The same is true of contractors and design consultants. In a typical building contract, we impose a completion date by which the contractor must finish the job. We provide for this date to be extended if delays are caused by the client or, in some cases, other causes beyond the control of the contractor, such as exceptionally bad weather.
However, if the contractor fails to meet the completion date it is invariably charged hefty liquidated damages, which can be simply deducted from other payments due to it. In the mean time, it has to proceed regularly and diligently with the work and risks having its contract terminated if it does not.
Compare this with the position of the architect. As with all its other obligations, it agrees to exercise reasonable skill and care. In other words, if it is late in providing design or other information, it can generally be sued only if the client can prove that this amounts to negligence. Even then, rather than having pre-agreed liquidated damages, the client needs to prove the amount of its loss caused by the negligent delay in order to recover any damages.
There may be good reasons for this different treatment. Some may be based in history and the professional status of the design consultants as opposed to the lowly labourer/contractor. A more compelling reason may be the different factors (including client input) that affect the design process. If fixed dates were imposed for providing design information, there would have to be so many reasons for extending these dates (not least delay by the client in making up its mind, or a delay by other consultants) that the fixed target date might as well not be there at all.
There are areas where this different treatment can catch people out. A design-and-build contractor is tied to a completion date. One cause of delay could be the supply of design information. Some of the design may be supplied by subcontractors, which (if only because we call them contractors) can be tied to similar fixed dates and liquidated damages clauses.
However, much of the design may come from a team of consultants. Furthermore, they may have been imposed on the contractor by the client and novated. The contractor has the ultimate choice whether to take on a job or leave it, but beyond this it may have had no say over the identity of the consultants or their terms of appointment.
- Design-and-build contractors are vulnerable to consultants’ delays
- Clients, equally, can lose out on certain contracts
- Consultants and contractors should be treated the same
The job is late and liquidated damages are deducted under the building contract. The contractor sees the cause of delay as resting with its design team. It turns to them but cannot get back its damages unless it can prove that the team’s delay has been negligent. Often, this would mean that pursuing the matter is not cost-effective and the contractor is left out of pocket.
Clients can lose out as well. Amendment 18 to JCT80 introduced the information release schedule, or IRS. This remains in the 1998 edition and is a programme for the release of design information agreed precontract and, in theory, updated during the job with neither employer nor contractor entitled to unreasonably withhold or delay its consent to an update.
The architect must ensure that information is released at the times stated in the IRS. Failure to do so is a “relevant event” that can entitle the contractor to an extension of time and it is not (as in the past) required to have asked for the information – if it is in the IRS, it must be handed over on time whether requested or not.
So where does this lead? If the contractor is delayed by the late supply of information, it will usually obtain an extension of time. For the period of the delay, the client loses out on its entitlement to liquidated damages from the contractor. From where does the client recover this loss? To recover damages from the consultants, it would have to demonstrate that they have been negligent, not just that they have failed to comply with the IRS. Again, there would be finger-pointing, with each consultant blaming the others (and indeed blaming the client) for any delay. Again, the damages action would be a difficult one.
It is all unfair; so what do we do about it? We could apply our liquidated damages sticks to design consultants and beat them down just as we do to contractors. This would not be popular with consultants or their insurers and, because of the interaction between different members of the team and client-caused delay, it may even be impractical.
On the other hand, perhaps the stick of liquidated damages is not the way to achieve timely completion and we should instead adopt a regime of carrots and other incentives. Time could be kind to everybody and give us an industry of Brad Pitts.
Patrick Holmes is a partner in solicitor Macfarlanes.