Delay claims - managing risk in uncertain climate

Construction projects, and in particular large-scale projects, are inherently reliant on the co-ordination of people, permissions, materials, equipment and labour. As a result, delays are very common. While the common causes of delay remain of concern to contract parties, recent events such as Grenfell and the potential legislative overhaul Brexit may cause, add further considerations for employers and contractors keen to understand their potential exposure to project delays.

Delay claims fall into several categories under most standard form contracts and give rise to different implications. There is delay which is the contractor’s fault, allowing the employer to claim liquidated damages if the project is not delivered on time. Alternatively, some delays are the result of the employer’s actions or impediment and may entitle a contractor to both additional time and a claim for loss and expense.

Brexit and the Grenfell Tower tragedy has made the industry acutely sensitive of potential legislative changes and parties want to ensure that the risks of these are properly apportioned at the outset

Neutral delays, such as adverse weather conditions or other kinds of force majeure, may similarly entitle the contractor to seek additional time (but not usually cost) to complete the works. Such neutral delays are, to a large extent, unavoidable by the contracting parties. Invariably delays to works may be apportioned between more than one category.

Both employers and contractors will always seek to attribute the cause of a project delay to the category that suits them. We therefore strongly recommend to all our clients that responses to instructions and applications are made promptly and documented properly and that comprehensive and accurate meeting minutes are kept. These simple steps may seem obvious, but they are vital in assessing the scope and impact of multiple delays. In our experience, the party that lacks the paperwork to back up its position is invariably in the weaker position when delay claims arise.

Contracts must be realistically deliverable for contractors, without enabling the use of legislative changes or economic uncertainty as a blanket explanation for delay

What about circumstances where the regulatory framework shifts during the works, forcing a project to be reassessed during the design or construction process? Who takes the risk for delays arising from, for example, the delay in procuring replacement materials to ensure compliance? Brexit and the Grenfell Tower tragedy has made the industry acutely sensitive of potential legislative changes and parties want to ensure that the risks of these are properly apportioned at the outset.

Generally contractors are obliged to ensure that the works, when completed, meet current statutory requirements. Most standard form building contracts state that, once construction begins, the risk for any subsequent changes to legislation is borne by the employer. Often the only exception to this is where legislative updates could be considered “reasonably foreseeable” by the contractor at the time of the contract “base date”. This may have been acceptable to contractors when construction legislation remained moderately predictable – but in the wake of events like Grenfell and with Brexit looming, contractors are pushing for the definition of what is “reasonably foreseeable” to be construed as narrowly as possible in order to avoid any risks of additional cost and delays arising from having to make changes to comply with updated statutory requirements.

It is essential that in amending template or standard form documents from project to project, that care is taken to ensure any revisions to the contract reflect the agreed commercial position between the parties. While some reconsideration is certainly reasonable in the face of uncertainty, there is a fine balance. Contracts must be realistically deliverable for contractors, without enabling the use of legislative changes or economic uncertainty as a blanket explanation for delay.