Extensions of Time D39PZ: Procurement and Contracts 2 Time and - - PowerPoint PPT Presentation

D39PZ: Procurement and Contracts 1

...last week (or things you should now understand)

• the purpose of a Gross Valuation, its role in an interim

valuation and how it is documented in an Interim Certificate

• the purpose of Interim Certificates and the information they

document

• the purpose and management of the Rectification Period
• the purpose of the Final Certificate, and the events leading

up to the CA’s ability to issue it

• the situations in which the Contract Sum may need to be

changed during construction

2

Unit 9: Contract Administration: Extensions of Time

D39PZ: Procurement and Contracts

D39PZ: Procurement and Contracts 3

Time and delays

Extension of Time: Principles Extension of Time: Practice Liquidated Damages Summary

D39PZ: Procurement and Contracts 4

Definitions of time in SBC/Q

SBC/Q defines how time is to be managed using:

• The Contract Particulars, that:
• define the agreed Date of Possession [of the site]
• define the agreed Date for Completion [of the Works]
• define agreed dates for sectional possession and

completion, if required.

• Clause 2: “Carrying out the Works”

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Definitions of time in SBC/Q

• The rights and obligations of the parties associated with

the management of time are defined by cl. 2.

• cl. 2.4 “Date of Possession”
• Obliges the Employer to give the site to the Contractor for

the duration of the Works.

• cl. 2.5 “Deferment of Possession”
• If agreed, the Employer can delay the Contractor’s

possession of the site for up to six weeks after the Date of Possession.

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Definitions of time in SBC/Q

• cl. 2.9 “Construction information and the Contractor’s

master programme”

• Obliges the CA to provide the Contractor with all the

information required to construct the Works.

• Obliges the Contractor to provide the CA with a

programme of works, to be updated as a ‘live’ document.

• cl. 2.26 “Adjustment to the Completion Date - Related

definitions and interpretation”

• Defines the circumstances that may create a need to

adjust the Completion Date agreed in the Contract Particulars

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Managing time using SBC/Q

• cl. 2.27 “Notice by Contractor of delay to progress”
• Obliges the Contractor to notify the CA when the progress
• f the Works are likely to be delayed, and to inform the CA

regarding the cause of the delay.

• cl. 2.28 “Fixing Completion Date”
• Defines how, and under what circumstances, the CA can

set a new Completion Date, which (if set) supersedes the Date for Completion agreed in the Contract Particulars.

• cl. 2.29 “Relevant Events”
• Defines the events that can be used to justify superseding

the Date for Completion (or a Completion Date, if issued).

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Managing time using SBC/Q

• cl. 2.30 “Practical completion and certificates”
• Defines the situations in which the CA can decide that the

Works are complete and issue a certificate to signify this

• cl. 2.31 “Non-completion certificates”
• Defines what the CA must do (issue a certificate) if the

Contractor does not complete the Works by the agreed Date for Completion (or Completion Date).

• cl. 2.32 “Payment or allowance of Liquidated Damages”
• Defines the procedure the CA must follow so that the

Employer can recover damages from the Contractor for late completion

D39PZ: Procurement and Contracts 9

Time generally

• When a contract is formed requiring the Contractor to do

something that takes time to complete:

• Time is “at large” if the Employer doesn’t care how

long the Contractor will take

• The Contract does not define the time available for the Works
• The Works must be completed in a “reasonable” time
• Time is “of the essence” if the Employer must have

the Works completed by a specified date

• The Contract will specify a date by which the Work must be

completed

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Delays - in essence

• In contract law, the “prevention principle” states:
• A party cannot benefit from its own breach of contract to

the detriment of the injured party.

• e.g. The Employer cannot oblige the Contractor to keep a

Completion Date if the Employer’s actions (or inactions) have caused the delay.

• In this situation, time becomes “at large”
• The Contractor’s express obligation to complete the

Works by the Completion Date is replaced with an implied

• bligation to complete them within a “reasonable” time.

