Reed Smith Client Alerts

This Client Alert discusses the recent decision of the Court of Appeal of England and Wales in North Midland Building Limited v. Cyden Homes Limited [2018] EWCA Civ 1744. The decision involved a bespoke extension of time clause in a construction contract that allocated to the contractor the risk of concurrent delay. The Court of Appeal upheld the first instance decision, confirming that parties to a construction contract are free to allocate the risk of concurrent delay and, if the drafting is sufficiently clear, the “prevention principle” will not invalidate the agreed risk allocation.

Authors: Peter Cassidy Sophia Harlow

Introduction

When negotiating a construction contract, the issue inevitably arises as to how the extension of time provisions will operate when delays happen for a combination of reasons, some of which are the contractor’s responsibility and some of which are the employer’s.  

Where a construction contract is silent on the subject of concurrent delay, a contractor’s entitlement to an extension of time for such delay is, as Lord Justice Coulson1 put it in North Midland, “not entirely free from doubt”. Having said that, there is first instance authority which supports the granting of an extension of time to the contractor in those circumstances. It is for this reason that parties, as was the case in North Midland, seek to introduce wording to reverse that potential outcome.

The Court of Appeal upheld Mr Justice Fraser’s first instance decision, agreeing that parties are free to allocate the risk of concurrent delay in their contract as they see fit and emphasising the primacy of the construction contract, which is “a detailed allocation of risk and reward”.  The Court of Appeal also held that a contractor would not be rescued from the inclusion of such an express allocation by reliance upon the “prevention principle”. 

The prevention principle dictates that contractual obligations are not enforceable if the party seeking to enforce them has, in fact, prevented its counterparty from performing them, such as where an employer has prevented the contractor from completing by the agreed completion date.