4. DELAYS
Categories of delays : -
➢ Delay caused by Contractor (Clause 21.1)
➢ Delay caused by Employer (Clause 23.8) - 15 relevant events
➢ Delay caused by Third Parties ( Neutral Event) (Clause 23.8) - 9 relevant events
5. DELAY BY CONTRACTOR
Reasons :
● Not having sufficient labour force or plant on site
● Not having necessary materials when needed
● Poor site management/co-ordination/experience
● Failure to pay workers or sub-contractors
Contractual Effects :
● Not entitle to claim for EOT
● No reimbursement for loss and expense
● Employer can be compensated by the way of LD
● Employer may terminate the contractor’s employment if delay is too long
6. DELAY BY EMPLOYER
15 Relevant Events under clause 23.8
Contractual Effects :
● Contractor entitlement to claim for EOT
● Contractor entitle to claim for loss and expense
● Employer cannot impose LD because is own fault
● If delay is serious, contractor can terminate his employment
7. DELAY BY THIRD PARTIES (NEUTRAL EVENTS)
● Weather, Act of God, Natural Justices
● 9 Relevant Events
● Not the fault of contractor or employer
● They have to bare with their own responsibilities
Contractual Effects :
● Contractor entitled to EOT
● Contractor not entitled to lose and expense
● Employer cannot imposed LD
● Contractor and employer should share the burden of delay
8. EXTENSION OF TIME
Procedure of EOT
STEP 1 : Giving of notice
- Must give a written notice of intention to claim for EOT. It is a condition precedent to
any EOT.
STEP 2 : Official Application
- Must submit official application within 28 days after the end of the event.
9. EXTENSION OF TIME
1. Decision to claim for EOT ( is up to the contractor )
2. Failure to submit claim application
3. Written notice shall be a condition precedent to an entitlement of EOT
Case Study 1: Syarikat Tan Lim Bent & Rakan-Rakan v Pulai Jaya S/B (1992)
It was held that this is an expressed condition, contractor must comply. Contractor may lose the case because he failed to submit
written notice.
Case Study 2 : Turner Corporation Ltd v Austotel Pty Ltd (1997)
It was held contractor cannot rely on acts of prevention by employer for not giving written notice. He must give notice which would
have negated the effect of that preventing conduct.
10. Principles for Granting EOT (Architect have to make decision)
1. Before granting EOT, architect have to consider certain items
- In writing - Have materially disrupted the regular progress of works
- Fall within clause 23.8 - Nett effective delay must be assessed based on approved
- Prevent further losses or delays work programme
2. Issue of the certificate of EOT (Architect have to make 2 decision)
- Reject totally with reasons
- Grant an appropriate EOT and issue certificate of EOT
11. 3. Timing of Issue
- Within 6 weeks from the contractor's application, architect must decide an
issue
4. Delay by NSC
5. Obligations of Architect
- To assess the length of EOT, architect must act reasonably, fairly and
impartially
- Failure to assess application and issue EOT is a breach
12. 6. Consequences of Not Granting Contractor’s Application
● If architect default in granting EOT
● Employer will loses the rights to impose liquidated damages
● It is a breach of contract
● Architect liable to the employer in tort (negligence) / for breach of contract (services)
For contractor, initial course of action : i) Make a fresh application
ii) Appeal to employer
iii) Contractor can refer the dispute to Arbitration
13. Can EOT be granted Prospectively or Retrospectively?
1. Clause 23.4
- Architect may issue the written notice of rejection or the certification of EOT before / after
the Completion Date
- Architect can make & approve EOT backward / forward
2. Situations can arise
- Contractor’s submission of his particulars under clauses 23 very near to the completion date
3. Retrospectively
- Contractor submit one week before the completion date
- Architect will assess EOT after completion date
14. EOT After The Issuance Of Certificate of Non-Completion(CNC)
1. If contractor doesn’t complete, architect must issue CNC to contractor. If not employer cannot
impose liquidated damages
2. When clause 23.9 is read together with clause 22.3 the granting of subsequent EOT will
revoke the CNC
3. When CNC is cancelled, employer have to return the surplus liquidated damages.
4. If contractor again fails to complete by the new completion date, a new CNC will be issued by
architect.
