Extension of Time and Liquidated Damage under Different Standard Construction Contract Forms
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Date
2007
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Addis Ababa, Ethiopia
Abstract
In principle construction work set out a date in which the
particular contractor is obliged to complete the work. The contractor
should complete the work on the specified date stated in the contract.
However, the practice shows that there are difficulties on the part of the
contractor on the specified date to complete the work on the specified
date. This might be attributable either to lack of calculation the in
estimation of completion date or other factors that threatens the smooth
running of the project. It might be the employer fault, the contractor fault
or neutral events. Given the fact that there is potential for delay to occur
in construction industry it is perhaps surprising that any construction
work is even completed on the specified contract time.
It is a lready stated that the contractor might encounter several
delaying circumstances during of the course of the work. This might
justify the inclusion of the mechanism that deals with delays which likely
to affect the completion date. This is the concept of "extension of time"
clause. It allows the party to revise the contract period under the
specified grounds.
'Extension of time' clause has importance for the contractor and
the employer. Extension of time might reduce the contractor's risk in
relation to delay by entitling him a time for completion. Other wise he will
be subjected to liquidated damage. On the part of the employer it
preserves the employer's right to liquidated damage due to act of
prevention (faults of employers).
It is not untrue that it is only for events stated in the contract as a
relevant event justified as a ground for extension of time. It might be
neutral events like force majuere of events due to the employer. Most
standard contract forms framed broadly so as to include both events. If
the contract period lapsed due to employer's fault and this is not
included as a ground then there is a possibility that time will be at large.
In this case there is no specific completion date. The contractor is
expected to complete in a reasonable time.
The issue as to the link between extension of time and the recovery
of loss and expenses or extra cost for extended period is controversial.
Most standard form stated that the linkage between the two lies on the
fact that whether the delay is due to neutral event or the fault of the
employer. If the delay is due to neutral event, the contractor will not
recover the loss and cost for extended time. The contractor bears his own
cost (the loss lies where its falls). Whereas if the delay is due to the
employer fault, the employer is liable to pay for the loss & the costs.
It is a lso important to note that the inclusion of extension of time
clause does not automatically justify extension of time unless the
contractor complies with the procedural and substantive element in the
contract. The contractor is obliged to give notice for any delay with its
details. Moreover the contractor is entitled to extension of time only if
there is delay due to relevant events that affect critical path (completion
date).
Finally most standard forms widely practiced in Ethiopia recognize
liquidated damage as a remedy if the contractor fails to complete a work
on time. The inclusion of liquidated damage clause and the existence of
certain completion date is a prerequisite. Moreover, the amount of
liquidated damage should be a genume pre-estimate and should be
recovered without court proceedings.