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By the Entrusty Group

Is The Contractor Obliged To Apply ForExtension Of Time ?

Your Contractual Questions Answered

The Entrusty Group, a multi-disciplinary group of companies, of which, one of their specialisations is inproject, commercial and contractual management, has been running a regular contractual question-and-answer section for MBAM members in Master Builders Journal.

In this instalment of the series, the Entrusty Group will provide the answer to the frequently asked questionabove.

Construction contracts usually have

a fixed time frame for theContractor to complete the works

(i.e. time is of the essence time being a

fundamental term of the contract). PAM

98 cl 21.1, PAM 69 cl 21 (1), JKR 203/A cl 38

(b), IEM cl 38 (a), CIDB cl 17.1 JKR PWD DB/

T cl.39.2 refer to Possession of Site and

Commencement.

Consequently, PAM 98 cl 21.1, PAM 69 cl

21(1), JKR 203/A cl 38 (b), IEM cl 38 (a), CIDB

cl 17.1 (a) and JKR PWD DB/T cl. 39.2 also

specify the Contractors primaryobligation to complete the Works by the

completion date. If the Contractor fails to

complete the Works by the Date for

Completion or within the extended time,

the Contractor is in breach. Under Section

75 of the Contract Acts 1950 (CA 1950) the

Contractor shall bear the damages

suffered by the Employer.

Purpose Of Extension Of Time Clauses

The main provision of EoT clauses is to allowfor any alteration to the completion date. It

is also to preserve the Employers rights to

deduct Liquidated Damages. The two major

effects of time extension clause(s) under

construction contracts are as follow:

(a) The extent to which the Contractor

could be made liable for liquidated

damages in the event of a delay to the

completion of the Works;

(b) The fact that extensions of time aregranted on account of delays

attributable to some act by the

Employer may afford a basis for a

claim by the Contractor against the

Employer for time related damagesand disruption losses.

Hudsons Building and Engineering

Contracts, 11thEdition, p 624explains the

rationale for such clauses:

It has been seen that, for the purpose

of treating the contract as repudiated,

in the rare cases where time is of the

essence, the contract time for

completion may cease to be applicable

for a variety of reasons, including theordering of extras or other interference

or prevention by the employer. In the

case of damages, it is equally obvious

that where the reason is some act of the

employer or his architect or engineer

preventing completion by the due date,

it cannot be the intention of the parties

that liquidated or other damages

should be calculated from that date

even if the act, such as ordering extras,

is not a breach of contract. Liquidated

damages stipulated for at a rate foreach day or week of delay in completing

the works must begin to run from some

definite date. It follows, therefore, that if

the date in the contract has for some

such reason ceased to be the proper

date for the completion of the works,

and no contractual provision exists for

the substitut ion of a new date, there is

such a case no date from which

liquidated damages can run and the

right to liquidated damages will have

gone. This, rather than solicitude for thecontractor, is the reason for the

provision usually known as the

extension of time clause.

EoT and liquidated damages clauses are

closely linked, and failure by the Architect/Engineer/S.O/P.D. to properly exercise his

power to extend time, where any delay is

caused by the Employer (or for which the

Employer is responsible in law), relieves

the Contractor from his liability to pay

liquidated damages. As a result, the courts

have consequently ruled that the clause(s)

are to be interpreted contra proferentum

against the Employer.

Contractual Provisions For EoT

Generally, the Contractor is to give written

notice of delay and cause/s to the

Architect/Engineer/S.O/P.D. when it is

apparent that the progress of works is

delayed for him to assess and grant EoT.

PAM cl 23, IEM/JKR cl 43, CIDB cl 24, and

JKR PWD DB/T cl. 45.1 are the relevant

clauses for EoT.

For the Contractor to claim for EoT, the

grounds for such claim for EoT must fall

within the specific events as listed in thecontract. Any event falling outside the

listed events does not entitle the

Contractor to any EoT. The grounds for EoT

applications can be divided into two basic

categories:

(a) Neutral events, e.g. force majeure,

exceptionally inclement weather, civil

commotion, strike or lockout,

availability of materials not due to the

Contractors fault, etc.

