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Rough Notes - EoT and LD

The document outlines the purpose and implications of the Extension of Time (EoT) clause in construction contracts, emphasizing the need for qualifying events to grant EoT and the consequences of omitting such clauses. It details the responsibilities of both contractors and employers regarding delays, liquidated damages (LD), and the conditions under which EoT can be invoked. Additionally, it discusses the legal context surrounding penalties and the enforcement of LD in various jurisdictions.

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2 views5 pages

Rough Notes - EoT and LD

The document outlines the purpose and implications of the Extension of Time (EoT) clause in construction contracts, emphasizing the need for qualifying events to grant EoT and the consequences of omitting such clauses. It details the responsibilities of both contractors and employers regarding delays, liquidated damages (LD), and the conditions under which EoT can be invoked. Additionally, it discusses the legal context surrounding penalties and the enforcement of LD in various jurisdictions.

Uploaded by

apurv78.magis
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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EXTENSION OF TIME AND LIQUIDATED

DAMAGES
(1) Purpose of EoT:
(A) EoT clause is provided to
(i) Enable owner/employer (or) to extend the contract and
thereby bind the contractor to complete the work,
which otherwise the contractor may abandon for
various reasons/circumstances, and/or,
(ii) Enable the contractor to complete the work whether
with or without levy of penalty and shall bind the
employer to allow the contractor to finish the work
which the employer might otherwise prevent by
termination of contract.
(2) Power to grant EoT - Qualifying Events:
(A) The Contract must list the qualifying events. Upon
occurrence of any non-qualifying event employer/owner has
no power to per-force grant EoT , that is the contractor is
not bound to accept an EoT. Therefore, if qualifying
events list did not cover employer’s delay, then
employer cannot force an EoT on the contractor.
Peak Construction (Liverpool) Ltd v. Mckinney
Foundations Ltd 1 BLR 111
Rapid Building Group Ltd v. Ealing Family Housing
Association Ltd (1984) 29 BLR 5

(B) Sample List - Qualifying Events:


o Failure to handover the encumbrance free site
o Delayed provision of Drawings
o Delayed Inspection and Approvals
o Delayed Payments

(3) Consequences of omission of EoT clause:


(A) In absence of an EoT Clause, upon delay attributable to
contractor,
(i)the contractor will assert termination (expiry/lapse of
contract) because there is no power with employer to
grant/enforce EoT, and,
(ii) the contractor becomes liable to pay damages
specified in the damages clause, for reason of causing
delay if such delay is specified as an eligible trigger event
in damages clause.

(B) Therefore, in absence of an EoT Clause, upon delay


attributable to contractor, and where LD for delay is less
than anticipated loss from execution of remaining/balance
works, the contractor will assert termination (expiry/lapse of
contract) and he shall abandon the project (thereby paying
LD < Loss from execution).
(C) Voidable continuation or automatic-expiry of contract: That
is, if upon the scheduled date of completion, in a contract
where the EoT clause is not there, then,
(i) whether the contract is concluded, and it is up to both
the parties to execute a fresh contract for remaining
works as per fresh rates(thereby entitling the contractor
to claim as per quantum meruit), OR,
(ii) whether the extension of contract is only voidable and
therefore can be extended at existing rates?

That is, whether a new contract between contractor and


employer is created if a contractor continues the work and
employer accepts the continuation, or, it merely creates a
voidable contract whereby one the continued execution of
consideration by one party after the scheduled completion
date may be either accepted or declined by the other party
(thereby precluding claim of payment for such work)

(4) Manner of invocation of power to grant EoT and to fix a


new completion date:
(A) Power Must be timely: Employer/Owner has to exercise
power 'within a reasonable time after the delay has come to
an end' or within time/stage stipulated in contract
Miller v. London County Council LT 425

(B) Can be exercised to have retrospective effect: Employer


may also grant an EoT upto a date already passed (Say,
grant an EoT in Aug 1950, for an EoT upto May 1949)
Amalgamated Building Contractors v. Waltham Holy
Cross UDC 2 All ER 452

(C) Impact of Grant/Acceptance of EoT: EoT Time At Large 


LD converts to Unliquidated Damages  Burden of Proof
rests on employer, and Quantum of damages is guided by
proof of damage/loss
(i) Upon acceptance of reasonable EoT, the contractor is
only obliged to finish the work in reasonable time, and
leads to “Time at Large”.
(ii) Since Time is at large, contractor may escape the LD
stipulated for delay.
(iii) That is, only liability would be the “actual loss suffered
by owner as a consequence of delay”, which will have
to be proved by owner/employer.
(iv) Therefore, burden of proof shifts to owner and the loss
gets limited to the amount that can be proved.
Wells v. Army and Navy Cooperative Society Ltd
(1902) 86 LT 764 (‘Wells’)

(5) Owner’s Delay-Liability (Delay Caused by


Owner/Employer):
(A) Standard Forms of Contract (FIDIC, JCT) do not cover
owner’s liability for delays: The clauses are drafted to
provide only for an ‘EoT’ in the event of delay attributable
to employer and no provision/right in contractor to
recovery/levy LD on employer
Fourth Edition of FIDIC, the Seventh Edition of ICE
and the Singapore Institute of Architects forms of
contract

(B) EoT alone not sufficient – EoT does not eliminate/obviate


employer-delay + LD also leviable on Owner: It has to be
duly accounted-for. Employer/Owner cannot get away with
simply grant of EoT – the owner is liable to pay delay-
damages to contractor.

(C) ‘Catch-All’ Provisions to exclude Employer’s Delay liability


not tenable: Owner’s try to exclude their delay-liability by
surreptitiously covering/excluding it under ‘contractor
liability’ clause ('catch-all' provision).
‘All delays beyond contractor’s control’, is not
tenable.
 Wells v. Army and Navy Cooperative Society Ltd
(1902) 86 LT 764 (‘Wells’)
'Extras or delays occasioned by strikes, lockouts,
force-majeure or other cause beyond the control
of the contractor'
 Perini Pacific Ltd v. Greater Vancouver
Sewerage and Drainage District Council SCR
189 (‘Perni’)
'Other special circumstances of any kind
whatsoever'
(6) Power of Contractor to demand EoT: Where the qualifying
events for grant of EoT is worded as ‘or by any other causes
beyond the contractor's control’ and any such event
leading to delay is mentioned/covered elsewhere in the
contract, the contractor may lap-it up as another qualifying
event to claim “Time-At-Large”
Kelly & Hingles Trustees v. Union Government (Minister of
Public Works) 1928 TPD 272
Standard Forms of Contract (FIDIC, JCT) do not cover
owner’s liability for delays:

(7) LD Clause “becoming Invalid” vs LD Clause being


“Absent”:
(A) If LD clause is adjudged to be not present  ULD can be
recovered.
But,
(B) If LD clause “becomes invalid” due to act of employer or
omission by the employer (say failure to invoke it upon
delay event), then ULD cannot be recovered
(8) Statutory Enforcement of Penalty:
(A) Where the specified LD amount >> Actual Loss suffered,
the LD is seen as a Penalty
(B) Penalty is not enforced generally, unless enforced
specifically be Statute
(C) Penalties can be recovered in South Africa and Hong Kong
(D) Strict English law prohibits penalties.
(9) In countries such India and Malaysia,
(A) Proof of Actual Loss suffered is to be given, where so
feasible/possible,
AND,
(B) The max. amount payable is limited to amount specified in
the LD clause.

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