Lecture 4 - EOT + Delay + LD (B+W).pdf

1Lecture 4 - Extension of Time, Delay & Liquidated Damages

Darren Benger

AR5422 - Architectural Practice 2 [Semester 2] - Dept of Architecture - School of Design & Environment

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In regard to completion ...

Extension of Time (EOT) and Delay occurs when the Works

are not completed by the Contractual Date for Completion

ie not completed within the Contract Period;

Lecture 4 - Extension of Time, Delay & Liquidated Damages

Darren Benger


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Clause 22(1) requires that the Contractor shall complete the Works on or before the Date of Completion [as stated in the Appendix]

Clause 22(2) states that complete and completion shall mean the completion certified by the Architect under Clause 24(4)

Similarly, Clause 3(4) gives definition that completion shall mean the completion certified by the Architect in his Completion Certificate under Clause 24(5)

Clause 24(4) provides that a Completion Certificate shall be issued by the Architect when the Works appear to be complete and to comply with the Contract in all respects.

Clause 24(5) further provides for completion being certified subject to a schedule of minor outstanding works.


Darren Benger


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Note:

Building contracts typically are not with time of the essence ie delay in completion will not cause material harm / render the agreement meaningless / render it impossible for the principal purpose or the performance of obligations (ie the building) to be accomplished


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Note: Building contracts typically are not with time of the essence ie completion by the date for Completion is a warranty term of contract, ie a promise / assurance by the Contractor to complete by a certain date, which if breached would entitle the Employer to [liquidated] damages, but not a condition term of contract that would entitle the Employer to treat the contract as repudiated or fundamentally breached (allowing the contract to be terminated or avoided in addition to any damages).

hence, the EOT and LD provisions in contract indicate that time is not of the essence (even though achieving completion by the Date for Completion may be very important)


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Clause 25 provides for where the Works involve different Phases or Stages

Each Phase or Stage has separate Completion Certificates and LD, insurance, maintenance, release of Retention Monies, [but not Final Certificate])

applied mutatis mutandis as if each Phase or Stage was the subject of a separate and distinct contract


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Clause 26 provides for where the Employer wants to occupy part of the Works

which is sufficiently complete, but before the whole of the Works are actually

completed

Note: Each Occupied Part has separate; completion and maintenance LD insurance release of Retention Monies


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Contractual Date for Completion:

Clause 10(1) provides that

the Date for Completion shall be calculated from the Contract Commencement Date and Contract Period


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Revised Date for Completion

Clause 10(1) provides that the Date for Completion shall be modified or re-calculated if the Commencement Date stated in the Appendix becomes "invalidated" for any reason which is not the responsibility of the Contractor.


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Revised Date for Completion

Architect to issue Certificate of Revised Contract Commencement Date if requested by contractor.

- postpones (shifts-back) the commencement of contract period, not an extension of the contract period.

- compared with failure of Employer to afford proper possession of the Site despite the Commencement Date, which is covered by EOT (See 23(1)(i) with 10(2))


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Changing the Time for Completion 3 modes :

Revised Date for Completion - Clause 10(1) A shifting of the timeframe to do the works (the

Contract Period) due to Revised Commencement Date

Extension of Time - Clause 23 A longer time within which to complete the Works

(an extension of the Contract Period)

Further Extension of Time - Clause 24(3)(a) Further time within which to complete the Works

(a period between termination of certified delay and certified completion or certified further delay)


Darren Benger


11Extending the Contract Period / recalculation of Date for Completion (EOT)

Clause 23 allows for the Contract Period / Date for Completion to be extended:

4 KEY REQUIREMENTS:

1) Only if delaying factors are within the grounds set-out in Sub-clauses 23(1)(a)to(q).

And subject to the matters / events actually causing delay to the completion of the Works.

2) Subject to due diligence and the taking of all reasonable steps by the Contractor to avoid or reduce [the delay in completion].


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Clause 23 allows for the Contract Period / Date for Completion to be extended:

3) Subject to the Contractor giving notice [see Sub-clause 23(2)].