(b) Defaults by the Employer and/or his

agents, e.g. late decision/information

of the Architect/Engineer/S.O/P.D.,

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late site delivery, compliance with the

Architect/Engineer/S.O/P.D., delay by

the Employers agents, delay by

nominated sub-contractors/

suppliers, etc.

PAM/IEM/JKR203/A/PWD DB/T requires

the Contractor to use his best endeavourto prevent delay in the works and do all

that may be reasonably required and

satisfaction of the Architect/ Engineer/

S.O/P.D. to proceed with the works.

CIDB Form is much more procedural and

comprehensive on extension of time

provisions:

Cl 24.1 Extension of Time

Cl 24.2 Notice of Delay

Cl 24.3 Superintending Officers DecisionCl 24.4 Interim Decision of Extension

of Time

Cl 24.5 Superintending Officers

Discretion

Cl 24.6 Certificate of Extension of Time

Cl 24.7 Review of Superintending

Officers Decision

CIDB s/cl 24.3 requires the S.O. to notify

the Contractor in writing within 30 Days

of notice receipt or further information,

whether in his opinion the delay event isone which in principle entitles to an EoT.

Under the CIDB contract, it also allows the

S.O. to grant EoT even when he considers

that there is insufficient information to

decide on the Contractors application.

In general, in deciding any EoT, the S.O.

shall take into account the following

matters:

(a) EoT previously granted, if any;(b) The effect/extent of work omitted or

decrease in the quantity of any work

resulting from re-measurement;

(c) Any concurrent delays with the

delaying event/s including those

due to the Contractors acts or

defaults.

The CIDB contract under s/cl 24.4 allows

the S.O. to make interim decision on EoT

where a delaying event has continuing

effects and to decide an overall EoT on theevent within 30 Days of receipt of final

particulars, by reviewing all the

circumstances.

Whilst s/cl 24.5 allows the S.O. absolute

discretion to grant a fair, reasonable and

necessary EoT even if the Contractor fails

to comply with the EoT provisions.

S/cl 24.6 requires the S.O. to notify the

Contractor of any decision in granting

extension of time in a certificate(Certificate of Extension of Time), copied

to the Employer and nominated sub-

contractors/nominated suppliers.

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S/cl 24.7 allows the S.O. to review any

previous EoT granted at any time prior to

issuance of Final Certificate either to fix a

Tim e for Com pletion later than that

previously granted or confirm thatpreviously fixed.

Contractors Obligations For Applying

For EoT

Generally, there is a duty imposed on the

Contractor to notify the Architect/

Engineer/S.O. in writing as soon as the

progress is delayed. The objective is to

ensure that the Architect/Engineer/S.O. is

aware that the completion period may not

be met and that the Contractor is pre-warned of the triggers off time whether or

not the reason of such delay is within one

of those grounds or the Contractors own

inefficiencies.

It is desirable that the notice should specify

the cause of the delay but even if the notice

does not contain sufficient details to

enable the Architect/Engineer/S.O. to form

an opinion as to whether the cause of delay

falls within one of those specified grounds,

it is still valid. Thus, the requirement ofnotice of delay is not a condition precedent

to the granting of an extension of time by

the Architect/Engineer/S.O. However, this

could be taken into account in granting an

extension of time.

In London Borough of Mertonv Stanley

Hugh Leach (1985) 32 BLR 51, it was

decided that a written notice is not a

condition precedent to granting EoT. The

Architect is under an independent duty to

do so. Mr Justice Vinelott went on to saythat failure by the contractor to give

notice of delay was itself a breach of

contract and this could have some effect

on his right to an extension of time. If the

architect, because of failure by the

contractor to give notice of delay, was

unable to avoid or reduce a delay to

completion, the contractor should have

no greater extension than if he had given

notice.

The legal principle here is that no oneshould benefit from his own breach of

contract (The Prevention Principle) and is

closely allied to the duty to mitigate.

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MBJ

87

In the next issue of the MBAM journal the article will answer the question on Is the

Contractor still entitle to Extension of Time when there is concurrent delay?

The Entrusty Group includes Entrusty Consultancy SdnBhd (formerly known as J.D. Kingsfield (M) Sdn Bhd), BK

Burns & Ong Sdn Bhd (a member of the Asia wide group BK

Asia Pacific) , Pro-Value Management, Proforce Management Services Sdn Bhd/Agensi

Pekerjaan Proforce Sdn Bhd and International Master Trainers Sdn Bhd. Apart from

project, commercial and contractual management services, the group also provides risk,

resources, quality and value management, recruitment consultancy services and

corporate training programmes to various industries, particularly in construction and

petrochemical, both locally and internationally.

