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Fundamentals of Construction
Law 2023: Money
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 Last Sessions

A. Contract formation (LP2/3)

B. Implied terms (LP4)
C. Scope and change (LP5)
D. Time (LP6)
 Practice Assessment

• Must support statements of law with authority

• Link answers clearly to issues
• Accuracy, brevity, clarity (= readability)

• Use the most relevant case (quality not quantity)

• Depth is from exploring nuances in facts/cases

• Clear crisp conclusion

 Assessment 2023
• Main contract dispute: Grun & Energy
– Express/implied terms eg quality standards, ground conditions
– Delays, risk & remedies including liquidated damages

• Claims by subcontractors Cumbrian &

Westmorland
– Contract formation and terms
– Termination & general damages

• Explain and justify legal principles (explain, analyse,

reference)

• Strengths and weaknesses & confidence (depth of

understanding, articulation)
 Assessment 2023
• Focus on underlying rights & liabilities of parties
• Not limited by prior debates or emails
• Don’t make up facts or assume what it not stated
• Structure
– very briefly summarise factual background
– list the issues you consider significant
– critically analyse those issues
– crisp actionable conclusion based on your analysis
 Assessment 2023

• Divide your word count into structure blocks

• Similar weight of critical analysis to each issue
• Use primary sources (cases, texts) NOT LPs
• Use brief quotes when precisely relevant to
support your analysis
• Stick to word count - excludes only contents/
references (words beyond will not be marked)
 Quick recap
• Contracts require certainty (LP2)
• Contract content
– parties
– workscope and cost changes (LP5)
– time and its remedies (LP6)
– quality (eg LP4)
– remedies including Construction Acts (LP4), money
(LP7), force majeure and termination (LP8)
 This Session

A. Damages: general, liquidated/delay, loss/

expense
B. Defeating liquidated damages: penalties and
prevention principle
C. Role of the contract administrator
 General Damages
“Time means money… Obligation to complete
early completion of works Express: date as extended
on site implies a quicker Implied: within reasonable
return of capital and time
revenue… In view of this, Remedies
many developers tend to loss/expense
secure their risk-free acceleration
positions by transferring the delay damages
responsibility to contractors termination
for ensuring project
completion on time”
Chan and Au (2010)
 General Damages
Purpose
Put innocent party “in the same position so far as money
can do so as if his rights had been observed”.
However, “this purpose if relentlessly pursued would
provide… indemnity for all loss… resulting from a particular
breach, however improbable.”
Can recover “only such loss as was at the time of the
contract reasonably foreseeable as liable to result from the
breach.”
Victoria Laundry v Newman Industries Ltd (1949)
 General Damages
Measure
“[1] such as may fairly and reasonably be considered either
arising naturally, i.e., according to the usual course of
things, from such breach of contract itself, or
[2] such as may reasonably be supposed to have been in
the contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it.”
Hadley v Baxendale (1854)
General Damages
 General Damages
• Calculation of general damages is complex
• Blurred boundary between “usual” damages and
damages recoverable only due to “special
knowledge” of contract breaker
• Employer to prove
– Breach ie delay not due to employer risks
– Loss based on evidence (duty to mitigate)
– Causation ie breach directly resulted in loss
 General Damages
• Two ‘limbs’ of H v B also referred to as
– direct v indirect
– direct v consequential
• These terms have real meaning in E&W law
• Loss of profit can be direct or indirect
– often used in limitation or exclusion clauses
– often without specific definition(!)
 Delay/Liquidated Damages
• Avoids general damages
• Adopts liquidated damages = quantified in
contract
• Use for any breach
– most common with delays
– failure to meet target areas
– low (but acceptable) performance
• Can be subject to overall cap
– right to terminate for delays beyond cap
 Delay/Liquidated Damages

“An agreed damage What can you recover?

clause is for the benefit
of both; the party Delayed 40 days. Contract says
establishing breach by LDs are:
the other need prove no A. £nil per day
damage in fact, the B. £n/a
other must pay that, no C. £1 per day
less but no more” D. £1,000,000 per day
Suisse Maritime v Rotterdamsche (1966)
 Delay/Liquidated Damages

