Documente Academic
Documente Profesional
Documente Cultură
JUNE 2007
iii
ACKNOWLEDGEMENTS
ABSTRACT
ABSTRAK
TABLE OF CONTENTS
1.0 INTRODUCTION
1.1 Background Studies 1
1.2 Problem Statement 5
1.3 Objective of the Research 6
1.4 Scope of the Research 6
1.5 Significance of the Research 7
1.6 Research Methodology 7
viii
REFERENCE 83
BIBLIOGRAPHY 85
x
LIST OF TABLES
LIST OF CASES
CASES PAGE
A Bell & Son (Paddington) Ltd v CBF Residential Care and
Housing Association. (1989) 46 BLR 105 11
Abdul Rahim bin Syed Mohd v Ramakrishnan Kandasamy &
Anor. [1996] 3 MLJ 385, HC 17
Afovos Shipping Co v Pagnan [1983] 1 WLR 195 at 201 (HL) 10
Amalgamated Building Contractors Ltd v Waltham Holy Cross
Urban District Council [1952] 2All ER452 at 452 (CA). 36
Amherst v James Walker [1983] Ch 305 at 315 (CA) 48
Arab Malaysian Corpn Builders Sdn Bhd v ASM Development
Sdn Bhd. [1998] 6 MLJ 136 20
Astea (UK) Limited v Time Group Limited [2003] EWHC 725
(TCC) 43
Attwood v Emery (1856), 1 CB (NS) 110; 26 LJCP 73 54
Ayadurai v Lim Hye [1959] MLJ 143 17
Balfour Beatty Building Ltd v Chestermount Properties Ltd 62
Build LR 1 45
Barque Quilpue Ltd v Bryant (1904) 36
Bernhard’s Rugby Landscapes Ltd v Stockley Park
Consortium (No 2) [1998] 44
BFI Group of Companies Ltd v DCB Integration Systems Ltd
[1987] CILL 328 11
Bilton v Greater London Council (1982) 20 BLR 1, HL 23, 42
xii
CASES PAGE
British and Commonwealth Holdings plc v Quadrex Holdings Inc.
[1989] QB 842; [1989] 3 All ER 492, CA 16
British Steel Corporation v Cleveland Bridge & Engineering Co
Ltd [1984] 1 All ER 504, 24 Build LR 94. 64
Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd
(1989) 51 BLR 16 2
CCECC (HK) Ltd v Might Foundate Developement Ltd & Ors
[2001] HKCU 916 69
Chaffer and Tassie v Richards (1905) 26 NLR 20. 27
Charles Rickards Ltd v Oppenheim [1950] 1 KB 616. 43
Charnock v Liverpool Corporation [1968] 1 WLR 1498 (CA) 48
Chye Fook & Anor v Teh Teng Seng Realty Sdn Bhd
[1989] 1 MLJ 308, HC. 18
Dodd v Churton [1897] 1 QB 562 (CA). 42
Earth & General Contractors Ltd v Manchester Corporation
(1958) 108 LJ 665 28
Etablissements Chainbaux S.A.R.L. v Harbormaster Ltd
[1955] 1 Lloyd’s Rep. 303 69
Fairclough v Rhuddlan Borough Council (1985). 29
Felton v Wharrie (1906) 28
Fisher v Ford (1840), 12 Ad. & El. 654 59
Ganam d/o Rajamany v Somoo s/o Sinnah [1984] 2 MLJ 290. 18
Gaymark Investments Pty Ltd v Walter Construction Group
(1999) NTSC 143, (1999) 16 BCL 449; (2005) 21 Const LJ 70 33
Greater London Corporation v Cleveland Bridge and
Engineering (1984) 34 BLR 57 48
Hock Huat Iron Foundry v Naga Tembaga Sdn Bhd
[1999] 1 MLJ 65. 19
Holme v Guppy (1838) 3 M&W 387 4, 22, 28, 36
Hydraulic Engineering Co Ltd v McHaffie, Goslett & Co.
(1878) 4 QBD 670 52, 54
Ismail bin Haji Embong v Lau Kong Han [1970] 2 MLJ 213 17
xiii
CASES PAGE
J and J Fee Ltd v The Express Lift Company Ltd
[1993] 34 ConLR 147. 36
Jamshed Khodaram Irani v Burjorni Dunjibhai
(1915) LR 43 IA 26 17
Kenny and Hingles’ Trustee v Union Government (1928) TD 272 27
Lai Yew Seong v Wong Chieu Gook (1913) 1 FMSLR 12 17
LeBaupin v Crispin [1920] 2 KB 714. 25
Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89 21
Lombard plc v Butterworth [1987] Q.B. 27 at 535 (C.A.) 20
Lyle Shipping Co. v Cardiff Corporation [1900] 2 QB 638 54
Maniam v The State of Perak [1975] MLJ 75 21
Meyer v Gilmer (1899) 18 NZLR 129 42
Mohamed Habidullah v Bird & Co. AIR 1922 PC 178 17
Murdoch v Lockie (1897) 15 NZLR 296 42
Neodox Ltd v Swinton and Pendlebury Borough Council (1958) 5
BLR 34 53
North West Metropolitan Regional Hospital Board v Bickerton
(1970) 29
Panamena Europea Navigacion (Compania Limitada) v
Frederick Leyland & Co Ltd [1947] AC 428 (HL). 32, 45
Pantland Hick v Raymond & Reid [1893] AC 22. 60
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
(1970) 1 BLR 111 13, 29, 39
Percy Bilton v Greater London Council [1982] 1 WLR 794 29, 38
Raineri v Miles [1981] AC 1050 (HL) 48
Rapid Building Group v Ealing Family Housing Association Ltd
(1984) 29 BLR 5 4, 13, 22, 28, 39
Rickards v Oppenheim [1950] 1 KB 616 69
Russell v Viscount Sa da Bandeira (1862) 13 CB (NS) 149 42
Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151. 17, 21
Sims & Co. v Midland Railway Co. [1913] 1 KB 103 63
xiv
CASES PAGE
Shawton Engineering Ltd v DGP International Ltd
[2005] EWCA Civ 1359. 70
SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391;
(1984) 1 Const LJ 159 36, 42
Startup v Macdonald (1843), 6 Man. & G. 593 59
Tan Ah Kian v Haji Hasnan [1962] MLJ 400, HC;
[1963] MLJ 175, FC. 18
Taylor v The Great Northern Railway Company [LR] 1 CP 385. 62
Temloc Ltd v Enrill Properties Ltd (1987) 39 BLR 30 12
Tew v Newbold-on Avon School Board (1884) 1 C&E 260 42
Thamesa Designs Sdn Bhd v Kuching Hotels Sdn Bhd
[1993] 3 MLJ 25 21
The Lyle Shipping Company Ltd v The Corporation of Cardiff
[1900] 2 QB 638. 62
Thornhill v Neats (1860) 8 CB (ns) 149 42
Trollope & Colls Ltd v NW Metropolitan Regional Hospital
[1973] 1 WLR 601 (HL) 42
United Scientific Holdings Ltd v Burnley Borough Council
[1977] 2 All ER 62, HL, [1978] AC 1050 (HL) 3, 16
Yeoh Kim Pong Realty Ltd v Ng Kim Pong [1962] MLJ 118 17, 18
Walter Lawrence v Commercial Union Properties
(1984) 4 ConLR 37. 27
