IF THE EMPLOYER’S AGENT ISSUES AN ORDER FOR EXTRA WORKS AFTER THE EXTENDED COMPLETION DATE BUT BEFORE PRACTICAL COMPLETION, WILL TIME BECOME AT LARGE RENDERING PENALITIES NO LONGER ENFORCEABLE?
The case, Balfour Beatty Ltd -v- Chestermount Properties Ltd (1993) heard before
Mr Justice Colman deals with the subject matter of the question.
The works comprised the construction of the shell and core of an office block. Work commenced on 19 September 1987, the completion date being 17 April 1989, later extended to 9 May 1989. The Architect issued a certificate stating that the works should be reasonably have been completed by this date. By January 1990 the work had still not been completed.
During the period 12 February 1990 to 12 July 1990 the Architect issued instructions for the carrying out of fit out works as a variation to the contract. Practical completion of the shell and core was achieved on 12 October 1990 with the fit out works not finished until 25 February 1991. The Architect issued two extensions of time to give a revised completion date of 24 November 1989. The variation with regard to the fit out works were issued after the revised completion date but prior to practical completion, during the period when the Contractor was in default.
The Contractor argued that the effect of the issue of variations during a period of culpable delay was to render time at large, leaving the Contractor to complete within a reasonable time. This being the case, the Employer would lose his rights to levy penalties.
Alternatively, the Contractor argued that the Architect should have granted an extension of time on a gross basis. In this case it was argued that the fit out work should have taken 54 weeks, this period to be added to 12 February 1990, when the fit out variation was issued.
It was the Employer's contention that the correct approach should be a net extension of time, that is to say, one which calculated the revised completion date by taking the date currently fixed for completion and adding to it the 18 weeks that the Architect considered to be fair and reasonable for the fit out work.
The main plank in support of the Contractor's argument was that if the net method were adopted the extended completion date would expire before the variation giving rise to the extension of time had been instructed, which was logically and physically impossible. If the Contractor's line were followed it would provide him with a windfall which swept up his delays. While recognising this, the Contractor considered the problem resulted from the Employer's own voluntary conduct in requiring a variation during a period of culpable delay.
Mr Justice Colman did not agree. He found in favour of the Employer on a number of grounds:
"The objective of the extension of time provisions is for the Architect to assess whether any of the relevant events have caused a delay and if so by how much. He must then apply the result of his assessment to give a revised completion date. It would need clear words in the contract to allow the Architect to depart from a requirement to extend the completion date by the period of delay caused by the relevant event."
The final nail in the Contractor's coffin came when Mr Justice Colman said:
"...in the case of a variation which increases the works, the fair and reasonable adjustment required to be made to the period for completion may involve movement of this completion date to a point in time which may fall before the issue of the variation instruction".
Where an Employer's Agent issues an order for extra work after the contract completion date but before practical completion, it is appropriate where resultant delays occur for an extension of time to be granted. Such extension of time will be calculated by extending the completion date by the net period of delay.
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