Pursuing and defending delayed project claims

Delay on a construction project is a matter of importance for both the

contractor and the employer. A contractor will incur additional costs
in maintaining a site presence that might not be recoverable; and an
employer will suffer lost revenue from the delayed completion of the
asset.

Where a project is delayed, one or other of the parties will have to

shoulder the burden of that late completion in financial terms.
Depending on the wording of the contract and the jurisdiction, the
employer may be entitled to claim liquidated or general damages for
delayed completion. The contractor may be entitled to an extension of
time to excuse the late performance, and possibly also to its costs
associated with that delay.
Not many anticipated the full effects and impact that the Covid-19
pandemic would have on live projects and it remains to be seen how
the industry will react to, and deal with, so many late projects.

Having the appropriate project controls and procedures in place to

identify the prospect of delay and then manage its effects is essential.
The NEC suite of contracts, for example, places the Accepted
Programme at its very core and the various associated provisions
within those contracts which deal with early warning and risk
management have been shown to have a positive effect in identifying
and managing the causes and effects of delay.
That said, not many anticipated the full effects and impact that the
Covid-19 pandemic would have on live projects and it remains to be
seen how the industry will react to, and deal with, so many late
projects. Even as things begin to return to normal, projects may
continue to be delayed due to the impact of the early shutdown of
projects; labour, plant and material supply issues; and the additional
burdens of 'new normal' methods of working.

The legal obligation to complete

Before considering how the parties to a construction contract might

deal with delay or the prospect of delay, it is worth addressing the legal
nature of the contractor's obligation to complete the project by the
agreed date.

The starting point is that late completion caused by the contractor will
amount to a breach of contract giving rise to a possible claim by the
employer for damages. If the employer has made the requirement to
complete by the agreed date a condition of the contract, late
completion would give rise to an entitlement to terminate.
Extensions of time

In both common law and civil code jurisdictions, the starting point
when determining whether a contractor is entitled to an extension of
time for completion – and relief from delay damages - is to check the
express terms of the contract.

Where the contractor can establish a contractual ground for the

extension then, subject to having given effective notice and being able
to demonstrate causation, it ought to be entitled to an extension of
time. It may also be entitled to associated loss and expense.

Whether there is a contractual entitlement to extend time for the

effects of the pandemic is something that will need to be considered
on a case by case basis. This might involve a consideration of the scope
of any contractual force majeure provision and whether the specific
impacts of the pandemic are caught by the definition. If they are, then
performance is generally excused for the duration of the
circumstances giving rise to the force majeure.

In common law jurisdictions, force majeure is a creation of contract. If

there is no contractual provision for force majeure, the contractor will
not be entitled to additional time to complete save for two specific
exceptions:

 the prevention principle – which prohibits a party from insisting

on compliance with a contractual obligation if that party has
itself prevented compliance with it. For example, if there is no
contractual basis for an extension of time but the contractor is
prevented from completing by the required date by the employer,
time might then be set 'at large' so that the contractor is then
required to complete within a reasonable period of time and the
employer's entitlement to liquidated damages is lost; and
 frustration – which may allow a party to be discharged from its
obligations where performance has become impossible due to
unforeseen circumstances. However, it is of narrow application
 and is difficult to establish: see our Out-Law guide to frustration
of English contracts and Covid-19.

In civil code jurisdictions, applicable codes may contain provisions

which justify non-compliance with the contractual completion
obligations or provide relief from liquidated damages in certain
prescribed circumstances, regardless of the existence of a contractual
force majeure provision. For example, the UAE Civil Code expressly
provides for relief in the event of force majeure, extraneous events and
unforeseeable circumstances. It is always worth checking if the
applicable law alters or supplements the contractual position.
For contractors: is the delay excusable?

Once it is satisfied that the delay is 'excusable' and there is a

contractual entitlement to an extension of time, the contractor should:

 check and comply with contractual requirements for notices,

particularly where these are expressed as a condition precedent;
 consider whether the delay is critical or non-critical to completion
– in other words, whether it will just cause activity delay and
disruption, or whether it is expected to delay overall completion
or some other milestone date in respect of which relief from
liability to pay delay damages is required;
 check whether there is sufficient 'float' in the contract
programme to allow the delay to be absorbed without a critical
delay to completion. This is likely to require a prospective
assessment of the construction programme, and underlines the
need to ensure that programmes are regularly updated – for
example, the obligation to regularly update the Accepted
Programme in an NEC contract ought to assist with determining
whether programme float can absorb an otherwise critical delay;
 establish whether there is a causal connection between the delay
event and the critical delay to completion. This is likely to depend
on the availability and quality of the contractor's records, witness
evidence and expert critical path analysis. If a causal connection
cannot be established, the claim is likely to be considered a global
or total cost claim and therefore more open to challenge;
 identity and use a suitable and defensible method of delay
analysis. The analysis should be grounded in the facts – hence
the need for quality records – and should not be overly
theoretical. It should also reflect how the contract deals with
delay and the need to re-programme and mirror what actually
happened, even if the contract requires a prospective assessment
to be provided in support of a claim to extend time;
 consider the guidance in the second edition of the Society of
Construction Law (SCL) Delay and Disruption Protocol;
 have you mitigated the delays? Common law jurisdictions
generally recognise a principle to mitigate loss or damage.
However, subject to any contractual provisions to the contrary,
whilst there may be a duty to mitigate time-related costs there is
not necessarily a duty to mitigate the delays giving rise to them;
and
 consider the jurisdiction in which you are operating to see if the
applicable law provides additional relief from performance. This
may also influence the treatment of issues such as concurrency
and the duty to mitigate, which may be of a higher standard due
to the requirement for good faith.
For employers: non-excusable contractor delay

If the contractor is in culpable delay, the employer should consider:

 whether any contractual requirements have been complied with,

and whether any contractor claims for an extension of time which
may reduce your entitlement to liquidated damages have been
dealt with adequately;
 whether your entitlement to liquidated damages is enforceable. If
the liquidated damages are "extravagant and unconscionable" in
comparison to the greatest loss that could conceivably be shown
to result from the contractor's breach, then the provision may be
open to challenge. The jurisdiction in which you are operating
may be relevant to this question, because common law and civil
code systems approach this issue differently;
 whether the liquidated damages expressed in the contract are
intended to be an exhaustive remedy for the contractor's delay so
that, regardless of your actual losses, recovery will be capped by
the amount of the liquidated damages;
 careful consideration should be given to the availability of
liquidated damages in circumstances where the employer is
considering terminating the contract. If the contractor has not
been given the opportunity to complete delayed works because
the contract has been terminated, a liquidated damages provision
might fail in those circumstances;
 is there concurrency? In England and Wales, a contractor would
be entitled to a full extension of time in such circumstances, but
not time-related costs. In contrast, Scotland and Hong Kong have
adopted an 'apportionment' approach, where a tribunal will
apportion the delay - and its financial consequences - between
the contractor and the employer. Again, the position may be
different in civil code jurisdictions where the application of the
requirement for good faith may mean that liquidated damages
are not available for concurrent delay; and
 does the contract displace the conventional position so that the
contractor recovers loss and expense, as well as recovering an
extension to the completion date, during the period of
concurrency?
If the contractor is in excusable delay, consider whether an instruction
to accelerate should be given. A careful assessment will need to be
made of the additional costs that this will generate compared to the
costs of completing late.