In North Midland Building Ltd v Cyden Homes Ltd, last autumn the TCC upheld a clause that disallowed a contractor's claim for an extension of time in cases of concurrent delay. The court found that the parties to a contract are free to allocate the risk of concurrent delay. The contractor had argued that clause could not be valid as the prevention principle would apply (that is the principle that provides that no party may require the other to comply with a contractual obligation in circumstances where that party has itself prevented such compliance.) The court held that the prevention principle does not apply to cases of concurrent delay.
See here for our blog post on the first instance decision
The contractor appealed the decision on the grounds that the prevention principle would apply to negate the concurrent delay clause as a matter of legal policy. This argument did not succeed as the appeal court stated that the prevention principle is not an overriding rule of public or legal policy and there is no authority to back this claim. The clause in question was an agreed term of the contract and there is no suggestion in any previous case that the parties cannot contract out of some or all of the effects of the prevention principle.
The contractor went on to argue that if the relevant clause was found to be enforceable, so that he was not entitled to an extension of time for concurrent delay, there was an implied term which would prevent the employer in those circumstances from levying liquidated damages. It would be bizarre if the employer could recover liquidated damages for a period of delay for which it was responsible.
This second ground for appeal did not succeed. There was no suggestion on the part of the contractor of the liquidated damages being a penalty so, as it was accepted they were a valid and genuine pre-estimate of loss caused by the delay, that must remain the case whether the delay was the result of just one effective cause, or two causes of 'approximately equal causative potency'. The extension of time provisions were inextricably linked to the provisions relating to liquidated damages and there could be no basis for arguing for a result in respect of liquidated damages that was different to the result in respect of extensions of time. As the concurrent delay clause was an effective clause, it expressly permitted the employer to levy liquidated damages for periods of concurrent delay, because it would not grant the contractor relief against such liability by extending the completion date.
The court dismissed the appeal and concluded that the upholding of the agreed clause, that did not allow the contractor an extension of time in circumstances of concurrent delay, could not be said to be uncommercial. It had been agreed by the parties to amend the JCT contract in this regard and place the benefit of concurrent delay on the employer.
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