Monthly Archives: January 2023

Collision Course: The Consequences of Conflicting Forum-Selection Provisions

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Heather Benzmiller Sultanian and Rebecca B. Shafer | Sidley Austin

On January 6, 2023, Vice Chancellor Laster issued an opinion in Fairstead Capital Management LLC v. Blodgett concerning a “dispute-resolution collision” between two applicable forum-selection clauses. The collision arises from the termination of a principal of an investment fund, whose partners fired him for allegedly breaching his employment agreement and also cancelled his member interests in two LLCs that owned rights to the profits generated by the fund. Unhappy with his ouster, the former principal wanted to litigate against his former partners and the LLCs. But that raised the question at the core of this Vice Chancellor Laster’s opinion: where to litigate?

Pursuant to the arbitration clause in his employment agreement, the former principal commenced an arbitration action against the other partners of the fund and the LLCs. But the partners did not want to arbitrate, and the LLC agreements required that litigation arising from those agreements be filed in state or federal courts in Delaware. The partners therefore sued the former principal in Delaware court for breach of the LLC agreements. Each side asked the Delaware court to issue a permanent injunction requiring the overall dispute to be resolved in its preferred forum and to grant summary judgment on the forum-selection issue.

The court’s decision illustrates the complexities involved in these “dispute-resolution collisions” — and the inefficiencies that can result. The court first noted that though an arbitration provision ordinarily would be a “clean winner” for the former principal, its analysis was complicated by the involvement of the LLCs, who were not parties to the employment agreement. The court determined that the LLCs had accepted a direct benefit under the arbitration agreement: the services the former principal provided to them through his employment. Therefore, under equitable principles, the LLCs were bound by that agreement.

The court’s analysis did not stop there. The next wrinkle arose from the application of the LLC agreements and their competing forum-selection clauses. In light of the conflict between those provisions and the employment agreement, the gating decision of whether the dispute is arbitrable was not clearly delegated to the arbitrator and, thus, fell to the court to decide.

The court came to the reluctant conclusion that the appropriate forum was a “mixed bag,” depending on the issue underlying each claim. The key to the analysis was a provision of the LLC agreements stating that they superseded any prior contracts or agreements as to any issues covered by the LLC agreements. As a result, any issues encompassed by the LLC agreements, including claims about the bases for cancelling the former principal’s member interests (to the extent unrelated to the employment agreement), must be decided by Delaware courts, per the LLC agreements’ forum-selection provisions. However, any issues that fall within the scope of the employment arbitration agreement, including whether the principal violated that agreement at all, must be arbitrated.

As the court bemoaned, this analysis “means that litigation will proceed inefficiently in at least two fora” — unless, of course, the parties could reach a new agreement to arbitrate the full dispute. (The court recognized that the parties’ differing views on the desirability of arbitration makes such an agreement unlikely.) In addition, even if the parties could agree to arbitrate the full dispute, any after-the-fact agreement would not wash away the costs and inefficiencies already generated by the collision of the relevant forum-selection terms.

Forum-selection clauses are common in commercial contracts, and there are sound reasons why different types of agreements might prefer different fora. A limited liability company, for example, might prefer to resolve disputes over its operating agreement in the courts of the state where it is chartered, while an employer might favor the privacy of arbitration for employment disputes. Whatever the preferred forum, Vice Chancellor Laster’s opinion illustrates why drafters of agreements should be cognizant of other potentially intersecting contracts and should draft forum-selection clauses with an eye toward avoiding potentially costly and inefficient “collisions” between arbitration and the courts.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Performance Bonds – Call Me?

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Robert Meade, Alistair Calvert and Tom Swarbrick | Bracewell

Performance bonds are intended to guarantee a contractor’s satisfactory and timely completion of a project. There is no need for the employer to establish or prove that the contractor has defaulted on its obligations prior to making the call. For that reason, enforcing a performance bond is often seen by employers as an attractive option: it can be a means of obtaining a quick cash return, which could alleviate any cashflow pressures that threaten the viability of the project.