15. EOT PROVISIONS
● Employer cannot set new completion date
● Contractor have to complete within a
reasonable time
● Time become at large
● Employer loses the rights to impose
liquidated damages
EOT PROVISIONS
● Completion date can be extended,
if there is a delay
● Employer can set new completion date
● Preserves employer’s contractual rights to
impose liquidated damages
● Prevents time become at large
16. Implications Of Time For Completion Being At Large
1. Original completion date no longer apply
2. there is no definite completion date to work towards
3. Contractor have to complete within a reasonable time
4. Employer loses his right to imposes liquidated damages
5. Contractor’s liability is limited to general damages
17. LIQUIDATED DAMAGES
In order to a successful claim for liquidated damages, Employer have to comply with the
following pre-conditions :
➢ Contract contains express clause enabling the deduction of the liquidated damages
➢ The liquidated clause must be valid and enforceable
➢ Details of liquidated damages must be clearly indicated
➢ Specific contractual procedure must be strictly complied
➢ Must be definite date fixed in contract from which damages can run
➢ Employer has not waived his right to deduct the liquidated damages
Amount of damages that need to be paid to the injured party to collect as compensation upon a specific
breach in a contract.
18. CASE STUDY
Case 1
➢ Selva Kumar a/l Murugiah v. Thiagarajah a/l Retnasamy [1995] 2 MLJ 817
Case 2
➢ Johor Coastal Development Sdn Bhd v. Constrajaya Sdn Bhd [2009] 4 CLJ 569
19. Question 1: As a Consultant assessing an extension of time
application by the Contractor, what are the initial checklist
and the principles to be applied?
20. ● The application must be in writing
● Causes of delay must be under Clause 23.8
● Contractor must have taken all practical steps to mitigate
● Delays must be ‘materially’ disrupted the regular progress of the works, resulting in the
completion date being breached
● The ‘nett effective’ delay must be assessed based on approved work programme under
Clause 3.5
21. Question 2: What are the purpose of an extension of time clauses in
most standard contract and its implications? What is the implication
of a Certificate of Non-Completion? What is the difference between
general damages and liquidated damages?
22. Purpose of EOT
Employer entitled to impose liquidated damages due to the delay caused by contractor.
Contractor in will be granted EOT due to delays caused by employer. (Clause 23.8)
If there is no EOT provision, the contractor’s liability will be limited to general damages not liquidated
damages.
Implication of EOT
If there is EOT provision, completion date can be extended and new completion date can be set. It preserves
the employer’s contractual right to impose liquidated damages to the contractor. It also prevent the completion
time to be ‘at large’.
If there is no EOT provision, time will be ‘at large’, contractor will have to complete the project at a
reasonable time.
23. Implication of certificate of Non completion ( 22.3 & 23.9)
A formal return notice for the contractor, it gives the employer the right to impose liquidated damage to
the contractor.
If EOT is issued after issuance of CNC, employer shall return the surplus amount of liquidated damages
imposed to the contractor.
General damages Liquidated Damages
No EOT provision With EOT provision
Hard to prove (no basis to follow) Easier to prove ( master programme as basis)
No fixed amount Fixed amount
Differences between General damages & Liquidated damages
24. Question 3: What are concurrent delays? Is the Contractor
entitled to extension of time and loss and expense if there
are concurrent delays by Employer and Contractor?
25. Concurrent Delays
● Simultaneous delays caused by the contractor and employer
● Two or more delay events occurring within the same time period
● Affecting the project schedule and project completion date
● but not all of those events enable to claim an extension of time or loss and expense
Contractor entitled to extension of time and loss and expense if
● Have the valid reason and certify by Architect and consultant Quantity Surveyor.
26. QUESTIONS
Q1 : What are the effects of construction projects delay?
Q2 : What are the examples of grounds for challenging extension of time certificate ?
(In what event can the contractor challenge the EOT certificate that is issued by the
Architect?)
Q3 : If Nominated Sub-Contractor goes bankrupt, can the contractor claim for EoT? If
yes what is the relevant clause?
