Concurrent delay: shifting the risk to the contractor

There are not many principles of English common law which seek to legislate on behalf of parties. Usually, good-old fashioned Victorian laissez-faire attitudes prevail, and the courts will not interfere with an agreement reached by two consenting parties. There are a few exceptions, one of which is the rule on penalty clauses (i.e. liquidated damages must be a genuine pre-estimate of loss), which was the subject of a significant appeal a couple of years ago in Cavendish v Makdessi (2015). A similar exception is the prevention principle (explained below) though, as has recently been confirmed by the High Court, the principle can be contracted out of, unlike the rule on penalty clauses.

In a construction project, a contractor often has an obligation to complete a project by a particular date (the completion date), and if the contractor does not meet that date, the contractor has to pay liquidated damages (which are subject to the aforementioned rule on penalty clauses). However, if the contractor is prevented from meeting the deadline then the contractor is no longer obliged to meet the completion date, and instead time is “at large”, which means the contractor has to complete within a reasonable time. Moreover, liquidated damages are no longer payable, and the employer must prove actual loss if it is to recover any (the leading modern case for this is Multiplex Construction v Honeywell Control Systems (2007)). That is what is known as the “prevention principle”.

The most common way to get around the prevention principle is to have an extension of time clause in the contract. If there is an operable extension of time clause (EOT clause), the prevention principle will usually not apply.

A bit of a headache arises with concurrent delay, which is when delay has been caused by two or more factors of approximately equal causative potency (I am paraphrasing John Marrin QC from his seminal essay on the topic from 2002). In such a scenario, in English law at least, broadly speaking the contractor is entitled to an extension of time. It should be noted that in Scottish law, delay is instead apportioned as between the parties, which is a totally different approach.

Those principles came to a head in the recent case of North Midland Building Limited v Cyden Homes Limited [2017] EWHC 2414 (TCC), the judgment for which was published 2 October 2017.

The case related to the Dyson family getting what was described by the contractor as “the most important private house to be constructed in the country for many years”, which somewhat evokes the self-prompting Trump era that we now seem to live in. I was tempted to hoover up a series of Dyson related puns for this article, but I decided it was better off cleaned up instead (badum tish).

The parties (presumably their lawyers) had amended the standard JCT D&B contract such that if there was a concurrent delay, the employer’s part in that concurrent delay would not be taken into account. In effect, the risk of concurrent delay was shifted entirely to the contractor.

That posed a problem as a matter of law (or so the contractor argued) because if there was concurrent delay (i.e. delay caused by both the contractor and the employer) it was not possible to extend time for completion in circumstances where the employer was at fault, and therefore the prevention principle rendered time “at large”.

However, Fraser J made short shrift of that argument. The parties had explicitly agreed a mechanism for extensions of time in the contract, and that ought to be enforced. Fraser J repeated a familiar sentiment of common law judges over the past couple of centuries: “parties are free to agree whatever terms they wish to agree, with the obvious exceptions such as illegality”.

A well drafted amendment should, therefore, be successful at shifting the risk of concurrent delay onto the contractor (or onto the employer, if that were possible to negotiate). However, in practice concurrent delay is really quite rare, and is talked about much more in academic papers than it is in case law.