When the time comes to settle the final account contractors and subcontractors are often faced with counterclaims for delay damages. Before assuming that you must accept the deduction you should consider whether the delay claim is fundamentally flawed – they often are.
Sometimes programmes and completion dates are estimates and not hard contractual terms. You should be sure to check whether there is an express term in the contract or other written or verbal agreement between the parties setting a precise date for completion?
if not you are entitled to reasonable time to complete the job
If so, you may be entitled to an extension of time
Can I identify an event causing delay?
Whether or not there is a mechanism for extensions of time you still need to seek and evidence extensions of time as soon as possible. If the delay is the other party’s fault it will be easier to prove and agree at the time the delay occurs. For example if there are significant variations and additional works then agree an extension of time. Keep good records in support of your claim – you don’t want to try to justify it weeks or months later. Delay analysis is complex enough even when you have good records.
What kind of delay: Critical delay, non-critical delay or Concurrent delay?
Not all delays are critical so the fact that you have experienced a delay, e.g. late supply of materials, does not necessarily mean it will affect the completion date. Critical delays do affect the completion date. However, not all critical delays make you liable for delay. Employers and main contractors often seek to claim for delay where they themselves have caused the delay – they have prevented you from meeting the completion date. The prevention principle holds that you cannot be liable for delay caused by the other party.
Concurrent delay can arise whereby both the employer and contractor are in delay. In that event the usual conclusion is that the contractor is entitled to an extension of time but not damages.
What kind of delay analysis is most appropriate?
Where records are not good then one will probably have to use the theoretical approach, which uses the updated programme immediately prior to the delaying event and then forecasts the delay. If records are better then looking at the actual causes and actual effect of the delays will produce a better answer retrospectively. Contractors may wish to apply immediately on a theoretical prospective basis. If that produces an overestimate of the delay then they suffer no loss but if the delay is underestimated then they may have the potential to apply for another extension of time.
Has the employer served a valid notice to pay less?
If the employer/main contractor seeks to withhold payment against delay damages then they must serve a valid notice to pay less against your application and they must do it within the specified time. See our blog on notices to pay less.
Check to see if there is an agreed completion date rather than an estimated date
Keep good records and agree extensions of time as close as possible to the delaying event
Consider the potential benefits of applying for extensions of time prospectively on a theoretical basis
Do not accept liability for delay where you have been prevented from completing on time or where the employer is in concurrent delay
Remember that delay analysis is legally and factually complex and there may be more than one way to analyse a delay dispute
Remember the employer must serve a valid notice to pay less within the specified period if they wish to withhold money for delay
6 April 2016
Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.