In the recent Court of Appeal decision in North Midland Building Limited v Cyden Homes Limited [2018] EWCA Civ 1744 the court confirmed the primacy of a contract between parties in determining an extension of time.
The Background
Cyden (the Employer) engaged NMBL (the Contractor) in a design and build contract based on the JCT Design and Build 2005 standard terms and conditions. The parties agreed certain bespoke amendments, including one which related to the way in which extensions of time would be dealt with in certain circumstances. Clause 2.25.1.3(b) was amended to provide that "any delay caused by a Relevant Event which is concurrent with another delay for which the Contractor is responsible shall not be taken into account in relation to extension of time."
Clause 2.26 expressly classified "acts of prevention" as a Relevant Event.
The works were delayed and a dispute arose between the parties as to the proper extension of time due to NMBL. The dispute centred on the extent to which (if at all) Cyden could take clause 2.25.1.3(b) into account when calculating the appropriate extension of time.
The Court's Decision
On appeal LJ Coulson agreed with the judge at first instance that the amended clause 2.25.1.3(b) was "crystal clear" in its meaning. In his view the clause was unambiguous and plainly sought to allocate the risk of concurrent delay to NMBL. The consequence was that the parties had agreed that, where a delay was caused by NMBL, even if there was an equally effective cause of that delay which was the responsibility of Cyden, liability for the concurrent delay rests with NMBL, so that it will not be taken into account in the calculation of any extension of time.
In light of that conclusion, the court had to consider whether there was any reason in law why effect should not be given to the clear contract provision. The only way in which NMBL could avoid the effect of the clause was to identify either another term of the contract or some overarching principle of law or legal policy which would render the clause inoperable.
The Prevention Principle
NMBL made what LJ Coulson described as the "bold proposition" that the prevention principle applied here. The common law doctrine of prevention provides that a party may not enforce contractual obligations where that party has prevented the obligation from being performed. In the context of a contractor having suffered delay at the hands of the employer the principle would allow the contractor to complete the works within a reasonable time.
It was argued on behalf of NMBL that the prevention principle would operate to rescue them from the clause to which it had agreed. LJ Coulson rejected that argument for the following reasons:
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The prevention principle was not an overriding rule of public or legal policy.
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The prevention principle was not engaged here. The Contract included provision for a prima facie entitlement on the part of the Contractor to an extension of time in the event of an act of prevention by the Employer.
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The prevention principle had no obvious connections with the separate issues that may arise from concurrent delay.
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Clause 2.25.1.3(b) was designed to do no more than reverse the result in previous authorities for this particular contract which provided that a contractor was entitled to an extension of time for concurrent delay. Those authorities were unconnected to the prevention principle.
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Most important of all - the amended clause was an agreed term. There was no suggestion in the authorities that the parties could not contract out of some or all of the effects of the prevention principle.
Key points
This case has confirmed that parties are free to allocate the risk of concurrent delay.
Bespoke amendments such as this will make it more difficult for contractors to be granted extensions of time. Contractors should carefully consider the extension of time provisions at the outset of a contract so that they know where the risk allocation lies.
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