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Delays - in essence

• SBC/Q considers three types of delay:
• Delays caused by the Contractor
• The Contractor bears its own costs and the Employer’s.
• Delays caused by the Employer
• The Employer bears its own costs and the Contractor’s.
• Delays caused events that neither the Employer or

Contractor can control

• These are known as “shared risk events” or “neutral

events”

• Neither party is liable - so both bear their own costs

D39PZ: Procurement and Contracts 12

It is critical that you understand...

• Date for Completion

The date for completion of the Works agreed when executing the contract and, accordingly, entered in to the Contract Particulars

• Completion Date

The date for completion of the Works agreed during the progress of those Works in response to practical situations (i.e. Relevant Events). If present, the Completion Date supersedes the Date for Completion

• Practical Completion

The date when the CA actually considers the Works to be complete and issues the Practical Completion Certificate

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Time and delays

Extension of Time: Principles

Extension of Time: Practice Liquidated Damages

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Extension of time: principles

• Most construction contracts lie somewhere between time

“at large” and time “of the essence.”

• They define a time period for completion of the Works by

establishing:

• the Date of Possession (of the site by the Contractor)
• the Date for Completion (of the Works by the Contractor)
• The time between the Date of Possession and the Date

for Completion is the “contract period”

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Extension of time: principles

• If a delay occurs, the SBC/Q provides for ...
• Extension of Time;
• Loss or Expense
• Liquidated Damages; and
• ... which determine where the loss caused by the delay

will lie.

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Extension of time: principles

Situation 1:

• If the Contractor (or someone working for it) delays the

Works:

• The Contractor is in breach
• The contract period will not be extended
• Contractor bears its own additional costs
• Contractor may have to pay Liquidated Damages to the

Employer to compensate for its breach of Contract upon late completion

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Extension of time: principles

Situation 2:

• If the Employer (or someone working for it) delays the

Works:

• The Employer is in breach
• The contract period will be extended
• Employer bears its own additional costs
• Employer pays damages to reimburses the Contractor for

any Loss and Expense caused by the delay

D39PZ: Procurement and Contracts 18

Extension of time: principles

Situation 3:

• If the Works are delayed by an event that neither party

can control:

• Neither party is in breach
• The contract period will be extended
• Contractor pays its own additional costs
• Employer pays its own additional costs
• No damages are paid by either party

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The “master programme”

• The Contractor must proceed with the Works “regularly

and diligently” (cl. 2.4). In addition:

• cl. 2.9.1.2 obliges the Contractor to issue a “master

programme”

• as soon as possible after execution of the contract; and
• as soon as possible after adjusting the completion date
• The master programme is not part of the Contract

Documents

• It is a statement of the Contractor's intent only
• The Contractor can use it to support a claim for Loss and

Expense

D39PZ: Procurement and Contracts 20

Time and delays Extension of Time: Principles

Extension of Time: Practice

Liquidated Damages Summary

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Adjustment of the Completion Date

• “Adjustment of the Completion Date” (JCT2011)

= “Extension of Time”

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Adjustment of the Completion Date

• JCT98 only allowed for an Extension of Time to lengthen

the contract period

• JCT05 and JCT 2011 accommodate shortening and

lengthening of the contract period and therefore allows for “Adjustment of the Completion Date”

• Adjustment of the Completion Date is governed by
• cls. 2.26 to 2.29
• The contract period cannot be shortened below that first

agreed (cl. 2.28.6.3).

D39PZ: Procurement and Contracts 23

Adjustment of the Completion Date

• Three critical dates must be understood:
• Date for Completion
• The date inserted in the Contract Particulars as the

initially-agreed date by which the Works must be completed by the Contractor.

• “the date stated as such date in the Contract Particulars

(against reference to clause 1.1) in relation to the Works or a Section” (cl. 1.1)

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Adjustment of the Completion Date

• Three critical dates must be understood:
• Completion Date
• If required, this date is set by the CA as a new date

for Completion of the Works.