Historically, calling an on-demand performance bond has always been seen as the exception, rather than the rule. They were a form of security that was often required, but that was only reluctantly enforced. However, the political and economic shocks felt around the globe since 2020 have started to change this perception.

Supply chain issues, increased costs and insolvency risks have led to employers being more willing than ever to call performance bonds, and we have seen a number of calls being made in the last two years. But experience shows that making a call is never as straightforward as the employer expects. There is often disagreement as to where fault lies and, occasionally, around the bond call procedure itself. The decision to call a performance bond should, therefore, be exercised with caution and only once full thought has been given to the process and potential outcomes. We set out below some of the factors that an employer should consider when deciding whether to call a bond.

The impact on the commercial relationship

Calling on a bond should not be looked upon in isolation but in the context of broader commercial relationships.

Facing a demand on a bond is likely to cause damage to a contractor’s banking relationships. The contractor will generally have provided collateral to the bond provider to support the performance bond. Any call will most likely cause the contractor to lose its collateral and will affect its subsequent ability to obtain performance bonds or access finance. This could correspondingly impact its ability to bid for and win future projects.

For that reason, employers should be aware that enforcing a bond is very likely to jeopardise the relationship between employer and contractor. If the parties’ goal to complete a project remains aligned, a bond call may not be appropriate despite the contractor’s defaults. However, the severe impact on the contractor can also provide the employer with leverage. We have recently advised on a number of projects where calling a bond (or at least threatening to do so) was enough to get the parties to seriously focus on settling their issues and completing the project.

Calling a performance bond can also have negative reputational impacts for the employer. If it becomes common knowledge that a certain employer frequently resorts to making calls on bonds, this could drive up the price at which contractors are willing to do business with that employer in the future and make it harder to obtain similar security.

Requirements of the bond

The cardinal rule is that an issuer of a bond will only pay out under the bond if it is presented with a valid demand. The employer will need to make sure that the demand takes the correct form and is accompanied by the correct documents. It will also need to ensure the demand is served at the right place and by the right method. Employers should ensure they comply strictly with these requirements. Failure to do so will result in the demand not being effective.

Because of this, it is sometimes prudent to liaise with the issuer of the bond before the call is made to ensure that all necessary requirements will be fulfilled. This introduces the risk that the contractor becomes aware of the proposed bond call (and therefore provides it with an opportunity to take preventative action), but it also significantly reduces the risk that the issuer of the bond will reject the form of the demand for being non-compliant.

Finally, the employer should ensure that the correct party is making the demand under the bond. Remember that in a project finance context, security will often have been taken over the bond proceeds. The employer should check the security and assignment documents to ensure the right party is making the demand. Is it the employer? Or is it the bank that has taken security over the bond?

Additional requirements

The underlying construction contract may seek to impose limits around when the bond can be called by the employer. It may also oblige the employer to take certain steps prior to making the demand, for example, giving notice or starting the contractually agreed dispute resolution process. The purpose of such provisions is to protect the contractor against wrongful calls and, in the case of notice provisions, to give the contractor time to take preventative action. Such provisions do not directly affect the obligation of the issuing bank or financial institution to pay on receipt of a valid demand, as the performance bond is autonomous from the underlying contract, but it may provide the contractor with grounds to claim that the employer has breached the provisions of the construction contract. It may also allow it to prevent the call being made or to prevent the issuer making payment under the bond.

Where the project in question is being financed, the employer should check the finance documents to establish whether the lender consent is required prior to making the call. The finance documents may also impose limits on what the employer can do with the proceeds of the bond, which may impact the employer’s decision to call the bond.

