The so called “prevention principle” has long meant that if the employer under a building contract causes delay so that the contractor cannot complete the project by the contractual completion date, the contractor is relieved of its obligation to complete by that date but must instead complete the project within a reasonable time (referred to as making time “at large”).
It is therefore no surprise that most construction contracts include detailed extension of time provisions to deal with the effect upon the completion date where such events occur, with most of the standard form contracts providing that acts of prevention by the employer are a relevant event for the purposes of the extension of time clause.
Concurrent delay is something of an imperfect science, but in principle can occur where a delay caused by the contractor takes effect at the same time as a delay caused by the employer, and both are equally causative of the delay to the works. In that situation, it has been argued by contractors that a failure to award them an extension of time gives rise to the prevention principle, making time “at large”. Such arguments have been given little support by case law, but a recent decision of the Court of Appeal has given much more heavy weight authority that the prevention principle does not apply to concurrent delay.
In that case (Cyden Homes Ltd v North Midland Building Ltd), the Court of Appeal upheld the decision of the Technology & Construction Court in 2017, which confirmed that where wording is introduced into extension of time clauses with the aim of allocating the risk of concurrent delay to the contractor (i.e. such that a concurrent delay by the employer does not let the contractor off the hook), such a clause will be enforceable and upheld. The court was satisfied that the provision was “crystal clear”, effective and not contrary to the “prevention principle”.
The contractor argued that the prevention principle was an overriding rule of public or legal policy, but the court rejected this. In doing so, the court held that there is no authority to suggest that parties cannot contract out of the prevention principle and that there is no clear connection with the separate issues which may arise from concurrent delay.
Additionally, the court rejected the contractor’s second ground of appeal that there was an implied term that the employer would be prevented from levying liquidated damages if the contractor was not entitled to an extension of time for concurrent delay.
Contractors should take note that the court’s view was that, even in the event of concurrent delay, liquidated damages would be taken as a true pre-estimate of expected loss. The court also found that the implied term would not ‘go without saying’ or be required for the contract to work. Similarly, the fact that the contract was harsh on the contractor without the presence of the implied term did not sway the judge: if that was the terms of the contract that the parties had signed up to, then those were the terms that they court would apply.
This judgment clarifies that parties are free to allocate risk of concurrent delay, and contractors must be alive to the potential commercial risk this creates for them when being asked to sign up to a contract on such terms. Also, where disputes arise involving issues of concurrent delay, this case will form an important authority for employers to successfully argue that the prevention principle does not apply in cases of concurrent delay.