What happens when a contractor agrees to certain terms in a contract that it later considers to be unfavourable?聽 Is the contractor still bound by those terms or can it use common law doctrines to change or avoid its contractual agreement?聽聽
These questions were addressed this month by Mr Justice Fraser (鈥渢he Judge鈥�) in the case of North Midland Building Ltd v Cyden Homes Ltd [2017] EWHC 2414 (TCC), where he considered the effect of a concurrent delay exclusion.
The facts
North Midland Building Ltd, (the Contractor) agreed to carry out the construction of South Farm a sizable house in Ashby-cum-Fenby, Lincolnshire, with outbuildings, barns and associated works. Its client was Cyden Homes Ltd (the Employer).
Contractor and Employer agreed certain bespoke amendments to the standard form JCT Design and Build Contract 2005. The most relevant amendment was to clause 2.25.1.3(b), which amended the extension of time machinery as follows: 鈥淎ny delay caused by a Relevant Event which is concurrent with another delay for which the contractor is responsible for shall not be taken into account鈥�.聽
When the works were delayed the Contractor applied for an extension of time, claiming associated loss and expense. Its application relied on a variety of Relevant Events.
The Employer responded by asserting that most of the substantial delays caused by the Relevant Events in the Contractor鈥檚 application were concurrent with the delays caused by the Contractor.
Relying on Clause 2.25.1.3(b) (above), the Employer argued that, apart from one event relating to weather, the delay events were 鈥渃onsumed by culpable delays attributable to鈥� the Contractor.聽 This caused a drastic reduction to the Contractor鈥檚 claim for an extension of time.
However, the Contractor disagreed and brought Part 8 proceedings against the Employer seeking the following declarations:
o聽聽聽聽聽聽聽聽聽 聽 that the effect of Clause 2.25.1.3(b) made 鈥渢ime at large鈥�, in a situation where the Contractor had a claim to an extension of time for a delay caused by a Relevant Event which was concurrent with another delay the Contractor was responsible for; and
o聽聽聽聽聽聽聽聽聽 that the Contractor was therefore obliged to complete within a reasonable time rendering the Employer鈥檚 contractual claim for liquidated and ascertained damages (LADs) void.
聽In support of this, the Contractor relied on the common law doctrine of prevention, often referred to as the prevention principle.
The prevention principle is 鈥渟omething that arises where something occurs, for which it is said the employer is responsible, that prevents the contractor from complying with its obligations, usually the obligation to complete the works by the completion date鈥�.
Decision
The Judge rejected all of the Contractor鈥檚 arguments.
This case was purely concerned with the correct construction of the clause agreed by the parties. The Judge found the clause to be properly constructed, and stated that the agreement between the parties, regarding appropriate situations for the granting of an extension of time, was 鈥渃rystal clear鈥�.
He found that the prevention principle simply did not apply to this case. First the parties had expressly included acts of prevention within the definition of Relevant Events and clause 2.25.1.3(b) applied to these. Second, following Coulson J鈥檚 comments in the Jerram Falkus case, the Judge noted: 鈥溾��.. for the prevention principle to apply, the contractor must be able to demonstrate that the employer鈥檚 acts or omissions have prevented the contractor from achieving an earlier completion date and that, if that earlier completion date would not have been achieved anyway, because of concurrent delays caused by the contractor鈥檚 own default, the prevention principle will not apply鈥�.
The Employer鈥檚 interpretation of the clause was therefore correct and it was within its contractual powers to respond to the Contractor in the way it did.
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In deciding this matter, the Judge took the approach that parties are free to agree whatever terms they wish to agree so far as the terms are not illegal and are sufficiently certain (as they were on the facts of this case).
This case is an important decision regarding exclusions to extension of time clauses and concurrent delays. It serves as a sobering reminder to parties to ensure that they fully appreciate the implications of the terms they are agreeing to. The Court remains reluctant to interfere with the contractual agreement of the parties. For a contractor this may ultimately result in its achieving a much shorter extension of time than it had thought it was entitled to.
About the author: Abiola Aderibigbe is a construction paralegal with Irwin Mitchell Solicitors
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