Advice on handling delays in construction
In the complex process that a building or civil engineering project involves, it is not uncommon for a schedule to slip and delays to occur.
In this article, we give four tips on what to look out for when a delay occurs.
The contractor is liable for any delay, unless…
The starting point in construction is that the contractor is liable for all delay, cf. AB 18 § 40(1). From the contractor’s point of view, this may at first seem an almost unreasonable starting point, but in this article we will try to give an overview of the somewhat more nuanced picture.
As a contractor, it is important to be aware of your burden of proof in connection with delay, particularly with regard to the requirement of the “critical path”. Contractors should also – especially in longer construction projects – pay attention to their ongoing claim management, which helps ensure that the contractor can discharge its burden of proof for delay at a later stage.
At the same time, it is important that clients are aware of the rules on notification and notice of claims in connection with their claims arising from a contractor’s culpable delay.
Remember to give notice!
The right to an extension of time when reality strikes
As a starting point, the contractor’s right to an extension of time requires that the delay is caused by one of the circumstances listed in AB 18 § 39(1).
In this article, we focus on two of the most frequent reasons for extensions of time and briefly outline possible cases that fall outside the circumstances listed in AB 18 § 39(1).
Decide on the conditions for extensions of time in your project
2.1. Changes required by the client
The contractor is entitled to an extension of time if the client requires changes to the project after the construction contract has been entered into. This of course only applies where the changes actually cause a delay.
By way of illustration, a client might decide on a different color for the windows. As a starting point, this will not cause a delay. On the other hand, it will probably cause a delay that justifies an extension of time if the client requires more windows to be installed than originally agreed.
The AB committee report on which the provision is based states that the reason why the client requires a change is not decisive.
The contractor will therefore also be entitled to an extension of time where the client has to require a change because the design turns out to be deficient. This may be because an item of work was forgotten, or because, according to the design, the work was to be carried out in a way that later turns out to be inappropriate.
2.2. Weather conditions
The starting point is that the contractor bears the time risk of the weather. However, exceptional weather conditions may entitle the contractor to an extension of time.
The burden of proving that there have been exceptional weather conditions lies with the contractor. The contract documents can specify in more detail what is meant by exceptional weather conditions, both in terms of type and extent.
Normally, the schedule will already allow for the weather disruption that usually occurs. The schedule’s provisions on weather days are thus a parameter for where the parties considered the line between usual and exceptional weather to lie. The contractor is not entitled to an extension of time if the weather days are covered by the schedule.
Similarly, it may affect the right to an extension of time if a contractor has scheduled activities that are vulnerable to winter weather during the winter period in its execution schedule.
Circumstances outside AB 18 § 39(1)
The list of causes in AB 18 § 39(1) is, however, not exhaustive, although it is difficult to imagine a case that could entitle a contractor to an extension of time without falling within the provision.
One possible case is where the work is delayed shortly before handover by accidental damage for which the contractor cannot be blamed. This will not in itself entitle the contractor to an extension of time, as the contractor as a starting point bears the responsibility for accidental damage until handover.
If, however, the contractor can document that it had no opportunity to avoid the situation or to adapt to it, there is much to suggest that there are grounds for an extension of time.
The contractor’s heavy burden of proof
There is no doubt that the contractor bears the burden of proving that one of the circumstances listed in AB 18 § 39(1), which entitle it to an extension of time, exists.
As mentioned above, since a wide range of circumstances can potentially fall within the provisions, this part of the burden of proof is probably not particularly strict in itself. However, the contractor’s burden of proof has two parts.
The contractor must not only prove that an event covered by the provision has occurred. The contractor must also discharge the burden of proving that the event actually delayed the time limit.
This second part of the burden of proof will often be somewhat harder to discharge, as the contractor has to prove the necessary causal link. As this can be a difficult task, the contractor should be aware of the challenge from the very start.
In this connection, it may be significant whether the contractor has drawn up a work plan setting out a specific sequence for the individual parts of its work, with a clear indication of the dependencies between the activities.
The heavy burden of proof is illustrated by the arbitral award in T:BB 2014.773 VBA, in which the tribunal would only grant an extension of time if it could be established with predominant certainty that the delays affected the activities on the critical path.
At the same time, the award established that failure to comply with the client’s duty to coordinate the timing under AB 18 § 13(2) may count against the client in terms of evidence.
Because of the high requirements for documenting the delay, which the contractor will rarely be able to meet in full, the result is often that the tribunal assesses the contractor’s claim for an extension of time on a discretionary basis. The outcome will thus often reflect that the quality of the documentation affects the size of the claim allowed.
A delay only matters if it is actually critical
Is it worth claiming liquidated damages?
If the contractor does not succeed in discharging the burden of proof for an extension of time, the contractor is in culpable delay, cf. AB 18 § 40(1).
As a result, the client can hold the contractor liable for the delay, either in the form of liquidated damages or in the form of a claim for damages under the general rules of the law of damages. Where the parties have agreed on liquidated damages, no claim for damages can be made in addition to the liquidated damages. Below, we comment on claims for liquidated damages.
Get your house in order if you want to claim liquidated damages
4.1. Liquidated damages
Liquidated damages are best described as a standardized or agreed calculation of loss. For many clients, they are the preferred sanction for the contractor’s delay.
Liquidated damages are practical, as there is no need to document whether the client has suffered a loss as a result of the contractor’s delay. The client simply has to calculate the total delay, deduct the extension of time to which the contractor is entitled and finally multiply by the agreed daily rate of liquidated damages.
AB 18 § 40(4) lists three conditions, all of which must be met before the client can claim liquidated damages.
- First, the time limit and the liquidated damages must be clearly stated in the contract.
- Second, the client must have made ongoing notes of overruns.
- Third, the client must give notice within a reasonable time of becoming aware of the culpable delay.
The client should pay particular attention to the third condition, which means that the notice must be clear and state the time from which liquidated damages run. In addition, the client must give notice within a reasonable time of becoming aware of the culpable delay, and therefore cannot wait until an actual delay has occurred before giving notice.
These conditions ensure that the contractor has the opportunity to assess whether it can or will accelerate the work to avoid liquidated damages.
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