Wells v Army and Navy Cooperative Society (1902) 86 LT 764 41
Westwood v Secretary of State for India (1863) 7 LT 736 42
xv
LIST OF ABBREVIATIONS
FC Federal Court
F&F Foster & Finlayson’s Reports
H&N Hurlstone & Norman’s Exchequer Reports
HL House of Lords
HKC Hong Kong Cases
HKLR Hong Kong Law Reports
IR Irish Reports
JKR Jabatan Kerja Raya
KB King Bench
LGR Local Government Reports
LJKB (QB) Law Journal Reports, King’s (Queen’s) Bench
Lloyd’s Rep Lloyd’s List Reports
LR Law Reports
LT Law Times Reports
JP Justice of the Peace / Justice of the Peace Reports
MLJ Malayan Law Journal
NZLR New Zealand Law Reports
PAM Pertubuhan Arkitek Malaysia
PWD Public Work Department
PD Probate, Divorce and Admiralty Division of High Court
QB Queen Bench
TCC Technology and Construction Court
SLR Singapore Law Reports
WLR Weekly Law Reports
WR Weekly Reports
CHAPTER 1
INTRODUCTION
Contracts of all kinds commonly specify a date for the performance of some
obligation (Wallace, 1995). Where it comes to building contracts, stipulated periods
are provided within which the buildings have to be delivered became an essential
condition of the agreement (Guest, 1975). It is usual to name the date by which
completion is required, as can be seen in Clause 39 of PWD 203A. Even where no
precise date has been included in the contract itself, a court may be persuaded to
imply a term for completion by a certain date, on the ground that the parties must
have intended this, as seen in Bruno Zornow (Builders) Ltd v Beechcroft
Developments Ltd 1 . The contractor’s obligation to complete the works by the
completion date is, like all such obligations, backed up by legal sanctions. Under
certain types of contract (for example contracts for the sale of perishable goods), time
is expressly or impliedly “of the essence”. Consequently, the employer’s remedy for
any lateness in performance or completion will be an award for damages for breach of
contract (Murdoch and Hughes, 2000).
1
(1989) 51 BLR 16.
3
1. The parties must have expressly stipulated in the contract that conditions as to
time should be strictly complied with
3. The party who has been subjected to unreasonable delay gives notice to the
party in default making time of the essence
The position in the rules contained in section 56 (3) of the Contracts Act 1950
is that: if in a contract in which time is of the essence, a party fails to perform it by
the stipulated time, the innocent party has the right either to rescind the contract, or
to treat it as still subsisting. If he treats it either expressly or by conduct as still
2
[1977] 2 All ER 62, HL, [1978] AC 1050 (HL),
4
continuing, the contract exists but time ceases to be of the essence and become at
large. Consequently he cannot claim liquidated damages under the contract unless
there is a provision as to the extension of time. However, this cessation can be
revived and so time can be restored to be the essence by the innocent party serving a
notice to the party in default giving a new date of completion. If this is done, there
would be a date from which liquidated damages could be calculated (Sinnadurai,
1987).
3
(1838) 3 M&W 387.
4
(1984) 29 BLR 5.
5
Problem also arises in the wording employed by many of the standard forms
of contract as there was a shortcoming in that some of them did not fully cater in the
extension of time clause for all delays caused by the employer. General sweep-up
wording in an extension of time clause (such as “or other unavoidable
circumstances”) has been held by the English courts not to cover employer defaults.
Similarly in Malaysia, only PAM 98 Clause 23.7(xi) allows the Architect to grant an
extension of time for “any act of prevention or breach of contract by the Employer.”
This is designed to be a “catch-all” provision so that time does not inadvertently
become at large. Other forms like IEM, PWD 203A and CIDB do not have such
similar provision (Martin, 2005). Thus, time will be at large when the employer
causes delay to the contractor e.g. by ordering extra work and there is no provision
for extension of time for the contractor.
The phrase “time at large” is much loved by contractors, the suggestion that
the contractor has as much time as he wants to finish the works. This is not what it
means. Time becomes at large when the obligation to complete within the specified
time for completion of a contract is lost. The obligation then becomes to complete
within a reasonable time. It is most certainly not “as and when the contractor sees
fit”. The question then is what is a reasonable time? What is generally at stake in the
matter of whether or not time is at large is the employer’s right to deduct liquidated
damages for late completion. The right is lost completely if time becomes at large –
the employer can still sue for general or unliquidated damages for late completion –
but regard will then had to be the contractor’s entitlement to a reasonable time
(Eggleston, 1992).
6
Time being “at large” does not mean that the Contractor has no obligation to
complete the work. He has to complete in a “reasonable time”. What is reasonable
will depend on all the circumstances at the time (Murdoch and Hughes, 1992).
