractor to use his best endeavours in all reasonable ways to ensure that the subcontractor was not obstructed or hindered in carrying out his obligations; (ii) providing for notification by the sub-contractor to the builder of any anticipated delay; (iii) entitling the sub-contractor to an extension of time for delays due to certain enumerated matters; and (iv) allowing extra expenses to be added to the contract sum ifthe expenses were "directly resulting from some default of the builder", not being circumstances beyond the builder's control. Cole J considered the sub-contract to comprehensively deal with the obligations of the parties and again was not prepared to imply a general term that the contractor would reimburse the sub-contractor for additional costs caused by extended performance times.

for late completion in some of the above circumstances. It has been said that liquidated damages obligations are almost invariably expressed to cover one particular class ofdamage only, namely that caused by failure to hand over the project for occupation on the required completion date, and not those quite different delay damages which in a construction project can easily be incurred by the owner during the construction period. (Hudson's Building and Engineering Contracts, 11 th Edition, 1995 at p.ll 08).

SPECIAL CONSIDERATIONS RELATING TO COMPLETION OF A PROJECT Practical Completion The meaning of practical completion in construction contracts will be determined in most cases by the definition found in the particular contract. In Murphy Corporation Limited v Acumen Design & Development (Queensland) Pty Ltd and Derek Graham Hooper (1995) 11 BCL 274 it was said that: "In broad terms the words mean, as put by Salmon LJ in J Jarvis & Sons Limited v Westminster Corporation (1969) 1 WLR 1448 at 1458: 'completion for all the practicalpurposes, that is to say, for the purpose of allowing the employers to take possession of the works and use them as intended'.

CONSEQUENTIAL EFFECTS OF DELAYS ON THE PROJECT These effects include: (a) further delay suffered due to weather, industrial, etc which would not have been experienced if the project had not suffered the earlier delay; (b) increased costs of any material and labour cost escalation; (c) the missing of seasonal (e.g. Christmas) trading in the case of a shopping centre, cinema etc; (d) the missing of a "window of opportunity", for example, being first on the market and thus ahead of the competition for a particular type of development; (e) losing business (e.g. sales of apartments) through late completion.
All such matters must be taken into account in pricing the cost ofconstructing a proj ect and in assessing liquidated damages for late completion. It may also lead to the view that general damages will be a more appropriate remedy

Ordinarily the best evidence that such a stage has or has not been reached will be a certification from the Contract's Superintendent, but that does not mean, in my view, that in the absence of a certification for Practical Completion, the Contractor can neverprove in legalproceedings that such a stage had in fact been reached. One situation where the Contractor could prove that such a stage had been obtained in the absence ofa certification would be where the employer had taken possession ofthe works as completed on an expressed or implied understanding that a stage of Practical Completion had been reached and then used them for the intended purpose. " (at 294-5)
Staged Completion A special consideration is "staged" completion. Many of the standard form construction contracts provide for the division of the Works into sections or separable portions and provide for staged completion of the separable portions such that each separable portion has its own date for practical completion. The issues that arise in relation to staged completion of the Works include the following: (a) an appropriate description/definition of each separable portion ofthe Works is most important. The separable portions must be carefully defined so that there is no overlap between the various separable portions comprising the Works. Whilst this is a practical point rather than a legal point, the legal consequences can be quite dramatic if the definition is not made correctly;

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(b) the contractor's obligations to carry out and complete the Works must be extended to include an obligationto carry out and complete the separable portions of the Works by the prescribed dates for practical completion; (c) the calculation ofliquidated damages applicable to each separable portion must be a genuine preestimate ofthe loss or damage to be suffered by the principal ifthe contractor fails to achieve practical completion of a separable portion by the date for practical completion of that separable portion; (d) the liquidated damages clause should specify whether the liquidated damages applicable to each separable portion are cumulative or separate and distinct from one another; (e) even though the Works is divided into separable portions, arguably there should still be an obligation to complete the Works (being the sum of all the separable portions) by the prescribed date applicable to the Works as a whole; (f) defects liability periods must be carefully defined, having regard to the nature ofthe Works and their uses. Often a principal will decide not to divide the Works into separable portions but nevertheless will specify intermediate "key dates" or "milestone dates". Liquidated or general damages may apply to such dates. In Philips Hong Kong Limited v The Attorney General ofHong Kong [1993] 9 Const. LJ 169-260; (1993) 61 BLR 49, the question arose on appeal to the Privy Council as to whether the application of liquidated damages to late completion by a key date, inter alia, led to double compensation, where the same delay resulted in the date for completion not being met. The contract works included the design, supply, testing, delivery, installation and commissioning of a processor based supervisory system for the approach roads and twintube tunnels which were to be constructed under Smugglers Ridge and Needle Hill Mountains in the New Territories as part of the Shing Mun section of the Project. Instead ofadopting the more usual course ofemploying a main contractor with overall responsibility for constructing the Shing Mun section and allowing the main contractor to subcontract portions of the contract, the government entered directly into a total of seven separate contracts (the "designated contracts") including the Philips contract. By dealing directly with the contractors, the government was seeking to exercise greater control over the whole project than would be possible under a single overall contract. The total value ofthe seven contracts was over HK$600 million while the Philips contract alone involved over HK$50 million. The Philips contract was detailed and included a substantial number ofstandard provisions used bythe government on otherprojects. Each ofthe designated contracts contained its own individual program for the progress of the work in the form of a flow chart. Each of the designated contracts also contained the programs which

the other contractors were required to meet. Each of the contractors should therefore have been aware of the activities on which the other contractors would be engaged at each stage of their work and the possible consequences ofdelay onthe part ofone contractor onthe other contractors. The government provided an explanation as to how the liquidated damages in the contract were calculated. So far as the missing of key dates was concerned, the amount of damages was calculated by applying a formula to what was anticipated wouldbe the value ofthe interfacing contracts (the actual value ofthe contracts was higher). In the case of delay in completion ofthe whole ofthe Philips contract the calculation was partly based on a formula appliedto the total value ofthe Philips contract in accordance with a manual of instructions for contracts of this nature which the government had prepared. This was a perfectly sensible approach in a situation such as this where it would be obvious that substantial loss would be suffered in the event of delay, but what that loss would be was virtually impossible to calculate precisely in advance. In the case ofa government body, the nature ofthe loss it will suffer as a result ofthe delay in implementing its new road program, is especially difficult to evaluate. The government reasonably adopted a formula which reflected the loss of return on the capital involved at a daily rate, to which were added values for supervisory staff costs, the daily actual cost of making any alternative provision and a sum for fluctuations. Except for the "alternative provision", the appropriate figures were calculated by reference to the estimated final contract sum. Philips argued that this approach fell down because wholly unfairly it could and most probably would result in the government receiving at least double compensation. It was suggested that this could happen because the government would receive liquidated damages both for the delay which causes a key date to be missed and again when the same delay resulted in the date for completion not being met. It was suggested it could also happen as a result of the same delay causing two or more key dates to be missed. (Liquidated damages continues to be paid in respect of the earlier key date after the later key date is missed.) As to the first argument, the government's response was that the two categories of liquidated damages were to cover different heads of loss so it was perfectly proper for payments to be made under each head. Where a key date was missed, the loss to which the liquidated damages primarily related was the added expense to which the government would be put in compensating the interfacing contractor whose contract was delayed. It was for this reason that the figure for liquidated damages was calculated on the value of the interfacing contract or contracts and, accordingly, increased with the number ofthose contracts affected by the date being missed. This was a quite different head ofloss from that already described which was covered by the liquidated damages payable for missing the date for completion. Accordingly, the Privy Council, in agreement with the Hong Kong Court of Appeal, held that the clause was

