Liquidated Damages and Extensions of Time: In Construction Contracts

405 Pages·2009·2.25 MB·English

by  Brian Eggleston

Liquidated Damages and
Extensions of Time
In Construction Contracts
Liquidated Damages and Extensions of Time: In Construction Contracts, Third Edition. Brian Eggleston
© 2009 Brian Eggleston. ISBN: 978-1-405-11815-6
Liquidated Damages and
Extensions of Time
In Construction Contracts
Third Edition
Brian Eggleston
CEng, FICE, FIStructE, FCIArb
A John Wiley & Sons, Ltd., Publication
This edition fi rst published 2009
© 1992, 1997, 2009 Brian Eggleston
Blackwell Publishing was acquired by John Wiley & Sons in February 2007. Blackwell’s publishing
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First published 1992
Second edition 1997
Third edition 2009
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Library of Congress Cataloging-in-Publication Data
Eggleston, Brian, CEng.
Liquidated damages and extensions of time in construction contracts /
Brian Eggleston. — 3rd ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-1-4051-1815-6 (hardback : alk. paper). 1. Construction contracts—
England. 2. Performance (Law)—England. 3. Breach of contract—England.
4. Damages—England. 5. Time (Law)—England. 6. Construction contracts—
Wales. 7. Performance (Law)—Wales. 8. Breach of contract—Wales.
9. Damages—Wales. 10. Time (Law)—Wales. I. Title.
KD1641.E34 2009
343.41′078624—dc22
2008044760
A catalogue record for this book is available from the British Library.
Set in 10/12 pt Palatino by SNP Best-set Typesetter Ltd., Hong Kong
Printed in Great Britain by TJ International Ltd, Padstow, Cornwall
1 2009
Contents
Preface ix
References x
Acknowledgements xi
1 Introduction 1
1.1 General overview 1
1.2 Legal developments 10
1.3 Contractual developments 14
2 Time in contracts 16
2.1 Problems with terminology 16
2.2 Conditions and warranties 17
2.3 Termination 20
2.4 Time for performance 22
2.5 Time of the essence 25
2.6 Notice making time of the essence 30
2.7 Time at large 33
2.8 Reasonable time 34
2.9 Fixing time by reference to correspondence 39
2.10 The effect of time at large on the contract price 39
3 Damages for late completion 41
3.1 Liquidated and general damages distinguished 41
3.2 Principles of general damages 43
3.3 Alternative remedies 49
3.4 Can general damages exceed liquidated damages? 57
3.5 Under-liquidation of damages 58
3.6 Double damages 61
3.7 Liability for damages in tort 64
3.8 The Panatown problem 66
4 Liquidated damages and penalties 71
4.1 Penalties – general introduction 71
4.2 Liquidated damages 76
4.3 Liquidated damages and penalties distinguished 78
4.4 Pre-estimates of damage 104
4.5 Particular aspects of penalty clauses 117
4.6 Evidential matters 123
4.7 Bonus clauses 125
4.8 Site occupation charges 128
5 Prevention 131
5.1 Principle of prevention 131
5.2 Need for extension of time provisions 133
vi Contents
5.3 Defi ning an act of prevention 136
5.4 Prevention after the completion date 138
5.5 Effect of late variations on unliquidated damages 142
5.6 Prevention and time at large 143
5.7 Conditions precedent and time-bars 144
5.8 Steria Ltd v. Sigma Wireless Communications Ltd (2007) 150
6 Legal construction of liquidated damages clauses 156
6.1 Rules of construction 156
6.2 Contra proferentem rule 160
6.3 Restrictions on implied terms 163
6.4 ‘Catch all’ phrases 163
6.5 Inconsistencies in drafting 166
7 Effects of determination 170
7.1 The question of continuing responsibility 170
7.2 British Glanzstoff 170
7.3 Contractual provisions 171
7.4 Novations 172
7.5 Summary on liquidated damages 173
7.6 Determination and limitation on liability 173
8 Problems with sectional completion 175
8.1 Discovering the parties’ intentions 175
8.2 Proportioning down clauses 175
8.3 Provisions for sectional completion 177
8.4 Requirements not fully specifi ed 177
9 Application to sub-contractors 179
9.1 Effect of ‘stepping-down’ provisions 179
9.2 Can there be a genuine pre-estimate of loss? 180
9.3 Commercial considerations 181
9.4 Nominated sub-contracts 182
10 Recovery of liquidated damages 188
10.1 When do liquidated damages become payable? 188
10.2 Meaning of completion 190
10.3 Certifi cates and conditions precedent 196
10.4 Methods of recovery 200
10.5 Time limits on recovery 202
10.6 Interest on repayment 203
10.7 Withholding notices 204
10.8 Decisions of adjudicators 206
11 Defences / challenges to liquidated damages 209
11.1 Benefi ts of precedents 209
11.2 Extension of time due 209
11.3 Completion achieved earlier than certifi ed 218
11.4 Certifi cates not valid 219
11.5 Conditions precedent not observed 226
Contents vii
11.6 No date for commencement 227
11.7 Prevention 228
11.8 Penalties 228
11.9 Provisions void for uncertainty 230
11.10 Waiver / estoppel 230
11.11 Unfair Contract Terms Act 1977 232
12 Extensions of time 236
12.1 Purposes of extension provisions 236
12.2 Notices, applications and assessments 237
12.3 Time for granting extensions 242
12.4 Application to claims 246
12.5 Proof of entitlement 248
12.6 Global claims 250
12.7 The liability of certifi ers 263