Calculating a reasonable time is not an easy matter and, as Emden’s Building
Contracts, puts it:
The approach adopted in this research is case law based. There are no
limitations as for the court cases referred to in this study in terms of type of projects
as long as the case is related to time at large and reasonable time. The standard
forms of contract that will be referred to are:
Then data and information collecting will be carried out. Primary source will
be law cases found in Malayan Law Journal through the access of Lexis Nexis
8
TIME AT LARGE
2.1 Introduction
Similarly, according to Chow (2004), a date is fixed from which the time for
completion begins to run. Frequently, this is the date on which the contractor takes
possession of the site, but this is by no means the rule. In large and elaborate
10
projects, it is not always possible for the owner to afford the contractor
unencumbered possession of the whole site and it is quite common in these situations
for the contract to provide that time for completion begins to run from some
stipulated date in lieu of the date of site possession. As an alternative to stipulating
the period within which the works have to be completed, a contract may provide that
the contractor’s obligation is to complete the works on or before a particular date.
Thus, instead of stipulating that the works shall be completed within 24 months from
1 January 2003, a construction contract may merely provide that the works shall be
completed on or before 31 December 2004. In this case, the contractor has the whole
of the period up to the end of the stipulated day of completion to perform his
obligation.5
5
Afovos Shipping Co v Pagnan [1983] 1 WLR 195 at 201 (HL).
11
whole of the Works by the Date for Completion as stated in the Appendix or such
extended time as granted by the Superintending Officer (Lim, 2004).
Lim (2004) also noted that although not specifically stated in clause 40, it is
implicit that the Superintending Officer should only issue the Certificate of Non-
completion after he has fully evaluated and granted the appropriate extension of time
(if any) to the Contractor pursuant to clause 43.7 In addition, it is essential that the
rate for Liquidated and Ascertained Damages is clearly inserted in the Appendix.
The clause is not enforceable and no amount can be recovered by the Government if
6
See BFI Group of Companies Ltd v DCB Integration Systems Ltd [1987] CILL 328.
7
See A Bell & Son (Paddington) Ltd v CBF Residential Care and Housing Association (1989) 46
BLR 105. If a new completion date is fixed and the contractor has not completed by that date, it is
implicit that a non completion certificate to that effect must be issued by the architect whether or not a
certificate had been issued in relation to an earlier and superseded completion date.
12
it is omitted. In this case, the Government would have to resort to claim general
damages against the Contractor for delayed completion. However, if “NIL” is
inserted as the rate, it would be construed to constitute an agreement by the parties
that no damages would be payable by the Contractor and the Government would be
precluded from even claiming general damages against the Contractor for delayed
completion.8
According to Rajoo (1999), clause 21 of PAM 1998 Form is one of the most
important clauses in the contract. It provides for the employer to give site possession
in whole or parts by appropriately designating the Date of Commencement or Dates
of Commencement. This enables the contractor to be given site possession in one go
or alternatively by defined sections based on the needs of the employer. The
contractor’s primary obligation is to complete the Works by the contractual date for
completion. As his secondary obligation, the contractor is then to begin the Works
and proceed ‘regularly and diligently’ so as to complete the Works ‘on or before’ the
completion date set out in the Appendix of the PAM1998 Form.9 He has the whole
8
Temloc Ltd v Enrill Properties Ltd (1987) 39 BLR 30.
9
Clauses 21.1 and 21.2 of the PAM Contract.
13
period between the Dates of Commencement and Completion to carry out and
complete the Works in a manner he considers best.10 The Dates of Commencement
and Completion must be specified in the Appendix and, subject to the grant of any
extension of time under clauses 23 or 32.1(iii) of the PAM 1998 Form (the latter
clause permits an extension of time for reinstatement of war damage), the contractor
is bound to complete the work by the specified Date for Completion. Clauses 21.2
and 21.3 go on to cure the inadequacy of the PAM 1969 Form in dealing with
commencement and completion in phases. If the employer requires the work to be
completed in parts, these two clauses set out the mechanics of how the contractor can
be obligated to complete the Works in part. Clause 21.4 empowers the architect to
issue instructions requiring the postponement of any work to be executed under the
contract. The employer or the architect may be forced by circumstances to call for
delay in the whole or part of the Works. Without this express power, the architect
would have no power to control the contractor’s order of working.
10
Supra note 4.
11
See Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111.
14
meaning a lengthening of the period within which the Works have to be completed
(Rajoo, 1999).
If the Contractor fails to comply with the Time for Completion, the
Contractor is subject to pay delay damages to the Employer for this default. These
delay damages shall be the sum stated in the Appendix to Tender, and payment is
provided to be made on daily basis. However, the total amount due cannot exceed
the maximum amount of delay damages (if any) stated in the Appendix to Tender.
The delay damages do not relieve the Contractor from his obligation to complete the
Works, or from any other duties, obligations or responsibilities which he may have
under the contract.14
12
Clause 8.1 of the FIDIC Form.
13
Clauses 8.2(a) and 8.2(b) of the FIDIC Form.
14
Clause 8.7 of the FIDIC Form.
15
Section 56(1) of the Contracts Act provides that failure to perform within a
fixed time in a contract, where time is essential, would render the contract voidable.
When time is of the essence in a contract, failure to complete by the specified date is
a breach of a condition entitling the innocent party to treat the contract as repudiated.
If the contract is a supply contract and the goods are offered late, acceptance of the
goods can be refused. If the contract is a construction contract and the contractor
fails to finish on time, the employer is entitled to dismiss the contractor from the site
and has no liability for payment for the unfinished work. However, this is not the
usual position in a construction contract. Finishing late does not normally entitle the
employer to dismiss the contractor from the site; it is a breach of warranty and
damages are the employer’s remedy. Nor does finishing late normally excuse the
employer from payment for unfinished work. The question then is what governs
whether or not time is of the essence in contracts. (Eggleston, 1992).
15
Supra note 2.
16
[1989] QB 842; [1989] 3 All ER 492, CA.