The best time to call the bond

Because calling a bond is likely to have a negative impact on the commercial relationship, many employers wish to delay making the demand as long as possible. However, it is not uncommon for the value of the bond to step down over time as the project progresses. That being so, if an employer is entitled to make a call it will be in its interests to do so at a point in time when it will obtain maximum value.

Performance bonds are also usually time limited, with a specified expiry date. Employers should be aware of the relevant expiry dates and be ready to enforce them prior to expiry if they will not be renewed. Most construction contracts will expressly permit this, although conditions may be imposed around the employer’s use of the bond proceeds.

It should be remembered that it may take several days or weeks to prepare for and properly call a bond. In one recent example, the original wet-ink demand had to be served on the issuing bank which required the document to be flown around the world so that it could be signed by the relevant individuals and then delivered. The decision to make the call should not be left to the last minute.

Contractor challenge

It is not unusual for demands on performance bonds to be challenged by contractors, either by seeking to prevent the issue of the demand itself or to prevent payment on the demand. In fact, the contractor often has little to lose by making the challenge, as the associated legal fees will likely be significantly less than the amount to be paid out under the bond. The potential for such a challenge, and related proceedings, should be a key consideration for any employer considering a demand.

Employers should, in particular, consider the most likely forum(s) for challenge and prepare accordingly. If the contractor seeks to prevent issue of the demand, it will need to consider what jurisdiction is provided for in the underlying construction agreement and, in particular, whether it is required to seek redress through arbitration or via a particular national court. Alternatively, if the contractor seeks to prevent payment by the issuing bank, it will be more likely to seek an injunction from the courts of the jurisdiction where the issuer is located. The position is often complicated by multiple bonds being issued by issuing banks or financial institutions in different jurisdictions.

The grounds on which a court or tribunal may intervene to prevent a call may differ from jurisdiction to jurisdiction, hence the need to seek local advice. In England, the general principle is that the court will be very reluctant to interfere in the process of a bond call. This is because the bond is recognised as an independent contract, separate from the disputes between employer and contractor. As a matter of English law an injunction would traditionally only be granted where the demand is obviously fraudulent and that is known to the bank. The court must be satisfied that the employer had no honest belief that it was entitled to make a demand. In more recent times, there has been movement towards granting an injunction in situations where it has been established that the employer is precluded from making the demand by the terms of the underlying contract.

Such considerations are not straightforward. The employer should seek advice in advance of a bond call as to the likely approach of the relevant court or tribunal and the grounds upon which they may restrain a call. The need to seek and obtain this advice should be built into the bond call timeline.

In all cases, employers should identify and collate evidence of a contractor’s breaches in order to be able to demonstrate to a court or arbitral tribunal that a demand is justified and properly made. Making time to consider the justification for a call, and gathering the relevant evidence, will be key not just to defending the call initially, but also to any subsequent dispute between the employer and contractor.

Wrong call

If the demand is satisfied, but calling the bond is later determined to be wrongful – for example, because it is ultimately decided that the contractor was not at fault and that the employer was not, therefore, entitled to call the bond – the employer will be required to repay the proceeds from the bond with interest. The employer may also have to compensate the contractor in damages for any other loss that it has suffered.

For this reason, calling an on-demand performance bond should not be seen as free money. However, it may be seen as money now, which could provide a significant benefit in the short term, even in the face of long-term risk.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Basic Indemnity and Insurance Considerations in the Construction Context

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Julia Edwards Bobbitt and Brian Waters | Gray Reed

Construction companies spend countless hours drafting agreements requiring indemnification and insurance for their projects. These obligations are prevalent for all tiers of construction industry members— from subcontractors and suppliers, to project owners. The purpose of this article is to address some considerations in anticipation of a claim being made after an incident on a construction project.