13 Relevant events 265
13.1 Force majeure 265
13.2 Adverse weather 267
13.3 Civil commotion, strikes, etc. 270
13.4 Damage to the works 271
13.5 Sub-contractors 272
13.6 Non-availability of resources 274
13.7 Statutory undertakers’ works 275
13.8 Other special circumstances 276
13.9 Statutory powers 276
13.10 Possession and access 277
13.11 Late issue of drawings and instructions 278
13.12 Variations and extra works 281
13.13 Compliance with instructions 281
13.14 Unforeseen physical conditions 282
14 Causation and concurrency 285
14.1 Introduction 285
14.2 Causation generally 286
14.3 Concurrency generally 289
14.4 Dominant cause approach 291
14.5 Apportionment 292
14.6 Rules for extension of time 297
14.7 Discussion on various approaches 297
14.8 Extensions when in culpable delay 300
15 Programmes, method statements and best endeavours 302
15.1 Status of contractor’s programmes and
method statements 302
15.2 Programmes 302
15.3 Shortened programmes 306
15.4 Method statements 308
15.5 Best endeavours and the like 309
viii Contents
16 Delay analysis 313
16.1 Introduction 313
16.2 Critical paths 316
16.3 Float 318
16.4 Methods of delay analysis 320
16.5 Judicial comments on delay analysis 322
17 Building forms 325
17.1 Introduction 325
17.2 JCT 2005 contracts 325
17.3 Commencement and completion 326
17.4 Notifi cation of delay 327
17.5 Extension of time 328
17.6 Relevant events 332
17.7 Non-completion certifi cates 333
17.8 Payment of liquidated damages 334
17.9 Proportioning down of liquidated damages 336
18 Civil engineering forms 337
18.1 NEC 3 – Engineering and Construction Contract, 2005 337
18.2 ICE Conditions of Contract – 7th edition, 1999 343
18.3 ICE Conditions of Contract for Minor Works –
3rd edition, 2001 350
18.4 CECA Form of sub-contract, 2008 353
19 Process and plant forms 356
19.1 The IChemE Red Book – 4th edition, 2001 356
19.2 MF/1 (Rev. 4) 2000 edition 360
20 FIDIC conditions of contract 1999 372
20.1 FIDIC contracts 372
20.2 Commencement and completion 373
20.3 Extension of time 374
20.4 Delay damages 377
Table of Cases 379
Index 389
Preface to Third Edition
The fi rst edition of this book, intended as a construction industry guide to
the purposes and perils of liquidated damages and extensions of time, was
published in 1992. The second edition followed in 1997, by which time it
had become evident that the book was also of interest to lawyers as a com-
pendium of cases. In this third edition I have endeavoured to retain the
original intent whilst at the same time covering in some detail new cases, of
which there are many, refl ecting current approaches of the courts to various
legalistic problems. For that reason, and recognising that many readers of
this book may not have ready access to court judgments or the time or incli-
nation to study them in depth, the extracts I have included from the more
important judgments are sometimes lengthy but hopefully no more so than
suffi cient to explain their purpose.
I have been surprised at the large amount of new material. The fl ow of
cases seems to have risen dramatically over the past ten years or so. One
likely reason for this is that the right to adjudicate disputes has increased
their volume with a corresponding increase of the follow-on work of the
courts. Another likely reason is the present high standing of the Technology
and Construction Court.
One change to the book I have been obliged to make has been to abandon
the earlier inclusion of provisions for liquidated damages and extensions of
time from all well-used standard forms of construction, process and plant
contracts. Such has been the multiplicity of new and amended forms in
recent years that all that can be done now is to include a selection of the
leading standard forms.
That change apart, the structure of the third edition is broadly the same
as in previous editions. There is, however, a new chapter on delay analysis
and the chapters covering penalty clauses, the effects of conditions prece-
dent and time-bars, and the complexities of causation have been signifi -
cantly expanded.
I am indebted to many friendly lawyers for bringing cases to my attention
and for providing me with transcripts of the judgments but special mention
must go to Mr Neil Kelly of MacRoberts for compiling three enormous
volumes of cases without which I would have struggled to produce this
third edition.
Brian Eggleston
July 2008
References
The following books are referred to in various parts of the text:
Anson – Anson’s Law of Contract, 26th edition, A.G. Guest (ed.), The
Clarendon Press, Oxford.
BLR – Building Law Reports, Volumes 1–79, H. Lloyd, N. Baatz, D.
Streatfi eld-James, P. Fraser and R. Clay (eds), F.T. Law and Finance,
London.
Emden – Emden’s Construction Law, 8th edition, A.J. Anderson, S.
Bickford-Smith, N.E. Palmer and R. Redmond-Cooper (eds), Butterworth,
London.
Hudson – Hudson’s Building and Civil Engineering Contracts, 11th edition,
I.N. Duncan-Wallace (ed.), Sweet & Maxwell, London.
Keating – Keating on Construction Contracts, 8th edition, V. Ramsay and
S. Furst (eds), Sweet & Maxwell, London.