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enforceable and that the liquidated damages payable for a contractor's failure to meet certain key dates was a quite different head of loss from that covered by the liquidated damages payable for missing the date for completion. It is interesting to note the comments of the Privy Council on whether the sum payable by way of liquidated damages would be wholly out of proportion to any loss which the government was likely to suffer. The argument ofPhilips that such a clause was penal did not recommend itselfto the Privy Council: "It would mean that it would be extremely difficult to devise any provision for the payment of liquidated damages in the case of a contract of this sort which would not be open to attack as being penal ... Such a result would undermine the wholepurpose ofparties to a contract to be able to agree beforehandwhat damages are to be recoverable in the event of a breach of contract." ((1993) 61 BLR 49 at 54.) The Privy Council concluded that: "So long as the sum payable in the event of noncompliance with the contract is not extravagant, having regard to the range oflosses that it could reasonably be anticipated it would have to cover at the time the contract was made, it can still be a genuine preestimate of the loss that would be suffered and so a perfectly valid liquidated damage provision". (( 1993) 61 BLR 49 at 59.) A difficulty may arise where the range ofpossible loss is broad. Lord Woolf stated (at 59) that: "Where it should be obvious, in relation to part ofthe range, the liquidated damages are totally out of proportion to certain of the losses which may be incurred, the failure to make special provision for those losses may result in "liquidated damages" not being recoverable ... However the court has to be careful not to set too stringent a standard and bear in mindthatwhat theparties have agreedshouldnormally be upheld. Any other approach will lead to undesirable uncertainty especially in commercial contracts. " It is important to note that the government was able to produce evidence ofits calculations ofliquidated damages for each relevant key date and for the overall completion date of the works as a whole.

EARLY OCCUPATION ISSUES The leading case on the term "occupation" is Wheat v E Lacon & Co Ltd [1966] AC 552. The test is whether the person in question has some control over the premises such that he can prevent injury to visitors. It would seem to follow from this that any person in physical occupation of the premises would be an occupier for the purposes of occupiers' liability since he will also have the power to do something. It would also follow that someone may be an occupier even though he is not in physical occupation as in the Wheat case. The control test allows more than one person to be in

occupation at the same time: Thompson v Commonwealth (1969) 70 SR NSW 398. Joint occupiers can each be in control of the whole or the same part of the premises or different parts of the same premises as where a landlord lets flats but retains control of the common areas such as stairs and lifts. In AMF International v Magnet Bowling Ltd [1968] 1 WLR 1028 it was held that financial loss consequential upon damage to property can be recovered, subject to the ordinary rules ofremoteness of damage in any case where the occupier's duty extends to prevention of damage to property. A principal normally parts with temporary possession ofthe site under what is in effect a revocable license, under which the contractor has a high degree ofeveryday control ofthe site. In general, a principal only impliedly warrants to do nothing positive to impede or obstruct the contractor. If a principal is an occupier and the contractor merely a visitor then an express term of the contract would be needed to restrict the obligations of the principal. As between the contractor and its sub-contractors it is normally clear that the contractor has overall control of the site. The potential liability ofthe principal and the contractor asjoint occupiers to thirdparties (i.e. between the contractor and the contractors ofthe principal orbetween the principal and sub-contractors) and also to a far wider class of third parties, such as adjoining owners or occupiers renders it essential that an effective indemnity clause is present in the contract between the principal and the contractor so as to redistribute the burden ofsuch claims effectively according to whatever policy is deemed to be appropriate. A finding of occupancy under the law does not necessarily connote liability and in these circumstances the nature of the occupancy is of vital importance in determining whether or not there has been breach of the duty ofcare. Thus a principal out ofpossession for a threeyear period, for instance, will generally be less likely to be found to be in breach of the duty than the contractor in effective control of the site. The facts of the AMF case (supra) are worth noting: The principal entered a building contract with contractors for the construction ofa bowling alley. The principal also entered into a separate contract with A for the sale and installation of the timber bowling lanes and machinery in the building and agreed on dates when the building would be ready to receive this equipment. A entered under the building contract and commenced work at a stage when the roof was on, but guttering and external surface drainage were incomplete, and external doorways were unfinished. A's work was separated from the rest ofthe work inside the building by a polythene screen. After an exceptionally heavy rain storm, surface water flooded into the building through one of the doorways and damaged A's work. A completed its work and brought an action against the principal and the contractor. The Court found that the damage could have been prevented by the contractor taking relatively simple precautions and that the contractor was in a better position to assess any risk but also noted that the principal did not ascertain whether the premises were

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fit and ready for A's work to begin. The Court held that both parties were occupiers and liable to A and that as between each other the principal was liable as a joint tortfeasor for 40% and the contractor for 60% of the damage. Early occupationpriorto Practical Completion is critical to certain projects (whether for fitout, staff training etc). Arguably no standard form deals adequately with the issues. Many of the standard form construction contracts prohibit the principal from taking occupation ofthe works prior to practical completion without the consent of the contractor. Where consent is grantedthe principal becomes liable for the parts of the works taken over and has the responsibility to insure them. See for example clause 9.10 of the ICC forms. Practice Note 31B (April, 1994) issued by the Royal Australian Institute of Architects, states that: "When the Works reach the stage ofdeemed or actual Practical Completion, a number of other important consequences follow. These are: That the Proprietor is entitled to possession ofthe Site. It may, however, mean that the Proprietor cannot still physically occupy the Works until the building certificates or certificates offitness are issued by local government authorities. The defects liability period commences (i.e. work that has been completed and becomes defective or faulty, as opposed to incomplete work during the defects liability period must be made good by the Builder). The risk generally reverts solely to the Proprietor (the insurance ofthe Works taken out in accordance with the contract coming to an end). Ifa retentionfund or bankguarantee has been used as a form ofsecurity by the Builder, usually halfof it is released by the Proprietor thereafter. The limiting ofthe power to issue variations under particular contracts (e.g. AS 2124). Liquidated or Ascertained Damages (if any) cease to accrue, and the Proprietor is then entitled to receive them." (At 1-2). However, other standard forms of contract give the principal the right to use or occupy any part of the works which the superintendent considers can be taken over without interfering with the contractor's obligations to complete the Works. Upon so taking over a part of the Works the principal may be required to insure that part of the Works; alternatively the contractor remains obligated to insure all ofthe works but any additional premiums are added to the contract sum. Standard form contracts often provide that if the principal uses or occupies any part ofthe works without the consent ofthe contractor then practical completion will be deemed to have occurred from the commencement of the use or occupation by the principal. An alternative to such early use and occupation is to stage the works. This requires careful planning of all

