A standard form construction contract is a map intended to provide employers and contractors with all the information to guide them to their destination: a completed construction project. This includes provisions for navigating around events that may cause delay, and matters that may result in loss and expense. This article provides a brief, high-level summary of how the Scottish Building Contracts Committee (SBCC) suite of construction contracts addresses the distinct, but often overlapping, issues of delay, extension of time, and loss and expense.
Relevant events: extension of time
SBCC contracts – the Scottish version of England’s JCT contracts - provide that certain causes of delay to the completion of construction works will entitle a contractor to an extension of time to complete the works in question. These causes of delay are known as “relevant events”.
The relevant events will be listed in the contract. Examples of relevant events in (unamended) SBCC contracts include:
- Employer’s instructions
- Changes (i.e. variations)
- Exceptionally adverse weather conditions
If the cause of the delay is not a relevant event (as defined in the contract), then the contractor won’t be entitled to an extension of time. In that situation, the employer may be entitled to liquidated damages from the contractor.
Relevant matters: loss and expense
SBCC contracts also provide that certain causes of loss and expense will entitle a contractor to payment of additional sums over and above the agreed contract sum. These causes of loss and expense are known as “relevant matters”.
Relevant matters in an unamended SBCC contract include:
- Changes (i.e. variations)
- Employer’s instructions
Eagle-eyed readers will note that these are also relevant events, meaning that the contractor would be entitled to both extension of time and loss and expense. But some causes, such as exceptionally adverse weather, gives rise to extension of time, but not loss and expense. It’s important to treat relevant events and relevant matters, and claims for extensions of time and loss and expense, separately from one another even though the facts underpinning each claim may overlap.
Claiming for extension of time
SBCC contracts as standard impose a proactive duty upon the contractor to notify the employer in circumstances where it becomes reasonably apparent to the contractor that the progress of the works, or any section of the works, is being or is likely to be delayed. In doing so, the contractor must explain the circumstances and must explain whether, and if so, why, any of those circumstances are believed to amount to a relevant event. It is then for the employer to assess the notice that has been submitted by the contractor. If the employer is satisfied that the notice sets out a relevant event, and is also satisfied that the works, or any section of the works, is likely to be delayed beyond the relevant completion date owing to that relevant event, then the employer must award an extension of time of a fair and reasonable length.
SBCC contracts also provide as standard for follow-up notifications e.g. providing particulars if those weren’t available at the time of the initial notification and notifying if there is a material change to the estimated delay.
When it comes to submitting and assessing notices, it’s important to follow the procedures set down in the SBCC contract. It is equally important to bear in mind that these written terms may have been amended at the time when the contract was agreed. A contractor should therefore always cross-check that the notice is in the correct format, that it is submitted to the correct person, that all the necessary supporting documentation is included, and that the submission is made in good time. This comes down to being organised and having a finger on the “pulse” of the construction project, so that it is possible to react quickly when a risk of delay is identified. Good communication and transparency between the office team and the site team is essential.
Claiming for loss and expense
SBCC contracts also impose a proactive duty on the contractor to notify the employer as soon as the likely effect of a relevant matter on regular progress becomes (or should have become) reasonably apparent to the contractor. The notification must be accompanied by, or as soon as is reasonably practicable followed by, the contractor's initial assessment of the loss and/or expense incurred and any further amounts likely to be incurred together with such information as is reasonably necessary to enable the employer to ascertain the loss and/or expense incurred.
Assuming that the contractor complies with these requirements, the employer is then required to notify the contractor within 28 days of receipt of the contractor's initial assessment and the accompanying information, of the ascertained amount of loss and/or expense incurred with reference to the information supplied by the contractor and in sufficient detail to enable the contractor to identify the differences between its assessment and employer’s assessment.
The contractor is then required to update that initial assessment and information on a monthly basis, in such form and manner as the employer may reasonably require, until all information reasonably necessary to allow ascertainment of the total amount of such loss and expense has been supplied. The employer must ascertain the contractor's loss and/or expense within 14 days of each subsequent update.
As with submitting and assessing notices for extensions of time, when submitting notifications with respect to loss and expense it is equally important that all parties follow the procedures and timescales that are set down by the written terms of the SBCC contract. The courts have concluded that SBCC contracts set out a “practical and workable set of steps for notification and provision of information by the contractor” and that “the contractor's entitlement is dependent on compliance. Accordingly, far from not spelling out the consequences of non- compliance, the wording of the clause makes it clear that without such compliance, the contractor is not entitled to reimbursement.” It is therefore important to ensure that all the procedures and requirements of the contract are strictly followed when applying for reimbursement for loss and expense. A failure to do so will mean that the application will be unsuccessful, even if there is a sound basis for it. As with applying for an extension of time, it’s essential to be organised, to be perceptive to developments on site, and to have clear lines of communication.
We’re here to help
Our specialist Construction Disputes team regularly advises clients on SBCC and other construction contracts. We pride ourselves on our expertise, industry knowledge and our straightforward advice.
If you have any queries relating to SBCC or other construction contracts, please contact Liam McKay or a member of our Construction Disputes team.