Time Being the Essence of a Contract

Time being the essence of a contract is an often heard statement in the construction industry. However, in response to the aforementioned, one may raise the point that if time is really of the essence of a contract, every contract should not provide for an extension of time clause. Most of the modern standard forms of contract state specific times for completion. The time is fixed to a specific date or by reference to a specific time frame. At the same time these standard forms of contracts also allow for an extension of time to anticipate events where a contractor fails to complete his obligation before or by the completion date. One of the reasons for the inclusion of an extension of time clause is to preserve the employer’s right to liquidated damages. To understand this principle better, the ‘Prevention Principle’ established in 1838 through the case of Holme v Guppy [1] as well as the most famously known case of Peak v McKinney [2] . The principle will be discussed in detail in the following chapter.

Ironically, the extension of time clause was also provided to benefit the contractor. According to the UK’s Society of Construction Law Delay and Disruption Protocol (October 2002), extension of time clause can be exercised by the contractor to accommodate delay, hence relieving their liability for damages (liquidated damages).

In essence, the importance of time in a contract will much depend on the intention of the contracting parties. Keating on Construction Contract [3] define the importance of time as

“one or more stipulations as to time are conditions breach of which discharges the other party from the obligation to continue to perform any of his own promises”.

The provision of ‘time is of the essence’ in a contract is not merely used to show the importance of time in a contract, it is also to provide the innocent party options to rescind or terminate and sue for damages in the event of a breach of time obligation [4] .

Everyone involved in the construction industry should be take heed of the maxim that time equals to money. An overrun project will often have serious financial consequences for the parties in a construction contract. Delay normally occurred when one or both of the contracting party failed to fulfil their contractual obligations. Delay will lead to claims in extension of time, liquidated damages, prolongation and disruption of the project. When delays happen, the blaming game will start and unavoidable tension between the contracting parties will begin. A simple illustration of a concurrent delay situation is when an activity is delayed caused by two or more cause of delay. For example an instruction from the employer may contribute to an existing delay caused by the contractor. Previous court cases have shows that contractors tend to use concurrent delay as a means to avoid liquidated damages claims and employers tend to use it as reason to reject claims in respect of delay from their contractors. To determine which party responsible, it is most appropriate to look into the causation of the delay during the work, whether it is caused by the contractor, employer or by neutral events. If a single cause of delay is identifiable, it might be simple to deal with the matter. However, numerous causes of delay are identified; the situation will become extremely complex.

The laws and principles on concurrent delay raise interesting issues and yet are one of the most difficult to apply in practice [5] . Difficulties in determining the parties responsible for the concurrency of delay arises when numerous causes of delay comes from different types of delay (i.e. employer delay and contractor delay) [6] . Past cases demonstrate that different methods of analysing delay will result in a different outcome. Tobin in his article on concurrent delay, he agreed with Pickavance and Fletcher that to analyse extension of time due to numerous causes is something ‘conceptually challenging’ and it is a problem with ‘no easy solution’ [7] . The problem can be evidenced by the way most of the standard forms of contract were drafted. There are no definite methods stated in the forms on how the Contract Administrator should assess or evaluate the causes of a concurrent delay and how to apportion the damages incurred by the parties due to the delay.

Much has been written about the subject of delay and concurrency delay. However, Pickavance in his book observed that the terminology used to describe the occasion is not consistently used in the same way in the same perspective. He stated that the word ‘delay’ for example was used in most of the standard forms of contract and writings to mean “a delay to the progress” which may both affect the critical activities and activities in float of current work [8] . The terminology of concurrency is also widely used in construction context to mean something besides concurrent delay where there can be situation of concurrent causes and concurrent events. Nguyen identified that simultaneous delays, commingled delays, and intertwined delays also represent concurrent delay [9] . Most of the writings covered in the literature review suggested that despite these difficulties, concurrent delay has become one of the prominent issues in the construction industry and that courts have failed to give clear guidance in addressing concurrent delay disputes.

A body comprising experienced construction professionals and lawyers, The Society of Construction Law’s (SCL) produced a useful guideline in 2002 entitled Delay and Disruption Protocol. The protocol is intended to assist the construction parties in managing delay and disruption in the United Kingdom construction projects. One of the issues covered in the protocol is the issue on concurrency. SCL Delay and Disruption Protocol identified true concurrency as

“occurrence of two or more delay events at the same time, one an Employer Risk Event, the other a Contractor Risk Event and the effects of which are felt at the same time. The term ‘concurrent delay’ is often used to describe the situation where two or more delay events arise at different times, but the effects of them are felt (in whole or in part) at the same time.”

There can be number causes of delay which may overlap with delay caused by the contractor. The most apparent is the act of an employer. The other is delay caused by neutral events e.g. adverse weather. For events to be considered as a concurrent in delay, Mr Justice Dyson in Henry Boot v Malmaison Hotel [10] held that the two events must be concurrent in the respective causes and the most important thing is that the events have got to be on the critical path of the construction programme which by definition would be likely to affect the contract completion date. The principle was also followed in the case of The Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond & Others [11] . Mr. Judge Seymour QC in the case added that the cause of the delay must not only be concurrent with the critical path in order to obtain extension of time; the event must be on the critical path. There will be no entitlement of extension of time if an event is not on the critical path, which rationally will not affect the completion. The author believed that by establishing the critical path of a project, it can be used as a tool to analyse delay, hence, one can establish the sequence of the project operations to identify whether the delay occurred was affecting or likely to affect the completion date. It can also be utilised to resolve issues on the entitlement for an extension of time. Judge Seymour however took a view that concurrency must begin simultaneously.