17
position arrived at in common law.17 Section 56 is the most invoked provision of the
Contracts Act dealing with time and the scope of this section has been considered in
a number of cases.18 The position is if in a contract in which time is of the essence, a
party fails to perform it by the stipulated time, the innocent party has the right either
to rescind the contract, or to treat is as still subsisting. If he treats it either expressly
or by conduct as still continuing, the contract exists but time ceases to be of the
essence and becomes at large. Consequently he cannot claim the liquidated damages
under the contract unless there is a provision as to the extension of time. However,
this cessation can be revived and so time can be restored to be of the essence by the
innocent party serving a notice to the party in default giving a new date of
completion.19
The law relating to time for performance under the Contracts Act was dealt
with exhaustively by Visu Sinnadurai J in Abdul Rahim bin Syed Mohd v
Ramakrishnan Kandasamy & Anor.20 Time, in a contract for the sale of land, is of
the essence in two main situations; firstly where the intention of the parties was such
that the time was of the essence of the contract for the fulfillment of their respective
obligations and secondly, where the nature of the subject matter or the surrounding
circumstances are such that the time specified for the performance is of the essence.
There is little difficulty in considering whether time is of the essence of a contract if
there is an express provision in the contract itself stating that it is so. In contracts
where the phrase ‘time is of the essence’ is employed, it is generally accepted that
the parties in these cases have clearly intended that the provision dealing with time is
an essential term of the contract. In such cases, both parties must perform their
respective obligations within the time stipulated. Where there is no express
provision in the contract making time of the essence, the courts will then have to
consider the nature of the property, the surrounding circumstances and the nature of
the contract to determine whether time was intended by the parties to be the essence
17
Yeoh Kim Pong Realty Ltd v Ng Kim Pong [1962] MLJ 118. See also Jamshed Khodaram Irani v
Burjorni Dunjibhai (1915) LR 43 IA 26 (section 55 of the Indian Contract Act is similar to section 56
of the Malaysian Act).
18
See Lai Yew Seong v Wong Chieu Gook (1913) 1 FMSLR 12; Ismail bin Haji Embong v Lau Kong
Han [1970] 2 MLJ 213; Ayadurai v Lim Hye [1959] MLJ 143. See also the Privy Council decision of
Mohamed Habidullah v Bird & Co. AIR 1922 PC 178.
19
Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151.
20
[1996] 3 MLJ 385, HC.
18
of the contract. In Yeoh Kim Pong Realty Ltd v Ng Kim Pong 21 time was not
expressly stated to be of the essence. It was held that considering the intention of the
parties, and on an ‘examination amongst other things of attendant circumstances’,
time was of the essence of the contract in question. It was also pointed out by the
judge, as seen in the case of Ganam d/o Rajamany v Somoo s/o Sinnah22 that the
mere stipulation of a date fixed for completion in a contract does not, by itself, make
time to be of the essence of the contract. The nature of the property and the
surrounding circumstances would still have to be considered in such cases.
The general principles regarding time were also spelt out by Gill J in the case
of Tan Ah Kian v Haji Hasnan.23 There are three situations whereby time is of the
essence of the contract: (i) where the parties have expressly stipulated in the contract
that it shall be so; (ii) where it was not originally stated to be but had been made so
by giving reasonable notice to the other, who had failed to perform the contract with
sufficient promptitude; and (iii) where from the nature of the contract or of its subject
matter, time must be taken to be of the essence of the agreement.
Chye Fook & Anor v Teh Teng Seng Realty Sdn Bhd24 is a case dealing with
late completion of a building, where time was of the essence of the contract. The
21
[1962] MLJ 118.
22
[1984] 2 MLJ 290.
23
[1962] MLJ 400, HC; [1963] MLJ 175, FC.
24
[1989] 1 MLJ 308, HC.
19
specific question before the High Court was whether the purchaser ‘could sue for
rescission on the agreement [that] … as the house was not completed … [on] the
completion date’. In a detailed judgment, Abdul Malek J dealt with relevant case
law and statutory law on the subject, particularly, sections 56 and 76 of the Contracts
Act. In Hock Huat Iron Foundry v Naga Tembaga Sdn Bhd25 the Court of Appeal
also considered the subject in relation to the provisions of Contracts Act 1950. The
position, as a result of the operation of section 56(1) of this Act and as set out in the
earlier decision of Loke Yuen Cheng & Anor v Vintex Sdn Bhd26, is that where the
parties to a contract clearly intends that time is to be of the essence of the contract,
then the occurrence of any delay in performance would render the contract voidable
at the option of the innocent party. If the innocent party elects to exercise the option,
the effect is that the contract is annulled so that the situation is as though it had never
existed. In the circumstances, the employer forfeits whatever recourse under the
contract, including an action for damages, and can only seek redress through
restitution.
25
[1999] 1 MLJ 65.
26
[1998] 4 MLJ 169.
20
the prescribed completion date. Such sums are called liquidated and ascertained
damages or LADs (Murdoch and Hughes, 2000).
When the LAD are agreed, the employer’s only remedy for late completion
by the contractor is a sum not exceeding the specified amount. He does not have an
27
See PAM Conditions of Contract (1998) cl 22; IEM Conditions of Contract cl 40; PWD Conditions
of Contract Forms 203/203A cl 40. See also Arab Malaysian Corpn Builders Sdn Bhd v ASM
Development Sdn Bhd [1998] 6 MLJ 136.
28
Lombard plc v Butterworth [1987] Q.B. 27 at 535 (C.A.).
21
Section 75 of the Contracts Act 1950 deals with the effect of a sum named in
a contract which is payable in cases of breach of contract, and in Malaysia ‘there is
no difference between penalty and liquidated damages’. 30 Section 75 of the Act
provides:
29
See Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151; Thamesa Designs Sdn Bhd v Kuching
Hotels Sdn Bhd [1993] 3 MLJ 25.
30
Maniam v The State of Perak [1975] MLJ 75; Linggi Plantations Ltd v Jagatheesan [1972]
1 MLJ 89.
22
31
Supra note 3.
32
Supra note 4.
23
there is express provision in the contract to extend time for the employer’s default.
Lord Fraser’s comment in Bilton v GLC33 sums it up:
33
(1982) 20 BLR 1, HL.
24
The expression ‘force majeure’ is of French origin. Under the French Civil
Code force majeure is a defence to a claim for damages for breach of contract. It
needs to be shown that the event made performance impossible, was unforeseeable
and was unavoidable in occurrence and effects (Eggleston, 1992).
