Extending time

Most contracts contain provisions for extending the date for completion of the works if delay occurs. Such provisions normally set out procedures that must be complied with in order to be entitled to an extension of time.

The first prerequisite is usually the giving of a proper notice stating that a delay to the works has occurred or is likely to occur because of an event, such as a variation.

Some contracts make the notice a condition precedent to the entitlement to an extension of time, so that if no proper notice is given, no extension of time is given, regardless of fault.

This would leave the delaying party liable to a claim for damages from the other party.

Case law has established that if, say, a main contractor prevents a subcontractor from completing the works, the main contractor loses the right to claim damages for delay caused.

If this was not the case, it would impose an unreasonable burden on the subcontractor to complete the works in accordance with the contract.

When a main contractor prevents a subcontractor from finishing the works by the completion date, the effect this could have on such an extension is illustrated by the case below.

The court case

This issue arose in the case of Multiplex Constructions (UK) v Honeywell Control Systems (No 2) (2007) EWHC 447 (TCC).

Multiplex engaged Honeywell as a subcontractor to design, supply, install and commission various electrical installations at the new Wembley Stadium. During the works, Multiplex issued three revised programmes to Honeywell showing extended completion dates that delayed Honeywell’s works.

A dispute arose over the status and effect of the contract programmes. Honeywell argued that they put time at large. Multiplex disagreed, so Honeywell sought a decision from an adjudicator, who decided that the programmes were directions from Multiplex under the terms of the variation provisions of the contract.

He further concluded that the events under the contract for extending time did not include such directions, which meant that time was at large. Multiplex was aggrieved by the decision and began legal proceedings.

Multiplex contended that the mechanism for granting extensions of time remained in force in respect of delay to completion caused by a direction issued under the variation provisions.

It highlights the need for subcontractors to carefully review the contract prior to entering into it to ensure that the terms are clear and unambiguous

Honeywell asserted that the decision of the adjudicator was correct. It stated further that, under the provisions of the contract, the giving of a notice of delay by it was a condition precedent to the entitlement to an extension of time. As it had not given proper notice, no time extension could be given.

Notwithstanding this, it argued that it would be unfair to allow Multiplex to rely on the strict provisions in view of the fact that it was Multiplex that had caused the delay by issuing the revised programmes.

If Honeywell was correct, this meant that its obligation to complete within the specified time for completion of the works was no longer applicable. Its contractual obligation was replaced by the implied term to complete within a reasonable time, and no extension of time would be necessary.

The judge did not accept Honeywell’s arguments. He concluded that time was not at large, and the extension of time provision was still operable under the contract.

He said that where possible, ambiguous ‘extension of time’ clauses should be interpreted in a way that enables the subcontractor to recover an appropriate extension of time.

Fortunately for Honeywell, the judge noted that, during the course of Multiplex’s submissions, it had conceded that Honeywell had given notices of delay, albeit not strictly in accordance with the contract. The form they took is unknown.

The judge said that Multiplex was obliged to consider the notices and award Honeywell an appropriate extension of time.

Comments

The legal arguments that ensued over the status and effect of the programmes issued by Multiplex were complex.

It highlights the need for subcontractors to carefully review the contract prior to entering into it to ensure the terms are unambiguous and clear.

If not, there could be real danger for a subcontractor in finding that it could not claim an extension of time simply because it failed to issue an appropriate notice of delay in compliance with the contract.

Readers are cautioned not to rely on this as legal advice.