Techtime

The difference between Extension of Time and Prolongation

Our news section in this issue relates to the recent judicial decision in De Beers v Atos is apt for our planned discussion this issue on why an Extension of Time does not automatically provide for recovery of prolongation costs. Construction contracts invariably contain time clauses to set out when the contractor must finish the work and some form of damages provision to ensure that the contractor makes all possible effort to comply with that requirement. The purpose of an extension of time clause is not, as many believe, to relieve the contractor of damages by giving him more time (though that is the effect), but is primarily to protect the operation of the damages clause. Suppose that the employer is responsible for an event which delays the contractor. This could be one of the relevant events listed in the contract or some other act which is termed an act of prevention. If the employer were, upon late completion by the contractor, to recover his liquidated damages, in spite of the delay being caused by himself, he would, in effect, benefit from his own wrongdoing. However this is prevented under English law by the Prevention Principle which, as long ago as 1838 in the case of Holme v Guppy, stated that a party cannot benefit from its own wrong. So a delay caused by the employer would have the effect of invalidating any liquidated damages clause since the contractor is no longer obliged to complete by the agreed date. In such circumstances, time is said to be at large. By awarding an extension of time, the employer makes up for the delay he has caused and, under the common forms of contract, restores the employers right to deduct damages for any further delay from the revised date for completion. But the Prevention Principle cuts both ways. Often a contractor causes delay himself, even when there are employer-risk events that would otherwise entitle him to receive an extension of time. If the two events occur at the same time, they are said to be concurrent but this term is the subject of much debate; there being disagreement over the extent to which event must completely overlap each other. Nevertheless, in the same way that the employer is not entitled to damages if he has caused delay, then the contractor is not entitled to prolongation costs if he also caused delay. The Society of Construction Law, in its Delay and Disruption Protocol (2002), sought to set out something of a compromise in such cases commonly referred to as time not money. That is, in cases of concurrent delay, the contractor would be entitled to the additional time (so that the employer was within the prevention principle) but not entitled to prolongation costs (so that he remained within the prevention principle). This approach was given judicial authority in the case of Henry Boot v Malmaison (2000). City Inn was something of a departure from this approach and advocated an apportionment of the respective costs of the parties. On the one hand, this was seen as being fair but, on the other, both parties could be seen as being the wrong side of the prevention principle. Remember also that City Inn was a Scottish case which, whilst influential, did not form a precedent for the English courts. De Beers v Atos now looks to have given the mandate back to the SCLs Protocol. The time not money approach is therefore somewhat attractive to employers when they cannot avoid having extensions of time awarded to the contractor. Not only do they lose the right to claim damages, they face additional prolongation costs too. From the contractors point of view, he expects to recover his prolongation costs as soon as he receives his extension of time and this is a common misconception, especially when he is certain that he has not caused any culpable delay. For an extension of time, it is only necessary to demonstrate the effect of Relevant (excusable) events and it is often tempting to use simple methodologies such as As-Planned Impacted which can readily establish the appropriate effect. The problem is that this methodology cannot show that the contractor did not also cause delay a fact easily relied upon by an employer seeking to avoid paying prolongation costs. Where possible, we prefer to analyse delays in all activities, using AsPlanned v As-Built methodology, so that we can show the discreet effects of culpable and excusable delay events separately. By establishing concurrency (or indeed a lack thereof) and the causative effect of each event on the critical path, we are often able to demonstrate an entitlement to prolongation as well as an extension of time.

...Next time
In our next newsletter we will address in more depth the various approached to concurrency and take a look at programme logic.