According to Chow (2004), the expression force majeure was first used in
clause 23(a) of the JCT 63 Form and has since been retained in successive editions of
that standard form. In the 1998 edition of the JCT Contract, it is specified as a
25
“relevant event” for the purpose of time extensions under clause 25. The term itself is
a curious French expression which is usually considered to cover a host of highly
unusual and superhuman events. In the classic case of LeBaupin v Crispin 34 , the
court accepted that the “term is used with reference to all circumstances independent
of the will of man, and which it is not in his power to control…” It was held to
include wars, epidemics and strikes, but a cautionary note was struck in the judgment
of that case on the interpretation of a force majeure clause:
34
[1920] 2 KB 714.
35
Ibid.
26
2. The relying party could not have reasonably provided for the event or
circumstances before entering into the contract.
3. Having arisen, the relying party could not have reasonably avoided or
overcome the said event or circumstance.
A force majeure event under the FIDIC Contract must therefore satisfy all the
four conditions prescribed here. In the context of a construction claim advanced by
the contractor, the “other party” refers to the employer. Chow (2004) therefore noted
that the paragraph appears to envisage that where the claim arises from, say a breach
by the employer, it is considered that the contractor will in most cases elect to sue for
breach of contract, rather than invoke the force majeure clause since this reduces the
onus of proof and is likely to provide him with a more extensive range of reliefs.
Clause 19.1 also specifically lists down a number of situations which are deemed to
be treated as force majeure which include wars, terrorism, strikes and lockouts and
natural catastrophes.
Eggleston (1992) stated that when variations or extra works cause delay to
completion, the contractor will have a clear case for extension of time, or if there is
no express provision to extend time, the employer will have lost his right to liquidated
damages. It is the following types of questions which give rise to arguments. For
example, have the variations actually caused delay to completion? Are the extra
works really extra? Could the contractor have accommodated them in his
programme? Some of these matters have been considered previously and others are
considered under particular forms but it is worth just noting here that extra quantities
are not necessarily the same as extra works and in some forms of contract, it is the
contractor and not the employer who takes the risks on quantities.
27
The particular situation where omissions of work may be a premise for a time
extension should be noted. Such a situation may arise, for instance, where plant and
equipment have already been bought on site and these have been prepared to support
the execution of a particular item of work. This item of work is then subsequently
omitted, thereby necessitating a new and possibly less productive sequence of work.
There is no direct English case authority on this point, but in the South African case
of Kenny and Hingles’ Trustee v Union Government36 , it was held that where the
language of a time extension provision empowered the engineer to assess the period
of delay consequent upon the ordering of extras, it would be reasonable for the
engineer to “take into account in deciding as to allowances for such delay the effect
of other orders requiring omissions.” (Chow, 2004).
This ground of time extension is found in the provisions of most of the major
standard forms. The general formulation is that time may be extended only when the
contractor can demonstrate that the weather conditions encountered could be properly
described as exceptional”. In construing the term “exceptional”, consideration should
be given as to whether the weather itself was exceptionally adverse or inclement, so
as to give rise to the delay and not whether the magnitude of the delay itself was
exceptional.37 It is suggested that this construction is consistent with the intent of this
provision in the other standard forms as well.
36
(1928) TD 272 at 289. See also another South African case, Chaffer and Tassie v Richards (1905)
26 NLR 20.
37
Walter Lawrence v Commercial Union Properties (1984) 4 ConLR 37.
28
to as the number of “wet days”. Next, the contractor compares the number of wet
days encountered with the number of wet days which are indicated by statistical
averages in meteorological records. Exceptional rainfall conditions for a particular
month are then established when the number of wet days actually encountered exceed
the number of wet days recorded in these meteorological averages. However, it is not
sufficient for an applicant for time extension to merely show the incidence of wet
days and hence, adverse weather conditions. It is necessary to establish the link
between the conditions and the progress of works, and in particular, the contractor has
to show that the nature of the construction operations being undertaken during the
period of “wet days” in a particular month are indeed operations which are
susceptible to the effects of these exceptional rainfall conditions (Chow, 2004).
38
See Felton v Wharrie (1906) Hudson’s Building and Engineering Contracts (4th Ed) Vol 2, p 398;
Earth & General Contractors Ltd v Manchester Corporation (1958) 108 LJ 665; Rapid Building v
Ealing Family Housing (1984) 29 BLR 5; Holme v Guppy (1838) 3 M&W 387.
29
2.5.2.5 Sub-contractors
The drawings and technical documents provided at the time of contract are
frequently insufficient to enable the contractor to carry out all aspects of the works
required under the contract. To enable the works to proceed properly, it is usually
necessary for the architect or engineer to issue instructions or additional drawings
during the course of the works. Most time extension provisions provide for time to be
extended where the architect or engineer fails to issue these instructions or drawings
in a timely manner. An issue which is closely related to time extensions granted for
39
See North West Metropolitan Regional Hospital Board v Bickerton (1970), Peak v McKinney
(1970), Percy Bilton v GLC (1982) and Fairclough v Rhuddlan Borough Council (1985).
30
delays in instructions is the date when the contractor should have contacted or applied
to the architect or engineer for these instructions. Most contracts require that the
contractor should apply for the relevant approval or instruction at an appropriate
juncture during the course of the works.
The major standard forms of contract also allow for the time to be extended in
respect of the following events:
1. Strikes and civil commotion which affect the works or affect the manufacture
or transportation of goods for use in the works40
4. Opening up for inspection any work covered up or the testing of any work,
materials or goods43
40
Clause 25.4.4 of JCT Contract (1998 Ed); clause 23.7(iv) of PAM Form (2nd Ed) (1998); Clause
43(h) of PWD 203A and clause 24.1(c) of CIDB 2000.
41
Clause 25.4.9 of JCT Contract (1998 Ed); Clause 8.5 of the FIDIC Contract (1999 Ed). In the case
of the FIDIC Contract, clause 8.5 describes the condition under which this event may qualify for an
extension of time under clause 8.4(b).