aspects of the works and the contractual consequences of requiring the works to be completed by the contractor in a number of stages. Often the contract provisions become unnecessarily complex. Wherever a deeming ofpractical completion occurs as a result of early use and occupation the principal will lose the benefit of any liquidated damages provisions and may encounter serious difficulties in having the remainder of the works completed by the contractor on satisfactory terms. The following case illustrates the care which must be taken in preparing contracts which provide for early or contemporaneous occupation prior to completion: In English Industrial Estates Corporation v George Wimpey & Co Ltd (1973) 7 BLR 122, the English Industrial Estates Corporation ("EIEC") entered into a contract with George Wimpey & Co Ltd ("George Wimpey") who agreed to build an extension to a factory leased to Reeds Corrugated Cases Ltd ("Reeds"). Reeds proposed to extend the factory, but wanted to continue making corrugated cardboardwhilst the extension work was being done. In order to make the cardboard, they intended to install a new machine in the board machine house. It was to be fed with rolls of paper weighing over a ton each. The machine would consume these rolls at such a rate that Reeds needed storage space for hundreds of these large rolls of paper. When the work was substantially completed there was a fire in the buildings which destroyed most of the plant and machinery. The issue was whether the fact that Reeds occupied the factory and used it for the purposes of production was tantamount to being in "possession", thereby being responsible for the risk of the fire damage. The contract was a standard form contract which incorporated bills ofquantities. The material clauses ofthe contract were: "20(A)(l) The Contractor shall insure against loss and damage by fire all work executed and all unfixed materials andgoods ... and shall keep such work, materials andgoods so insured until Practical Completion of the Works and until the Employer shall authorise in writing the cancellation of such insurance. "

"16.

If at any time ... before Practical Completion of the Works, the Employer, with the consent of the Contractor, shall take possession ofany part or parts ofthe same . (d) the said relevant part shall, as from the date on which the Employer shall have takenpossession thereof, be at the sole risk ofthe Employer. "

Clause 12 of the printed form provided: "Nothing in the Contract Bills shall override, modify or affect in any way whatsoever the application or interpretation of that which is contained in these Conditions ".

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In addition, there were two relevant provisions in the bills of quantities which expressly contemplated the premises being used during construction: "C. Employer may install equipment as the work proceeds ... the contractors shall permit the Employer or any other person authorised by him to place and install as much plant and equipment during the progress ofthe building as is possible before the completion ofthe various parts ofthe works ... D. Occupation ofcompleted parts ofthe Works The Contractorshall allow the Employer or any person authorised by him to occupy and use any part or parts of the Works as soon as, in the opinion ofthe Architect or Employer, such part or parts can be occupied and used without impeding the progress ofcompletion ofthe Works ... "

The Court of Appeal concluded that Reeds had not taken possession of the relevant part of the Works for the purposes of clause 16 of the contract. Each of the judges came to this conclusion based on different reasoning. Lord Denning held that the special provisions C and D were inserted specially so as to enable the contractors to make their calculations and that it was on the basis ofthese provisions that the contractors made their tender and the employers accepted it. Furthermore, provisions C and D were specific and specially inserted whereas conditions 12 and 16 were general terms and as such insofar as conditions 12 and 16 were inconsistent with provisions C and D, they should be rejected. In the alternative, Lord Denning held that all the terms could actually be read together; that the condition 16 deals with the usual building contract where the employer does not take possession, whereas the special provisions C and D were designed to deal with the specific instance where Reeds were installing plant and equipment while the work was in progress. In either case, the contractors remained liable to insure the works and charge the increased cost to the employers. The contractors, at the time ofthe fire, had not handed over to the employers the responsibility for the board machine house, the reel warehouse orthe factory extensions east and south. Reeds were using and occupying those places, but, until actual handover, it was the responsibility ofthe contractors to insure them. The risk had not passed to the employers. It remained with the contractors and they or their insurers had to bear the loss.

In CS Phillips Pty Ltd and Anor v Baulderstone Horn ibrook Pty Ltd (Supreme Court ofNew South Wales, Common Law Division, Giles J No. 55040/1994, 26 October, 1994), the defendant Baulderstone Hornibrook Pty Ltd ("Baulderstone") contracted with Franklins Ltd ("Franklins") to construct and commission a distribution facility and associated works at Ingleburn in New South Wales. Bya subcontract in the JCCB-1985 form the first plaintiff CS Phillips Pty Ltd ("Phillips") contracted with Baulderstone for the contractual steelworks for that project. The contract price was $3,159,650.00 and the subcontract works were to be completed by December 11, 1993 subject to extension of time in accordance with the subcontract. Philips provided security by way of bank guarantees to Baulderstone under the subcontract and now sought to restrain Baulderstone by injunction from making a demand upon the security because of Phillips' late completion. Clause 10.15 of the subcontract provided: "10.15 Ifthe Subcontractor shallfail to substantially complete (as defined, where appropriate and, if at all, in item J 1 of the Appendix), the Subcontract Works by the date or within the periodhereinprovidedthe Subcontractorshall payorallow to theBuilderby way ofLiquidated and Ascertained Damages a sum calculated at the rate stated in item J 2 ofthe Appendix to this Agreement for the period during which the Subcontract Works remain or have remained not completed and any such sum may be deducted from any moneys then due and owing or to become due and owing to the Subcontractor by the Builder or may be otherwise recovered from the Subcontractor by the Builder as a debt due and owing. Any sum to which the Subcontractor may become liable in terms ofthis clause shall be exclusive of any amount for which the Subcontractor may become liable under clause 10.16. " Item J.2 in the Appendix to the subcontract contained the narration "LiquidatedDamages for SubcontractWorks" and a reference to clause 10.15, and provided in the printed form for the insertion ofa dollar amount per week. A dollar amount of $5,750.00 had been typed in, and the printed word "week" had been deleted and replaced in typescript by the word "day". All the typescript was then ruled through and replaced by "N/A". The alteration was duly initialled. It was common ground that N/A was a short form for "not applicable". The plaintiff Phillips' principal argument was that the parties to the subcontract had agreed that there should be no damages at all for delay. Hence, they said the security provided under the subcontract was not available to Baulderstone, and Baulderstone was not entitled to call for payment under the guarantees, so far as Baulderstone claimed to be entitled to damages compensating for loss suffered in consequence of delay. Although at first sight this was no more than a question of construction of the subcontract, Baulderstone stated

LIQUIDATED DAMAGES FOR LATE COMPLETION - TOPICAL ISSUES The application of liquidated damages by a principal for late completion by a contractor and the challenges associated therewith continue to lead to litigation and arbitration. Can the contract drafting be made clearer so as to avoid such disputed situations, i.e. the rights and obligations of principal and contractor are drafted with greater clarity to avoid disputation?