4) Subject to the submission by the Contractor of sufficient explanation, information, particulars or materials that will enable [the Architect] to estimate the period of extension of time to be granted within 28 days of the Architect requesting in writing.

causation: did the event actually cause the delays to the projects ?

by refusing what hes obliged to give, he can choose not to grant EOT


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What are the grounds for EOT entitlement?

23(1)(a) : Force Majeure where part of the contract cannot be performed due to

causes that are not within the control of the parties, such as natural disasters, that could not be avoided through the exercise of due care.


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23(1)(b) : exceptionally adverse weather conditions typically assessed as raindays (days in which

prescribed a rainfall measurement is exceeded) in excess of the average number of raindays per month.


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23(1)(c) : fire, storm, lightning, high winds, earthquake or aircraft or aerial objects

23(1)(d) : war, hostilities, insurgency, terrorism, civil commotion, or riots

23(1)(e) : industrial action by workmen, strikes, lockouts or embargoes


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23(1)(f) : Architects instructions but relating to clauses:

1(4)(a) : varying the permanent works 1(4))b) : varying temporary works or methods of

working 1(4)(c) : postponing or suspending work (w/o defect

/ contractor fault) 7(1) : variation required to comply with statutory

requirement 11 (2) : inspection of works covered up or for tests

or investigations 14 : instruction to deal with discrepancy

May be related to frustration of the contract

Impossible to only perform part of the prjct

elaborate on the subclause to say.. this day w ? mil of rain is considered a rainy day.


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23(1)(g) : Architects instructions given in relation to P.C. or Provisional Sum But only where the work constitutes a variation

(change from description of work, materials or goods in the Contract Documents)

23(1)(h) : Architects instructions under Clause 28 in regard to Contingency Sums ie where the works to be ordered are totally unknown

at the time the Contract is made, thus constitutes a variation


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23(1)(i) : failure of the Employer to afford possession [of Site] to the Contractor Cl. 10(2) entitles the Contractor to free and

uninterrupted possession of the whole of the area of the Site on the Contract Commencement Date


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23(1)(j) : the Contractor not having received from the Architect within a reasonable time necessary drawings, instructions and other information reference Clause 3(2):

the Architect shall supply further or working drawings, specifications, details, levels, instructions necessary to amplify and explain in detail the work to be carried out within a reasonable time [considering: programme, rate of progress, extended Date for Completion, reasonable pre-planning requirements, advance notice or request]


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23(1)(k) : acts or omissions [failure to act] of other contractors engaged by the Employer

23(1)*(l) : shortage of labour[*optional clause]

23(1)*(m) : shortage of goods and materials[*optional clause] Would this provision address the sand ban issue?

Difficulty (or costliness) of procurement vs absolute non-availability of goods and materials.

Christine Chow

Esxtra work that could not be planned

Not enough info cannot carry out the works


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23(1)(n) : valid suspension of work Contractor is entitled to suspend work under Cl. 33(5)

if Architect fails to issue a required Certificate or statement in writing, and under Cl. 33(6) in accordance with SOP Act provisions (ie for non-payment of adjudicated amount)


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23(1)(o) : grounds under .. 1(8) : relates to unauthorised orders by Architect 3(3) : damage to Works caused by Employer /

Consultants 7 : variation due to statutory obligation 14 : instruction related to discrepancy 29(3)(a)(ii) : order Contractor into sub-contract despite

valid objection to the sub-contractor nominated 29(3)(b)(ii) : order Contractor into sub-contract despite

valid objection to a term in the Nomination Instruction


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23(1)(p) : any act of prevention or breach of contract by the Employer, or any matter in respect of which the Employer gives the Contractor an indemnity

A cover-all clause: - consider the previous notes on granting EOT for prevention situations (else time may become at large)

Thought: is the Architect's specification of a material that is known to take 3 months to order/deliver visvis a Contract Period of 2 months considered an act of prevention, or something the Contractor should pick up while tendering?


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23(1)(q) : any other grounds expressly mentioned in the Contract Documents

Note: mentions Contract Document rather than Conditions - hence other grounds for EOT could be added in supplementary terms.

