The timely delivery of construction projects is crucial to client satisfaction. Yet, delays are a major cause of disputes in building and construction matters. The pandemic and the changing nature of work mean that ongoing supply chain interruptions and skilled worker shortages are becoming more and more commonplace, which makes it difficult for builders and contractors to make plans and create project timelines. In this article, we will outline your contractor rights when a project becomes delayed, and explain how you can protect yourself and your business against any excess costs or potential legal disputes.
Protecting yourself begins with understanding your legal rights and responsibilities. It is important that you always strive to deliver projects according to the agreed timelines – both in the residential building industry as well as in the corporate world. After all, principals have their own deadlines to manage and need to be able to plan for the future.
That being said, there is a range of causes for delays that are beyond the contractor’s reasonable control. In such scenarios, you need to incorporate an extension of time clause in your building contract.
How to Classify the Cause of Delays in Building & Construction
In the building and construction industry, there are an array of different circumstances that could cause a delay. To make an extension of time claim, you need to prove that the circumstances causing the delay were “not reasonably foreseeable” and beyond your “reasonable control”.
Such reasons may be:
- Inclement weather
- Delays caused by the client
- Force majeure events such as war
- Underlying latent conditions to do with the site
Some delays can be said to be within the contractor’s reasonable control. This can mean that the contractor is liable for any delay costs or other ramifications that arise as a result of the delay. These may be situations where, for example, a contractor did not order the relevant materials in time for a project phase, did not apply for the correct building permits or did not allocate enough staff to complete a project on time.
In some scenarios, delays can be caused by the principal, or the client. These delays may include changes to building plans by the client, limiting access to the site or a failure to action an aspect of the project according to the timeline specified in the contract, such as signing a document by the specified date.
What is an Extension of Time (EOT)?
An extension of time clause in a building contract can vary depending on the individual contract. It typically is included to protect both parties during the project. The function of this clause is to extend the end date of the project to accommodate delays. As a result, this can minimise risk and limit liability for both parties where circumstances are out of their control.
The EOT contract clause is typically incorporated into the building contract before the commencement of the project. As the consequences of delayed construction projects can be quite costly, EOT contract clauses are very important for contractors to understand.
How to issue a Notice of Extension of Time
Each EOT clause has its own requirements and procedures for making a claim. Generally, an extension of time claim must be made in writing and accepted by the principal.
Usually, a notice of delay and intention to make a claim is required. Next, a formal extension of time claim is required. It is very important to understand the notification process stipulated in your contract. If the notice of delay is not providedin the right timeframe, the claimant may lose the right to claim an EOT. Contracts typically stipulate that the principal must be made aware of any delays as soon as possible.
How to Manage Delays in Construction Projects
Delays in building and construction projects are very common, but if builders and contractors can mitigate this risk as much as possible and understand their legal and procedural obligations then the risk may be minimised.
All care should be taken to create a construction timeline that is as realistic as possible, given the contractor’s knowledge at the time. Contractors should be aware of any factors which have the potential to cause delays, such as the availability of materials and staff at any given time in a given location, as well as the organisation of any permits and legal documents that may be required. As well as this, contractors should also ensure the site will be accessible ahead of time.
However, each project is different and may require a unique EOT clause to ensure that any time-related risks can be managed sufficiently. It is crucial that the contractor understands the full extent of these risks as well as the objectives of each project in detail, and incorporates these details into their building contract.
If you are a contractor, it is critical that you structure your building contracts and, more specifically, your EOT clauses in precisely the right way to limit liability and avoid costly delays.
To engage a lawyer with specialist experience in building and construction, get in touch with our expert team. Please contact the team at Maguire & McInerney Lawyers by phoning us directly on 02 4228 5911 to learn more.