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that it wishedthe opportunity to call evidence ofsurrounding circumstances to aid in that construction. The Court then considered relevant case law: In Temloc Ltdv Errill Properties Ltd (1987) 39 BLR30 the contract provided by clause 24 for the architect to issue a certificate to that effect ifthe contractor failed to complete the works by the completion date, and that: "... the Contractor shall, as the Employer may require in writing not later than the date ofthe Final Certificate, payor allow to the Employer the whole or such part as may be specified in writing by the Employer ofa sum calculated at the rate stated in the Appendix as liquidated and ascertained damages for the period between the Completion Date and the date ofPractical Completion and the Employer may deduct the same from any moneys due or to become due to the Contractor under this Contract (including any balance stated as due to the Contractor in the Final Certificate) or the Employer may recover the same from the Contractor as a debt ... ". The Appendix in the contract was completed to read "Nil". It was held that on the proper construction of the contract it had been agreed that there should be no damages at all for delayed completion. Croom-Johnson LJ adopted the trial judge's view that the agreement, excluding liquidated damages, also excluded damages at large. Watkins LJ agreed and Nourse LJ said (at 39-40): "I think it clear, both as a matter ofconstruction and as one of commonsense, that if (1) clause 24 is incorporated in the Contract and (2) the parties complete the relevant part ofthe Appendix, either by stating a rate at which the sum is to be calculated or, as here, by stating that the sum is to be nil, then that constitutes an exhaustive agreement as to the damages which are or are not to be payable by the Contractor in the event ofhis failure to complete the works on time. " In Baese Pty Ltd v RA Bracken Building Pty Ltd (1990) 6 BCL 137, Giles J distinguished Temloc Ltd vErrill Properties Ltd (supra) when considering clauses 10.14 and 10.15 of the JCCB-1985 head contract. Those clauses were in quite different terms from Cl10.15 of the JCCB1985 subcontract, on which Giles J did not think it could be distinguished in the same way. Temloc Ltd vErrill Properties Ltd was followed in Surrey Health Borough Council v Lovell Construction Ltd (1988) 42 BLR 25 so far as it is held that C124 was exhaustive in respect ofdamages for non-completion. Giles J regarded that for the purposes ofthe application before him in the present case, if the symbols "N/A" have the same effect as "Nil", the plaintiffs had a strong case that Baulderstone could not call for payment under the guarantees on the ground that it was entitled to damages compensating for loss suffered in consequence of delay. Giles J went on to state: "Two views are possible in relation to "N/A". On one view instead ofstating a rate for the calculation ofa

sum, the party stated that there was no applicable rate and meant thereby that no sum was to be calculated: they intended the same as ifthere hadbeen the insertion ofthe word "Nil". On the other view, by inserting "N/A " the party stated that the item in the Appendix had no application and meant thereby that the item in clause 10.15 itselfwere not operative at all as part ofthe subcontract - in effect that Cl1 0.15 was struckoutofthe subcontract. Perhaps there will be evidence available and admissible to aid in the construction ofthe subcontract in this respect. However, in the absence ofthat evidence it seems to me that the better view is the one first mentioned. The subcontract included special conditions deleting or altering a number of clauses in the printed form, including deleting Cl 10.08 to Cl 10.14 inclusive and Cl 10.17 to Cl 10.20 inclusive. Had the parties intended by "N/A " that Cl1 0.15 should be written out ofthe subcontract, leaving damages at large, then they would have so provided by an express deletion of Cl 10.15 in the same manner as they deleted those clauses. Accordingly, for the purposes of this application the plaintiffs still have a strong case that Baulderstone could not callfor payment under the guarantees on the ground that it was entitled to damages for delay. "
It should be stated that the above case dealt with interlocutory orders sought requiring Baulderstone to restore an amount received by Baulderstone under bank guarantees provided by the plaintiff. Cases such as the above are a strong reminder of the need to take considerable care with contract conditions, even in completing the appendix! Balfour Beatty Building Limited v Chestermount Properties Limited (1993) 62 BLR 1 considered the underlying contractual purposes of the completion date/ extension oftime/liquidated damages regime. The Court stated: "At the foundation ofthis code is the obligation ofthe Contractor to complete the Works within the contractual period terminating at the Completion Date and on failure to do so to pay liquidated damages for the period oftime by which Practical Completion exceeds the Completion Date. Butsuperimposedon this regime is a system ofallocation ofrisk. Ifevents occur which are non-Contractor's risk events and those events cause theprogress ofthe works to be delayed, inasmuch as such delay would otherwise cause the Contractor to become liable for liquidated damages, or for more liquidated damages, the contract provides for the Completion Date to be prospectively or, under clause 25.3.3, retrospectively, adjusted in order to reflect the period ofdelay so caused and thereby reducepro tanto the amount of liquidated damages payable by the Contractor. Likewise, if the Works are reduced by an omission instruction by the Architect, it may be fair and reasonable to reduce the contract period for completion prospectively or retrospectively and therefore to advance the Completion Date. "

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The Court went on to state: "It was common ground that if the Contract failed to provide for power to grant an extension of time on account ofdelays caused by an act ofprevention, the effect on the act of prevention was to prevent the Employer relying on the Completion Date/Liquidated Damages provision in the Contract. If the obligation to complete the Works was to be performed within a reasonable time there couldbe no extensions on account ofRelevant Events and the Employer's only hope of compensation would be to recover unliquidated damagesfordelay: see Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111. The remarkable consequences of the application of this principle could therefore be that if, as in the present case, the Contractorfell well behind the clock and overshot the Completion Date and was unlikely to achieve Practical Completion untilfar into thefuture, if the Architect then gave an instruction for the most trivial variation, representing perhaps only a day's extra work, the Employer would thereby lose all right to liquidated damagesfor the entireperiod ofculpable delay up to Practical Completion or at best, on the Respondent's submission, the Employer's right to liquidated damages would be confined to the period up to the act ofprevention. For the rest ofthe delay he would have to establish unliquidated damages. What might be a trivial variation instruction would on this argument destroy the whole liquidateddamages regime for all subsequent purposes.
So extreme the consequencefor thefuture operation of the Contract couldhardly reflect the common intention, particularly having regard to the very specific distribution ofrisk provisions which are agreed to be applicable in respect of Relevant Events occurring before the Completion Date. It is certainly a construction which is most improbable in the absence ofsome other express provision supporting it. "

was given. This was the gross approach. The net approach, however, involved starting with the existing Completion Date and extending it by the amount which the Architect considered as fair and reasonable having regard to the delay caused by the requirement to execute the variation instructions. The Court went on to state: "Against this backgroundthe contention that the "gross method is fair" to both parties cannot stand up. If a Contractor overshoots thepreviouslyfixed Completion Dateyou mustpay liquidated damagesfor the whole of theperiodoftimefrom thatdate to Practical Completion unless the Architect subsequently extends the time for completion by reason of a Relevant Event by retrospectively postponing the Completion Date. If the Relevant Event is a variation instruction, the Architect will have to consider whether it is fair and reasonable that the Contractor's total period oftime for completion should be increased. If the variation works can reasonably be conducted simultaneously with the original works without interfering with their progress and are unlikely to prolong Practical Completion, the Architect might properly conclude that no extension of time was justified. He would therefore leave the Completion Date where it was. That would leave the Contractor to pay liquidated damages for the amount of time by which he had exceeded the original period of time for completion. His continuing liability to pay liquidated damages while he is at the same time carrying out the variation works does not reflect an assumption by him ofthe risk ofloss oftime due to what would otherwise be an act ofprevention. It merely reflects his breach ofcontract by failing to complete the original works within the original or last-jixed contract periodfor completion.
In contrast, ifthe Architect were to assess the length of time required to carry out the variations works and to refix the Completion Date at the end, such period starting from the date of the variation instruction, it would produce a result which would be unfair to the Employer. If that were done, the Employer would be deprived of any compensation for the Contractor's breach infailing to complete by the earlier Completion Date. The additionalperiod oftime then allowed to the Contractorfor completion ofthe Works, would not be co-extensive with any period of delay caused by a Relevant Event. The submission that this is not unfair to the Employer because he has brought it upon himself by requesting a variation during a period ofculpable delay is misconceived because it assumes that the Relevant Events in general or variation instructions in particular are to be treated according to different principles depending on whether they occur before or during a period ofculpable delay. As I have already held, I cannot accept that the contract expressly or impliedly contemplates any such differences in principle. "

