Resident legal expert Paul Cott explains the importance of time in the building and construction industry, and advises you to know your rights when the clock is ticking.

I think everyone reading this is aware of the critical importance of time in life. We all have it, we all spend it and, at times, it’s all we have.

No less important is time in the context of building and construction projects, whether commercial or domestic. After all, as has been said in many contexts, time is money. For every day past the deadline on one project – extensions of time aside – builders experience a loss of income on another. And for every day past the deadline, the owner is missing out on possession or rental income.

There is always a contractual stipulated time for completion; however, there is also a distinction between the date of practical completion and the date for practical completion.

Practical completion recognises that completion of a building project is rarely ‘perfect’ in the sense of the works being defect free. So an extra amount of time is added on at the end of projects to enable the builder to fix minor defects while work is still possible and permitted.

A date for practical completion represents the date work has to be achieved by. To get to practical completion (which often designates handover of the property to the owner) the builder is required to proceed with due diligence. In summary, this means the contractor is meant to take reasonable steps to comply with the timetable.

‘How long is a piece of string’ is a colloquial phrase that resonates among the industry when talking about this subject; however, it can be summarised as doing what is needed on a particular job – regardless of the circumstances – to satisfy the client and contract, while complying with the law. This must occur while not being delayed by things within the builder’s control.

This leads me to the issue of extensions of time (EOT). Certain types of events can see a builder entitled to extend time. Standard contracts often contain clauses that automatically extend time by a certain number of days due to inclement weather, natural disasters, strikes, changes in the law, latent conditions (i.e. things about the site such as an unexpected amount of rock below the surface) and similar things. The parties can agree between themselves as to what events qualify for an extension of time but in the context of residential contracts, it is rare that they do so.

Time can’t be extended by the builder if they are at fault, or in breach of the contract themselves. Often it is said that the principle here is based on who should, and who can, bear the loss. Builders should take whatever steps they can to minimise delays and losses on the job. Reasonable delays should be avoided. Unfortunately, when so much depends on the exact facts of a case, it is not possible to state more precisely exactly what a builder needs to do to avoid reasonable delays.

A related issue surrounds how much time delay can actually be claimed.

Unfortunately, the law doesn’t provide a lot of guidance as to how long a builder can legitimately claim and the only answer that can be given is this: it depends on all of the circumstances. A court or a tribunal can still assess, however difficult such an assessment is, whether or not the amount of time claimed was reasonable and legitimate.

If an EOT is to be claimed, it must be done so by the builder via notice in writing to the owner, preferably before it is actually extended. This is critical as I have witnessed multiple cases where time was allegedly extended by the builder (verbally) without the owner’s knowledge. Following disputes surrounding various other issues, a court or tribunal has had to attempt to unravel the facts and work out exactly what occurred.

The precise notice requirement for the EOT is generally set out in the contract and often prescribed as to the time by which the notice should be claimed or given to the owner. It is important to remember that if the notice requirement is not complied with, the builder can lose the right to an extension. This rule exists to enable the owner to make whatever adjustments necessary in the event of not being able to achieve handover of the building or property. This is known as the prevention principle.

This situation can also result in the builder not being able to claim liquidated (i.e. agreed) damages for delays caused by the owner, which is the converse of the right of the owner to claim such (set amount) damages for delay caused by the builder. Actual damages though, suffered by the builder, may in this case still be able to be claimed.

One hopes that this article gives the reader an understanding of the key issues surrounding time in the context of building and construction contracts. Both residential and commercial contracts contain clauses dealing with the critical element of time and in both types of contracts, it is dealt with in some detail, as it should obviously be.

Both types of contracts aim to achieve a balance between the rights of an owner and the rights of a builder in relation to time, to extending it and as to the common practical issues of delays.

Whether they do so is a matter of opinion, but it is a complex area and in particular sets of circumstances that arise, some unfairness can result.
It is important to consider getting advice if an issue involving time crops up; as there are plenty of hidden traps you can fall into.