Eg should / could obtaining TOP be written in as a ground for EOT ?? (See notes in previous lecture on Completion / Post-Completion)


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Remember; Architect only authorised to grant EOT as provided for in contract

- especially that EOT is subject to the stipulated grounds.


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Note on TOP as criterion for 'completion': If TOP were written into the Contract as a criterion for

Completion, then the potential for the Statutory Authorities to delay completion (eg beyond a stipulated period allowed for TOP application processing) would need to be expressed as a ground for EOT.

If not, EOT would not become entitled. It would also be argued as to whether such delays are

Employer-caused (ie could set time at large) or a neutral event (hence the Contractors risk).


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Mitigation of Delay

Subject to due diligence and the taking of all reasonable steps by the Contractor to avoid or reduce [the delay in completion]. Sdimilar in nature to Cl. 21 requiring that the

Contractor shall proceed with the Works diligently and with due expedition at all times until completion.

What are reasonable steps? Does this involve cost to the Contractor? Eg can an Employer expect acceleration in the progress of works, or just maintaining of the rate of progress of works?


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Contractor to give Notice (Cl. 23(2):

A condition precedent to EOT is that the Contractor is to give notice within 28 days

(unless Architect has already expressed willingness to grant EOT)

The Architect is not authorised to grant EOT if this requirement is not met.

[Also note that Cl. 37(3)(f) does not allow an Arbitrator to disregard or substitute with his own decision a decision of the Architect on EOT if the Contractor had failed to give notice in compliance with 23(2)]


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The Notice is only required to;

Notify the Architect of any event or direction or instruction that the Contractor considers will entitle an EOT,

Give explanation as to why delay to completion will result

[it does not need to give information/particulars, nor justification for EOT, nor estimate the duration of delay].


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28 days to give 'notice' is from the date the event / matter is known - not necessarily the date it finishes.

[eg this gives the Employer opportunity to change / retract an instruction, or to order acceleration of the Works progress to avoid the delay

eg to meet an important key date for completion (eg fixed date for ceremony or to committed date for commence of business, or to start a school term, etc)

to avoid claims by Contractor under general law for prolongation costs (if EOT is granted)]


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Within 1 month of a request by Contractor (specifically mentioning Cl 23(2)) the Architect shall inform the Contractor whether the matter described in the Notice entitles the Contractor in principle to an EOT,

Typically, this should firstly include a verification that the matter is under the stipulated grounds for EOT.

[ie, to let the Contractor know how he should schedule for the remaining works, so he can complete on time - he must know the target!]


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32Request for Information and Architects Decision on EOT

Firstly, the duty of the Architect:Clause 23(3) : After any delaying factor ... has

ceased to operate and it is possible to decide the length of period of extension ... the Architect shall determine such period of extension ... and notify the Contractor in writing ...


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ie the decision on actual length of period of EOT is only once the delaying factor has ceased to operate.

the Architect shall determine such period of extension - ie the Architects duty, and not subject to a claim by the Contractor (although Contractor may be required to submit explanations, information, etc).

The Architect may notify the Contractor on the decision on EOT at any time up to and including the issue of the Final Certificate

this correlates to the issuance of Delay Certificate - consider 24(1) as EOT matters can affect issuance of Delay Certificate and therefore has effect in LD recovery.


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How to assess EOT? Generally accepted in law that the EOT is a

reasonable estimate (not an exact science), but;

Generally required by law that the process of estimating the quantum of EOT shall be reasoned and methodological - not impressionistic.


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Different theories exist for determining/assessing EOT, but SIA does not stipulate or recommend any particular approach / method.

eg see the SCL UK's protocol for delay.

Most theories and approaches involve analysis of programmes and critical path networks


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What is critical path? Where a delay in one task has a consequential

and unavaoidable knock-on effect to subsequent tasks such that the overall completion is delayed.

Eg: Piling - Sub-structure - Superstructure -Building Envelope - Internal Works --completion.