In the present case the Architect issued a Final Certificate ofnon-completion under the Contract which gave rise to a claim by the Employers to be entitled to deduct the sum of 3.8 million as liquidated and ascertained damages. The Contractor claimed that variations instructions issued after the most recently set Completion Date invalidated the Employer's entitlement to liquidated damages. As indicated above, the Contractor was unsuccessful with his argument. The Contractor contended alternatively that he should have been given an extension of time on account of the variation instructions issued after the Completion Date on a "gross" basis and not on a "net" basis. That is, the new Completion Date should have been fixed having regard to the date when the Works could fairly and reasonably be expected to be completed having regard to the date when the variations were ordered. This would mean ignoring the previous Completion Date and starting the time extension assessment from the date when the variation instruction

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It should be noted, however, that a different result might eventuate in a contract form other than the one which was the subject of the above case namely, JCT80 form of contract. The case highlights some of the complexities involved in ordering a variation, no matter how small, after the date for practical completion has passed without practical completion being achieved. The following case also assists in putting acts of prevention into proper context: in Turner Corporation Limited (Receiver & Manager appointed) v Austotel Pty Limited (Supreme Court of New South Wales, Common Law Division Construction List Cole J No.5 5093 of 1993, 2 June, 1994) the Court considered the contractor's argument that the proprietor had lost its entitlement to liquidated damages in the sum of$l,725,000. This contract involved a JCCA 1995 with quantities form. The original date forpractical completion was 3 October, 1991. This was subsequently extended by the arbitrators to 22 November, 1991. The builder requested instructions from the architect regarding the provision of a gas leak detector on the project on 27 September, 1991. The architect did not issue the instructions until 20 February, 1992. Practical completion was achieved on 1 May, 1992 (the date of practical completion). The Court stated the builder's argument as follows: "... the Builder argued that the delay in provision of instructions regarding the gas leak detector entitled it not only to an extension oftime ofseven days, coupled with a consequent entitlement to cost ofdelay, but also resulted in the Builder being entitled to invoke the "prevention principle ".
Shortly put, the Builder asserted that not only was it entitled to an extension ofseven days to the date for Practical Completion arisingfrom delay in provision of instructions, thus minimising the time for which it might be liable for liquidated damages for failure to achieve Practical Completion by the datefor Practical Completion, but that achievement of its contractual obligation of Practical Completion by the extended date for Practical Completion was prevented by the late receipt of those instructions. This latter aspect was said to result in the Proprietor not being entitled to recover any sum by way of liquidated damages pursuant to the provisions of the contract because it had prevented performance. "

nonetheless could be excluded by contract. Perhaps there might now be added an additional basis that it would be to unjustly enrich a proprietor were it to benefit by obtaining damagesfor delayfor which it was responsible. Whatever be the juridicial basis I agree with Brooking J that "it is grounded upon considerations offairness and reasonableness. "(SMK Cabinets v Hili Modern Electrics Pty Limited (1984) VR391 at 394-396). Whether there has been prevention, so it seems to me, must depend upon the terms of the contract. The concept ofprevention however it may be phrased or described, relates to acts ofthe Proprietor or thosefor whom it is responsible which prevent the Builderfrom fulfilling its contractual obligations. The obligation upon the Builder under the JCCAform is to bring the works to Practical Completion by the datefor Practical Completion. The date for Practical Completion is the nominated date in the contract (11 October, 1990) "subject to adjustment as providedfor in section 9 ". The clauses within section 9 contemplate delays oftwo types which entitle the Builder to an extension oftime. Thefirst type is delay inprogress ofthe Works resulting from "any cause or causes beyond the control ofthe Builder including an act ... ofdefault or omission on the part of the Proprietor, the Architect ... ". The second class ofdelay is that resultingfrom a variation directed by the Architect. In each instance the delay must be one which is likely to or may reasonably be expected to result in delay in the Works "reaching Practical Completion ". In respect ofdelay generated by these two distinct types the Builder has a right to seek an extension of time to the date for Practical Completion. It follows that as the Proprietor is responsible for its own act or an act ofanotherfor whom it is responsible which might be described as an act preventing the Builder from bringing the Works to Practical Completion by the Datefor Practical Completion, the Builder has a right to applyfor an extension oftime to the Date for Practical Completion to the extent to which it would be delayed by that act in bringing the works to Practical Completion. The consequence is that the Builder could never say that it was prevented from completing the works on time, that is, by the Date for Practical Completion, by the so called preventing act ofthe Proprietor because the preventing act ofthe Proprietor entitles the Builder to applyfor an extension of time equivalent to the delay to the progress ofthe works caused by the otherwise preventing act. Such act would fall within clause 9.01 if it was not a variation or clause 9.07, ifit was. It follows, in my view, that under the JCCA form of contract theprevention principle has no application in relation tofailure toperform the contractual obligation to bring the works to practical completion by the Date

After analysing the provisions ofthe JCC 1985 form of contract, the Court stated: "There has been debate regarding thejuridicial basis for the so called "prevention principle" disentitling a proprietor to recover liquidated damages where its acts, or actsfor which it is responsible, haveprevented performance of the contract. Some have thought it flows from an implied term in the contract. Others ground it on a "broad notion ofjustice ... that a man should not be allowed to recover damagesfor what he himselfhas caused ". Yet others have thought ofit as a rule of law based on a matter offairness which

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or mechanism whereby the delay is to be calculated, thefact theprincipalmay have caused delay has the effect that an allowance should be made in accordance with the contract. It does not have the effect that the contractualprovisions are thereby overlooked or put aside or that time is put "at large ". In any event the principal's action must cause "actual", as opposed to potential delay in the sense that the completion ofthe work is delayed by the actions of the principal. It is not to the point to say that there could have been a delay. It is necessary to establish that delay was caused. In any event one must determine, as a matter of fact, what the overall effect ofthe action ofthe principal was. As the illustration to which I have referred, and the illustration referred to in McAlpine, make clear it cannot be right that a small actual delay brings about the result for which the contractor contends in the present case. That delay must be judged in all the circumstances of the case. Certainly it may allow some reliefto the contractor, but to suggest that it eradicates all delay caused by the contractor prior thereto, or even subsequent thereto if not causally related to the activities of the principal, would be to set up a legalprinciple far exceeding the one where a party cannot reply upon its own default. "

for Practical Completion as a result of an asserted preventing actfor which the Proprietor is responsible. Essentially that is because that act is one beyond the control ofthe Builder, or from a variation, and each entitles the Builder to an extension oftime to the Date for Practical Completion, equivalent to the delay which it would suffer in bringing the works to Practical Completion.

