‘Time is money’, so the old adage goes. Not so, says Keith Pickavance, the doyen of all matters related to the programming of construction activities. He states: “Time and money are completely different, both in principle and in the way one deals with them practically. They are different in principle because once a given construction period starts, time will expire at a constant rate up until the completion date, whether or not it is used. Whether it is used effectively, efficiently, or not used at all, time will always expire at the same rate. Money, on the other hand is quite different. A fixed amount of money will only expire if it is spent, and the more intensively it is spent, the quicker it will expire.”[1]

These incisive observations lead us to consider how the law treats time in respect to completion of construction projects. What happens if the time expires before the money is spent and what remedies are available when an over-run is found to be the responsibility of the other party?

In considering this, as with other legal matters, it is important to understand that provisions in any particular contract are an overlay on underlying legal principles, therefore we should first strip away any pre-conceptions from this or that form of contract.

Reasonable time

In English law (in the absence of specific agreement between parties), the contractor’s obligation in respect to completion within a particular timeframe is that he should complete within a ‘reasonable time’. What constitutes a reasonable time is a matter of fact in each case. If the contractor fails to complete within a reasonable time then the employer can claim general damages, that is, identifiable and proven losses he has actually incurred. Establishing what is a reasonable time may however require the application of rather subjective criteria.

There is one level of sophistication to this arrangement within common law, which is that, let’s say if things are dragging on and the employer wants the works completing by a certain point in time, he can issue a notice to the contractor making ‘time of the essence’, the notice would have to allow a reasonable time. If the contractor fails to complete by the specified date then the employer can claim general damages from the date fixed by the notice.

However, if the employer causes or contributes to the reasons why the contractor is prevented from completing by the specified date, he will not be able to enforce the date or claim damages. This circumstance is often referred to as ‘time being at large’. This is something of a misnomer, as it suggests the contractor can take his time in completing, when in fact he still has an obligation, albeit one to complete within a ‘reasonable time’ only. The prevention by the employer leads to the application of what is known as the ‘prevention principle’ i.e. that a party cannot gain by an act that prevented the other party completing its own obligations.

Completion date

From the common law base position we can now overlay the first level of contractual, as opposed to common law, sophistication. That is the insertion into a contract of a clause that the contractor should complete its works by a certain date or within a certain period from commencement. The contractor would then be bound to complete by that date, failure to do so would attract general damages as before.

But again the prevention principle would apply, if acts of the employer cause or contribute to the delay then he will not be able to insist on the completion date, the contractor’s obligation reverts to one of completion within a reasonable time only and the employer can only claim damages if that, rather soft-edged, reasonable time obligation is not met.

Liquidated damages

Here we can introduce the second level of contractual sophistication, which is that, instead of the employer being put to proof of his actual loss when the contractor is in delay then the damages are pre-agreed by the parties by ‘liquidating’ them to a single sum per period of delay, ‘£1,000 for each day of delayed completion’, or the like. This is known as liquidated damages (LDs). Some standard forms (mainly building as opposed to civil engineering related) refer to liquidated and ascertained damages (LAD’s), it is submitted that there is no difference between the terms and lawyers certainly would tend to refer to the more generic LDs.

The advantages of LDs is said to be two-way, the employer is not put to proof of his losses and the contractor knows in advance what his liability is if he does find himself in a delay situation. English law does provide, what some see as rather curious, devices for a contractor to escape LDs, however, consideration of these devices is a diversion from the main thrust of framework being outlined here.

EOT clause

We now introduce the third level of contractual sophistication, this is a mechanism whereby the employer can extend the date for completion, even in circumstances where he has caused or contributed to the contractor’s delay, an ‘extension of time’ clause. We can now start to see the shape of familiar standard form provisions. An extension of time (EOT) clause, in essence, allows an employer to say, ‘I have caused delay to the contractor but the contract allows me to fix a new date, taking into account the delays I have caused, and the contractor will then be obliged to complete by that new date’. If an LD clause is also included in the contract then it will still be enforceable but will apply to any contractor delays in excess of the new date.