The Starting Point

When a claim is made against you, or an incident occurs that is likely to generate a claim, you should immediately review the insurance and indemnity provisions in both your upstream and downstream construction contracts. As soon as possible, you must determine to whom you agreed to provide indemnity and/or insurance coverage, and conversely, who owes you indemnity and/or insurance coverage for such claims. For example, a general contractor often—if not always—will have agreed to indemnify the owner of the project for claims and to include them as an additional insured on the general contractor’s policy. Likewise, a subcontractor likely will have agreed to indemnify the general contractor and make it an additional insured on the subcontractor’s policy.

Putting All Parties on Notice

If a claim is made against you—that is, you receive a demand letter or are named in a lawsuit based on an incident occurring on your project—immediately notify both your carrier and any parties who may owe you defense and indemnity. In the notice letter to parties who owe you indemnity, you should demand a defense and refer to the provisions in the construction contract that require the other party to provide defense and indemnity. You should also include in the letter a specific reference to any insurance that the party may have and request that the party immediately put its insurance carrier on notice and provide you with a copy of the policy or contact information for its insurance carrier.

Sending a timely notice of the claim to your carrier is particularly important if your insurance policy is “claims-made”—meaning there is only coverage for incidents that happen during the policy period and are reported to the insurance carrier during the policy period (or a stated time after the policy period). Failing to put your carrier on notice may mean you lose coverage for that claim.

Conversely, if a claim (demand or lawsuit) is made against someone else—e.g., upstream contracting party—who demands indemnity from you, you should likewise place your carrier on notice. Your commercial general liability policy may cover the indemnity claim against you as an exception to the Contractual Liability Exclusion. The claim for indemnity is an indirect route to coverage for your indemnitee (that is, the person you agreed to indemnify) under your policy, separate and apart from that party’s own potential claim as an additional insured on your policy.

Coverage for an Additional Insured

Whether you are trying to get coverage as an additional insured on another’s policy, or another party is trying to get coverage as an additional insured on your policy, there are two differences in additional insured endorsements that may change an insurer’s coverage analysis. For example, one standard version of an additional insured endorsement provides that an additional insured is only covered “with respect to liability arising out” of the named insured’s work. Another version of an additional insured endorsement provides that an additional insured is only insured where the damage is “caused, in whole or in part, by [the named insured’s] acts or omissions.” Courts interpret the language of each differently, which should be considered when drafting contractual insurance requirements and when procuring coverage.

The “arising out of” coverage language is broad. Typically, any claim resulting from an injury to the named insured’s employee is said to “arise out of” the named insured’s work if the employee was present on the jobsite by virtue of the named insured’s work on the project, whether or not the named insured’s work proximately caused the injury. On the other hand, the “caused…by” language requires that the named insured’s work proximately caused the injury. These differences often affect whether an insurer will undertake the duty to defend or ultimately provide any coverage.

Who’s Paying Defense Costs?

Insurers are generally obligated to defend their insureds in a lawsuit by paying for legal counsel. However, insurers usually only have the duty to do so when the allegations in the lawsuit fit within a basis for coverage under the policy. And, as discussed above, the specific policy language will determine when that duty arises. This is Texas’s so called “Eight-Corners Rule.” It requires the insurer to provide a defense based on the policy language and the facts stated in the lawsuit, regardless of whether such facts are true and without looking at outside evidence or facts.

Which facts are alleged can have serious impacts on the coverage provided. In a recent Texas Supreme Court case, Monroe v. BITCO, the Court expanded the “Eight-Corners Rule” and held that Texas courts may consider outside evidence, “if the underlying petition states a claim that could trigger the duty to defend, and the application of the ‘Egiht-Corners Rule’, sure to a gap in the plaintiff’s pleading, is not determinative of whether coverage exists,…provided the evidence (1) ‘goes solely to an issue of coverage and does not overlap with the merits of liability, (2) does not contradict facts alleged in the pleading, and (3) conclusively establishes the coverage fact to be proved.’” 640 S.W.3d 195 (Tex. Feb. 11, 2022). In theory, the Monroe Exception may be used to both create or avoid the insurer’s duty to pay for its insured’s legal defense where the underlying pleadings lack key coverage facts.

