A decision in the case between North Midland Building and CydenHomes provides clarity on a hotly debated topic within construction law.
The High Court recently considered the question of whether clauses that pass concurrent delay risk to a contractor fall foul of the doctrine of prevention.
The prevention principle means that a party may not enforce a contractual obligation against another party where it has prevented that party from carrying out the obligation.
This arose in the case of North Midland Building Limited v Cyden Homes Limited  EWHC 2414 (TCC) and the judge concluded, in an important decision, that an express contractual term which allocated the risk of concurrent delay was unaffected by the prevention principle.
This timely and firm judgment by Mr Justice Fraser on an area hotly debated within construction law provides a welcome opportunity to reflect on:
- What concurrent delay is;
- How parties try to allocate risk related to concurrent delay;
- What effect, if any, the prevention principle has.
What is concurrent delay?
The issue of concurrent delay arises where an employer risk event and a contractor risk event (or multiple events for both) cause delay at the same time.
For the delay to be considered concurrent, the two (or more) events must be of approximately “equal causative potency” – meaning the delaying events occur at the same time and their effects are felt at the same time.
In such a scenario, the usual ‘time but no money’ position is likely to apply – meaning the contractor would be granted an extension of time, but any associated loss and expense would not normally be recoverable. However, parties have increasingly sought to diverge from this position and contractually allocate such concurrent delay risk.
The arguments of the case
In this case, Cyden Homes engaged North Midland Building to construct a large private residence in the Midlands.
They agreed a bespoke amendment to the JCT Design and Building Contract 2005 which expressly set out that, if the contractor was responsible for a delay at the same time as a delay for a ‘relevant event’ (JCT-speak for grounds for an extension of time for completion), then the ‘relevant event’ would not be taken into account.
This clause, the contractor argued, rendered the time for completion mechanism ineffective or inoperable, as the effect of the clause was such that, where there was concurrent delay, the time for completion could not be extended. This was the case even if there was an act of prevention by the employer.
The contractor pleaded that this was contrary to the common law doctrine of the ‘prevention principle’. The consequences of applying that principle would be that:
- Time would be ‘at large’, meaning the contractor would only have to complete the works within a ‘reasonable time’;
- The employer could not levy liquidated damages for delay.
What it means for the industry
The judge found in the employer’s favour.
Mr Justice Fraser was purely concerned with the correct construction of a clause agreed by the parties, which he found to be “crystal clear”. He did not entertain the contractor’s argument that the ‘prevention principle’ affected the clause.
As such, the judgment has affirmed the validity of clauses which pass the risk of ‘concurrent delay’ contractually.
In summary, a few points can be drawn from the decision – namely that express terms of a contract are likely to ‘win’ over a common law doctrine (in this case the ‘doctrine of prevention’) and that concurrent delay risk may be contractually dealt with as the parties choose.
This decision is also likely to encourage a surge in the popularity of concurrent delay allocation clauses in construction contracts over the coming years.
John Crowley is an associate in the construction practice at Jones Day
The views and opinions set forth herein are the personal views or opinions of the author; they do not necessarily reflect views or opinions of the law firm with which he is associated