• “the Date for Completion of the Works or of a Section as stated

in the Contract Particulars or such other date as is fixed either under clause 2.28 or by a Pre-agreed Adjustment.” (cl. 1.1)

• cl. 2.28 = “Fixing Completion Date”

D39PZ: Procurement and Contracts 25

Adjustment of the Completion Date

• Three critical dates must be understood:
• [Date of] Practical Completion
• The date certified by the CA as the date on which

the Works are practically completed: when the Employer can take Possession and begin to use and insure the project.

• “When in the opinion of the Architect/Contract

Administrator practical completion of the Works or a Section is achieved and the Contractor has complied sufficiently with clauses 2.40 and 3.23.4” (cl. 2.30)

D39PZ: Procurement and Contracts 26

Completion on time

Practical completion certificate

• cl. 2.30.1

D39PZ: Procurement and Contracts 27

Late completion

• cl. 2.30.1

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Completion on time (but later than first agreed)

• cl. 2.30.1

extension of time granted

• cl. 2.28.1

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Revising the Completion Date

• cl. 2.27 obliges the Contractor to notify the CA as soon as

“it becomes reasonably apparent that the progress of the Works or any Section is being or is likely to be delayed.”

• cl. 2.28 requires the CA to grant an extension of time if a

Relevant Event has occurred.

• The CA must only grant a ‘fair and reasonable’ period of

time as the extension. This might not be what the Contractor requests.

D39PZ: Procurement and Contracts 30

Revising the Completion Date

• cl. 2.28.2 obliges the CA to notify the Contractor of its

decision following a request for an extension of time

• This must be done within 12 weeks of receipt of the

Contractor’s request.

• Or before the Completion Date if there are less than 12

weeks left before the Completion Date

• cl. 2.28.3 dictates the content of the CA’s notification

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Notification of Revision to Completion Date

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Relevant Events (cl. 2.29)

• Relevant Events are not the same as Relevant Matters.
• Relevant Events justify an extension of time.
• Relevant Events caused by one of the parties are defined

by cls. 2.29.1 to 2.29.7.

• Relevant Events caused by neither party are defined by
• cls. 2.29.8 to 2.29.14.
• cl. 2.29.7 defines a “catch-all” Relevant Event to reduce

the number required.

D39PZ: Procurement and Contracts 33

Relevant Events caused by a party

• Variations - cl. 2.29.1
• CA instructions to correct discrepancies; postpone part of the

Works; execute an undefined Provisional Sum; deal with Antiquities; instruction work for which the Contractor has refused to provide a Variation Quotation; inspection of Works in accordance -

• cl. 2.29.2.2
• Deferment of the Contractor’s possession of the site - cl. 2.29.3
• Discover of antiquities – cl. 2.29.4
• Inaccurate approximate quantities cl. 2.29.5
• Suspension of work by the Contractor (under cl. 4.14) following

non-payment - cl. 2.29.6

• Action (or inaction) by the Employer or its agents - cl. 2.29.7

D39PZ: Procurement and Contracts 34

Relevant Events caused by neither party

• Action (or inaction) of a Statutory Authority regarding their
• bligations in relation to the Works
• cl. 2.29.8
• Exceptionally adverse weather conditions - cl. 2.29.9
• Loss or damage caused by a “Specified Peril” - cl. 2.29.10
• Civil commotion or terrorism - cl. 2.29.11
• Strike or lock-out affecting the trades employed - cl. 2.29.12
• Actions of the UK Government - cl. 2.29.13
• Force majeure - cl. 2.29.14

D39PZ: Procurement and Contracts 35

Relevant Events

• Specified Perils (cl. 6.8):
• “Fire, lightning, explosion, storm, flood, escape of water from any

water tank, apparatus or pipe, earthquake, aircraft and other aerial devices or articles dropped therefrom, riot and civil commotion, but excluding Excepted Risks.”

• Excepted Risks (cl. 6.8):
• “Ionising radiations or contamination by radioactivity from any

nuclear fuel or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof (other than………………….)

• pressure waves caused by aircraft or other aerial devices travelling at

sonic or supersonic speeds.”