The scope of this study will revolve only on concurrency disputes using Joint Contracts Tribunal standard forms of contract. Currently in the United Kingdom, since there are more than 5 prominent publishers of standard forms of contracts; one will wonder why the author chose JCT contracts as his reference. Joint Contracts Tribunal Ltd. (JCT) has been producing construction contracts for more than 50 years and is widely used in the United Kingdom’s construction industry. Research done by the Royal Institute of Chartered Surveyors (RICS) in 2007 [12] shows that JCT standard form of contract is still the most used standard forms of contract with 79% users by number within the sample. Currently, there are 18 forms of main contracts published by JCT. These include variants, two framework agreements and numerous sub contracts, warranties and guides. Throughout the 79 years of producing forms of contract, JCT contracts have been well tested in the courts. Cases regarding time provision are one of those largely referred to the courts. However, it would be fair to say that, JCT has been taking into consideration the court judgements and comments to improve the time management provision in their contracts.

1.2 Aims and Objective

The study aims to analyze and discuss the principles governing concurrent delay adopted or applied in the courts in resolving concurrent delay disputes arising out of a construction contract. In recognition of the above background, the findings of this dissertation will provide parties in the construction industry essential information on the concept of concurrent delay and assist in the administration of contracts when the issue of concurrent delay arises.

This study is not meant for lawyers; the author aims to provide knowledge on various principles regarding concurrent delay to the construction professionals mainly in the Malaysian public sector projects. The author hopes that the findings of this study will assist Superintending Officers/Contract Administrators in the Public Works Department, Malaysia who administers construction contracts for public sector projects in handling concurrent delay. In pursuit of this aim, the main study objectives established are as follows:

To analyze the principles governing concurrent delay adopted or applied in the United Kingdom courts;

review time related provisions in the JCT contract;

evaluate procedures regarding concurrent delay set out in the Society of Construction Law’s (SCL) Delay and Disruption Protocol; and

develop best practice recommendations in handling concurrent delay disputes in the Malaysian public sector construction projects.

1.3 Scope of Study

The study will focus on concurrent delay issues encountered under the JCT contracts. Analysis on past and recent law cases regarding concurrent delay will be conducted extensively. The study primarily considers principles adopted and applied by the judiciary in the United Kingdom in dealing with concurrent delay disputes. Also, suggested procedures regarding concurrent delay in the SCL Delay and Disruption Protocol will be evaluated. The study will concentrate on the experiences of the United Kingdom courts in dealing with concurrent delay disputes, which is useful in developing the best practice recommendations for handling concurrent delay for public sector projects in Malaysia. Even though most of the concurrent delay issue arises mainly about entitlement of extension of time and damages (liquidated damages, loss and expense), this study only covers on the subject of extension of time. The damages part however will be not elaborate further.

1.4 Research Methodology

This dissertation is intended to seek into the current judiciary position and guideline in the United Kingdom to deal with concurrent delay issues. For the most part of this study were based on the opinion of the courts in the United Kingdom on dealing with concurrent delay. To achieve the aim and objective of the study, it was suggested that it is not appropriate to use empirical and quantitative approach [13] .

For the purpose of the study, thorough literature reviews will be conducted on the scope of study to provide theoretical understanding on the subject of study. The literature review shall cover the theoretical background, legal principles regarding delay and concurrent delay, time provision in JCT contracts, issues and weaknesses in application of the principles in the United Kingdom construction industry. A combination of primary and secondary data sources will be used in the research, mainly on past dissertation, thesis, published books and textbooks, journals, e-journals and analysis on the principal relevant court cases concerned with concurrent delay. Due to constraint of time preparing the dissertation, the author collected data via the desk study or ‘secondary data’ approach which was based on existing written resources. The data mainly formed the structure of the dissertation. Naoum [14] quoted Stewart and Kamins views in his book on the advantages using secondary data information:

“The most significant of the advantages of the secondary data are related to time and cost. In general, it is much less expensive to use secondary data than it is to conduct a primary research investigation. This is true even when there are costs associated with obtaining the secondary data. When answers to questions are required quickly, the only practical alternative is to consult secondary sources. If stringent budget and time constraints are imposed on primary research, secondary research may provide higher quality with a new research project. Secondary data also may provide a useful comparative tool. New data may be compared to existing data for the purpose of examining differences or trends.”

On the basis of extensive literature review, the author has identified prominent law cases which have been used by the practitioners in the construction industry as a guideline in dealing with concurrent delay. These cases were important as they are the point of reference on the studied issue.

Established problems and resolution will be gathered and discuss as the findings of the study will be used to outline a recommendation of best practice in handling concurrent delay for Malaysia’s public sector construction projects.

1.5 Dissertation Structure

The dissertation is structured in five chapters with the initial chapter presenting the background of the study. The next three chapters display the objectives of the study and present findings. The last chapter will summarize dissertation findings, suggestions for best practices and future research recommendations.

Chapter 1 provides the general information and a snapshot of the study. Under this chapter, the author also clearly defines the aim, objective, scope of the study and the research methodology adopted. There is also a concise guide on the content of the dissertation.

Chapter 2 is an overview on the time provisions provided in the current JCT contract and delay remedies in the context of liquidated damages with loss and expense.

Chapter 3 analyze the legal principles concerning concurrent delay, various principles adopted and applied by the court in the United Kingdom in dealing with concurrent delay dispute. The chapter also looks into principles adopted and applied by the court in handling the same dispute in Malaysia. This chapter will be carry out by analysing law cases on concurrent delay dispute.

Chapter 4 evaluates the suggested procedures in the SCL Delay and Disruption Protocol as basis for identifying suitable practices to be referred.

Chapter 5 discusses the findings of the study and recommendations for good practices will be drawn from these findings. Future study recommendations will also be suggested in this final chapter.