As distinct to tasks that are carried out concurrently or simultaneously to work tasks on the critical path.

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In law, the Architect is required to act impartially when estimating EOT, and shall not be influenced by either party.

(else the EOT decision / Delay Certificate may be ruled to be invalid, and possibly time would be at large, so LD cannot be applied).

The Architect must act impartially and fairly and no longer as the agent of the Employer for purposes of estimating EOT - as EOT can lead to recovery of LD.


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In law, the Architect is required to act impartially when estimating EOT, and shall not be influenced by either party.

Also note the Architects Rules 1991 -The Schedule (Code of Professional Conduct and Ethics)(Act 22 of 1991, Section 38, The Schedule) - Part I, Rule 3 - Conditions of a contract3.- (1) An architect shall at all times apply the conditions of a contract with entire fairness between his client and any contractor concerned, and in any questions arising between his client and the contractor in which the architect is acting between the parties by reason of his professional expertise, he shall act in an impartial manner.


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In order to fulfil his duty to decide on EOT:Clause 23(4): The Architect may in writing

request the Contractor for sufficient explanation, information, particulars or materials that will enable [the Architect] to estimate the period of extension of time to be granted... within 28 days of the Architect requesting in writing


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The Conditions state: The Architect shall not be required to decide and estimate the EOT unless in receipt of the sufficient information etc requested.

[BUT : be careful in establishing what is sufficient - general expectation of the Courts is for the Architect to do the best possible with the information available - not to take an easy way out!]

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Delay (Cl. 24(1)

The Contractor is in default if After latest date for completion (ie revised or

extended date) No other matters entitling EOT Works nonetheless incomplete

then Architect may issue a Delay Certificate at any time up to and including the Final Certificate

(if was as soon as possible then any error in certificate would invalidate the Delay Certificate -thus time would become 'at large' and any entitlement to LD would be lost)


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Liquidated Damages (Cl. 24(2)

Upon a Delay Certificate, Employer shall be entitled to recover LD at the rate stated in the Appendix at Employers discretion whether to deduct

Note: LD is a pre-determined quantum of damages that may apply if Contractor breaches contract (ie fails to meet complete contractual obligation to complete on time) An estimate of realistic / reasonable losses if the

Works are delayed - need not be proven in detail. Not a penalty (ie not to be unreasonably excessive).


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Termination of Delay (Cl. 24(3)

Termination of Delay Certificate is issued where a matter that would entitle the Contractor to EOT (regardless of the Contractors own delay*) occurs during period of delay

*(The principles of the concurrent delay doctrine require that neither party can recover damages from the other while at fault himself hence; the Employer cannot profit from liquidated damages during a period of the Contractors culpable delay if the Employer has also prevented completion).

Stops the continuation of accruement of LDLecture 4 - Extension of Time, Delay & Liquidated Damages

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Further Delay Certificate

Upon a Further Delay Certificate, Employer shall be entitled to recommence accruement & recovery of LD

Christine Chow

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Completion Certificate

the liability of the Contractor to pay LD shall cease upon the issue of the Completion Certificate.


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OTHER CONSIDERATIONS REGARDING TIME FOR COMPLETION AND DELAYS .


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47Delays and Changing the Time for Completion

Considerations:

NEUTRAL EVENT Delay

those events not caused by the act or omission of a party, ie beyond the parties control

EMPLOYER-caused Delay

CONTRACTOR default Delay


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Issues of NEUTRAL EVENT Delay:

EOT provisions in contract relieve the Contractor of otherwise being allocated the risk of delays due to neutral events

considering that the Courts will generally enforce the contract on its terms as agreed to by the parties (irrespective of commercial fairness),

ie the Contractor would otherwise still be obliged to complete the Works by the Contractual Date for Completion, irrespective of hardships caused by Neutral Events

hence EOT affects the commercial bargaining / negotiations, and contract price (ie risk = $)

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49What would happen if there was no EOT provision in the Contract?- for Neutral Events:

EOT is a contractual provision to allow the Contract Period to be shifted and extended

else even in the case of delays due to neutral events (eg Force Majeure) the Contractors obligation would still be to strictly comply with the Contract Period and Date for Completion

Note: Very difficult to achieve frustration or impossibility of a contract where a contract may be set aside due to an unforeseen event, that could not have been induced by the parties, making it impossible for the principal purpose or the performance of obligations to be accomplished.


