![Volume IV Issue No. 3
The Global Leader in Managing Construction Risk
Why does an extension of time not automatically entitle a contractor to prolongation costs?
A contractor often believes that an from delay then the Sharia principles of It has been mooted by the SCL that
extension of time also entitles him to fairness and equity may lead a court to contracts should contain a provision setting
damages or compensation for being kept on consider that a party should be liable for the out an agreed amount per day that can be
site longer than agreed. However it has consequences arising from their default, i.e. applied to each day of prolongation. In
been held in the UK courts 1 that the sole the costs incurred as a consequence of the other words the reverse of the Employer’s
purpose of an extension of time is to relieve action of the employer. liquidated damages provision. Anything
the contractor of the obligation to pay which may reduce the likelihood of dispute
liquidated damages for the whole or part of But what about the situation where there is must be worthy of consideration.
the overrun period. more than one cause of delay at any one
time? Unhelpfully, there is a lack of any In summary the reason an extension of time
To establish an entitlement to prolongation uniformly accepted view among does not automatically entitle a contractor
costs, a contractor must demonstrate that a practitioners regarding concurrent delay to prolongation costs is that entitlement to
delay to completion of the contract has and how it should be treated, both for recovery of costs associated with delay does
occurred and the cause of the delay is an extensions of time and prolongation costs. not flow from the same contractual
action or inaction of the employer which One point worthy of comment however is entitlement as time. Cost recovery will
amounts either to a breach of contract or is the position taken under the SCL Protocol. depend on there being either a specific
an event for which the contract specifically With regard to extensions of time, the contractual provision allowing recovery of
provides an entitlement to extra payment Protocol states that provided one of the prolongation costs or the contractor being
for the contractor. causes of delay in any given concurrency able to prove that the delay was a breach of
situation affords grounds for extension of the contract by the employer and that the
If the contract specifically provides for the time under the contract, the contractor breach actually caused the costs claimed.
contractor to recover his costs in the event should be given a time extension Clearly in this instance, to paraphrase
of certain specified events and the event notwithstanding any contemporaneous Benjamin Franklin, time is not the same as
that has caused delay is one of those default on his part. Interestingly, in the money.
specified then he can recover under the context of prolongation costs the Protocol
contractual mechanism. If the contract states that recovery of prolongation costs in - Nicola Caley
does not specifically provide for the the situation where there is both employer Managing Consultant of Hill Claims
Group
contractor to recover his costs or it does but and contractor delay will be only for the
the event that has occurred is not one of costs arising solely from the employer delay
those specified in the contract then the and will depend on the contractor being
contractor’s remedy will lie in a claim for able to separate the costs of the employer
breach of contract. A claim for breach of delay event from those of the contractor
contract will require proof of causation i.e. delay event.
that the action or inaction of the employer
actually caused the loss2. Thus it is arguable that the Protocol sets the
threshold for recovery of prolongation costs
The UK cases quoted are persuasive only at a higher level than that required for an
rather than binding but there is nothing in extension of time as, in practical terms, it is
the UAE Civil Code or Sharia law which suggested that there would be significant
would preclude the payment of damages if difficulties in separating out losses arising
set out in the contract , as long as they were from ‘contractor’ and ‘employer’ delays.
reflective of the actual loss rather than The potential to recover costs for non- Hill International, with 3,000
employees in 100 offices worldwide,
punitive or compensation for a future critical delay also exists. However delay
provides program management,
possible gain. It should be borne in mind costs arising from non-critical elements of
project management, construction
that if the amount was not representative work, which do not lead to delays to
management and construction claims
of actual loss it is open to the courts to completion of the works overall, would and consulting services. Engineering
amend the figure up or down so that the normally be regarded as loss of productivity News - Record magazine recently
damages reflect the actual loss incurred. or disruption costs. The same principles for ranked Hill as the 11th largest
It is suggested that if the contract is silent recovery of the costs would apply except it construction management firm in the
on the question of recovery of costs arising would not be possible to recover any United States.
contribution to overhead or overall project
1
H Fairweather & Co Ltd v London Borough of costs, only costs specific to the element in For more information on Hill, please
Wandsworth [1987] 39 BLR 106 delay. visit our website at www.hillintl.com.
2
Costain Ltd v Charles Haswell & Partners Ltd [2009]
EWHC 3140 (TCC), [2010] TCLR 1, 128 Con LR154
David Brodie-Stedman David Merritt
Disclaimer: This article does not constitute advice, legal or
Senior Vice President & Managing Director Senior Vice President & Managing Director otherwise, and is provided only as general
Asia, Middle East and Africa Middle East and Africa commentary. Appropriate professional advice should always
be obtained before taking or refraining from taking any
Abu Dhabi Office Sultan Business Centre action in relation to such information and/or the application
Butti Al Otaiba Bldg., Suite 1601 & 1602 5th Floor, Suite 501 of applicable law. This article and the materials contained in
Sh. Khalifa St., P.O. Box: 5201, Abu Dhabi – U.A.E P.O. Box: 71467, Dubai - U.A.E. it are provided on the basis that all liability for any loss or
damage, whether direct or indirect, arising out of or in
Tel : +971 – 2 – 627 2855 Tel. : +971 - 4 - 337 2145 connection with any use or reliance upon this article is
Fax: +971 – 2 – 627 2042 Fax : +971 - 4 - 335 6077 excluded to the fullest extent permitted by law.
