Delay costs, delay damages and the principle of prevention
Delay costs vs delay damages
Contractors often face various obstacles that delay the critical path of a construction program. Often, these obstacles and delays are the result of actions of the principal, its employees or agents.
One of the most discussed issues in construction disputes is how a contractor can claim costs and damages resulting from the delay caused by the principal and avoid the imposition of damages for non-compliance. of the construction program and practical completion.
The principal of a construction contract is obliged to allow full and unrestricted access to the site and is obliged to make available as much as necessary for the work to be carried out under the relevant construction contract. Failure to do so may constitute a material violation: Carr v JA Berriman Pty Ltd (1953).
At common law, there is no automatic right to delay damages, because damages can only be recovered if it can be proved that they are damages resulting from a breach of contract. contract. The automatic provision for late-payment damages can only occur if the contract specifically provides for it (most often liquidated).
Consequently, there must be a sufficient link between the damage actually suffered and the event which gave rise to the delay, since the damage must arise from the breach.
This is distinct from late fees, under which a contract provides for the recovery of costs incurred in the absence of default but in the event of delay.
As a general rule, construction contracts will give the right to an additional period in the event of delay, and in addition, an express right to the costs and expenses resulting from the delay.
In the absence of an express right, the injured party will have to invoke common law compensation in the form of legal action for breach of contract (ie lack of sufficient access to the site).
Where late fees are available, they will generally take the form of:
(a) Agreed (or lump sum) damages; and or
(b) In the form of reimbursement of costs incurred.
When damages apply, the need to quantify the damages via a breach of contract under common law is removed.
In cases where fixed damages result from a delay, such damages must be a true pre-estimate of the damages resulting from the delay and the initial default. The link between act / omission and loss is essential. If they are not, the provision can be canceled as a penalty.
When a construction contract does not expressly provide for the right to an additional period in the event of delay caused by the principal, the period will be “fixed”.
Time “in freedom” and the principle of prevention
Under common law, the principal of a construction contract cannot bind the contractor to a specified completion date if the principal prevented the contractor from completing on that date by act or omission.
Instead, time becomes ticked and the obligation to complete the project by the specified date is replaced with an implied obligation to complete within a reasonable time. The same principle applies between the project manager and the subcontractors.
In general, the principle of prevention has the effect of preventing damages clauses from being enforceable by the party responsible for a breach or an act / omission causing delay.
In order to avoid the application of the principle of prevention, most construction contracts and subcontracts include time-extension clauses.
There is a strong argument that time extension clauses exist for the protection of both parties to a construction or subcontracting contract and that if a contract provides for an extension of time due to preventive acts by the donor order, then the principle will not apply: Multiplex vs. Honeywell (2007) BLR 195 CCT.
In Turner vs. Coordinated Industries (1994) 11 BCL 202 (Turner), the Court considered the circumstances in which, under the contract, the contractor was entitled to an extension of time if the principal breached the contract.
The Court declared that the principle of prevention did not apply and listed three considerations to be taken into account before the principle of prevention applied:
(a) If the contract includes a provision which entitles the contractor to an EOT when the principal breaches the contract, then the time limit cannot be fixed by breach of the contract by the principal;
(b) In the absence of such a clause, the actions of the principal must cause a “real” delay in the application of the principle of prevention; and
(c) It is necessary to determine what was the overall effect of the principal’s action. A small real delay of the principal does not allow to eliminate other delays of the contractor on the basis of the principle of prevention.
Extension and compensable delays
In addition to an extension of time, a contractor may be entitled to the associated costs and expenses resulting from a delay or extension. When a contract does not provide for such an express right, the entrepreneur will have to prove his right by a common cause of action (breach of contract) or an act of prevention by the other party.
The contractor’s default right to extension under most standard forms is a cause for which the other party is responsible. This is defined as a “compensable delay”.
Therefore, an extension request is a request in which a party to a contract is entitled to additional costs resulting from a “compensable delay”.
Compensable delays affect the critical path and give entitlement to EOT, then entitling to recovery of extension costs.
Examples are a change or change order or a site instruction requiring additional costs, which would not have occurred if these instructions had not been issued by the prime contractor.
This is distinct from a disturbance claim when certain events occur, causing a delay but not triggering an EOT. It is also distinct from an “excusable delay” such as an event of force majeure such as bad weather.
In essence, the extension request must be compensable, affect the critical path and delay the completion of the work.
Allocation for simultaneous delay
Australian courts have decided to temper the “preventive principle” in circumstances where there is a concurrent contribution to the delay by two parties to the contract (see Trollope & Colls Ltd v Council for the North West Metropolitan Hospital  1 WLR 601).
Courts are now prepared to consider that a party to a contract who has been prevented from fulfilling its contractual obligations by the behavior of another party cannot invoke the breach of that other party if it could not have fulfilled its obligation. contractual obligation anyway (Turner).
In Turner, it was decided that the “principle of prevention” should apply in cases where the principal (or the party causing the impediment) caused the actual delay and it was not sufficient that the principal caused the delay in the completion of the work.
The principal’s delay must be assessed in “all the circumstances of the case” and may provide some relief to the contractor.