Common misconceptions in Construction Law

Construction law is diverse and in some respects archaic.  No two construction projects are the same and this can mean that even familiar, simple principles can arise in novel and diverse ways.  Andrew Cullyer, Litigation Executive specialising in construction law and disputes, here reviews three of the common misconceptions within construction law in relation to Extensions of Time, Rectification Periods and Possession.

Extensions of Time in construction contracts

Extensions of Time provisions are a mechanism in the contract that allows the employer, usually by their agents, to extend the contractor’s fixed date for completion under the contract.  Where the contractor fails to complete within either the original or extended period, the employer may be liable for damages for delay and these may be liquidated damages specified under the contract.

So the fundamental question is, for whose benefit are Extension of Time contractual provisions: the employer or the contractor?

It is tempting to say the contractor, as they have the direct benefit of additional time and may be able to claim Loss and Expense as a result of the extension of time.  However, Extension of Time provisions are actually for the benefit of the employer.

An Extension of Time should only be granted where the employer or their agents, or by some unforeseen or unforeseeable act, have prevented the contractor from carrying out the works causing a delay to completion. This, at common law, could be a breach of the contract by the employer.  Extension of Time provisions allow the employer to cure their potential breach of contract by extending the time to complete, rendering any delay by them irrelevant.

Otherwise, any act of prevention by the employer would render the date for completion void and they would lose their right to levy liquidated damages for delay.   Where there are Extension of Time provisions the right to levy liquidated damages for delay after the extended completion date is retained by the employer.

Rectification periods in construction contracts

These are periods in the contract which the employer may require the contractor to return to remedy certain defects at their cost; this can also be known as “snagging”.

It could be said that the employer sees the benefit of these clauses, opposed to the contractor, as they get a right to insist that a contractor rectify defects while the employer does not have to pay out for rectifying those defects.

This is not wholly wrong but it is not the full picture as rectification periods do not alter the underlying contractual liability of the contractor for their defective work or work not in accordance with the contract.  They would, in simple terms, always have to pay to have the work rectified as it arises from their breach of contract or they would have to accept a reduction in value to the work they have carried out due to the presence of defects.

A rectification period grants a contractual mechanism by which the contractor may return and carry out the works itself at presumably the lowest cost.  It is certainly likely to be at a lower cost than if the employer has engaged others to do the work.

Modern rectification period clauses in the standard contracts retain more employers’ rights than previous versions of those standard terms and give the employer or his agents a degree of control over this process.  Care should be taken when drafting and agreeing rectification clauses and we would always recommend seeking legal advice when doing so.

It is all too easy for a rectification clause not only to provide a contractual mechanism but also to go further and provide the contractor a contractual right to return to remedy its own defects.  This can cause significant problems especially where there has been a break down in relationship and a loss of confidence by the employer in the contractor.

Even if drafted properly the presence of a rectification period clause will require the employer to have a very good reason to employ others during that period.  Any others employed are likely to be at a higher cost than getting the contractor to rectify the defects themselves.

However, should a contractor refuse to comply with an instruction to remedy its own defects during the rectification period, this would grant the employer significant latitude to employ others and claim the cost of so doing from the contractor.

Possession during construction

Most commercial construction contracts generally provide for the employer to give the main or principal contractor possession of the whole of the site where the works are going to be carried out.

An important exception is where works are being carried out to a residence which is going to remain occupied during the course of the works. The arrangements as to possession tend to be very different and are therefore not applicable within the context in this article.

Generally, the contractor needs unfettered access to carry out the works and by having possession this allows it to carry out the works without worrying about this issue.  It also means that the contractor is generally responsible for the security and safety of the site and its insurance which is logical as they are the ones best placed to do this whilst the works are being carried out.

The problems arise when the employer wishes to re-enter the site and take partial possession for any reason, or to retake possession entirely. This has legal consequences if the relevant contractual procedures are not followed and/or done without the consent of the contractor.

Most JCT Standard form contracts contain detailed provisions for partial possession by the employer and these will require the consent of the contractor.  Furthermore, if in taking partial possession the contractor is delayed, they may be entitled to an Extension of Time or Loss and Expense.

Those detailed provisions, if followed, protect the employer because the common law position is if the employer retakes possession of the site (in whole or in part) this can be considered deemed practical completion of the works.

However, where the partial possession provisions of the contract are followed, only the part that is possessed by the employer is deemed to be practically complete.  The employer therefore retains many important rights in respect of the rest of the works including the charging of liquidated damages for late completion.

Taking possession of the site in whole or in part without following the contract or otherwise without the contractor’s consent could be considered a breach of the contract. Where possession of the whole of the site is taken this could be considered a fundamental breach of contract. Such a fundamental breach may give the contractor the right to terminate the contract.

If you are an employer contemplating taking early possession of the site, or you are a contractor who has been removed from site prematurely or you have questions relating to Extension of Time provisions or rectification periods, you can contact Andrew Cullyer today on 023 8071 7482 or email andrewcullyer@warnergoodman.co.uk.

For general Litigation or Dispute Resolution enquiries, contact Laura Blakemore on 023 8071 7412 or email laurablakemore@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.