Remember, if the carrier does not pick up defense costs- whoever owes that party indemnity may have to pay those costs as part of their indemnity obligations.

Why it Matters: Expanding the Available Funds

Insurance policies have limits. If a general contractor and owner are both sued for $2 million, as a result of an incident during construction, and both make claims on the general contractor’s policy with a limit of $1 million, either or both parties may not be covered for the full value of their potential liability if the policy has a limit “per occurrence.” If the general contractor also owes the owner indemnity for that claim, the general contractor is then at risk to pay out of pocket for both its and the owner’s liability over policy limits. However, if the general contractor has coverage available to it under another policy— such as a subcontractor’s—then the general contractor does not necessarily have to expend its own funds or insurance coverage, and can utilize a separate bucket of available funds. It is important to spread the loss across policies where exposure is high.

If the general contractor also owes the owner indemnity for that claim, the general contractor is then at risk to pay out of pocket for both its and the owner’s liability over policy limits.

In summary, there are many moving pieces to determine who has what financial responsibility for a claim following an incident. It is important to keep these notions in mind during both contract negotiations and after a claim arises.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

“Substantial Completion”: Different Strokes for Different Folks??

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David Senter | Nexsen Pruet

Due to a recent decision of the North Carolina Court of Appeals, there now exists the potential for some uncertainty as to the time limits to assert claims related to a construction project. Specifically, that potential uncertainty relates to when the six-year statute of repose on construction claims begins to run. As for a statute of repose, you may say “what the heck is that?” Generally, the statute of repose is a firm and absolute deadline, after which claims related to improvements to real property, including a construction project, will be time-barred. This period runs from the date of “substantial completion” and is not subject to a date of discovery standard, such as might be the case with the three-year statute of limitations. The specific uncertainty relates to whether there can be different substantial completion dates for the contractor and each of its subcontractors, such that time limits begin to run at different times.

In Gaston County Board of Education v. Shelco, LLC, et al., No. COA21-618, 2022-NCCOA-550, 877 S.E.2d 316 (August 16, 2022), the Court of Appeals addressed the definition of substantial completion in the context of a dispute where the owner sued a contractor, an engineer, an architect, and the architect’s subcontractor over a cracked retaining wall.  The owner, contractor, and architect had signed a Certificate of Substantial Completion for the project generally. However, the engineer and the architect’s subcontractor had not.   

The Court considered the statutory definition for substantial completion which is “that degree of completion of a project, improvement or specified portion thereof… upon attainment of which the owner can use the same for the purpose for which it was intended.” NC Gen. Stat. § 1-50(a)(5)c. The statute also allows the parties to agree in writing upon the date of substantial completion, which in the industry is generally reflected in a Certificate of Substantial Completion.

The court in the Gaston County case found that even though the contractor and the architect had signed a Certificate of Substantial Completion, that Certificate did not bind the engineer or the architect’s subcontractor because they had not signed that Certificate. Of course, subcontractors typically never sign certificates of substantial completion. So, does this mean that there are separate substantial completion dates for subcontractors? Maybe. North Carolina courts have not interpreted “substantial completion” in terms of construction projects which have multiple stages or scopes of work performed by subcontractors completed at different times, which, of course, is every project. In other words, the question is whether substantial completion for purposes of the statute of repose begins as to a subcontractor when it finishes its scope of work, as opposed to when the contractor finishes the project generally. Should the court’s analysis focus on the contractor’s or subcontractor’s “specified portion thereof” or on the owner’s ability to use the work for the “purpose for which it was intended”? The Court’s opinion has the potential to create uncertainty on that point. 