42
Clause 25.4.10 of JCT Contract (1998 Ed); clause 8.4(d) of FIDIC Contract (1999 Ed).
43
Clause 23.7(x) of PAM Form (2nd Ed) (1998); clause 24.1(h) of CIDB 2000.
31
A final remark should be made on the general category of events which comes
frequently under a supposedly “catch all” or “umbrella” ground typically formulated
as “any cause beyond the control of the contractor.” Such a provision is not intended
to cover delays arising from events which are reasonably foreseeable by the
contractor at the time of contract and which could be avoided by reasonable action on
the part of the contractor. Thus, it would not cover, for example, delay caused by the
contractor’s financial stringency, where this is triggered by the actions of a third party
on whom the contractor depends for financial support. There should also be no basis
for time to be extended in respect of delays arising from events which are caused by
the contractor’s want of competence or judgment. These events include ineffective
supervision, insufficient manpower and a failure to plan the work properly (Chow,
2004).
From the authorities that a general expression like “causes beyond the
contractor’s control” would not be sufficiently embracing to cover delays associated
with some breach or act of prevention by the employer. For this purpose, a separate
provision has to be inserted in the time extension clause to cater specifically to these
delay events.44
The standard form building and civil engineering contracts deal with the
specification of time to complete in two different ways. On the one hand, the
building contracts tend to invite the insertion (in the appendix to the building
44
Clause 44(1)(e) of the ICE Conditions of Contract (7th Ed); clause 8.4(e) of the FIDIC Contract
(1999); clause 23.7(xi) of the PAM Form (2nd Ed) (1998).
32
contract) of a fixed calendar date for the handover of possession of the site to the
contractor coupled with a fixed completion date by which the contract must be
practically completed. There, the period between the two dates is described as the
contract period which the contractor must carry out and complete the work. On the
other hand, the engineering contracts tend to stipulate that the work shall be
completed within a specified number of days or weeks from the notice to proceed.
The date on which the notice to proceed may be given is then left open for a limited
period of time. It is only once the notice to proceed has been given that the contract
period can commence and the date for completion can be calculated.
During the execution of the contract, circumstances may arise which render
that completion date unenforceable. Of itself, the failure competently to put into
effect the contractual machinery to extend the time for completion by the contract
administrator is not sufficient to render the completion date unenforceable and time
at large. The effect must be that the parties to the contract do not truly know their
position. If the true position can be established by other contractual means then the
breakdown is likely to be immaterial. Provided always that the true position can be
restored by the operation of other contractual machinery, for example reference to an
adjudicator, arbitrator or the court to open up and review the decision or absence of a
decision, the failure of the contract administrator during the course of the contract
will not set time at large.45 (Pickavance, 2005).
45
Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC
428.
33
1. There may be a contract together with a number of employer’s risk events for
which the contract makes provision to extend time but which cannot be
applied because the draftsman has failed to specify the contract completion
date or time for performance in the contract.
3. There may not be a contract completion date simply because there was no
contract.
The first two possibilities as to how time might have become at large require,
as a starting point, the assessment of a reasonable period for the works for which the
contractor has contracted and, while it is normally the case that the date for the
completion is stipulated by the terms of the contract, its proper revision under the
contract or by collateral agreement, that may not always be so.
Eggleston (1992) had the view that the circumstances of time becoming at
large are usually where an act of prevention by the employer creates delay and that
delay is not covered by an extension of time provision; and to a lesser extent:
1. Where the provisions for extension of time have not been properly
administered or have been misapplied
3. Where there has been interference by the employer in the certifying process
46
See, for example, Gaymark Investments Pty Ltd v Walter Construction Group (1999) NTSC 143,
(1999) 16 BCL 449; (2005) 21 Const LJ 70.
34
Atkinson (2007) stated that the term “time at large” is usually used in
construction contracts in the situation where liquidated damages are an issue. If time
is “at large” then it is argued that liquidated damages cannot be applied, because
there is no date fixed from which the liquidated damages can be calculated. In some
situations the date for completion may be relevant to termination and the issue
whether or not there has been a breach of contract by failure to complete. Time is
made at large in four situations:
2. The time for performance has been fixed under the contract, but has ceased to
apply either by agreement or by an act of prevention (which includes
instructed additional work) or breach of contract by the Employer with no
corresponding entitlement to extension of time.
3. The Employer has waived the obligation to complete by the specified time or
date. An alternative situation is that the Employer is faced with a breach of
contract by the contractor which would entitle to Employer to terminate the
employment of the contractor and/or to bring to an end the primary
obligations of the parties to perform, but instead elects to continue with the
performance of the contract.
47
[1993] 34 ConLR 147.
36
The prevention principle comes from a generally stated legal principle that a
party cannot benefit from its own wrong. The prevention principle has a very long
history in the common law. As long ago as 1838 the court held in the case of Holme
v Guppy 48 that where the contractor had been prevented from starting the works
because of the activities of the employer's other workmen, a fresh contract could not
be found and liquidated damages could not be applied (Brewer Consulting, 2005).
An act of prevention may vary from an omission on the part of the employer,
a fault, or even the ordering of variations and extras which might be fully
contemplated by the contract. In SMK Cabinets v Hili Modern Electrics Pty Ltd51 Mr.
Justice Brooking summarized the law as follows:
48
Supra note 3.
49
[1952] 2All ER452 at 452 (CA).
50
Barque Quilpue Ltd v Bryant (1904), per Lord Justice Vaughan Williams.
51
[1984] VR 391; (1984) 1 Const LJ 159 at p. 396.
37
52
[1982] 1 WLR 794.
39
53
Supra note 4.
54
(1970) 1 BLR 111.
40
for which the nominated subcontractor was required to carry out the piling. In the
contract between the contractor and the employer, time was said to be “of the
essence” without any provision for the contract period to be extended for acts or
omissions of the employer that might interfere with the works. During the course of
the works, serious faults were discovered in the piles and the work was suspended
pending investigation and repair. However, because of delay on the employer’s part,
an expert was not engaged until some six months later. His recommendations were
eventually put into effect some ten months after the faults had first been discovered
and the piling was not completed until 58 weeks after the work had been suspended.
