delays, extensions of time and the prevention principle
ADYARD ABU DHABI v SDS MARINE SERVICES [2011]
This was a construction case in which the issue was whether a party could cancel certain shipbuilding contracts and reclaim sums it had already paid where there had been a delay in completing the ships. Amongst other things, the Court addressed in what circumstances the shipbuilder was entitled to an extension of time where the customer had requested changes to the design, particularly given the fact that there was a contractually agreed mechanism for the shipbuilder to request an extension.
facts:
- A contracted to build two vessels to be ready for contractually defined sea trial dates. The ships were not delivered on time and S purported to rescind (or cancel) the contracts and recover sums paid in line with express contractual provisions.
- A claimed that S had commissioned a number of variations to the contract and that it was therefore entitled to an extension of time as a result. It relied on the ‘prevention principle’, which provides that where work is to be completed within a stipulated time, the customer cannot insist upon strict adherence to the timetable where, by its own conduct, it has rendered it impossible or impracticable to complete the work within that time.
- A submitted that it did not need to prove that the intervening event (in this case the variations) had in fact caused the delay. It was sufficient simply to look at the event and see when it occurred relative to the completion date so that a theoretical/potential delay would suffice.
decision:
- The Commercial Court rejected A’s submissions as a matter of both principle and authority. A was running very late with the construction of the two ships. It had been unable to show that the request for the variation caused actual delay to the progress of the work.
- The contract contained an extension of time mechanism which did cover the alleged delays and so the prevention principle would not apply.
- In accordance with existing case law on this point, to succeed in an extension of time claim, a party must show that the intervening event caused the delay as a matter of fact. An example was given of a change request that the ship be painted red rather than blue. Red paint takes four weeks to order but it is available in time because the shipbuilder is over five weeks late in being in a position where it is ready to paint. Thus, had the shipbuilder not been late when the request was made it may have been entitled to a four week extension. However, since the request did not, in fact, contribute to the delay there was no entitlement to an extension.
- As A was unable to show that it was entitled to an extension of time, S’s right to rescind the contract and recover sums paid was upheld.
points to note:
- The prevention principle is a well-established principle of English law. Commissioning extra work or changes even though contractually permitted can amount to a qualifying prevention against the right to an extension of time.
- For suppliers, it is crucial to note that where there is an express provision governing the supplier’s right to request an extension of time, then that mechanism must be utilised. Failure to do so may quash any argument that it was entitled to an extension based on the prevention principle.
- An extension of time mechanism is not to be ignored simply because it is a failure by the customer to fulfil its obligations that causes the delay. Notice of entitlement to the extension under the contractual mechanism still has to be given by the supplier.
- This case also shows the importance of being able to prove that an intervening event causes actual delay to the progress of work.
- Customers must be wary of the impact that requesting changes to a specification may have on the contractual timetable and ensure that any impact is properly documented. Otherwise a customer may lose its right to insist on timely performance.
- It has been suggested that because the case related to shipbuilding it would not be of wider application but we can see no particular reason why that should be the case.