Contractor found responsible for all risks of concurrent delay

Where concurrent delays occur (one an employer delay and one a contractor delay), the common law position is that the contractor will be entitled to an extension of time for the delay but not for any additional costs. Some employers sought to change this position by amending the JCT standard form contracts so that contractors did not get additional time or money, but there remained questions about whether such amendments would work. The Court of Appeal has confirmed that a properly drafted concurrent delay exclusion is enforceable.

The claim

Cyden Homes Limited entered into an amended JCT building contract with North Midland Limited. The works were delayed and North Midland applied for extensions of time for the delay. Cyden sought to rely on the “concurrent delay exclusion”, which provided: “...any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account…”. Reliance on such wording meant that North Midland would not be entitled to an extension of time and liquidated damages would be payable. The Technology and Construction Court (TCC) found that this wording should be enforced in Cyden’s favour but North Midland appealed. The Court of Appeal agreed with the TCC that it was enforceable on the grounds that:

(1) the concurrent delay exclusion did not breach the prevention principle:

The Court held that the exclusion wording was “unambiguous” in that it “plainly seeks to allocate the risk of concurrent delay to the [contractor]”. To avoid this, North Midland must show that there is a reason in law why the clause cannot be relied upon by Cyden. On that basis, North Midland raised the prevention principle, which effectively means that a party (the employer) cannot enforce an obligation against a party (the contractor) who has been prevented from performing that obligation by the party seeking to enforce it (the employer). In short, as Cyden had been responsible for part of the delay, North Midland argued that this should prevent Cyden from relying on the clause for its benefit.

The Court dismissed North Midland’s claim, citing that there was no authority that the prevention principle is an overriding rule of public/legal policy and there is no reason why the parties cannot contract out of the effects of the principle, as was the case here.

(2) there was no implied term that liquidated damages were not payable as a claim for damages can still arise even where the contractor is not (entirely) responsible for the delay:

The Court held that the extension of time provisions are “inextricably” linked to the provisions relating to liquidated damages and that the proposed implied term (i.e. that liquidated damages were not payable) would be contrary to the express provisions of the contract, which clearly provided for no extension of time for concurrent delay and for the payment of liquidated damages.

The Court of Appeal upheld the validity of the concurrent delay exclusion and dismissed the argument that liquidated damages were not payable.

Conclusion

The case demonstrates the Court’s willingness to uphold clearly drafted and agreed clauses and its unwillingness to save a party from a bad bargain. Time and money is at the epicentre of most construction contracts and this judgment should be borne in mind by both employers and contractors.