The Devil's Advocate
Marina Pratchett Law Corporation
March 4, 2020
SCHEDULING FOR EARLY COMPLETION
All standard form construction contracts contain a provision that sets a date for commencement and completion of the contract work and provides a mechanism for seeking extensions of time and compensation for delays.
Delays are one of the most common causes of construction disputes; most of these disputes involve completion of the contract work later than the date set out in the contract.
What are the respective rights and obligations of the parties when the contractor planned to complete the contract work earlier than the completion date provided for in the contract and those plans are frustrated? What are the parties’ rights and obligations when, regardless of the completion date prescribed by the contract, the contractor has prepared a schedule for the performance of the work which provides for early completion of the work and the acts or omissions of the owner or consultant hinder or prevent that early completion or alternatively the owner and consultant fail to co-operate with the contractor’s schedule for early completion?
This issue arose in a case in the United Kingdom called Glenlion Construction Ltd. v The Guinness Trust 1988 Const. L.J. 4(a), 39-46. The matter was heard in an arbitration, with the parties agreeing that certain preliminary legal issues should be determined by the arbitrator before proceeding with a full arbitration. The preliminary issues related to (a) whether the contractor was entitled to finish early and (b) if the answer to (a) was yes, whether or to what extent, the owner and its consultants had to co-operate in assisting the contractor to meet its early completion date.
Ordinarily arbitration awards are not public; however, the arbitrator’s ruling on the preliminary issues was appealed to the Office Referees Court (which later became the Technology and Construction Court), a specialized court established to hear cases involving technical and construction issues. The Official Referee hearing the appeal was Judge Fox-Andrews QC, a well known and experienced Official Referee in construction disputes.
From the decision of Official Referee on the appeal we learn that the following facts were assumed:
- Glenlion Construction as contractor contracted with The Guinness Trust as owner to construct a housing development;
- The form of contract was a standard form stipulated price contract (JCT);
- The site was made available to the contractor on a specified date and the date for completion set out in the contract was stated as 114 weeks from that specified date (herein the “Date for Completion”);
- The contract required the contractor to prepare a “programme chart” or schedule, that showed a completion date no later than the Date for Completion (underlining added);
- The programme chart required approval by the Consultant before it became the operative schedule;
- The programme chart prepared by the Contractor and approved by the consultant set out a completion date that was 101 weeks from the specified date, that is, it set a date for completion what was thirteen weeks earlier than the Date for Completion;
- Both parties agreed that “contractors frequently produce programmes that are overly-optimistic”;
- The Date for Completion was relevant to contractual liquidated damage and to the Contractor’s rights to damages for compensable delay;
- It was assumed that the Contractor was unable to meet its early completion date, but the reasons why were not expressly set out. However, it does not appear that the cause of the contractor’s delay was wrongful acts or omissions by the owner or its consultant; it appears that the Contractor was asserting that the owner and consultant were duty bound to co-operate with the contractor by accelerating their own actions to match the contractor’s accelerated program.
The questions for determination by the arbitrator and then by the Official Referee on appeal were drafted by counsel for both parties as follows:
- where the approved programme shows an earlier date for completion than the Date for Completion, is the Contractor entitled to carry out the works in accordance with the approved programme?; and
- is there an implied term of the contract that insofar as the approved programme showed a completion date before the Date for Completion, the owner and consultant must perform their obligations under the contract so as to enable the contractor to complete the work on the dates set out in its approved programme?
The Official Referee held that a contractor is always entitled to complete earlier than a contractually required date for completion (one assumes unless there is an express contract provision to the contrary). The fact that the contractor’s programme had been approved by the consultant was irrelevant to the Official Referee, who stated that a contractor has a right to work to an earlier date and a right to finish early, even where he did not produce a programme with an earlier date and whether or not he was required to produce a programme for approval. That is an important finding because there are circumstances where it is not in an owner’s interest to take possession of the work earlier than the contractual completion date. The taking of possession may trigger start of warranties and operational costs to the owner such as building security and maintenance, utilities and insurance earlier than the owner was expecting or wanting, such as in circumstances where the owner cannot proceed with sales or rentals.