As a result of the subsequent delay to completion, the employer claimed liquidated
damages from the contractor who, in turn, claimed the same liquidated damages from
the nominated subcontractor.
The Court of Appeal found that, because part of the period of delay to
completion had been caused by the employer itself and there was no clause in the
contract between the contractor and the employer that enabled the employer to extend
time for the effect of its own failures, there was then no date by which the contractor
was obliged to complete and hence there was no enforceable completion date from
which liquidated damages could be calculated. In explaining the application of the
prevention principle in this case Salmon LJ said:
This decision was cited with approval by the Court of Appeal of British
Columbia in Perini Pacific Ltd v Greater Vancouver Sewerage and Drainage Board
(1966), where it was decided that an extension of time clause which provided for
time to be extended on account of “extras or delays occasioned by strikes, lockouts,
force majeure or other cause beyond the control of the contractor” similarly would
not cover delays caused by the employer’s delivery of certain machinery in a
defective condition. Again, no liquidated damages could be recovered, although it
was forcefully argued on behalf of the employer that the effect of the employer’s act
of prevention only accounted for 45 days out of the total delay of 99 days.
55
(1902) 86 LT 764.
42
The principle is ... that, when one party to a contract is prevented from
performing it by the act of the other, he is not liable in law for that
default; and accordingly a well established rule has been established in
cases of this kind ... to die effect that if the building owner has ordered
extra work beyond that specified by the original contract which has
necessarily increased the time requisite for finishing the work, he is
thereby disentitled to claim the penalties for non-completion provided
for by the contract. The reason for that rule is that otherwise a most
unreasonable burden would be imposed on the contractor. 57
56
[1897] 1 QB 562 (CA).
57
[1897] 1 QB 562, 566. See also Thornhill v Neats (1860) 8 CB (ns) 149; Russell v Viscount Sa da
Bandeira (1862) 13 CB (NS) 149; Westwood v Secretary of State for India (1863) 7 LT 736; Murdoch
v Lockie (1897) 15 NZLR 296; Meyer v Gilmer (1899) 18 NZLR 129; Cf Tew v Newbold-on Avon
School Board (1884) 1 C&E 260; Trollope & Colls Ltd v NW Metropolitan Regional Hospital [1973]
1 WLR 601 (HL); Bilton v Greater London Council (1982) 20 BLR 1, HL; SMK Cabinets v Hili
Modern Electrics [1984] VR 391 (Victoria Full Court).
43
2.6.1.3 Waiver
Pickavance (2005) asserted that apart from the circumstances in which there
is no specified time, or in which, whilst there may be a specified time, there is no
power to vary it, there is one other situation in which the contractor may not have a
fixed date by which it must complete. That is the circumstance in which the
employer has waived the obligation to complete by the specified time or date or,
where the employer, faced with a breach of contract by the contractor which would
entitle the employer to terminate the employment of the contractor and/or to bring to
an end the primary obligations of the parties to perform, instead elects to continue
with the performance of the contract. For example, in Charles Rickards Ltd v
Oppenheim,58 the plaintiff agreed to supply a Rolls Royce motor car chassis and to
build a body on it within seven months. It failed to complete the work by the agreed
delivery date, but the defendant waived the original delivery date and new dates were
promised and agreed. Eventually, the defendant gave written notice to the plaintiff
stating that, unless he received the car by a firm date, four weeks away, he would not
accept it. The car was not delivered within the time specified and was not completed
until some months later when the defendant refused to accept it. The Court of
Appeal held that he was justified in doing so. After waiving the initial stipulation as
to time, the defendant was entitled to give reasonable notice making time of the
essence again, and on the facts the notice was reasonable.
58
[1950] 1 KB 616.
59
[2003] EWHC 725 (TCC).
44
subsequently claimed the contract had been repudiated and terminated the contract.60
It was common ground that strict compliance with an agreement to complete by the
end of October 2000 or by 6 November 2000 had been waived by failure to treat
such failure as repudiatory and that Astea’s obligation thereafter was to complete
within a reasonable time.
60
It was not contended that it had been expressly agreed that Astea would do anything by a date
proximate to March 2001, nor that any notice had been given making time of the essence of the
contract in relation to Astea doing something by a date proximate to March 2001, it was just the date
when Time Group’s patience expired.
45
Panamena Europea Navigacion v Frederick Leyland Ltd61. It was held that non-
compliance with the machinery by the administrator was not in itself sufficient: the
effect must be that either or both of the parties to the contract do not in consequence
of the breakdown truly know their position or cannot or are unlikely to know it. If
the true position is or can be established by other contractual means then the
breakdown is likely to be immaterial even when the result of the breakdown is that
one party does not obtain the contractual right or benefit which would or might
otherwise have been established by the machinery, provided that the true position can
be restored by the operation of other contractual machinery.
2.7 Conclusion
In the absence of any agreed contractual mechanism for fixing a new date for
completion, no such new date can be fixed and the contractor’s duty then is to
61
[1947] AC 428.
62
62 Build LR 1.
46
complete the works within a reasonable time. Provided that a contractor has not
acted unreasonably or negligently, he will complete within a reasonable time despite
a protracted delay if the delay is due to causes outside his control. In such
circumstances, time is said to be at large (Chappell, 2005). The question of time
being at large and the relationship between the time for completion, liquidated
damages and extension of time clause are concluded below:
1. The general rule is that the main contractor is bound to complete the work by
the date for completion stated in the contract. If he fails to do so, he will be
liable for liquidated damages to the employer.
2. That is subject to the exception that the employer is not entitled to liquidated
damages if by his acts or omissions he has prevented the main contractor
from completing his work by the completion date
3. These general rules may be amended by the express terms of the contract,
such as extension of time clauses.
CHAPTER 3
REASONABLE TIME
3.1 Introduction
The Concise Oxford Dictionary (10th edition) by the Oxford University Press
defines the word “reasonable” as fair and sensible, and as much as is appropriate or
fair. In the nineteenth century and earlier, the courts imposed implied terms on the
parties to all contracts of certain types, such as sale of goods and bills of exchange,
by way of judicial legislation. Such implied terms have been consolidated by statute
and, as Judge Peter Bowsher QC remarked in Barratt Southampton Ltd v Fairclough
Building Ltd (1988):
These terms now have the status of standard terms of contract upon
which everyone is deemed to contract unless express terms are agreed
to the contrary. There is little to be learned from them when
considering what terms should be implied into a modern commercial
contract falling outside those old cases or the consolidating statutes
into which they have been incorporated.
