Navigating the Maze: Construction Delays and Extensions of Time

In the complex world of construction, delays are an unfortunate but common occurrence. Whether you’re a contractor, client, or architect, understanding the implications of delays and the importance of Extensions of Time (EOT) is crucial. This journal entry from our bespoke “Construction & Contracts” series will explore the key aspects of construction delays, contractual obligations, and the significance of EOT clauses in managing these challenges.

The Importance of Completion Dates

The completion date in a construction contract is more than just a target – it’s a binding obligation and it should be taken very seriously. Clearly stating a Completion Date in a contract generates certain obligations for the contracting parties, namely Employer and Contractor.

1. Contractor’s Obligation:

a. Complete the work within the stipulated time.

b. Adhere to the agreed-upon schedule.

c. Manage resources effectively to meet the deadline.

2. Employer’s Obligation:

a. Allow the contractor the time he is entitled to complete the work.

b. Provide necessary access and resources as per the contract.

c. Avoid unnecessary interference with the contractor’s progress.

When Things Go Wrong: Breaches and Preventions

Contractor’s Breach

If a contractor fails to complete the work on time, it’s considered a breach of contract. This can lead to:

1. Financial penalties.

2. Damage to reputation.

3. Potential legal action.

Monitoring the progress of the works is a crucial aspect of the Contract Administrator (typically the Architect) scope of work.

Employer’s Act of Prevention

Sometimes, the employer may inadvertently (or intentionally) prevent the contractor from completing on time. Acts and events falling under this eventuality are considered “Employer-caused delays”. Examples include:

1. Requesting significant changes to the scope of work.

2. Failing to provide necessary access or information.

3. Delaying crucial decisions that impact the project timeline.

In standard form of contracts, there are certain obligations on the Contractor to timely notify the Employer in case he believes that a certain act or event, outside the Contractor’s control, will cause a delay.

The Critical Role of EOT Clauses

Extensions of Time (EOT) clauses are a vital component of construction contracts. Here’s why:

Without an EOT Clause:

1. Time is set “at large” if the employer prevents completion.

Requests for changes for example, can give the Contractor ground to claim that he cannot finish on time. In the absence of a clause administering this occurrence, the stipulated completion date will cease to be an obligation for the Contractor, and he will only need to complete within a reasonable period of time (i.e. time is set “at large”)

2. The contractor is only liable for general damages.

In case of further delays, the Contractor is obviously still liable for general damages, but there won’t be any clause regulating the amount or calculation of such damages.

3. The employer must prove actual losses resulting from the delay.

Another important observation is that the Employer will bear the burden of proving their actual losses. This could be a complicated task and the Employer may need to hire a consultant or a lawyer to assist, incurring in further costs.

With an EOT Clause:

1. The completion date can be recalculated if the employer causes delays.

Time will give more certainty to both parties and prevent disputes in case the delay is cause by the Employer.

2. The contractor may be liable for liquidated damages.

The Contract document will specify upfront the damages to be payable in case of delay.

3. The employer doesn’t need to prove specific losses.

After the Completion Date has passed, entitlement to damages arises without the need to prove any losses on the part of the Employer.

Understanding Liquidated Damages

Liquidated damages are a pre-agreed sum that the contractor must pay for each day the project is delayed beyond the completion date. They are:

1. Calculated based on the estimated losses the employer might incur due to delays.

2. Typically specified as a daily rate in the contract.

3. Easier to enforce than general damages, as the amount is pre-determined and there is no need to prove the actual loss.

However, it must be noted that here are critical aspects to LD: firstly, the stipulated sum must be a genuine estimate of the potential loss incurred, not a penalty imposed on the Contractor.

Secondly, the amount should be a daily rate. Liquidated Damages expressed as a percentage of the Contract Sum may void the validity of the clause.

Finally, it is important to understand that, in order to enjoy the entitlement to Liquidated Damages, the provisions of the contract in relation to Extension of Time clause must be operated correctly. In any case where the time is set at large, automatically the Employer will loose his right to collect liquidated damages (which are related to a completion date).

The Architect’s Role as Contract Administrator

In many construction projects, the architect serves as an impartial contract administrator. Their responsibilities include:

1. Assessing claims for extensions of time.

2. Determining the validity of delay events.

3. Recommending appropriate extensions when justified.

4. Balancing the interests of both the contractor and the employer.

Employers are therefore required not to interfere with the architect neutral judgement when administering the contract, but at the same time they are protected by a professional handling the contract and advising on the correct procedures.

Key Takeaways for Managing Delays and EOTs

To effectively navigate the challenges of construction delays:

1. Ensure your contract includes a well-drafted EOT clause.

2. Keep detailed records of all events that could impact the project timeline.

3. Communicate promptly and clearly about potential delays or preventions.

4. Seek professional advice when dealing with complex delay scenarios.

Understanding the intricacies of construction delays and Extensions of Time is crucial for all parties involved in a construction project. By familiarizing yourself with these concepts, you’ll be better equipped to handle the challenges that inevitably arise during the construction process.

If you need personalized advice on handling delays in your project, don’t hesitate to contact our experienced team for a consultation.