(b)

If the Builder, having a right to claim an extension of


time fails to do so, it cannot claim that the act of prevention which would have entitled it to an extension of the time for Practical Completion resulted in its inability to complete by that time. A party to a contract cannot rely upon preventing conduct ofthe otherparty where it failed to exercise a contractual right which would have negated the effect of that preventing conduct. It seems to me that if there is a contractual provision regarding time which permits an extension oftime to the Date for Practical Completion (whether with or without the payment ofany additional cost) for an act oforfor which a Proprietor may be responsible which has the effect ofpermitting variation ofthe contractual timefor Practical Completion, an act which otherwise might prevent the Builder from completing by the contractually required date for Practical Completion cannot be an act ofprevention because the contract is extended to accommodate the caused delay to performance, and the contractual obligation regarding timefor performances thus varied. That is, the obverse ofpreventing completion by the contractually required time. The act of the Proprietor does not prevent performance of the contractual obligations within time: it entitles the Builder to apply for a contractual variation extending time for performance. Here the Builder claims an extension of seven days arising from the alleged act of prevention. It was granted the time it claimed. Thereafter, so it seems to me, it cannot assert that it was prevented from completing on time, that is by the date for Practical Completion, in consequence ofthe allegedpreventing act. "

(c)

CONCLUSION The completion date/time extension/liquidateddamages regime in modem construction contracts is by no means settled. Clearer and simpler risk allocation of time management will be likely to result in less disputation concerning the parties' rights to time extensions, delay costs and liquidated damages. Clarity of drafting is absolutely critical in relation to the drafting of special conditions and project specific documentation.

This case appears to put the onus onto the builder to apply for a time extension for acts of prevention by a proprietor. The builder cannot seek to invalidate the liquidated damages clause by failing to claim an extension of time for the proprietor's acts of prevention. In a more recent case, Turner Corporation Limited (In Provisional Liquidation) v Co-Drdinated Industries Pty Ltd & Drs (1995) 11 BCL 202, Rolfe J considered in considerable detail the case law relating to prevention and arrived at the following principles (at 221-222): "(a) Where the contractprovides an extension oftime clause, which can accommodate delay caused by theprincipalandprovides the contractual regime

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APPENDIX JCC E, F -1994 (BUILDING WORKS CONTRACTS - JOINT CONTRACTS COMMITTEE) 9.01 Notifications of Delays Ifthe commencement or progress ofthe execution ofso much of the Works constituted by anyone or more of the Stages is or will be delayed by any cause beyond the control of the Builder including any act (other than any instruction by the Architect as to a Variation) default or omission on the part of the Proprietor, the Architect, any Separate Contractor, employee or agent of the Proprietor in a manner which might reasonably be expected to result in a delay in that Stage or those Stages reaching Practical Completion the Builder shall, if he desires to claim an extension oftime for Practical Completion ofthat Stage or anyone or more ofthose Stages, as soon as practicable and in any event not later than twenty (20) days after the cause of delay arose give a notice in writing to the Architect identifying the affected Stage or Stages and stating the nature, the cause and where possible, the extent ofthe delay. 9.02 Notice of Claimed Extension As soon as practicable the Builder shall give a further notice in writing to the Architect stating a fair and reasonable time or times by which in his opinion the time or times for Practical Completion of the identified Stage or Stages should be extended. 9.03 Architect's Determination Subject to the Builder having complied with the provisions of Clauses 9.01 and 9.02 the Architect shall as soon as practicable but not later than twenty (20) days after receiving the Builder's notice pursuant to Clause 9.02 determine what, if any, extension or extensions of time time for Practical Completion of the particular identified Stage or Stages shall be granted to the Builder and shall thereupon notify in writing the Builder accordingly. 9.04 Deemed Extension If the Architect does not notify the Builder in terms of Clause 9.03 the time or times for Practical Completion of the identified Stage or Stages shall be deemed to be extended by the time or times stated in the Builder's notice given under Clause 9.02. 9.05 Architect May Extend Notwithstanding that the Builder has not given either of or both notices pursuant to Clause 9.01 and 9.02 the Architect may at any time by notice in writing addressed to the Builder extend the time or times for Practical Completion ofanyone or more Stages ifin his opinion the Builder would otherwise be entitled to such an extension or extensions. 9.06 Condition Precedent to Extension of Time Notwithstanding the preceding provisions of this Section 9 the Builder shall not be entitled to any extension of time unless he shall have taken proper and reasonable steps both to preclude the occurrence ofthe cause ofdelay and/or to avoid or minimise the consequences thereof.

AS2124-1992 (AUSTRALIAN STANDARD GENERAL CONDITIONS OF CONTRACT) 35.5 Extension of Time for Practical Completion When it becomes evidentto the Contractorthat anything, including an act or omission of the Principal, the Superintendent or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details ofthe possible delay and the cause. When it becomes evident to the Principal that anything which the Principal is obliged to do or provide under the Contract may be delayed, the Principal shall give notice to the Superintendent who shall notify the Contractor in writing of the extent of the likely delay. If the Contractor is or will be delayed in reaching Practical Completion by a cause described in the next paragraph and within 28 days after the delay occurs the Contractor gives the Superintendent a written claim for an extension oftime for Practical Completion setting out the facts on which the claim is based, the Contractor shall be entitled to an extension of time for Practical Completion. The causes are: (a) events occurring on or before the Date for Practical Completion which are beyond the reasonable control ofthe Contractor including but not limited to (i) industrial conditions; (ii) inclement weather;
(b) any of the following events whether occurring before, on or afterthe Date for Practical Completion (i) delays caused by - the Principal; - the Superintendent; - the Principal's employees, consultants, other contractors or agents; (ii) actual quantities of work being greater than the quantities in the Bill of Quantities or the quantities determined by reference to the upper limit ofaccuracy stated in the Annexure (otherwise than by reason of a variation directed under Clause 40); latent conditions; variations directed under Clause 40; repudiation or abandonment by aNominated Sub-Contractor; changes in the law; directions by municipal, public or statutory authorities not caused by the Contractor; claims referred to in Clause 17.1 (v); any breach of the Contract by the Principal; any other cause which is expressly stated in the Contract to be a cause for extension of time for Practical Completion.

(iii) (iv) (v) (vi) (vii) (ix) (x) (xi)

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Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause referred to in the preceding paragraph, then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension oftime for Practical Completion. In determining whether the Contractor is or will be delayed in reaching Practical Completion regard shall not be had to - whether the Contractor can reach Practical Completion by the Date for Practical Completion without an extension of time; - whether the Contractor can, by committing extra resources or incurring extra expenditure, make up the time lost. With any claim for an extension of time for Practical Completion, or as soon as practicable thereafter, the Contractor shall give the Superintendent written notice of the number of days extension claimed. If the Contractor is entitled to an extension of time for Practical Completion the Superintendent shall, within 28 days after receipt of the notice of the number of days extension claimed, grant a reasonable extension oftime. If within the 28 days the Superintendent does not grant the full extension of time claimed, the Superintendent shall before the expiration of the 28 days give the Contractor notice in writing of the reason. In determining a reasonable extension of time for an event causing delay, the Superintendent shall have regard to whether the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay. Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue ofthe Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason. A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension oftime within 28 days shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.

