Time Related Claims
Construction Delay Claims
Constructions contractors usually have a time within which or a date by which the contractor must complete the work or bring it to the stage of practical completion.
There is usually a definition of completion or practical completion. completion is usually defined to be substantial completion of work.
Before a contractor makes a contract, the contractor must consider the risks involved in contracting. One major risk is liability to the owner for delay.
What if the contractor is delayed by events beyond the control of the contractor? Generally speaking, if a contractor agrees to complete work or hand it over by certain date, the contractor must honor the promise if, for reasons beyond the control of contractor, it becomes impossible to meet the deadline.
One exception is where the contract is terminated before the date for completion or hand over. Another is where the owner causes the contractor to breach the contractor’s promise. One party to a contract cannot hold the other liable for a breach which the first party causes the other to make. This is the legal maxim, “ no person can take advantage of his or her own wrong” . if an owner causes the contractor to breach the time provisions of the contract, the owner has no remedy for the breach.
For example, if the contractor promised to complete a building by 01, July 2019, and due to a delay by the owner in providing materials , the contractor was unable to meet the deadline, the owner would have no claim for damages on account of the contractor’s failure to complete by 01, July 2019.
Contracts usually that if the contractor is delayed in achieving practical completion by certain prescribed events, the contractor may notify the owner or the Engineer ( as per FIDIC ) and make a claim for extension of time. Under the term of the contract the Engineer is empowered by both parties to decide whether the contractor was delayed by one of the prescribed events and if so, the extent of the delay.
Damages for Delays
For owner-caused (or other contractor-caused) delays, a contractor may have a claim for:
Damages for delays can be a contentious issue in construction contracts. If a delay is caused by the owner or another contractor, a contractor may have a claim for damages. Here are some of the types of damages that may be available to a contractor in such a situation:
- Additional time-related costs: A delay in the completion of the project can result in additional time-related costs for the contractor, such as increased labor costs, equipment rentals, and extended overhead expenses. The contractor may be able to claim compensation for these additional costs.
- Liquidated damages: Many construction contracts include provisions for liquidated damages, which are a set amount of damages that the contractor will be liable for if the project is not completed by the agreed-upon deadline. However, if the delay is caused by the owner or another contractor, the contractor may be able to argue that they are not liable for liquidated damages.
- Consequential damages: Consequential damages are indirect damages that result from a delay, such as lost profits or increased financing costs. These damages may be recoverable if they were foreseeable at the time of contract formation.
- Delay damages: Delay damages are damages that result directly from a delay, such as the costs of accelerating the project to make up for lost time. These damages may be recoverable if the delay was caused by the owner or another contractor.
It is important to note that the availability of damages for delays will depend on the specific terms of the contract and the circumstances of the delay. Contractors should carefully review their contracts and document any delays and associated costs to ensure they have a strong claim for damages.
E-basel, a legal tech platform, can assist parties in managing claims for damages for delays by providing tools to manage the process efficiently and transparently. E-basel can help parties to track and document delays and associated costs, and facilitate negotiation and agreement between the parties. By using e-basel, parties can reduce the risk of disputes and improve project outcomes.
Project management & supervisory expenses
- Loss of use
- Loss of rents
- Lost profits
- Insurance costs
- Construction loan interest
For contractor-caused delays, an owner may have a claim for:
- Supervision costs
- Extended general conditions
- Jobsite trailer rental
- Temporary facilities/utilities
- Liability insurance
- Equipment rental & maintenance costs
- Field labor
- Increased materials cost
- Lost productivity
- Hourly labor rate increases
The duration of contract performance has a direct effect on the profitability of construction projects from the perspective of all stakeholders. For project owners, lost profits or benefits stem from being unable to make use of the project at the agreed date whilst to the contractor, extra cost will be incurred due to prolonged stay on site.
Most standard forms of contract thus have provisions that anticipate delay brought about by the actions and/or inactions of the contractor, the owner or are outside the control of both parties.
The contractor is often excused from the consequences and/or allowed compensation for any costs due to delays resulting from events or circumstances that are beyond its control.
Contractual provisions also allow the owner to recover liquidated damages from the contractor for failure to deliver the project within the contract performance period. Liquidated damages clauses entitle the owner to recovery of a specified sum of money for each day or week of culpable delay. In both instances, a detailed schedule analysis is required to investigate the events that have actually caused the project to overrun.
Delay claims are now a major source of conflict in the construction industry and also one of the most difficult to resolve. Inspired by this, academic researchers and practitioners alike have made numerous attempts by way of developing Delay Analysis Techniques ( DATs ) and good practice documents for guiding practitioners on the proper analyses and resolution of the claims.
The knowledge of the application of these techniques is of paramount importance to understanding their limitations and capabilities in practice and areas of improvement needs. As part of a wider research work, this paper seeks to develop such knowledge and understanding via: an evaluation of the most common DATs based on a case study, a discussion of the key relevant issues often not addressed by the techniques and their improvement needs.
The evaluation of the techniques confirmed that the various DATs give different allocations of delay responsibilities when applied to the same set of delay claims data, reinforcing the common notion that the most appropriate technique for any claims situation depends on the claims circumstances and the project.
The different results stem mainly from the unique set of requirements and application procedures each technique employs. In addition, there are a number of issues such as: functionality of the programming software employed for the analysis, resource loading and levelling requirements, concurrent delay and delay pacing, which are all vital to ensuring accurate and reliable analysis results but are not addressed by the DATs.