Delay On Construction Projects
Delay and disruption, like payment and defects, are core issues on construction projects and hence frequent subjects of disputes.
Under a construction contract a contractor agrees to complete its works by a given date, allowing the client to plan for occupancy of the property thereafter, and the contractor to plan to move resource elsewhere from that date. If, however, the works are not completed by that date, inevitably either or both parties will incur a loss, e.g. the client will not be able to let the property at that date. Therefore, the parties need to agree in the contract how to deal with that situation should it happen. That means how to deal with adjusting the completion date and how to compensate the innocent party.
In terms of the completion date, it will be adjusted if the innocent party is the contractor (ie an extension of time granted), but not so if it is the client. In the former case it will be moved forward to the extent of the delay caused by the client. In the latter case the date will remain the same.
In terms of the compensation, if the contractor is at fault, it will be penalised in damages. Those will be liquidated damages (LADs) if they have been fixed by the parties and recorded in the contract. If they have not been, they will be unliquidated and will need to be proved. If the contractor is the innocent party though, it will make a claim for loss and expense, and the client will assess it in accordance with the contract.
Sometimes delay and/or disruption occurs on a project but it does not actually affect the completion date. That is because it is not on the critical path, i.e. not part of the sequence of work activities that alone cause a project to complete on time or not. Therefore, the completion date will not be moved in that situation. Often a critical path analysis must be produced to demonstrate delay to completion, because the project is complex, with a great number of works activities, and the real causes of the delay need to be pinned down.
A contractor is usually required under a construction contract to notify the client as soon as it thinks delay is likely and supply details and evidence, so that there is early warning.
Delay can be analysed prospectively or retrospectively, i.e. predicted or assessed after the event. The latter will inevitably be more accurate.
Ridgemont regularly advise on delay provisions in contracts and on delay disputes.
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KEY CONTACT: Tim Seal
Head of Construction