29 May 2016

If rainy weather prevents you from getting the job done on time, virtually all construction contracts will allow you to claim an extension of time (EOT).  In fact, for reasons we will consider in another blog, your head contractor or principal may benefit from granting you an EOT so that it can claim liquidated damages if you do not practically complete your works by the extended time for completion.

However, contractors often want to take their delay-claim a step further by also seeking to be compensated for the losses that they suffer by having to “man-down” or keep their labour and machinery idle on site while they wait for delayed head works to catch up to them.  This kind of loss is commonly known as “prolongation costs”.

Prolongation costs and EOTs are often seen as going hand-in-hand because they deal with the same problem for contractors: the negative financial impact of delayed works on construction contractors.  However, from a contractual point of view, there is an important difference.  That difference has to do with how construction contracts typically allocate risk between contractors (including subcontractors) and principals (including head contractors).

Typically, the contractor agrees to complete the whole of the contractual scope of work (as varied) for the agreed contract price (as varied) by the agreed time for completion (as varied).  The risk of incomplete, defective, unprofitable or late delivery of the works is allocated to the contractor under the contract.

Construction contracts typically contain certain “safety valves”, however.  An important one of these is the EOT clause.  EOT clauses typically prescribe certain events beyond the contractor’s control, such as rainy weather, as qualifying the contractor to claim an EOT.

If the contractor exercises this right and the time to complete the works is extended, this does not mean that the contractor can make a claim against the principal for the losses that the contractor suffers because of the extra time it has to spend on site.  This is because the contract has allocated the risk of not finishing on time to the contractor, not the principal.  There is no basis in the contract to shift the loss caused by the delay from the contractor (which contractually bears the risk of that loss) to the principal.

All an EOT does is ensure that, to the extent that delay is not the contractor’s fault, the contractor does not become liable for the losses caused by delay to the principal.  In other words, as long as the contractor exercises its right to claim EOTs properly and on time, the EOT clause ensures that the contractor only has to compensate the principal for delay that the contractor has caused in breach of its contractual obligation to practically complete its works (as varied) by the agreed time for completion (as varied).

The same goes for the principal.  The contract may, for example, provide (or imply) that the principal will ensure that the site will be ready to receive the contractor’s works immediately, or that the project will keep pace at all times with the contractor’s program. In that event, if the head works fall behind causing delay to the contractor, the contractor may claim that the delay has resulted from the principal’s breach of the contract.  In that case, the delay may not be treated as part of the risks that the contractor agreed to take on under the contract: it may be treated as a breach of contract instead, which may then entitle the contractor to be compensated for its “prolongation costs”.

 

This is only general information and does not constitute specific legal advice.  If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

 

 

*This is general information only, and does not constitute specific legal advice. Please consult one of our experienced Legal Team for specific advice relevant to your situation.

100 years of Supporting West Australians

"Always fast and thorough service. Thank you"

Sitka Pil

My circumstances at the time I made contact with HHG were dire following my argument being rejected by two no win no fee firms. Following my initial meeting with HHG's employment law team I was left feeling extremely positive by the response and concern shown by HHG in regards to their support of my argument along with their preparedness to pursue an outcome on my behalf.

I accept the fact that nobody really wins in these cases (mental health/ workplace) however the end result was what would be considered most favourable and far in excess of what would have been achieved had I not sought the advice from HHG.

I have no hesitation in recommending HHG to anyone caught up in the messy circumstances I found myself in at the time.

Great advice and five-star commitment to their client!!"

Nathan Lynch

"Thank you for such great assistance with the transaction of Flying Domestics on behalf of Lorna Good. It has been such a pleasure to work with the HHG Legal Group and I look forward to working with you in the future."

Jim Goodwin

"Simon Creek and his team were at all times empathic, professional and confident.  My matter needed to be addressed within a pressing time frame, and their availability at short notice and contact after hours was much appreciated.  It caused me considerable stress, but having such a thoroughly reliable and competent team to call on helped me to feel in control. Although I hope not to need their services again in future, I would be confident in doing so!"

Dr Lana Bell

"A good outcome is what we can expect.  A great outcome is a sign of a company which does the very best for their clients. A very big thank you to Daniel Morris for showing empathy towards my small and much needed legal action.

To HHG Legal Group, thank you for a great outcome.  I would recommend your company to anyone seeking legal services."

Jan Atkinson

"Your support this morning was amazingly kind, not to mention your totally reassuring competence, knowledge and wisdom that you used on my behalf.  It was extremely reassuring to have your knowledgeable support, and I particularly appreciated your real and obvious kindness to me. It means so much at a very difficult time. I'm so grateful to you."

Family Law Client

"Janene was very professional and we established a good rapport quickly. The subject of death and wills can be quite confronting to deal with, however, Janene's approach was soft and accommodating."

Lynette Livesey

"A big thank you to HHG for their professional service, continued support, and wide range of legal knowledge. Our clients have given us nothing but kind words regarding HHG Legal Group and so we have no hesitation in referring and recommending Simon Creek and HHG Legal Group for their outstanding services and legal expertise."

Nigel Plowman, Director at McKinley Plowman & Associates

"Simon is a friendly and practical legal advisor. I have received great feedback from the clients I have referred to him and his team at HHG Legal Group."

Richard Beal, Director at BDO

"Over the last few years, I have been impressed by Simon’s legal ability, management skills, entrepreneurial spirit, personal integrity and people skills. He appears to be that rare breed of lawyer – both knowledgeable and commercial."

Michael Malone, Founder of iiNet

"Our family has been a client of HHG Legal Group over many years.  Business has included drawing up of wills for three generations and preparing of probate for my father in law. I would have no hesitation in recommending HHG Legal Group to anyone requiring such services."

Bernice Climie

"You should be congratulated for the manner in which your staff address clients and we found our dealings with your company, once again a very pleasant experience and we would like to truly thank you for your efforts."

Steve Harvey and Jane Powell

"HHG Legal were absolutely fantastic. Extremely responsive and brought calm to our chaotic family situation through their knowledge and caring attitude. Extremely professional from our very first contact with them and they expertly guided our family though the required legal process over almost a 12 month period."

Amanda Williamson

"Fantastic team! They really care about their client. Tim Colcutt is a 'go that extra mile' guy who gives his client his all. I can't recommend HHG and Tim enough."

Kerry Samson

"I had a fantastic lawyer in Anne Hurley. She helped me out a great deal with good, sound advice in a friendly, professional manner. First class, thanks Anne"

Graeme Hammond

"Marine Plant Systems has been working with HHG Legal Group for a few years now and they continually provide first-class service. Their professional advice has been invaluable to our company."

Carolin Grimm - Marine Plant Systems

"We were kept up to date at all times. Pricing was always updated over the time period so we remained "in budget". Personal access to someone whenever I had questions. All in all a great experience without too much fuss."

Rosslyn Tasker - COO AltusQ Pty Ltd

"Good service you can count on."

Miles Lee

"HHG Legal Group has provided outstanding support as I have taken the journey of buying a business, their professionalism is beyond reproach. Their assistance throughout the Due Diligence process has been invaluable, I would fully recommend them."

Mark Armitage

"Very friendly and efficient service - what a pleasure working with Anne."

Jacques Taylor

"I highly recommend Daniel from HHG Legal Mandurah. When dealing with a complicated legal property matter recently I was extremely impressed by Daniel's honesty and integrity and the legal advice I received. I am very happy with the service from HHG Legal."

Tony Walker