Even though they had not signed the Certificate of Substantial Completion, the Gaston County court reinstated the Complaint as to the engineer and the architect’s subcontractor because of specific pleading rules as to the statute of repose defense. The engineer and the architect’s subcontractor have sought discretionary review by the North Carolina Supreme Court in order to provide clarity regarding the pleading requirement and clarity on “when the date of substantial completion begins to run for portions of the work.” The AGC has requested permission to file a friend-of-the-court brief. The AGC wants the court to “clarify the manner in which the statute of repose applies to construction claims” in order to avoid “the risk that it [the opinion] introduces substantial uncertainty into the industry.”[1] It remains to be seen whether the Supreme Court will agree to review the Court of Appeals’ decision and, if it does, what will happen on appeal, but in the interim and whatever the outcome of any appeal, there are several things that contractors can do to eliminate the uncertainty and to manage the risk.

First, for new contracts, contractors can insert language in their subcontracts specifically noting the subcontractor’s agreement that the date of substantial completion of the project generally or the date agreed to by the contractor in a Certificate of Substantial Completion, shall be the date of substantial completion of the subcontractor’s work.

Second, for existing contracts, contractors need to be aware that they may have to track separate claim deadlines for each subcontractor involved with the project.

South Carolina dealt with this issue in Lawrence v. General Panel, 822 S.E. 2d 800 (SC 2019) where, based on a different statute, the South Carolina Supreme Court held that when a contractor completes its part of the project (“a specified area or portion thereof” such as the foundation or installation of windows), the project is substantially complete as to that contractor’s work and the statute of repose clock as to that work begins to tick, even if the entire project’s substantial completion is years or months away. While one may or may not agree that there should be separate substantial completion dates for purposes of the statute of repose, at least there is certainty in South Carolina over that point. The Lawrence court went on to find that under the applicable statute, the issuance of a Certificate of Occupancy was prima facie proof of “substantial completion,” notwithstanding ongoing work on an area or portion of the project. So, South Carolina basically uses bookends when it comes to this issue.[2]

As for North Carolina, stay tuned for further clarification from the Court as to the potential for varying substantial completion dates but in the meantime protect yourself by taking the above steps now to deal with this issue. 

[1] The Author acknowledges reliance throughout this Alert upon the pleadings filed by the parties and the AGC in connection with the petition for discretionary review in the Gaston County case. 
[2] See 1.15.19 Law Alert by Nexsen Pruet’s Cheryl D. Shoun re: “South Carolina Supreme Court Clarifies Statute of Repose”.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Concurrent Delay: the Latest Guidance From the Courts

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Laura Johnson | Bryan Cave Leighton Paisner

Summary

In Thomas Barnes & Sons plc v Blackburn with Darwen Borough Council, the TCC had to consider whether there was a concurrent delay and if so how did that affect the parties’ rights under the contract. The delay to the works in this case entitled the employer to terminate the contract and engage a third party to complete the works. There are debates as to what concurrent delay actually means but the SCL Delay and Disruption Protocol, 2nd edition helpfully explains that it is:

“the occurrence of two or more delay events at the same time (one an Employer Risk Event, the other a Contractor Risk Event) and the effects of which are felt at the same time. For concurrent delay to exist, each of the [events] must be an effective cause of Delay to Completion ([meaning] the delays must both affect the critical path).”

How this works in practice will depend on the facts, and this judgment provides a useful illustration and reminder of the court’s approach to concurrent delay.

What happened?

The claimant contractor, Thomas Barnes & Sons plc (in administration) and the defendant employer, Blackburn with Darwen BC, entered into an amended JCT SBC with Quantities, 2011 Edition for the construction of Blackburn bus station, to include office space and a concourse for access to the buses.

During the project there were delays to the structural steel works (for which the contractor was not contractually responsible), completion of which were necessary for the subsequent works and final interior finishes. However, while the structural steel work delays were ongoing, the contractor suffered delays to its roof works, which were also a prerequisite to the interior finish leading the employer to terminate the contract on this basis and procure a replacement contractor to complete the works.

