Construction Contracts and Liability for Concurrent Delays – Court Guidance

dock craneBuilding companies routinely take on contractual liabilities to pay compensation if they are to blame for delays in completion – but what happens if such delays are as much the employer’s responsibility as the contractor’s? The Court of Appeal considered that issue in a guideline case.

A developer had employed a contractor to design and build a large house. Included in the contract was a provision that required the latter to pay £5,000 in compensation for each week the project was delayed. Controversially, it also contained a clause which provided that, where a delay caused by the contractor was concurrent with a delay for which the employer was responsible, the latter would be ignored when calculating any extension of time to the completion date.

The contractor argued that it was wrong in principle for the employer to hold it to a completion date, and a consequent liability to pay compensation, in circumstances where at least part of the delay was caused by the employer. That submission failed to convince a judge, however, and the validity of the clause was upheld.

In dismissing the contractor’s appeal against that ruling, the Court noted that the clause had the crystal clear objective of allocating the risk of concurrent delay to the contractor alone. Although the contractor viewed the effect of the clause as unfair, it had freely agreed to it. Even if the employer had been equally responsible for the delay, there was no overarching principle of law or legal policy that rendered the clause inoperable so as to rescue the contractor from its consequences.