Extensions of time, delay costs and time bars: claiming and assessing delay
Delay is one of the most expensive and most disputed issues on any construction project. For contractors, an extension of time (EOT) protects against liquidated damages. For principals, a well-run EOT regime preserves the right to those damages and keeps the project on a contractual footing.
This article looks at how EOT claims are made and assessed under contracts based on AS 2124-1992 and AS 4000-1997. It also covers delay costs and the time bars that so often decide these claims.
Key takeaways
Notice requirements are usually conditions precedent. A late or deficient notice can defeat an otherwise valid claim.
An up-to-date construction program is essential. Without one, neither party can properly show or assess critical delay.
Distinguish cause from effect. The event causing delay and the delay itself can happen weeks apart, and the difference matters for time limits.
Time and money are treated differently. An EOT does not automatically carry an entitlement to delay costs.
Respond to every claim, on time. A failure to assess an EOT claim is a breach of contract and can fuel prevention principle arguments.
Is the contractor entitled to an EOT?
Assessing an EOT claim usually involves the following questions.
1. Is the cause of delay a qualifying cause?
The contract lists the events that entitle the contractor to an EOT. Under AS 2124 these are in cl 35.5, and they typically include acts or omissions of the principal or superintendent, variations, and (if selected in the annexure) events such as inclement weather or industrial action.
The cause and its effect may not coincide. A variation directed in March may only delay the works when that work is reached in May. Inclement weather, by contrast, causes delay at the same time it occurs.
2. Was the contractor actually delayed on the critical path?
Under AS 2124, an EOT is generally only available for delay to work on the critical path, and the contractor must show it. In practice, that depends on an up-to-date construction program. Superintendents should require programs to be provided and regularly updated, and should review and respond to updated programs promptly. Repeated failures to do so make later EOT assessments difficult.
The principal's own conduct matters too. In Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49, the Court found that the contractor could not comply with the programming requirements because the principal had persistently failed to provide reliable interface and access dates.
3. Has the contractor tried to mitigate?
Mitigation is relevant to what is a reasonable EOT, and some contracts make it an express precondition.
4. Is there concurrent delay?
Where a qualifying and a non-qualifying delay overlap, the contract's concurrency clause will determine the outcome. Many amended contracts deny an EOT for concurrent periods, with exceptions where the qualifying delay began first. Concurrency analysis is technical, and expert programming evidence is often needed.
5. Were the notice requirements met?
Under AS 2124, the contractor must give a notice of likely delay as soon as practicable, and in any event within a short period after it becomes evident that something may delay the works. It must then make a written claim (often within 14 or 28 days) after the delay occurs. The claim must set out the facts on which it is based, the number of days claimed, any delay or disruption costs, and supporting documents. These are often conditions precedent to an EOT.
Assessing and responding to the claim
Under AS 2124, the superintendent must assess an EOT claim (within the time required) give reasons if the full extension is not granted. Depending on the timing, the assessment may be partly prospective and partly retrospective.
A good response mirrors the claim. It should:
reference the notices and the qualifying cause relied on
address critical path and concurrency
state the number of days granted and the new date for practical completion
address any costs claimed
request an updated program.
If more information is needed, give an interim response rather than none.
The prevention principle and unilateral extensions
A failure to assess a claim on time does not, by itself, set time at large, but it is a breach of contract. The bigger risk is the prevention principle. A principal cannot hold the contractor to the date for practical completion, or claim liquidated damages, where the principal's own conduct prevented the contractor from meeting it. If there is no mechanism to extend time for that conduct, the date may fall away and the contractor need only finish within a reasonable time (see Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53).
Most contracts address this by giving the superintendent power to grant an EOT even where none has been claimed. In unamended forms, courts have held that this power must be exercised honestly and impartially, in the interests of both parties (Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211). Many amended contracts now state that the power is for the principal's benefit only. Superintendents should still consider using it where principal-caused delay would otherwise threaten the date for practical completion.
Delay costs
Time and money are separate entitlements. Under AS 2124 (cl 36), the contractor is only entitled to delay costs for an EOT granted for specified compensable causes, typically delay caused by the principal, the superintendent or those they are responsible for. Weather and other neutral events usually give time but no money. Under that clause, the contractor must claim within 14 days of the EOT being granted. It is then paid the extra costs necessarily incurred by reason of the delay, such as extended site overheads, plant and supervision.
Two points often cause disputes. First, the EOT is often assessed prospectively, but costs are actual, so the days granted and the costs proved may not match. Second, where compensable and non-compensable delays overlap, the contractor must show which costs were caused by the compensable delay. Good records, and often expert evidence, are essential. Watch, too, for delay costs being claimed again within variation valuations.
Time bars
Time bars require a party to give notice within a set time, failing which it loses its entitlement. Australian courts have enforced them as part of the parties' commercial bargain. In CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC 217, a subcontractor was delayed for over 100 days by the head contractor's failure to move a shiploader. It notified the delay about three weeks after it began, when the subcontract required notice within seven days. The Court held the claim was time barred, rejected arguments based on waiver, estoppel and the prevention principle, and the subcontractor ended up liable for liquidated damages.
When assessing compliance with a time bar, consider three things:
the trigger: what event starts time running (the possibility of delay, its start, or its end)
the timeframe: calendar or business days, or words such as "promptly" or "as soon as practicable"
the content: what the notice must contain, and whether that is achievable at the time.
There are now some limits on time bars. Under s 16 of the Building and Construction Industry (Security of Payment) Act 2021 (WA), an adjudicator, court, arbitrator or expert can declare a notice-based time bar unfair in a particular case, if compliance was not reasonably possible or would be unreasonably onerous. That applies to contracts entered into after the provision commenced. The unfair contract terms regime in the Australian Consumer Law may also apply to standard form contracts with small businesses.
If you intend to rely on time bars, be consistent from the start. Enforcing them selectively invites waiver and estoppel arguments. If you choose not to rely on one, say expressly that it is a one-off.
How we can help
Lang Litigation and Construction Law advises principals, contractors and subcontractors on EOT and delay claims, delay costs, liquidated damages and time bars, and acts in adjudication, arbitration and litigation. If you are preparing, assessing or disputing a delay claim, contact us early.
This article is general information only and is not legal advice. You should seek specific advice about your circumstances.