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Further note on 'frustration' of Contract:

Compare with Cl. 1(3)(c) where the Architect may issue a Direction (ie w/o cost increase) "to assist [the Contractor] in overcoming difficulties or in avoiding excessive costs during construction"

ie 'Difficulties' is NOT a basis for compensation / additional payment nor a ground for EOT (ie risks assumed by the Contractor).


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Issues of EMPLOYER-caused Delay:

EOT is to avoid the effects of Prevention

ie delays caused by Employer through preventing / hindering the Contractors performance of obligations under the contract*

*Acts of Prevention (such as late decisions and information, or late possession of Site) can include acts of the parties under the Employers control, eg the Architect as agent of the Employer who administers the contract


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Issues of EMPLOYER-caused Delay:

Prevention can cause the Date for Completion to fall away / become undefined (hence time becomes at large)

When time is at large: (a)the Date for Completion can no longer be applied, so

the Contractor only needs to complete the Works within a reasonable time

(b)therefore LD provisions cannot be applied as there is no defined starting date of delay default

(c)so the Employer would only be entitled to general damages (if Works are not completed within a reasonable time)

Date for completion is uncertain

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53What would happen if there was no EOT provision in the Contract?- for Employer Delays:

Lian Soon Construction Pte Ltd v Guan Qian Realty Pte Ltd (No 2)[2000] 1 SLR 495; [1999] SGHC 25918 ... where there is any prevention by the employer of the contractors performance of the contract and the contract does not provide for extension [of time], or if it so provides but extension is improperly withheld, the contractual date for completion will cease to apply, and the employers entitlement to liquidated damages, if any, is gone; his remedy for the contractors delayed performance, if any, is confined to general damages, which in most cases would be more difficult to prove than are liquidated damages.


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- for Employer Delays:

time at large is often argued by Contractors lawyers (eg where there is claimed error in Architects certificates, so the revised date for completion is not clear) ie so Employers entitlement to liquidated damages, if any, is gone.


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Typically time at large - a situation where there is no longer a defined date for completion - is due to:

1. No fixed date [but not usual in SIA form due to Appendix]

2. Date ceases to apply due to; (i) act of prevention by Employer (where

(a)there is no provision to regularise the prevention with an EOT, or

(b) EOT is improperly withheld (ii) breach of contract by Employer

3. Employer waives obligation for completion 4. Interference by Employer in certification


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Prevention principle is that the Employer cannot insist upon the performance of an obligation which he has prevented the promisor from performing.

Prevention - Breach of Contract*

(eg affording late possession of Site), or Ligitimate conduct

(eg ordering variations in accordance with rights under the contract)

*eg Cl. 31(14) notes "breach of contract such as for late provision of necessary information or or failure to give undisturbed possession of the Site" as grounds for EOT under 23(1)(i)&(j).Also note Cl. 23(1)(p): "EOT for "any acts of prevention or breach of Contract by the Employer " as a general ground for EOT.

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When time is at large, it is a usually an implied term that the Contractor is to complete within a reasonable time (usually determined retrospectively based on the facts).

Where contract allows for EOT, the Date for Completion is reset / revised - so a clear and defined date for completion still exists - to preserve the Employers right to LD for breach of obligation to complete on time.

If no EOT clause then a new contract is required to set a new date for completion, or time becomes at large if the existing contract is to be pursued.


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When time is at large, the Employers remedy for the contractors delayed performance, if any, is confined to general damages, (no longer liquidated damages) which in most cases would be more difficult to prove (and take more time and expense) than for liquidated damages.


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Note that if EOT cannot be issued ... eg no EOT provision in contract eg EOT is subject to a condition precedent of the Contractor

giving 'notice' of a delaying event

...then situations of 'prevention' cannot be dealt with under the contract, hence prevention would cause time to become at large.

