Volume IV Issue No.

The Global Leader in Managing Construction Risk

Why does an extension of time not automatically entitle a contractor to prolongation costs?
A contractor often believes that an
extension of time also entitles him to
damages or compensation for being kept on
site longer than agreed. However it has
been held in the UK courts 1 that the sole
purpose of an extension of time is to relieve
the contractor of the obligation to pay
liquidated damages for the whole or part of
the overrun period.
To establish an entitlement to prolongation
costs, a contractor must demonstrate that a
delay to completion of the contract has
occurred and the cause of the delay is an
action or inaction of the employer which
amounts either to a breach of contract or is
an event for which the contract specifically
provides an entitlement to extra payment
for the contractor.
If the contract specifically provides for the
contractor to recover his costs in the event
of certain specified events and the event
that has caused delay is one of those
specified then he can recover under the
contractual mechanism. If the contract
does not specifically provide for the
contractor to recover his costs or it does but
the event that has occurred is not one of
those specified in the contract then the
contractors remedy will lie in a claim for
breach of contract. A claim for breach of
contract will require proof of causation i.e.
that the action or inaction of the employer
actually caused the loss2.
The UK cases quoted are persuasive only
rather than binding but there is nothing in
the UAE Civil Code or Sharia law which
would preclude the payment of damages if
set out in the contract , as long as they were
reflective of the actual loss rather than
punitive or compensation for a future
possible gain. It should be borne in mind
that if the amount was not representative
of actual loss it is open to the courts to
amend the figure up or down so that the
damages reflect the actual loss incurred.
It is suggested that if the contract is silent
on the question of recovery of costs arising
1

H Fairweather & Co Ltd v London Borough of

Wandsworth [1987] 39 BLR 106
2
Costain Ltd v Charles Haswell & Partners Ltd [2009]
EWHC 3140 (TCC), [2010] TCLR 1, 128 Con LR154

from delay then the Sharia principles of

fairness and equity may lead a court to
consider that a party should be liable for the
consequences arising from their default, i.e.
the costs incurred as a consequence of the
action of the employer.
But what about the situation where there is
more than one cause of delay at any one
time? Unhelpfully, there is a lack of any
uniformly
accepted
view
among
practitioners regarding concurrent delay
and how it should be treated, both for
extensions of time and prolongation costs.
One point worthy of comment however is
the position taken under the SCL Protocol.
With regard to extensions of time, the
Protocol states that provided one of the
causes of delay in any given concurrency
situation affords grounds for extension of
time under the contract, the contractor
should be given a time extension
notwithstanding any contemporaneous
default on his part. Interestingly, in the
context of prolongation costs the Protocol
states that recovery of prolongation costs in
the situation where there is both employer
and contractor delay will be only for the
costs arising solely from the employer delay
and will depend on the contractor being
able to separate the costs of the employer
delay event from those of the contractor
delay event.
Thus it is arguable that the Protocol sets the
threshold for recovery of prolongation costs
at a higher level than that required for an
extension of time as, in practical terms, it is
suggested that there would be significant
difficulties in separating out losses arising
from contractor and employer delays.
The potential to recover costs for noncritical delay also exists. However delay
costs arising from non-critical elements of
work, which do not lead to delays to
completion of the works overall, would
normally be regarded as loss of productivity
or disruption costs. The same principles for
recovery of the costs would apply except it
would not be possible to recover any
contribution to overhead or overall project
costs, only costs specific to the element in
delay.

David Brodie-Stedman
Senior Vice President & Managing Director
Asia, Middle East and Africa

David Merritt
Senior Vice President & Managing Director
Middle East and Africa

Abu Dhabi Office

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5th Floor, Suite 501
P.O. Box: 71467, Dubai - U.A.E.
Tel. : +971 - 4 - 337 2145
Fax : +971 - 4 - 335 6077
E-mail : dxb@hillintl.com

It has been mooted by the SCL that

contracts should contain a provision setting
out an agreed amount per day that can be
applied to each day of prolongation. In
other words the reverse of the Employers
liquidated damages provision. Anything
which may reduce the likelihood of dispute
must be worthy of consideration.
In summary the reason an extension of time
does not automatically entitle a contractor
to prolongation costs is that entitlement to
recovery of costs associated with delay does
not flow from the same contractual
entitlement as time. Cost recovery will
depend on there being either a specific
contractual provision allowing recovery of
prolongation costs or the contractor being
able to prove that the delay was a breach of
the contract by the employer and that the
breach actually caused the costs claimed.
Clearly in this instance, to paraphrase
Benjamin Franklin, time is not the same as
money.
-

Nicola Caley
Managing Consultant of Hill Claims
Group

Hill
International,
with
3,000
employees in 100 offices worldwide,
provides
program
management,
project management, construction
management and construction claims
and consulting services. Engineering
News - Record magazine recently
ranked Hill as the 11th largest
construction management firm in the
United States.
For more information on Hill, please
visit our website at www.hillintl.com.

Disclaimer: This article does not constitute advice, legal or

otherwise,
and
is
provided
only
as
general
commentary. Appropriate professional advice should always
be obtained before taking or refraining from taking any
action in relation to such information and/or the application
of applicable law. This article and the materials contained in
it are provided on the basis that all liability for any loss or
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excluded to the fullest extent permitted by law.