Delay damages and termination

If the project is already delayed, beyond the date of
completion, and then the employer terminates the
contract, can the employer recover liquidated/delay
damages until the point of termination and general
damages after?
Triple Point Technology Inc v PTT (2021)
 Delay/Liquidated Damages

Delay damages and waiver

If the project is delayed, can the employer
irrevocably agree to waive its rights to liquidated
damages [compensation for contractor delay], if
the contractor agrees to waive its rights to loss
and expense [compensation for employer
delay]?
Mansion Place Ltd v Fox Industrial Services Ltd (2021)
 Loss/Expense

Delay/prolongation: arise from the “extended

duration of the works during which costs are
incurred as a result of a delay.” (SCL, 2017)
JCT = loss & expense
NEC= claim for extra costs

Disruption: arise from “disturbance,

hindrance or interruption of a contractor’s
normal work progress” (SCL, 2017)
 Loss/Expense
Contractual remedy Breach of contract claim
Express operable Express or implied
contractual mechanism obligation on employer or
contract administrator
Occurrence of relevant Breach of that obligation
employer or neutral event
Causation of loss & Causation of damages
expense
Loss & expense not Damages reasonably
otherwise recoverable foreseeable and naturally
under other provisions of arising as a consequence of
the contract the breach
 Penalties
Defeating liquidated damages
1. Establish amount is a penalty
2. Establish extension mechanism does not apply
3. Establish relevant event ie more time (LP6)
– can contractor breach defeat right to an extension
when concurrent with other trigger events?
 Penalties
Do liquidated damages have to be:
1. Fair and reasonable?
2. In contemplation of parties?
3. Genuine pre-estimate?
4. Caused by delay?
5. Greater than sum which would otherwise be due?
6. Not extravagant and unconscionable compared to
greatest loss that could conceivably follow?
7. Not out of all proportion to any legitimate interest in
enforcing the primary obligation?
Penalties
Recent case #1
Stages B & C possessed June
2018. PC of whole Dec 2018.
Contract allows partial possession
in advance of PC. No mechanisms
for reducing LDs to reflect early
possession. LDs £25,000pw
capped at 7% contact sum.
Is LDs clause void or
unenforceable as a penalty?
Eco World v Dobler (2021)

Creative commons licensed image

 Penalties
Recent case #1
• Provisions reasonably clear & certain
• One completion date for whole of works
• LDs payable for failure to complete the whole works by
the completion date. No reductions.
Held: Not unconscionable or extravagant as negotiated,
legitimate interest, quantification would be difficult, capped
at reasonable level.
Eco World v Dobler (2021)
 Penalties
Recent case #2
In a loan relating to a construction project, interest was
payable at 3% in four instalments. In default, the rate
reached 12% compounded monthly.
A loan of £800,000 from 2018 became
• £23m (June 2021)
• £30m (Aug 2021)
 Penalties
Recent case #2
Held: “a 400% increase in the primary interest rate on
default, when combined with the provision for monthly
capitalisation of interest, is so obviously extravagant,
exorbitant and oppressive as to constitute a penalty”
Ahuja v Victorygame (2021)
 Prevention Principle
Defeating liquidated damages
“the prevention principle [says] that the employer cannot
hold the contractor to a specified completion date, if the
employer has by act or omission prevented the contractor
from completing by that date. Instead, time becomes at
large and the obligation to complete by the specified date is
replaced by an implied obligation to complete within a
reasonable time.”
Multiplex v Honeywell (No. 2) (2007)
 Prevention Principle
• Does prevention only apply to breach?
• Did the EoT clause cover the specific acts?
• Was the EoT clause still operable?
• Was the contractor’s mandatory notice a
condition precedent to granting an EoT?