A contract should therefore always allow for the granting of EOT, and irrespective of whether such 'notice' is submitted

The SIA's form of contract does allow for the Architect to indicate a 'willingness' to grant EOT in lieu of requiring the 'notice (See 23(2)).


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Notes on Notice:

In fact, some jurisdictions have found that a pre-condition Notice of delay can work against the Employer where failure to meet the pre-condition and the denying of entitlement to EOT renders as ineffective the EOT provision (as if it didnt exist), hence time can become at large.

Hence, in the provisions of contract, the EOT should be grantable by the Employer / Contract Administrator irrespective of any Notice of delay or claim for EOT by the Contractor, else without EOT (in a case of Employers prevention) the time for completion becomes at large.

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Notes on Notice:Also, the Courts have found in some jurisdictions and cases that a result of no EOT being entitled because of a failure to comply with a procedural pre-condition to submit a Notice of delay should not be a basis for the Employer being entitled to LD !The Courts sentiment is that it would be unmeritorious for an Employer to get LD where the delays were of his own making. This is in line with the well-established principle of law that a party cannot benefit from the non-performance that has been hindered by him.

[This does not mean that the Architect can or should ignore any failure of Contractor to comply with a procedural pre-condition to submit a Notice of delay but should be of general awareness of the position the Court / Arbitrator make take]


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Also Note that EOT may not be desirable if finishing on time is very important to the Employer;

(eg to commence business on time - to meet a key date, eg supermarkets opening in time for CNY)

Not to be confused with time being of the essence which relates to the essence / fundamental basis of the contract, for which EOT is not applicable - ie the performance of the Contract is useless if not done on time.


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Also note that in some cases, Contractors pursue loss of profit or other expenses caused by prolongation of the project!

(eg lost opportunity on other jobs) - so the Employer is sued for prolongation costs / losses resulting from EOT granted to deal with prevention / delays caused by the Employer - even though EOT was granted in accordance with the terms of Contract.

(See Cl.12(6) which states that Loss of profit on omitted work or on other business or contracts by reason of prolongation of the contract period shall be recoverable only in accordance with the general law where the Employer is in breach of contract) noting that some grounds for EOT are still 'breaches of contract' eg Cl. 23(1)(i),(j),(p).


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Commencement Date:

Typically: Particular Date stated in the Tender

Documents, or By formula set-out in the Tender Documents

and LOA eg, particular date, or issuance of Permit, whichever

later type of clause.

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Mobilisation Period:

Not contractual provision, but common in practice. Period for Contractor to arrange the following, as

necessary before physical works can be allowed to commence:

Permit to carry out structural works MOM worksite registration Insurances (and Performance Bond, if applicable) Set-up the Site

Typically a period allowed before Contractual Commencement Date takes effect, as this exercise is not entirely within the Contractors control.

Some projects will consider / allow some time for mobilisation-type activities, but contained within the Contract Period.


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Mobilisation Period:

Note on Programme and Make-up of Prices:

A period for mobilisation also correlates to contractual provisions:

Clause 4(1) and 5(3) respectively require that the Contractor will not be permitted to commence work until 14 days after submission of; a sufficiently detailed programme a sufficient breakdown of prices

This is notwithstanding the passing of the stipulated Contract Commencement Date, and no extension of time shall be given in respect of any delay so caused.


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Note: Effect of Architects Certificates

Notes on Temporary (Provisional) Finality:Clause 31(13) and 37(3)(h) expressly provide in contract

that Architects Certificates : shall have status of temporary finality ie full effect

by way of Summary Judgment or Interim Award shall be given to all decisions and certificates of the Architect

ie the Architects Certificates shall not be final and binding before an arbitrator or the Courts; The Courts and/or Arbitrator are not bound by an Architects Certificates or decisions, including payment, EOT and Delay Certificates

Lecture 4 - EOT + Delay + LD (B+W).pdf

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Transcript of Lecture 4 - EOT + Delay + LD (B+W).pdf