On the second question, however, the Official Referee held that, while the owner and consultant should not hinder or prevent the contractor in its performance of the contract, there was no implied duty or obligation that required the owner and consultant to meet the contractor’s accelerated program, to furnish information in times required under the accelerated program or otherwise actively co-operate with the contractor, beyond what they were required to do by the terms of the contract.
In reaching his conclusion it was relevant to the Official Referee that the earlier completion date was a contractor’s right, but not a contractor’s obligation. The Official Referee held that on the language of the contract, the owner could not have pursued a claim against the contractor for failure to meet the earlier completion date shown on the programme. The Official Referee did not like the lack of symmetry in the duties that the implied duty the contractor was seeking would impose – the imposition of a duty on the owner but not on the contractor: “It is not immediately apparent why it is reasonable or equitable that a unilateral absolute obligation should be placed on an [owner].”
Without explaining what the significance to him of this passage was in the context of this decision, the Official Referee also referred to Hudson Building and Engineering Contracts (10th ed, p. 603):
“In regards to claims based on delay, litigious contractors frequently supplied to architects….at an early stage in the work highly optimistic programmes showing completion a considerable time ahead of the contract date. These documents are then used (a) to justify allegations that the information or possession has been supplied late…and (b) to increase the alleged period of delay or to make a delay claim possible where the contract completion date has not in the event been extended.”
In reaching his conclusion, the Official Referee also wondered about how this new completion date would impact the other terms of the contract. He referred specifically to the Variations (Changes) provision, stating ‘a fair and reasonable extension of time for completion of the works beyond the [Date for Completion] might be an unfair and unreasonable extension from an earlier date…The unilateral imposition of a different completion date would result in the whole balance of the contract being lost.”
Later cases in the UK have held that the situation is different if the earlier completion date becomes a firm, fixed and legally enforceable date for completion. (for e.g. see JF Finnegan Ltd v Sheffield City Counsel (1989) 43 BLR 124).
In Keating on Building Contracts (6th Editon) Keating states: “Where the programme date is earlier than the Date for Completion stated in the contract, it may be that some direct loss and/or expense may be recoverable on the grounds of disruption. However, provided that the contractor can still complete within the Contract Period, he cannot recover prolongation costs”. Keating’s position has been adopted and followed in the South Africa case of Ovcon (Pty) Ltd v Administrator of Natal (1991) 4 SA 71, a case where the contractor showed completion in eleven months with a contract period of fifteen months. Three months delay to the programme period was caused by the owner. The court refused to award additional costs saying: “if the contractor had taken its contemplated fifteen months, these expenses would have been incurred in any event.”
It seems that the courts are reluctant to award what is essentially a lost profit claim.
However, some courts in the USA have taken a different approach and permitted a contractor to recover delay costs where the contractor demonstrated that it would have completed early (see for eg Schmid V US, 173 Ct Cl 302, 351 F 2d 65)1.
It is important for counsel who hire US experts to address delay claims for their clients to know that the experts may be working on the assumption that the law in Canada is the same as the law in the US, giving the contractor has an actionable right to complete early.
In addition, Canadian owners hiring US construction companies should look closely at programmes submitted for approval to see if float time has been stripped out and a date for earlier completion shown. If the programme is approved, the owner may face a contractor asserting that all events impact the critical path and an owner can unwittingly find themselves embarking on a major construction project with zero float.
On the other hand, there may be circumstances where the contractor has been contractually induced to expend costs to finish early, perhaps by a early completion bonus or cost savings-sharing formula. It is expressed or implied in these circumstances that the objective of early completion was mutual, that the contractor should conduct itself to attempt to finish early and the owner would fully co-operate. If the acts or omissions of the owner or consultant prevent the contractor from finishing early, there would be no reason at law why the contractor should not be compensated.
Disclaimer: This Article is general in nature and it not intended as legal advice. You must contact legal counsel to obtain appropriate advice in relation to any legal issues you may have.