Out-Law News 2 min. read
03 Oct 2017, 12:11 pm
The decision "reinforces the general principle under English law that contracting parties are free to allocate risk as they see fit", according to construction disputes expert Simon Plunkett of Pinsent Masons, the law firm behind Out-Law.com, who acted for the successful employer in the case.
The general position in England and Wales is that the contractor is entitled to an extension of time where two causes of delay to completion operate concurrently, one of which is the contractor's risk and one of which is the employer's risk. The ruling confirms that the parties may expressly agree the opposite.
Contractor North Midland Building Ltd and employer Cyden Homes Ltd had agreed to amend the extension of time mechanism at clause 2.25 of the JCT Design and Build 2005 edition standard form contract so that "any delay caused by a relevant event which is concurrent with another delay for which the contractor is responsible [was] not to be taken into account" when assessing the contractor's entitlement to an extension of time.
The contractor argued that this provision, which it acknowledged that the parties had agreed, was not permitted in light of the 'prevention principle'; meaning that the parties had agreed to something which the law did not permit them to agree because the effect was to deprive the contractor of an extension of time for concurrent delays and allow the employer to benefit from its own act of prevention. The contractor said that this mean time was "at large", so that the contractor's obligation was to complete the project within a reasonable time and the employer could not claim liquidated damages if it failed to do so.
In his judgment, Mr Justice Fraser ruled that the meaning of the disputed provision was "crystal clear".
"The parties agreed that ... if the contractor were responsible for a delaying event which caused delay at the same time as or during that caused by a relevant event [for which the employer is responsible], then the delay caused by the relevant event 'shall not be taken into account' when assessing the extension of time," he said.
The court held that there is no "rule of law" in the field of construction contracts which prevents the parties from agreeing that concurrent delay be dealt with in a particular way. The 'prevention principle' claimed by the contractor simply did not arise in this case, because it was subject to the express terms of the contract which allocated the risk in a different way. In addition, there was no 'prevention' where there was a concurrent delay, because the contractor would have completed late in any event due to its own default.
"Parties procuring construction works often try to introduce provisions into contracts allocating the risk of concurrent delay to the party carrying out the works," said construction disputes expert Lucy O’Dwyer of Pinsent Masons.
Plunkett said: “this decision demonstrates that courts are prepared to uphold these arrangements. However, contracting parties will need to give careful thought to the drafting of these provisions, so as to avoid disputes as to their precise meaning and effect".