which the Principal is obliged to do or provide under the Contract may be delayed, the Principal shall promptly give notice to the Superintendent who shall promptly notify the Contractor in writing of the extent of the likely delay. If the Contractor is or will be delayed in reaching Practical Completion by a cause described in the next paragraph and within 28 days after the delay occurs, the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion setting out the facts on which the claim is based, the Contractor shall be entitled to an extension of time for Practical Completion. The causes are (a) any of the following * (i) industrial conditions; * (ii) inclement weather; or (iii) any other cause, occurring on or before the Date for Practical Completion and which are beyond the reasonable control of the Contractor; and (b) any ofthe following other causes whether occurring before, on or after the Date for Practical Completion (i) delay or disruption caused by - the Principal; - the Superintendent; - an employee, consultant, other contractor or agent ofthe Principal or Superintendent; (ii) actual quantities ofwork being greater than the quantities in a Schedule of Rates by reference to the upper limit of accuracy applicable to clause 3.3(b) and stated in Annexure Part A (otherwise than by reason of a variation); (iii) a Latent Condition; (iv) a variation; (v) a change in Legislative Requirements; (vi) a direction by a municipal, public or statutory authority but not where the direction arose from the failure ofthe Contractor to comply with a Legislative Requirement; (vii) delay by a municipal, public or statutory authority not caused by the Contractor; (viii) a claim referred to in clause 17.1 (iv); (ix) a breach of the Contract by the Principal; (x) another cause which is expressly stated in the Contract to be a cause for an extension of time for Practical Completion; Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause of delay listed in clause 35.5(a) or (b), then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension oftime for Practical Completion. Notwithstanding the precedingparagraph the Contractor shall be entitled to an extension of time if the concurrent delay occurs after the Date for Practical Completion and

AS4300-1995 (AUSTRALIAN STANDARD GENERAL CONDITIONS OF CONTRACT FOR DESIGN AND CONSTRUCT) 35.5 Extension of Time for Practical Completion When itbecomes evidentto the Contractorthat anything, including an act or omission of the Principal, the Superintendent or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details ofthe possible delay and the cause. When it becomes evident to the Principal that anything

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the cause ofthe delay is one or more ofthe events listed in clauses 35.5(b)(i), (iv), (viii) and (ix). In determining whether the Contractor is or will be delayed in reaching Practical Completion regard shall not be had to - whether the Contractor can reach Practical Completion by the Date for Practical Completion without an extension of time; or - whether the Contractor can, by committing an extra resources or incurring extra expenditure, make up the time lost. With any claim for an extension of time for Practical Completion, or as soon as practicable thereafter, the Contractor shall give the Superintendent written notice of the period of extension claimed. If the Contractor is entitled to an extension oftime for Practical Completion the Superintendent shall, within 28 days ofreceipt ofthe notice ofthe number ofdays extension claimed, grant a reasonable extension oftime. Ifwithin the 28 days the Superintendent does not grant the full extension of time claimed, the Superintendent shall before the expiration of the 28 days give the Contractor notice in writing of the reason. In determining a reasonable extension of time for an event causing delay, the Superintendent shall have regard to whether the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay. Notwithstanding that the Contractor is not entitled to or has not claimed an extension of time, the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contract extend the time for Practical Completion for any reason. A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension oftime within 28 days, shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.

Contractor where authorised by the Contract; (c) weather sufficiently inclement to interfere with the progress of the Contract Works; (d) any strike, lockout or other industrial action; (e) loss or damage to the Contract Works or any part thereof not due to the fault of the Contractor; (f) Variations to the Contract Works provided that the extended time, if agreed when a Variation is ordered, shall constitute the extended time; (g) failure of the Architect to supply in due time all details and directions necessary for the carrying out of the Contract Works and for which the Contractor has applied in writing at a reasonable time to allow the Architect to prepare such details and directions; (h) the late supply by the Employer of any materials, services or work; (i) an act or default by a Separate Contractor; U) any other significant cause beyond the control of the Contractor; (k) the death of the Contractor. Where Sectional Practical Completion applies as noted in the Specific Conditions, the time for achieving Sectional Practical Completion shall be extended in the manner described in this Clause.

8.04 Claim for Extension of Time The Contractor shall so notify the Architect if the Contractor considers that the Contract Works have been delayed or one or more ofthe reasons stated in Clause 8.03 and shall submit a claim for an extension of time. The claim shall be made within 25 Working Days of the occurrence ofthe cause ofthe claim, stating the extension claimed and the reasons therefor. The Architect shall investigate the claim and, within 25 Working Days, shall notify the Contractor of any extension of the Time for Practical Completion or Sectional Practical Completion.

Note: Clauses 35.5(a)(i) and 35.5(a)(ii) prefixed by "*,, are optional and the Annexure should be completed appropriately. If the Annexure options are not completed, the particular Clause will apply.

NZS 3910: 1987 (CONDITIONS OF CONTRACT FOR BUILDING AND CIVIL ENGINEERING CONSTRUCTION) 9.2 Extension of times 9.2.1 The Engineer shall grant an extension of the time for completion of the Contract Works or for any Separable Portion ifthe Contractor is fairly entitled to an extension by reason of: (a) the net effect of any Variation; or (b) weather sufficiently inclement to interfere with the progress of the works; or (c) any strike, lockout or other industrial action, or (d) the late supply by the Principal ofany services or work; or (e) any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of the Contractor.

NZIA 7TH EDITION (GENERAL CONDITIONS OF CONTRACT) 8.03 Extensions of Time The Time for Practical Completion shall be extended beyond that stated in the Specific Conditions or beyond any extended time fixed hereunder if work is delayed by reason of: (a) non-availability of permits unless this is caused wholly or in part by any act or default of the Contractor; (b) the suspension of the Contract Works by the

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9.2.2

The Engineer shall not be bound to grant an extension unless: (a) the Contractor notifies the Engineer that he claims an extension and states the grounds for the extension; (b) the notice is given with 20 Working Days after the circumstances arise which are relied on as the grounds for extension, or as soon as practicable thereafter; (c) the notice either gives details of the period of extension sought or is followed within a reasonable time by a further notice giving such details. Where the effect of any ground for an extension is of a continuing nature, the Contractor may give more than one notice each claiming a specific period of extension on that ground. Upon receipt of notice of a claim for extension of time the Engineer shall investigate the claim. The Engineer shall within 20 Working Days or as soon as practicable thereafter determine whether or not the Contractor is fairly entitled to an extension and shall notify the Contractor of his decision. Upon receipt of details of the period of extension sought by the Contractor the Engineer shall, if he has determined that the Contractor is fairly entitled to an extension, then determine the period of the extension and notify the Contractor ofhis decision as soon as practicable.

being such as fairly to entitle the Contractor to an extension of the Time for Completion of the Works, or any Section or part thereof, the Engineer shall, after due consultation with the Employer and the Contractor, determine the amount of such extension and shall notify the Contractor accordingly, with a copy to the Employer.

9.2.3

9.2.4

44.2 Contractor to Provide Notification and Detailed Particulars Provided that the Engineer is not bound to make any determination unless the Contractor has: (a) within 28 days after such event has first arisen notified the Engineer with a copy to the Employer; and (b) within 28 days, or such other reasonable time as may be agreed by the Engineer, after such notification submitted to the Engineer detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time. 44.3 Interim Determination of Extension Provided also that where an event has a continuing effect such that it is not practicable for the Contractor to submit detailed particulars within the period of 28 days referred to in Sub-Clause 44.2(b), he shall nevertheless be entitled to an extension of time provided that he has submitted to the Engineer interim particulars at intervals of not more than 28 days and final particulars within 28 days of the end of the effects resulting from the event. On receipt of such interim particulars, the Engineer shall, without undue delay, make an interim determination of extension of time and, on receipt of the final particulars, the Engineer shall review all the circumstances and shall determine an overall extension of time in regard to the event. In both such cases the Engineer shall notify the Contractor accordingly, with a copy to the Employer. No final review shall result in a decrease of any extension of time already determined by the Engineer.