27. ANSWER FOR Q1
➢ Cost overrun
- Contractor extend insurance policies (claimable)
- Contractor’s fault, employer has the rights to impose liquidated damages
➢ Time overrun
- Contractor claims for EOT
- New completion date
➢ Dispute (Arbitration)
28. ANSWER FOR Q2
➢ Certificate not given time
➢ Certificate no in the correct format
➢ Certificate issued by unauthorised person
➢ Addressee of certificate not named
➢ Decision to extend time improperly delegated
➢ Certificate not given fairly
➢ Contractual procedures not followed
Delays of a project can be categorised into 3 categories which are delays caused by contractor, employer and third parties which is the neutral event
The common delay caused by the contractor are not having sufficient labour force or plant on site, not having necessary materials when needed (not enough materials which caused work cannot be done until the next delivery of materials), poor site management/co-ordination/ lack of experience( do not know how to plan properly), and lastly failure to pay workers or sub-contractors.
If a delays is caused by contractor, contractor have to compesate employer by the way of LD. Contractor is not entitled to claim for EOT, no reimbursement for loss and expenss, employer can be compesated by the way of LD, and employer may terminate the contractor ‘s employment if delay is too long.
. For the delay caused by employer is listed under clause 23.8 If the causes of delay are fall under this clause, the contractor is entitle to claim for EOT. If delay is caused by employer, contractor entitle to claim for EOT, contractor get monetary compesation by way of lose and expense, employer cannot impose LD because is his own fault,and if the delay is so serious, the contractor may want to terminate the employment.
For the delay caused by neutral events which are the weather,act of god and the natural justices. There are 9 relevant events in the PAM Contract. Neutral events is not the fault of the contractor and employer as well. They have to bare with their own responsibilities. The contractor is entitled to claim for EOT but will not be compensated with money because not employer’s fault, employer cannot imposed LD as it is not the contractor fault, contractor and employer should share the burden of delay since nobody fault.
Case 1: employer was ask by the federal court to prove the actual damage even though under clause 22.2 reads that both party is agreed with the amount stated in the contract.
Case 2: Employer still have to prove the actual damage. Court had made decision where there will be some case that damage can be easily calculated that will have to prove and some case that calculation is complex does not need to prove. The decision is still up to the court decision whether it is a complex or non complex case.
JKR (diff)
JKR- no notice required to apply for EOT
As a consultant assessing an extension of time application by contractor, the initial checklist and the principles to be applied are the consultants have to check whether the application is in writing form.
The causes of delay must be fall within Clause 23.8. If it is not under this clause then it will be rejected.
Contractor must have taken all practical steps to mitigate the delay which to prevent further losses or prevent further delay.
The delays must be materially disrupted the completion date or the progress of the works, if it does not affect then cannot claim for EOT.
The nett effective delay must be assessed based on approved work programme.The approved work programme is the basis of the EOT. EOT cannot be claimed without work programme. Clause 3.5 mentioned that master programme must submit within 2 weeks from the date of letter of award for approval.
PURPOSE
It gives the benefits to the employer to impose liquidated damages to the contractor if its contractor’s default in causing the delays.
It gives benefits to the contractor to have extended time in completing the project due to the delays caused by employer under clause 23.8 relevant event.
In the event if there is no EOT provision, the contractor’s liability will be limited to general damages not liquidated damages.
IMPLICATION
If its contractor default in delaying the works, it gives the right to the employer impose liquidated damages to the contractor.
If it's employer default, the contractor will be granted for EOT contractor will (avoid the liability to pay to pay liquidated damages).
If there is no EOT provision, time will be at large, contractor will have to complete the project at a reasonable time.
This certificate gives the formal return notice for the contractor to inform the contractor that they have failed to complete their works on time agreed in the contract and it gives the employer the right to impose liquidated damage to the contractor.
In the event if EOT is issued after issuance of CNC, employer is to return the surplus amount of liquidated damages to the contractor.
General damages is only exist if there is no EOT provision in the contract while LD is an agreed amount stated in the contract by both parties in the event if any party breach the contract.