Care has to be taken when drafting EOT clauses, if the clause does not describe the particular reason why the employer is entitled to extend the time then the EOT will be invalid and we will be back to the reasonable time scenario described above. This is why one often sees at the end of a list of circumstances allowing the issue of an EOT, a catch-all ‘…and any other reasons we haven’t thought of’ provision. For example the Institute of Civil Engineers Conditions of Contract, 7th Edition, Clause 44(1):

“(e) any delay impediment prevention or default to the Employer or (f) other special circumstances of any kind whatsoever which may occur …”

Further, many standard forms require the giving of a notice by the contractor as a ‘condition precedent’ to the employer considering the need for an extension of time. Again, care needs to be taken. The ‘prevention principle’ will still apply even where there is a need to give notice, i.e. if the reasons accrue to the employer, he cannot gain by his own failings. But if no notice is given, the contractual machinery for granting an EOT cannot even start and the employer cannot therefore issue a valid EOT. Once again, the reasonable time scenario kicks in. So, where it might appear on its face that strict notice requirements might be to an employer’s advantage, in fact they are not and create the Catch-22 situation described above. Again therefore, standard forms tend to include a device whereby an employer can consider and issue EOT’s of his own volition, consider ICE Clause 44(2)(b):

“The Engineer may in the absence of any claim make an assessment of the delay that he considers has been suffered by the Contractor…”

“it is always preferable to deal with and issue EOT’s as promptly as possible, in this way the contractor knows the extent of his liability …”

As can be seen from the above quoted clause, in practice in many standard forms the task of assessing and granting EOT’s is left, by agreement, to an independent certifier, e.g. the Engineer. This leads to such questions as what happens if the certifier fails to issue an EOT before the original date expires, or at all? The answer is that it will depend upon the particular wording of the contract but for example the wording, “the architect shall make a fair and reasonable extension of time for completion of the works” has been judged to operate so as to allow a retrospective extension of time[2].

If a certifier simply fails to deal with the issuing of an EOT at all in circumstances where there are Employer culpable delays then again reasonable time will apply and LDs will be unenforcable. So, a certifier who considers he his doing his Employer a service by not issuing an EOT is in fact doing the opposite. In whatever case it is submitted that it is always preferable to deal with and issue EOT’s as promptly as possible, in this way the contractor knows the extent of his liability and may even take steps to accelerate at his own cost to meet the original date, and the Employer’s position as regards LDs is protected.

Contractor’s rights to compensation

We have dealt with compensation to the Employer by way of general damages or LDs where the contractor has caused delay for which he is not entitled to an EOT, but what of the contractor’s right’s to compensation? Again we will look at these from the common law and contractual perspectives.

In common law, an employer act that prevents the contractor from completing is a breach of contract on the part of the Employer, which will entitle the contractor to general damages, as set out previously these are losses which he must prove he has actually incurred. To this extent there is no difference between Employer-claimed damages and contractor-claimed damages at common law.

Consider now the usual scheme in standard form contracts, there is no legal reason why the contractor’s losses in the event of Employer-culpable delay cannot be reduced to a ‘liquidated’ sum in the same way that Employer losses are habitually dealt with in standard form contracts by way of LDs. It is submitted that it can only be a matter of policy by the drafters of standard form contracts, but I know of no standard form where the contractor is afforded the same convenience of a liquidated approach to his losses, though I have seen that approach in bespoke forms. So that even in the contractual scenario the Contractor is put to full proof in the same way as if he were claiming damages at common law.

Standard forms usually provide for some means of compensation to the Contractor for his additional costs. These can be for the recovery of his time-related resources, which are engaged for a longer period by reason of the extension. Usually these will be by way of site set-up and staff costs, these are usually referred to as ‘prolongation claims’ and are conceptually straight forward to understand and to demonstrate. More problematic is the fact that a simple prolongation of the period for completion may belie the fact there were inefficiencies in undertaking the actual work. These inefficiencies result in a loss to the Contractor over and above his recovery through payment of the contract measured rates. In theory such losses are subject to compensation but are conceptually more difficult to deal with and are fertile territory for disputes.

Standard form provisions for contractor compensation often set down certain parameters for the types of loss that the Contractor is able to recover, for instance many engineering forms provide that he should be able to recover his ‘costs’. Costs are then specifically defined as excluding an element for profit, the contract then goes on to describe circumstances where cost only is recoverable and circumstances where cost plus profit is recoverable, ICE Clause 12 is a well-known example. This often leads to ‘claim gymnastics’ whereby the Contractor will stretch any available facts to demonstrate that the particular problem he encountered comes within the ambit of a cost plus profit clause. It is submitted that such gymnastics are unnecessary, the simple solution is to make one’s best case on the facts then claim ones ‘cost’ as compensation under the contract and the profit element as common law damages.

In Part 2 of this article we will examine some of the issues that arise in demonstrating or assessing entitlements to extensions of time.


Contract Law