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TIME AT LARGE

LEGAL

It is a common misconception that the extension of time provisions within construction contracts are there for the benefit of the contractor, writes Kim Franklin. When the project runs into delays, a contractor who is granted an extension of time is released from the obligation to pay liquidated damages for the period of overrun - surely a good thing for the contractor.

This line of thinking reckons without the mindset of the 19th-century judiciary. In those days, contractual provisions that imposed liquidated damages for delay were seen as a penalty against the unsuspecting contractor, and were to be enforced only in the rarest of circumstances.

Thus, if the employer could in any way be responsible for the delay - by ordering variations or otherwise preventing the contractor from completing on time - the contractual completion date would go out of the window and the penalty clause be struck down. Or, as the lawyers would say, the operation of the 'prevention principle' would put time at large and render the liquidated damages clause unenforceable.

Employers, who were keen to hang on to their completion dates and their liquidated damages, introduced a mechanism by which they could extend time for any delay for which they were in any way responsible. So, you see, the extension of time provisions is there for the benefit of the employer and they have developed increasingly intricate contractual mechanisms over the years to ensure that they can extend time.

Times have changed, and now liquidated damages are seen as a good thing. It is far easier to pre-estimate your losses in the event of delay than to go through the grisly process of working them out and proving them. Employers have become sloppier when wording their extension of time clauses.

Why bother with a long list of unlikely events, when you can simply refer to 'anything for which the employer is responsible'.

Nineteenth-century judges would have turned in their graves at such laxity and hastened to put time at large.

But how would a 21st-century judge respond to such a catchall provision? Would he defenestrate the completion date, and the liquidated damages to boot?

The answer is to be found in Multiplex Construction v Honeywell Control Systems (No. 2) (Judgment 06.03.07), the latest piece of litigation to be generated by the new Wembley Stadium. Honeywell argued that variations to its contract caused delay and that as, on its reading of the contract, it did not allow Multiplex to extend time, the completion date was put at large.

Mr Justice Jackson was keen to adopt a 21st-century approach and leaned in favour of permitting the contractor to recover appropriate extensions of time for events causing delay.

He rejected Honeywell's argument. On his reading of the contract, Multiplex could extend time for issuing variations and preserve the completion date.

Like I said, extension of time clauses are there for the benefit of the employer.

Kim Franklin is a barrister and chartered arbitrator at Crown Office Chambers in London. Visit www.crownofficechambers. com

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