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IACCM Contract Management Forum

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2016-09-12 11:46:35

Extension of Time and Liquidated Damages on construction contracts

If there are concurrent delay events on a construction project by Employer as well as Contractor,can the contract provision on EOT(Extension of Time) and Liquidated damages be applied simultaneously to compensate both the parties to the contract ?
 
 •  IACCM  •   2016-09-13 07:49:22
Thank you for your post. We have reached out to colleagues in the construction industry and I hope that theresponse below provides you with some interesting insight.

Kind regards, Sally

Response:

This is an area of law which is still widely debated by academics and practitioners and the correct approach appears to be currently undecided.

Firstly, the methods for assessing extensions of time and the application of liquidated damages should be sought from the express contractual provisions at first instance. However, if the contractual provisions are silent then below are two alternative viewpoints on relief/damages arising from concurrent delay that may be considered:

Apportionment method - The aggregate position which arises from contractor delay event(s) and relevant event(s) which delay the Contractor would be assessed. The contract completion date would be extended by an Extension of Time and the remaining delay period, if any, liquidated damages would be applied. This approach was proposed in the case of City Inn Ltd v Shepherd Construction Ltd [2008], however, this is not considered to be the current approach by the courts of England & Wales.

Non-apportionment method - The current approach considered to be adopted by the courts in England & Wales, as stated in Henry Boot Construction v Malmaison Hotel (1999) and approved in further caselaw, is that an occurrence of concurrent delay would entitle the contractor to an extension of time i.e. no liquidated damages are applied. A reason for the current approach is the application of the prevention principle whereby a party, usually the Employer, cannot benefit under a contract through delay events it has caused to the contract completion date.

Further recent caselaw regarding Concurrent Delay can be found within the case transcript for Saga Cruises BDF Ltd & Anor v Fincantieri SPA [2016] EWHC 1875 (Comm) (29 July 2016).

Tom Hawkins, Contract Solutions Team, Arcadis UK
 
 
 •  ThyssenKrupp Industrial Solutions (India) Private Limited (formerly Uhde India Private Limited)  •   2016-10-04 05:10:00
Dear Chandrashekhar,

As Sally mentioned below, construction industry is still grappling with these questions. However from my own experience in such situations with Indian clients, I have been able to apply the apportionment method. On one side, we had to pay LD for the portion of the delay attributed to us while on the other hand, for the balance duration of delay, client issued extension of time and also compensation for the extension of time.

We cannot really generalize these and will depend upon the facts of individual cases. Moreover the outcome I mentioned above was the result of negotiation between us and client. The outcome would have been different if the matter was escalated to arbitration/court of law.

Regards,
Rajesh
 
 
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