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Good communication is key when applying for extensions of time

Contractors need to give the correct notice for ‘extension of time’ clauses to avoid the jeopardy of delay damages, says Daniel Atkinson

A contract may state that an employer can deduct money for each week’s delay by the contractor, usually called delay damages or liquidated damages.

This would be unfair if the employer has caused the delay, so most forms of construction contract allow the contractor to serve notices for those events.

These are found in extension of time clauses. The effect of the extension is that the completion date, and so the date from which delay damages can be deducted, is revised to take into account the effect of the event.

The modern trend is that the contract will specify that the contractor will lose the right to an extension of time if he does not give the specified notice.

This is seen as allowing more effective management of the contract. It reflects a growing need for employers and -contractors to plan the works and use the extension of time clauses as management tools rather than just to protect the employer’s rights to delay damages.

Whether a contractor loses the right to the extension of time if he fails to give notice is a matter of interpretation of the notice clause.

The three factors to be considered are:

  • The form of the clause itself;

  • The relation of the clause to the contract as a whole and;

  • General considerations of law.

Recent decisions have suggested that a contractor may lose the right even though the contract does not expressly warn of the consequences of non-compliance.

If the extension of time clause is not clear, then the court will lean in favour of an interpretation that allows the contractor to get an appropriate extension of time for the delay.

Since the extension of time clause is for the benefit of both the contractor (he gets his extension of time) and the employer (he keeps alive his delay damages) that makes sense.

Interpreting a vague extension of time clause any other way would only benefit the employer.

So what must be in the notice? It seems obvious, but the contractor must first identify what has happened and then state that those circumstances have caused a delay to the works.

The notice must come from the contractor so that it is clear to the employer that he is stating that there has been a delay. It is not usually enough to point to a record of delay by others in minutes of a meeting, for example.

If the details are stated in the contract as necessary for effective notice, then the lack of details will mean that no notice has been properly submitted, so again the contractor will lose the right to an extension.

The fact that the contract administrator is familiar with the project - and in some cases has detailed knowledge of its progress - is a factor in considering whether the contractor has acted reasonably and quickly enough in providing notice. In some situations the briefest notification will be enough.

Daniel Atkinson is executive director of Atkinson Law.