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Why does an eot not automatically entitle a contractor to prolongation costs vol. iv issue no.3
- 1. Volume IV Issue No. 3 The Global Leader in Managing Construction Risk Why does an extension of time not automatically entitle a contractor to prolongation costs? A contractor often believes that an from delay then the Sharia principles of It has been mooted by the SCL that extension of time also entitles him to fairness and equity may lead a court to contracts should contain a provision setting damages or compensation for being kept on consider that a party should be liable for the out an agreed amount per day that can be site longer than agreed. However it has consequences arising from their default, i.e. applied to each day of prolongation. In been held in the UK courts 1 that the sole the costs incurred as a consequence of the other words the reverse of the Employer’s purpose of an extension of time is to relieve action of the employer. liquidated damages provision. Anything the contractor of the obligation to pay which may reduce the likelihood of dispute liquidated damages for the whole or part of But what about the situation where there is must be worthy of consideration. the overrun period. more than one cause of delay at any one time? Unhelpfully, there is a lack of any In summary the reason an extension of time To establish an entitlement to prolongation uniformly accepted view among does not automatically entitle a contractor costs, a contractor must demonstrate that a practitioners regarding concurrent delay to prolongation costs is that entitlement to delay to completion of the contract has and how it should be treated, both for recovery of costs associated with delay does occurred and the cause of the delay is an extensions of time and prolongation costs. not flow from the same contractual action or inaction of the employer which One point worthy of comment however is entitlement as time. Cost recovery will amounts either to a breach of contract or is the position taken under the SCL Protocol. depend on there being either a specific an event for which the contract specifically With regard to extensions of time, the contractual provision allowing recovery of provides an entitlement to extra payment Protocol states that provided one of the prolongation costs or the contractor being for the contractor. causes of delay in any given concurrency able to prove that the delay was a breach of situation affords grounds for extension of the contract by the employer and that the If the contract specifically provides for the time under the contract, the contractor breach actually caused the costs claimed. contractor to recover his costs in the event should be given a time extension Clearly in this instance, to paraphrase of certain specified events and the event notwithstanding any contemporaneous Benjamin Franklin, time is not the same as that has caused delay is one of those default on his part. Interestingly, in the money. specified then he can recover under the context of prolongation costs the Protocol contractual mechanism. If the contract states that recovery of prolongation costs in - Nicola Caley does not specifically provide for the the situation where there is both employer Managing Consultant of Hill Claims Group contractor to recover his costs or it does but and contractor delay will be only for the the event that has occurred is not one of costs arising solely from the employer delay those specified in the contract then the and will depend on the contractor being contractor’s remedy will lie in a claim for able to separate the costs of the employer breach of contract. A claim for breach of delay event from those of the contractor contract will require proof of causation i.e. delay event. that the action or inaction of the employer actually caused the loss2. Thus it is arguable that the Protocol sets the threshold for recovery of prolongation costs The UK cases quoted are persuasive only at a higher level than that required for an rather than binding but there is nothing in extension of time as, in practical terms, it is the UAE Civil Code or Sharia law which suggested that there would be significant would preclude the payment of damages if difficulties in separating out losses arising set out in the contract , as long as they were from ‘contractor’ and ‘employer’ delays. reflective of the actual loss rather than The potential to recover costs for non- Hill International, with 3,000 employees in 100 offices worldwide, punitive or compensation for a future critical delay also exists. However delay provides program management, possible gain. It should be borne in mind costs arising from non-critical elements of project management, construction that if the amount was not representative work, which do not lead to delays to management and construction claims of actual loss it is open to the courts to completion of the works overall, would and consulting services. Engineering amend the figure up or down so that the normally be regarded as loss of productivity News - Record magazine recently damages reflect the actual loss incurred. or disruption costs. The same principles for ranked Hill as the 11th largest It is suggested that if the contract is silent recovery of the costs would apply except it construction management firm in the on the question of recovery of costs arising would not be possible to recover any United States. contribution to overhead or overall project 1 H Fairweather & Co Ltd v London Borough of costs, only costs specific to the element in For more information on Hill, please Wandsworth [1987] 39 BLR 106 delay. visit our website at www.hillintl.com. 2 Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC), [2010] TCLR 1, 128 Con LR154 David Brodie-Stedman David Merritt Disclaimer: This article does not constitute advice, legal or Senior Vice President & Managing Director Senior Vice President & Managing Director otherwise, and is provided only as general Asia, Middle East and Africa Middle East and Africa commentary. Appropriate professional advice should always be obtained before taking or refraining from taking any Abu Dhabi Office Sultan Business Centre action in relation to such information and/or the application Butti Al Otaiba Bldg., Suite 1601 & 1602 5th Floor, Suite 501 of applicable law. This article and the materials contained in Sh. Khalifa St., P.O. Box: 5201, Abu Dhabi – U.A.E P.O. Box: 71467, Dubai - U.A.E. it are provided on the basis that all liability for any loss or damage, whether direct or indirect, arising out of or in Tel : +971 – 2 – 627 2855 Tel. : +971 - 4 - 337 2145 connection with any use or reliance upon this article is Fax: +971 – 2 – 627 2042 Fax : +971 - 4 - 335 6077 excluded to the fullest extent permitted by law. E-mail: auh@hillintl.com E-mail : dxb@hillintl.com