Contract Out Of Concurrent Confusion
Following the Court of Appeal's decision last week in North Midland Building Limited v Cyden Homes Limited, regarding contract provisions dealing with concurrent delay, we thought it would be helpful to briefly summarise the position.
A useful working definition of concurrent delay, which Coulson LJ, giving the leading judgement in North Midland, "gratefully adopts" was that given in Adyard Abu Dhabi v SD Marine Services. In Adyard, Hamblen J said that a concurrent delay is:
"a period of project overrun which is caused by two or more effective causes of delay which are of approximately equal causative potency."
Dispute arises where one of those causes is the result of the employer's action or omission and the other is the result of the contractor's. The conundrum is, in such circumstances which party should bear the cost of the delay, the employer or the contractor?
Absent a clause of the type in North Midland (reproduced below), i.e. on unamended JCT wording, the authorities appear split over whether an extension of time should be awarded where there are two concurrent causes of a delay, one the employer's risk and the other the contractor's risk.
Nevertheless, while Coulson LJ found it unnecessary to resolve this potential difference in North Midland, he confirmed that the parties are free to clarify the position in their contract. Coulson LJ upheld a clause which provided that, when the employer is deciding whether to give an extension of time:
"any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor was responsible shall not be taken into account".
Coulson LJ rejected the contractor's argument that the prevention principle prohibited the operation of the clause. He held that the prevention principle is not an overriding rule of public or legal policy and that it was not engaged in this case. Furthermore, it had no obvious connection with the separate issues that may arise from a concurrent delay. In any event, there was nothing in the authorities to prevent the parties contracting out of the prevention principle.
In light of the decision in North Midland, employers should consider inserting wording to the effect above in to their building contracts and development agreements. Such wording allows the parties to confirm that the contractual positon where an employer delay is concurrent with a contractor delay is that an extension of time will not be awarded.
Dan is an associate in our Construction team.