The contractor sought an extension of time (EOT) due to the structural steel delays and brought a claim seeking:

  • Monies considered due under the contract at the time of termination; and
  • Damages for wrongful termination.

Overall, the court held that issues with both the structural steel and roof covering works were concurrent causes of delay, as both works items were on the critical path (to completion of the internal finishes) and both were causing delay over the same period. The judge agreed with the employer’s delay analyst, that the roof cladding and glazing could not be progressed until the roof coverings were completed and also that the majority of the internal finishes and services could not be progressed until the roof coverings were in place.

The court held that although the contractor had established an entitlement to an EOT, because of the contractor’s delay-related default, the employer was still entitled to exercise both its contractual right to terminate and its common law right to terminate for repudiatory breach.

Consideration of the termination rights and the related sections of the judgment are outside the scope of this blog. In brief, while the employer had failed to comply with the notice requirements of the JCT contract, that did not invalidate the effectiveness of its acceptance of repudiatory breach, nor did it, in itself, amount to a repudiatory breach of contract that could be accepted by the contractor.

Determining concurrent delay

The judgment provides useful commentary on determining concurrent delay based on established case law and industry guidance.

The court considered the decision of Akenhead J in Walter Lilly v Mackay, stating that four observations were helpful in deciding this case:

  • The court is not compelled to choose only between the rival approaches and analyses of the experts. It is a matter of fact for the court to decide what delayed the works and for how long.
  • When considering delays, one should generally have regard to the item of work with the longest sequence.
  • It is not necessarily the last item of work that causes delay.
  • Contemporaneous complaints that were never agreed upon by the parties, established or implemented, are irrelevant to a delay analysis.

The judge referred to Keating on Construction Contracts, 11th edition with regard to the application of the principle of concurrent delay in the context of an EOT contractual claim (counsel agreed that this was an accurate summary and settled law). In brief:

  • It depends on the precise wording of the contract.
  • A contractor is probably entitled to an EOT if there was an effective cause of delay, even if there was another concurrent cause of delay for which the contractor was responsible.
  • A contractor will only be entitled to recover loss and expense if it satisfies the “but for” test. The contractor’s claim will fail if there is another cause of loss for which the contractor was responsible (even if the cause relied on is the dominant cause).

The court held that there was concurrent delay in this case:

“The plain fact is that both of the works items were on the critical path as regards the hub finishes and both were causing delay over the same period.”

The internal finishes could not have started earlier because of the delay to the structural steelwork. The court was satisfied that the converse was also true – it could not have started earlier due to the roof delays.

The court also considered the SCL Protocol when considering the differing delay analysis methods selected by each expert. The Protocol aims to provide “useful guidance on some of the common delay and disruption issues” and that “irrespective of which method…deployed, there is an overriding objective of ensuring that the conclusions derived from [the delay] analysis are sound from a common sense perspective”, highlighting that a practical approach depending on the facts of the case was important in this case.

Conclusion

In this case, the court seems to have taken a very practical approach in determining that both events were causes of delay and therefore there was concurrent delay entitling the contractor to an EOT but not recovery of losses (in line with the approach in Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd. This was the case on the facts here and this is a useful addition to the guidance from the courts in other cases such as Adyard Abu Dhabi v SD Marine Services and De Beers UK Ltd (formerly Diamond Trading Co Ltd) v Atos Origin IT Services UK Ltd.

Concurrent delay is an area that is not expressly covered in the JCT form of contract, although the North Midland decision (as upheld by the Court of Appeal in North Midland Building Ltd v Cyden Homes Ltd has shown that parties can agree in advance how to deal with concurrency. This is what the FIDIC 2017 suite of contracts has sought to do in clause 8.5 (Red Book 2017) and if compensation events are assessed chronologically and prospectively as intended, concurrency should be less of an issue under the NEC form of contract. What is certain is that this will continue to be a common issue when looking at delay and one for the courts to decide based on the specific circumstances, and contract, in each case.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.