See also concurrent delay (LP6)

 Prevention Principle
“...the fact that the parties Implied term
had contemplated at an s14(1) Supply of Goods
earlier stage that and Services Act 1982
completion would be What is a reasonable time?
effected by a certain date All circumstances at time of
would not necessarily performance relevant
mean that a failure to
complete by that time
would involve a breach of
the obligation to complete
within a reasonable time”
Urban I (Blonk Street) Ltd v Ayres & Anor
(2013)
 Role of Contract Administrator
• Approving programme
• Granting extensions
• Confirming (certifying) completion
• Deducting delay damages
• Agreeing compensation for delays
• Instructing the contractor to accelerate
• Notifying poor rate of progress
 Role of Contract Administrator

...all such matters the Impartial

[contract administrator] will
act in a fair and unbiased
manner and... reach such
decisions fairly, holding the
balance between [the] client
and the contractor
Not right but careful
Use reasonable skill and
care
Breach by CA is
attributed to employer

Sutcliffe v Thackrah (1974)

 Role of Contract Administrator

“I recognise that the Not right but careful

assessment of a fair and Logical
reasonable extension Applying contract
involves an exercise of accurately
judgement, but that Link between event &
judgement must be fairly delay
and rationally based” Retrospective &
John Barker Construction v London Portman
Hotel (1996) prospective
 Role of Contract Administrator
Contractor to take risk for all concurrent delays
• Purely a matter of contractual construction
• Contract, which had been significantly amended
and negotiated, specifically permitted the
outcome
• Prevention is not an over-arching doctrine – just
an implied term in absence of express term
• The ‘death knell’ to intricate arguments?
North Midland Building Ltd v Cyden Homes (2018)
Role of Contract Administrator

Employer variation (will

take 1 week) during
existing delay

Adds 1 week to
today’s date?

Adds 1 week to
Contractual Completion
date?

Sets time at large?

 Role of Contract Administrator
• If an employer orders a variation during a period
of culpable delay, CA extends existing
contractual period
– does not start time running again
• Net calculation ie total time for works
• Contractor has to do job in that time and has
that time to do job
Balfour Beatty v Chestermount (1993)
 Role of Contract Administrator

• Must apply contract

• Precise wording critical
• Fact-based ie evidence
– current programme
– impact of event
– projected delay to completion
 Reference List
Bailey, J. (2014). The Society of Construction Law Delay and Disruption Protocol: A Retrospective Analysis.
Society of Construction Law, Paper 189.
SCL (2017). Delay and Disruption Protocol (2 nd edition). Society of Construction Law.

Ahuja Investments Ltd v Victorygame Ltd [2021] EWHC 2382

Balfour Beatty v Chestermount (1993) 62 BLR 1-34
Eco World - Ballymore Embassy Gardens Company Ltd v Dobler UK Ltd [2021] EWHC 2207
Hadley & Anor v Baxendale & Ors [1854] EWHC Exch J70
John Barker Construction Ltd v London Portman Hotel Ltd (1996) 12 Const. L.J. 277
Mansion Place Ltd v Fox Industrial Services Ltd [2021] EWHC 2972
Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No. 2) [2007] EWHC 447
North Midland Building Ltd v Cyden Homes [2017] EWHC 2414 (TCC)
Photo Production Ltd v Securicor [1980] AC 827
Suisse Maritime Société d’Armements Maritime v Rotterdamsche Kolen Centrale [1966] 1 Lloyd's Rep 529
Sutcliffe v Thackrah [1974] AC 727 [1974] 2 WLR 295
Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29
Urban I (Blonk Street) Ltd v Ayres & Anor [2013] EWCA Civ 816
Victoria Laundry v Newman Industries Ltd [1949] 2 KB 528

Supply of Goods and Services Act 1982, c.29.

 Next Sessions

• 8 November: termination (LP8)

• 15 November: drawings threads together (revision)

• 22 November: drop in – send your queries!
• 29 November: letters of intent (my pet subject and not
related to the assessment)
 Next Steps
• Read around LP7
• Review feedback on your practice assessment
– Check lessons on academic writing: answer the
question
– Check referencing skills
– Follow logical structure