Just because an employer’s own actions have delayed completion does not necessarily let the contractor off the hook, explains Ian Yule
Contractors often argue that, because of an employer’s interference or “act of prevention” the position under a contract is that time has become “at large”. The consequence, they say, is that the contractor no longer has any obligation to meet the contractual completion date, or to pay liquidated damages.
The prevention principle, as it is called, is an attractive “get out of jail” card for contractors. It is no wonder that they and their advisers often include it in claims documents. The argument is frequently overused, however. Recent observations by the courts may act as a reminder that its true scope is actually quite narrow.
What exactly is the prevention principle? It is the principle that an employer cannot insist on holding the contractor to a completion date if it is the employer itself that has prevented the contractor completing. If the principle applies, the date for completion falls away (to be replaced by an obligation to complete within a reasonable time) and the employer can no longer take liquidated damages.
The prevention principle […] is an attractive ‘get out of jail’ card for contractors [but] the argument is frequently overused
Well-drafted contracts, including all the standard forms, allow the employer to give an extension of time for its own acts of prevention. That should be sufficient to repel any “time at large” arguments. But one sometimes sees contractors arguing in adjudications that the mere failure of the contract administrator to give an extension for an employer breach is itself enough to set time at large. As was made clear in Henia Investments Inc vs Beck Interiors (2015), that is not correct.
Similarly, the Court of Appeal in Carillion Construction Ltd vs Emcor Engineering Services Ltd (2017) rejected what was a rather intricate “time at large” argument on the straightforward ground that if the contract allowed the main contractor to extend time to its subcontractor when the main contractor had committed some breach, then the prevention principle could not be brought into play. All basic stuff, but it is reassuring to hear the courts restate the position.
The most useful recent discussion is in Severfield (UK) Ltd vs Duro Felguera UK Ltd No. 2 (2017). Severfield, as steelwork subcontractor, brought time and money claims against its main contractor, which, by the date of trial, was in liquidation and therefore not represented. Mr Justice Coulson found that Severfield was entitled to extensions of time because of the main contractor’s various defaults. But Severfield had also argued that time was at large. Although the judge had already given it the extension of time it wanted, he went on to consider that argument, for the sake of completeness.
We should see no more arguments that time has become ‘at large’ merely because the scope of work has changed radically
Severfield had relied on a 19th-century case. There, the court had said that if additional or varied work was “so peculiar, so unexpected, and so different from what any person reckoned or calculated upon, that it is not within the contract at all”, then the contract provisions on payment no longer applied. But the judge in Severfield said that that was all about variation orders that were not really variations to the contract works at all. Anyway, he went on, the case was more about money claims, not time claims.
The judge also mentioned a decision from 1992, McDermott International vs McAlpine Humberoak. In that case, a subcontractor had claimed that time had become at large simply because the main contractor had issued a vast number of drawing revisions as the works proceeded. The claim failed. That case, said the judge, was “a signpost that, in modern times, the courts will uphold the contractual mechanism agreed by the parties wherever possible, and avoid, if they can, relying on extra-contractual concepts such as […] time being at large”.
The prevention principle should be used only in those rare cases where the contract contains no power for time to be extended for employer defaults. That does sometimes happen – for example, with hurriedly drafted letters of intent, intended as “mini-contracts” pending agreement of a formal contract. But such cases are not common. In the light of the recent court guidance above, we should see no more arguments that time has become “at large” merely because the scope of work has changed radically from that originally envisaged, or because the contract administrator has allegedly not dealt with a claim for more time. To put it another way, this get out of jail card will rarely be effective.
Ian Yule is a construction and engineering partner in Shoosmiths