9.2.5

FIDIC 4TH EDITION 1992 (CONDITIONS OF CONTRACT FOR WORKS OF CIVIL ENGINEERING CONSTRUCTION) 43.1 Time for Completion The whole ofthe Works and, ifapplicable, any Section required to be completed within a particular time as stated in the Appendix to Tender, shall be completed, in accordance with the provisions of Clause 48, within the time stated in the Appendix to Tender for the whole ofthe Works or the Section (as the case may be), calculated from the Commencement Date, or such extended time as may be allowed under Clause 44. 44.1 Extension of Time for Completion In the event of: (a) the amount or nature of extra or additional work, or (b) any cause ofdelay referred to in these Conditions, or (c) exceptionally adverse climatic conditions, or (d) any delay, impediment or prevention by the Employer, or (e) other special circumstances which may occur, other than through a default ofor breach ofcontract by the Contractor or for which he is responsible,

FIDIC DESIGN, BUILD (DECEMBER 1994)

AND

TURNKEY

8.3 Extension of Time for Completion The Contractor may apply for an extension ofthe Time for Completion ifhe is or will be delayed either before or after the Time for Completion by any of the following causes: (a) a Variation (unless an adjustment to the Time for Completion is agreed under Sub-Clause 14.3); (b) a force majeure event (as defined in Sub-Clause 19.1); (c) a cause ofdelay giving an entitlement to extension of time under a Sub-Clause of these Conditions, unless the Contractor has not complied with such Sub-Clause; (d) physical conditions or circumstances on the Site, which are exceptionally adverse and were not (by

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the Effective Date) foreseeable by an experienced contractor; or (e) any delay, impediment or prevention by the Employer. The Contractor shall, within 28 days of the start of the event giving rise to the delay, give notice to the Employer's Representative ofthe Contractor's intention to apply for an extension of the Time for Completion, together with any other notice required by the Contract and relevant to such cause. The Contractor shall keep such contemporary records as may be necessary to substantiate any application, either on the Site or at another location acceptable to the Employer's Representative, and such other records as may reasonably be requested by the Employer's Representative. The Contractor shall permit the Employer's Representative to inspect all such records, and shall provide the Employer's Representative with copies as required. Within 28 days of the first day of such delay (or such other period as may be agreed by the Employer's Representative), the Contractor shall submit full supporting details of his application. Except that, if the Contractor cannot submit all relevant details within suchperiodbecause the cause ofdelay continued for a period exceeding 7 days, the Contractor shall submit interim details at intervals of not more than 28 days (from the first day ofsuch delay) and full and final supporting details ofhis application within 21 days of the last day of delay. The Employer's Representative shall proceed in accordance with Sub-Clause 3.5 to agree or determine either prospectively or retrospectively such extension of the Time for Completion as may be due. The Employer's Representative shall notify the Contractor accordingly. When determining each extension oftime, the Employer's Representative shall review his previous determinations and may revise, but shall not decrease, the total extension of time.

be such as to entitle him to an extension of time for the substantial completion ofthe Works or any Section thereof he shall within 28 days after the cause of any delay has arisen or as soon thereafter as is reasonable deliver to the Engineer full and detailed particulars injustification ofthe period ofextension claimed in order that the claim may be investigated at the time.

(2) Assessment of delay


(a) the Engineer shall upon receipt ofsuch particulars consider all the circumstances known to him at that time and make an assessment of the delay (if any) that has been suffered by the Contractor as a result of the alleged cause and shall so notify the Contractor in writing; (b) the Engineer may in the absence of any claim make an assessment ofthe delay that he considers has been suffered by the Contractor as a result of any of the circumstances listed in Sub-Clause (1) ofthis Clause and shall so notify the Contractor in writing.

(3) Interim grant of extension of time


Should the Engineer consider that the delay suffered fairly entitles the Contractor to an extension ofthe time for the substantial completion of the Works or any Section thereof such interim extension shall be granted forthwith and be notified to the Contractor in writing. In the event that the Contractor has made a claim for an extension of time but the Engineer does not consider the Contractor entitled to an extension of time he shall so inform the Contractor without delay.

(4) Assessment at due date for completion


The Engineer shall not later than 14 days after the due date or extended date for completion of the Works or any Section thereof (and whether or not the Contractor shall have made any claim for an extension oftime) consider all the circumstances known to him at that time and take action similar to that provided for in Sub-Clause (3) ofthis Clause. Should the Engineer consider that the Contractor is not entitled to an extension oftime he shall so notify the Employer and the Contractor.

ICE 6TH EDITION (CONDITIONS OF CONTRACT) 43. Time for Completion


The whole ofthe Works and any Section required to be completed within a particulartime as stated in the Appendix to the Form of Tender shall be substantially completed within the time so stated (or such extended time as may be allowed under Clause 44) calculated from the Works Commencement Date.

(5) Final determination of extension


The Engineer shall within 14 days of the issue of the Certificate of Substantial Completion for the Works or for any Section thereof review all the circumstances of the kind referred to in Sub-Clause (1) of this Clause and shall finally determine and certify to the Contractor with a copy to the Employer the overall extension of time (if any) to which he considers the Contractor entitled in respect ofthe Works or the relevant Section. No such final review ofthe circumstances shall result in a decrease in any extension of time already granted by the Engineer pursuant to SubClauses (3) or (4) of this Clause.

44. Extension of time for Completion


(1) Should the Contractor consider that: (a) any variation ordered under Clause 51(1); or (b) increased quantities referred to in Clause 51 (4); or (c) any cause ofdelay referred to in these Conditions; or (d) exceptional adverse weather conditions; or (e) other special circumstances of any kind whatsoever which may occur,

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I CHEM ENG (CONDITIONS OF CONTRACT FOR PROCESS PLANT) 14. Delays and Extensions of Time 14.1 Ifthe Contractor shall be delayed in the performance of any of his obligations under the Contract by any ofthe matters specified in Sub-Clause 14.2, he shall forthwith give notice thereof to the Engineer and shall become entitled to such extension of any date orperiod specified in the Contract for the completion or doing ofanything by the Contractor as shall in all the circumstances be fair and reasonable. The Engineer shall, as soon as the extent and consequence of any such delay are known, grant such extension by notice both to the Purchaser and to the Contractor. A notice given by the Contractor under Clause 43 (Force Majeure) shall also constitute a notice under this sub-Clause. 14.2 The matters of delay entitling the Contractor to an extension of date or period under this Clause are: (a) delay caused by the occurrence of conditions to which the provisions of Sub-Clause 5.3 apply; (b) delay due to the Engineer giving any Variation order which is not withdrawn, or the approval by the Engineer ofthe Contractor's proposals for a Variation, except where such proposals relate to a defect due to a default on the part of the Contractor; (c) the giving of any suspension order by the Engineer, except where given by reason ofthe Contractor's breach of Contract; (d) delay caused by force majeure as defined in Clause 43 (Force Majeure); (e) delay caused by any breach ofthe Contract by the Purchaser; (f) delay caused by the failure of any SubContractor nominated by the Engineer in accordance with Clause 9 (Nominated SubContractors) to perform such Sub-Contractor' s obligations despite all due supervision by the Contractor.
14.3 The Contractor shall at all times use his best endeavours to minimise any delay in the performance ofhis obligations under the Contract, whatever may be the cause of such delay.

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