Dealing with Delay Claims

Contract Journal - 19/09/2007

David Blake
Contract Journal Legal Column

Dealing with delay claims – Subcontract claims

The recently published JCT Standard Building Sub Contract (2005) has some important revisions surrounding the receipt of claims from sub-contractors. Here David Blake, Chairman of commercial and contract management consultancy Blake Newport revisits some of its key principles:

What has changed under the new contract and what does all of the terminology mean?
The critical change surrounds the relevant ‘events’ or ‘matters’ within the contract, which are now listed much more comprehensively than before.

Put simply, relevant ‘events’ are those circumstances in which a subcontractor is prevented from undertaking work and can therefore claim for extra time allowance, whilst ‘matters’ are events which are deemed to allow the subcontractor to also claim for financial compensation. These most often occur due to a breach of contract by the contractor.

What are the implications of these changes?
Historically contractors have been able to simply award a gross total of time to all the claimed events listed by a subcontractor. Under the new provision, much more detail is required with contractors expected to clearly identify the Extension Of Time (EOT) that is attributed to each individual event. A more considered review of the circumstances is therefore required of the Contractor prior to awarding any EOT.Additionally this creates an added responsibility for the sub-contractor of supplying and recording the necessary information surrounding ‘events.’ .

What must a contractor consider in assessing a sub-contractor’s extension of time claim?
Contractors must ensure that any requests for information and programme analysis made of a sub-contractor are wholly reasonable, taking into account the relative size of the sub-contract against the value of the claim. In turn, the sub-contractor must be able to demonstrate that the relevant ‘event’ for which they are claiming has had an impact on the work being undertaken and caused them a delay on the critical path for their section of works.

I’ve already granted an extension of time – do I have to pay for loss or expense?
No, not in all cases. There are eight ‘events’ under the sub-contract that are known as neutral events. For this particular type of ‘event’, sub-contractors can claim for an EOT, but are not entitled to loss or expense. Even in the case of periods of EOT in which financial entitlement may exist, sub-contractors still have to prove that loss or expense was incurred as a direct result of the particular ‘event’ or ‘matter’ taking place.

I have just received a claim for loss / expense what are my obligations?
Under the JCT Sub contract there is no obligation for contractors to agree the value within a fixed time period - unlike the EOT which must be granted within sixteen weeks. Contractors take note however –the final sum is expected to be calculated eight months from the date when the sub-contractor provides all the necessary information.

Notwithstanding the above the contractor has an ongoing monthly obligation to ascertain the value of a sub contractor’s work and any payment notice has to specify what the amount of payment relates to and how the figure was calculated. Failure to properly assess the amount of loss or expense properly applied for on a monthly basis could lead to adjudication.

Can contractors discard a claim for being late?
In essence, the answer is no. The language used in the JCT Sub Contract only requires claims to be submitted ‘as soon as reasonably apparent’ and there are no fixed time scales within which the sub-contractor must operate. The only time limit in place is the stipulation that subcontractors must provide details of all sums claimed by four months after practical completion and this in itself is not a condition for entitlement. Any attempt to bar a claim on the grounds of it being late is therefore unlikely to succeed.

The subcontractor hasn’t performed – can I rely on this to defend the claim?
It is true that a breach of contract by the contractor for which EOT is claimed can often coincide with a failure by the subcontractor making the claim. This should be identified in the EOT assessment however and is unlikely to apply when defending a claim. But the sub-contractors’ own responsibility for delays should still be considered when calculating the amount of loss or expense to be awarded. After all, they still have to demonstrate that the relevant ‘matter’ has financially affected the works and caused additional loss or expense. This must involve proving to the reasonable satisfaction of the contractor that these costs are directly linked to the ‘relevant event or matter’ and not to their own failings.

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