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Clause 25 Of The Standard Form Of Building Contract 2005 - Extension Of Time For Completion

Summary

One of the most important provisions of the new Standard Form of Building Contract 2005 (which was launched in April of this year) is the extension of time provision contained in Clause 25. This provision will be the subject of close attention by employers and their contract advisors at the time that tender documents are prepared which incorporate the new Standard Form. This update reviews the principal provisions of Clause 25 and highlights some of the issues which employers and contractors alike should consider when the new Standard Form is included in tender documents.

Full Update

The extension of time provision contained in Clause 25 of the new Standard Form extends to some 5 or so pages and represents a substantial redraft of the provision contained in the old Standard Form.

When claiming an extension of time for completion, the Contractor is obliged to serve two notices of delay.

The "first notice" is to be served "as soon as practicable" and in any case within 28 days of the commencement of an event "likely to cause delay to the completion of the Works or a Section" becoming apparent. The first notice is to state the likelihood and estimated length of the delay, set out the material circumstances, including the cause of the delay, and state if the Contractor considers that he is or may become entitled to an extension of time due to one of the events listed in Clause 25.1(3).

The "shopping list" of events set out in sub clause (3) consists of 22 grounds on which the Contractor may claim an extension of time. Such events include "force majeure" (although, somewhat surprisingly, this term remains undefined), inclement weather, "Excepted Risks", loss or damage caused by a "Specified Peril" and delays caused by nominated subcontractors or nominated suppliers where they are entitled to an extension of time under their subcontract.

Other grounds include delay due to obtaining approvals or consents from Government departments which could not reasonably have been foreseen by the Contractor and a "catch all" provision, included in sub clause (u), for "a special circumstance considered by the Architect as sufficient grounds to fairly entitle the Contractor to an extension of time".

It can therefore be seen that the grounds upon which a contractor can seek to claim an extension of time for completion are very generous and will provide the Architect with great flexibility when determining the Contractor's entitlements to receive extensions of time for completion.

Following the service of the first notice, the Contractor is obliged, pursuant to sub clause 4(a), to "continuously use his best endeavours to prevent or mitigate delay to the progress of the Works", and to prevent the completion of the Works being further delayed.

The obligation placed on the Contractor to use "best endeavours" to prevent or mitigate delay is an onerous obligation and would be likely to be construed as requiring the Contractor to spend additional sums on preventing or mitigating delays.

The provision contained in sub clause (4)(a), however, goes on to provide that the words "best endeavours" are not to be construed to mean that the Contractor is obliged to spend additional money (without re-imbursement) to accelerate the execution of the Works to recover delay that the Contractor did not cause.

Accordingly, some relief is provided to the Contractor by this provision but inevitably, difficulties will remain in distinguishing between measures which merely "prevent or mitigate delay" and those measures which amount to an acceleration of the Works to recover delay for which the Contractor was not responsible for causing.

The Contractor's "second notice" is required to be served "as soon as practicable but in any case within 28 days" of the service of the first notice. The second notice is to provide substantiation that the "listed event" is the cause of the delay and the Contractor is also obliged to provide particulars of the cause, effect and length of the delay to the completion of the Works "in sufficient detail to enable the Architect to make a decision" of the Contractor's entitlement to receive an extension of time.

After receipt of the Contractor's second notice, the Architect is obliged to give an extension of time and to fix a later Completion Date if he is satisfied that the completion of the Works is being or is likely to be delayed beyond the Completion Date by the "listed event" stated by the Contractor in the first and second notices. Clause 25.3(2) places an obligation on the Architect to give an extension of time, and the reasons for his decision, "as soon as practicable but in any case within 60 days after the receipt of the particulars submitted with the second notice".

A useful provision is included in sub clause (3) which obliges the Architect to notify the Contractor if he decides not to order an extension of time, and the Architect is also obliged to give reasons for his decision.

Express power has also been given to the Architect to revise any decision he may make if the Contractor provides further and better particulars of his claim within 28 days of receipt of a notice from the Architect rejecting his previous claim.

Sub clause (4) contains a provision which is likely to have been included in the new Standard Form as a direct result of the decision in Gaymark Investments v Walter Construction Group (1999) in Australia. Sub clause (4) provides that if the Contractor fails to submit notices within the timeframe prescribed under Clause 25.1 or Clause 25.2, but a first notice is nevertheless submitted, the Architect shall, if he is satisfied that the completion of the Works has been delayed by one of the "listed events" referred to in the Contractor's first notice, grant an extension of time "to the extent that he is able to on the information available".

The decision in Gaymark stated that where the Contract provided that the service of notices and particulars of claim for an extension of time were conditions precedent to the Contractor's entitlement to receive an extension, if the Contractor fails to provide such notices and particulars, and the cause of delay was an act of prevention or breach by the Employer, the contract administrator could not unilaterally grant an extension of time unless express provision was contained in the contract to that effect. In the absence of such a provision, the liquidated damages provisions of the contract would become unenforceable.

While there has been much debate as to whether the decision of the Australian courts in Gaymark is good law, the draftsman of the new Standard Form have nevertheless sought to address the implications of the decision.

Detailed provisions are included in Clause 25 dealing with some of the "old chestnuts" of variation orders omitting works being issued after a new Completion Date has been fixed, and where delays are caused in a period of "culpable delay" by the Contractor.

The Architect is also, by sub clause (8), obliged to "finally decide the overall extension of time, if any," that he considers the Contractor is entitled to receive within 90 days of the substantial completion of the Works or such later date as may be agreed between the Employer and the Contractor.

Commentary

Clause 25 of the new Standard Form Building Contract introduces substantial changes to the extension of time provision contained in the previous Standard Form used in Hong Kong. Clause 25 provides the Contractor with generous grounds on which to claim extensions of time for completion and, no doubt, the 22 "listed events" set out in sub clause 25(3) will be the subject of detailed consideration by employers and their advisors at the time that tender documents adopting the new standard form are prepared. Clause 25 seeks to address a number of the uncertainties which existed in Clause 23 of the old Standard Form and addresses issues raised recently by decisions such as Gaymark Investments v Walter Construction Group.

In this respect, Clause 25 represents a substantial improvement to the extension of time clause contained in the Standard Form.