• Any act or terrorism that is not within the Terrorism Cover from time to

time required to be taken out and maintained under this Contract

(will justify an extension of time) (will not justify an extension of time)

D39PZ: Procurement and Contracts 36

Late completion

• cl. 2.30.1
• cl. 2.28.1
• cl. 2.31

D39PZ: Procurement and Contracts 37

Non-completion Certificate

• cl. 2.28.5 allows the CA to
• for up to 12 weeks after

Practical Completion - review all previous extensions of time granted and revise the Completion Date as required to reflect all Relevant Events

• This allows

accurate damages for any late delivery to be determined.

D39PZ: Procurement and Contracts 38

Clause 2.28.4 Clause 2.28.4 and Clause 2.28.6.3

X

D39PZ: Procurement and Contracts 39

Clause 2.28.4 and 2.28.6.4

No second fixing is possible except due to another Variation Quotation where Variation itself the subject of a Relevant Omission

X

Length of pre-agreed adjustment

D39PZ: Procurement and Contracts

Clause 2.28.5.1 Clause 2.28.5.2

D39PZ: Procurement and Contracts

Clause 2.28.5.2 and 2.28.6.3

X

D39PZ: Procurement and Contracts

Clause 2.28.5.2 and 2.28.6.4

X

Length of pre-agreed adjustment No second fixing is possible except due to another Variation Quotation where Variation itself the subject of a Relevant Omission

D39PZ: Procurement and Contracts 43

Time and delays Extension of Time: Principles Extension of Time: Practice

Liquidated Damages

Summary

D39PZ: Procurement and Contracts 44

Liquidated Damages (cls. 2.30 to 2.32)

• Paid by the Contractor to the Employer if the Works are

not completed by the Date for Completion (or Completion Date)

Aside: Read the cl. 1.1 definition of Completion Date carefully.

• If this occurs, the Contractor is “in delay.”
• Damages are paid at a rate agreed when the Contract

was executed

• Defined in the Contract Particulars
• Liquidated Damages must accurately evaluate the

Employer’s monetary loss caused by late completion.

• They must not be a penalty

D39PZ: Procurement and Contracts 45

“Liquidated and Ascertained” Damages

• Liquidated Damages were called “Liquidated and

Ascertained Damages” under JCT98

• The reasons why still apply:
• “Liquidated” = The damages are paid as a monetary sum.
• “Ascertained” =

The quantum of the damages is known beforehand. It was agreed as a rate (e.g. amount per week of delay) when executing the contract and therefore entered in the Contract Particulars

D39PZ: Procurement and Contracts 46

Liquidated Damages

• If the use of Liquidated Damages was agreed:
• The Contractor knows the extent of its liability
• The Employer cannot recover additional damages by

litigation if its actual loss is greater than the damages

• Liquidated Damages can only be used when time is of the
• essence. This requires:
• the Date of Possession and Completion Date to be

defined; and

• the Completion Date to be maintained during the Works

D39PZ: Procurement and Contracts 47

Liquidated Damages

• The Employer can only deduct Liquidated Damages if:
• the Works continue past the Completion Date; and
• the CA does not yet consider the Works to be practically

complete:

• signified by the CA’s issue of Non-Completion Certificate on

the intended Completion Date (cl. 2.32.1.1).

• the Contractor’s liability for payment of Liquidated Damages

commences with the issue of the Non-Completion Certificate (cl. 2.32.1.2)

• it has notified the Contractor that it intends to do so before

issue of the Final Certificate (cl. 2.32.1.2).

D39PZ: Procurement and Contracts 48

Time and delays Extension of Time: Principles Extension of Time: Practice Liquidated Damages

Summary

D39PZ: Procurement and Contracts 49

Putting time and certification together...

D39PZ: Procurement and Contracts 50

Putting time and certification together...

D39PZ: Procurement and Contracts 51

Putting time and certification together...

D39PZ: Procurement and Contracts 52

Remember to read the full Unit notes and Appendices, and complete your independent study