Fouled by your own side

‘The promisee cannot insist upon performance if he prevents the promisor performing.” That’s called the “prevention principle”. It sounds like “Peter Piper picked a peck of pickled peppers”.

So, let me ask you: have you heard of the prevention principle? If you’re involved in Wembley stadium you’ll have heard it. Multiplex has. So has Honeywell Controls. Let me also ask, have you heard of “time at large”? Yes, of course. And have you heard of liquidated damages, extensions of time? Yes, of course. The latest judgment regarding our world-class sports stadium discusses all these legal notions. The judgment is a jolly good read.

Honeywell happily won a £13.5m subcontract with Multiplex for the design of communication and controls at the stadium. The promise was to start on 5 April 2004 and finish by 31 May 2005. Now, those dates are a two-way deal. It’s all very well to point a finger if Honeywell shows up late, but what’s the score if Multiplex tells Honeywell it can’t start on 5 April? That’s an act of prevention.

The same goes if Multiplex prevents Honeywell from finishing on 31 May, or instructs or directs it not to. The signboard up in the stand flashes “time at large” and “liquidated damages dumped”, with a smiley face bobbing up and down in the corner.

If you’ve been hanging around our industry for the past 170 years, you might have been involved in building a brewery in Liverpool. Mr Holme was the builder, Mr Guppy the brewer and the job was worth £1,700. It was a lot of money, then. The start date was 15 April 1836, and the completion date was 31 August. Liquidated damages were £40 per week. Snag was, the brewer couldn’t give possession on 15 April; it was four weeks later. Then, the builder made a start and was lumbered by its own problems and more of the employer’s; the first Liverpudlian pints of bitter were ages late. The employer deducted liquidated damages, but not of course for those first four weeks. Dear me, none of this will do, said the court in Liverpool. Why not? Because the brewer disabled the builder from making a start – an act of prevention – so the brewer forfeited the £40 per week damages rule. Do you see why?

The new signboard up in the stand flashes ‘time at large’ and ‘liquidated damages dumped’, with a smiley face bobbing up and down in the corner

In another contract a few years later, a builder called Mr Dodds agreed with a client called Mr Churton that he would complete his work on a certain date. He even agreed to carry out additional works if instructed by the architect. The architect did instruct and the builder did the extras. The job ran late for a mixture of causes, but the employer, when asking for extras, occasioned an act of prevention and forfeited a claim for liquidated damages, irrespective of the builder’s culpability. Like the brewery job, this building contract had no “extension of time” device to deal with an employer’s act of prevention. That’s when and why contracts incorporate “extension of time” clauses. To avoid the “prevention principle” the extension of time clause protects the employer and preserves its right to liquidated damages.

Come back to Liverpool. It is now 1970. Peak Construction contracted with the Liverpool Corporation for a block of flats. The contract document was one of the most one-sided, obscurely and ineptly drafted in British history. It contained liquidated damages and an extension of time clause, but an act of prevention occurred at the hands of the employer that was not in the list of reasons for extension of time. So the smiley popped up and down in the builder’s camp. The liquidated damages fell away.

Wembley was in the news in 1973 when the hospital near the stadium was in dispute. Lord Denning said: “If one party, by its conduct renders it impossible or impracticable for the other party to do its work in the stipulated time, then the one whose conduct caused the trouble can no longer insist on strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time.”

On the Honeywell contract there were acts of prevention but they did not make time at large because the contract contained an extension of time clause with respect to those events. But a point needs a mention: what’s the score if there is no extension of time that covers an act of prevention? Yes, time becomes at large. So what? It means the works are to be performed in a “reasonable time”. How much time is a question of fact, and if the performance is not within a reasonable time, then damages are payable. How much? It will be a sum foreseeable had you thought about it at the outset. Vague, opaque? Not really. But that smiley isn’t jumping up and down and smiling as much as it was.