Entrusty Group will provide 30 minutes of free consultancy with prior appointment to

MBAM members on their contractual questions. The Group also provides both in-house

and public seminars/workshops in its various areas of expertise. For further details,please visit website: www.entrusty.com. or contact HT Ong or Wing Ho at 22-1& 2 Jalan

2/109E, Desa Business Park, Taman Desa, 58100 Kuala Lumpur, Malaysia. Tel: 6(03)-7982

2123 Fax: 6(03)-7982 3122 Email:enquiry@entrusty.com.my

There is also an obligation imposed on

the Contractor to constantly use his best

endeavour to prevent delay. Th e

Contractor shall also do all that may

reasonably be required to thesatisfaction of the Architect/Engineer/

S.O. to proceed with the work.

There are two issues to be considered

when deal with timing for granting

extension of time:

(a) EoT must not be granted too late to

be effective in keeping liquidated

damages provisions alive; and

(b) EoT must not be granted too late to

allow the contractor to re-programme his work.

In the case ofMillerv LCC (1934) 151 Lt

425, the contract provided for the whole

of the work to be completed by 15

November 1931. There was a provision

for the Engineer to grant extension of

time retrospectively. Work was

completed on 25 July 1932. On 17 Nov

1932 Engineer issued Certificate

granting extension to 7 February 1932.

It was held that the phrase to assignsuch other time for completion

contemplated exercise of the power

within a reasonable time of the delay

and a retrospective extension came too

late to be effective. A power to extend

the time had therefore not been

exercised within the time limited by the

contract, the building owner has lost the

benefit of the clause, i.e. there was no

date from which penalties could run

and no liquidated damages could be

recovered.

In Amalgamated Building Contractorsv

Waltham (1952) 2 AER 452, Lord Justice

Denning declined to follow Millerwhich

he said turned on its particular wording

of the clause and the time fixed for

completion of work had been validly

extended.

In the relatively recent case of City Inn

Ltdv Shepherd Construction Ltd, Outer

House [2001], 2001 Greens Weekly Digest26-999, it was held that any EoT must be

condition on the Contractor putting in

the relevant application notice.

The contract was the Joint Contracts

Tribunal (JCT) Standard Form of Building

Contract Private Edition with Quantities

1980 edition (PAM form of contract is

based on JCT 63), with a schedule ofamendments appended. This schedule

inserted into the conditions an additional

clause 13.8.

The most relevant par t of the clause,

clause 13.8.5 stated:

If the Contractor fails to comply with

one or more of the provisions of Clause

13.8.1, where the Architect has not

dispensed with such compliance under

Clause 13.8.4, the Contractor shall notbe entitled to any extension of time

under Clause 25.3.

Lord MacFadyen said:

For present purposes, what is

significant is that the clause 13.8.5

clearly states that the consequence of

failure on the part of the Contractor to

comply with any one or more of the

provisions of clause 13.8.1 is loss of

entit lement to an extension of time.

Further, he stated:

I am therefore of the opinion that

failure on the part of the Contractor to

comply with one or more of the

provisions of clause 13.8.1 is probably

to be regarded as a breach of contract

on his part.

Conclusion

Generally, the Contractor ought to submit

to the S.O./Engineer/Architect /P.D. the

relevant notices to inform about the

delaying event(s) and that the Contractor

will be seeking the corresponding EoT

within the timeframe set down under the

relevant contract. A failure to do so on the

part of the Contractor may deprive

(dependent on the wording of the

relevant clauses for EoT under thecontract) the Contractor of any EoT.

The advice to any Contractor is to ensure

that the notice of delay is submitted

within the timeframe to avoid being in a

situation where due to his not compliance

will be considered a breach of contract

and therefore the Contractor is disallowed

for EoT for such a breach.

If in the unfortunate event that the

Contractor failed to submit in the relevantnotice of delay, the only obvious possible

argument for getting the appropriate EoT

is to raise the Prevention Principle where

the Employer cannot take advantage of its

own wrong in enforcing a contract.