1979 implies various terms into the contract, for example that the goods will be
reasonably fit for any purpose made known to the seller. A similar term will be
implied in contracts for the supply of a service or contracts for work and materials by
section 4 of the Supply of Goods and Services Act 1982. (Powell-Smith et al., 1999)
Where the construction contract does not expressly prescribe the time within
which the works are to be completed, the court may be prepared to infer that the
parties intended the works to be completed within a reasonable time.63 However,
before the court arrives at this inference, it must consider the contract as a whole and
the circumstances surrounding it. Where a completion date is clearly specified in the
contract, the contractor is expected to complete the works by the “due date”.64 In
such a situation, a contractor cannot maintain that he is entitled to complete the
works within a reasonable period after the date fixed65 (Chow, 2004).
The principles of reasonable time apply not only to contracts where time for
completion has not been specified in the first place, but also to contracts where
specified time has been lost and reasonable time substituted. Contracts whereby time
63
See: Charnock v Liverpool Corporation [1968] 1 WLR 1498 (CA).
64
See: Greater London Corporation v Cleveland Bridge and Engineering (1984) 34 BLR 57.
65
See: Raineri v Miles [1981] AC 1050 (HL), cf Amherst v James Walker [1983] Ch 305 at 315 (CA).
49
for completion is not specified are very common in construction and may indeed
form the majority. This is because when the average householder employs a builder
to fit new windows, erect a porch or decorate the bedrooms, he pays most attention to
the price and the written quotation but beyond that the contractual details are
frequently left open. Where there is a formal contract and time is at large the defunct
extension of time provisions may serve well as some guide as to what is reasonable
time. Thus, extra works, exceptional weather, strikes etc., might all be taken into
account. With or without a formal contract it might be appropriate to look at the
production capability of the contractor, his management and financial resources, and
his other contractual commitments, particularly if known to both parties (Eggleston,
1992).
According to Davies (1989), at the turn of the century the general rule of law
as it then stood was that any act necessary to be done by either party in order to carry
out a contract must be done within a reasonable time. The principle was interpreted
that except where time was of the essence of the stipulation, a breach of contract was
only committed in the case of unreasonable delay in the performance of any act
agreed to be done. For example, where time was not essential, a party failing to
complete a sale of land on the day fixed by the agreement did not commit a breach of
contract either in equity or at law; it was only on failure to complete within a
reasonable time after that day that the contract was broken.
50
However, by the middle of the century it was found that whether or not time
was of the essence, anyone who was actually injured by the breach of a time
stipulation could recover damages. In other words, a breach of a contractual
stipulation as to time which is not of the essence of a contract would not be treated as
a breach of a condition precedent to the contract, that is as a breach which would
entitle the innocent party to treat the contract as terminated or which would prevent
the defaulting party from suing the specific performance. Nevertheless, it was a
breach of the contract and entitled the injured party to damages if he had suffered
damage.
The current view of the law with regard to time within all contracts may be
summarized as follows. Time will not be considered to be of the essence unless:
3. A party that has been subjected to unreasonable delay gives notice to the
party in default making time of the essence
What then is the effect of the term ‘reasonable time’? According to Davies
(1989), what is a reasonable time may not depend solely upon the convenience and
financial interests of the contractors. No doubt, it is in their interest to have every
detail ‘cut and dried’ on the day a contract is signed, but a contract may not
51
contemplate that. Rather, it may contemplate further drawings and details being
provided. The architect or engineer is to have time to provide them which is
reasonable having regard to the point of view of him and his staff and the point of
view of the client as well, as the point of view of the contractor.
Where the time for completion is not given in the contract documents, the
Supply of Goods and Services Act 1982, Part 2, section 14(1), provides for a term to
be implied that the work will be carried out within a reasonable time. However, if
parties to a contract were told by the client the contract completion date because it
had been left out of the contract documents, such evidence may not be admitted,
particularly where to put in the date would lead to a severe liquidated damages clause
being brought into operation. In other words, as a general principle, where a
complete blank is left in a material part of the contract evidence is not admissible to
fill it.
Wallace (1995) further elaborated that in the first place, when arriving at a
reasonable time in “ordinary circumstances”, the parties may or may not have
contracted with the particular resources and capacity of the particular builder in
mind. Thus, an owner may have deliberately chosen a small local or jobbing builder,
with limited resources of capital, plant and labour, to build his house, in the hope of
getting a cheaper or better quality job while sacrificing speedy completion. On the
52
other hand, a builder with limited resources might tender for a large contract in
competition with more substantial contractors and give no indication of his inability
to carry out the work as rapidly as them. In the former case the test might well be
subjective, and in the latter objective. 66 A party may have expressly or impliedly
warranted or discounted his ability or capacity to maintain progress in a particular
situation or at a particular speed.
While it may be that most factors beyond the builder’s control will excuse
him, it is possible that expressly or impliedly the parties will have contracted with a
particular factor in mind. Thus, whereas there is little doubt that allowance would be
made for delay due to an unexpected strike, it would not, it is suggested, follow that a
contractor’s inability to obtain sufficient labour in competition with other contractors
in the district would excuse him. In the case of subcontractors of all kinds, whether
nominated or otherwise, it is submitted that the tendency of the courts should be not
to excuse the main contractor from meeting his main contract obligation in any case
where delay is caused by some act or omission within the subcontractor’s control,
though for that reason outside the main contractor’s direct personal control, since, in
such a case, the contractor will or should have his remedy against the subcontractor,
who in law is the contractor’s agent for the purpose of carrying out the works,
whether nominated or not. Any tendency to excuse the main contractor would in
effect be an invitation to subcontractors to default on their obligations, and might
well result in the owner failing to recover his own loss whereas the contractor might
still be able to recover any loss he personally might have suffered at the hands of the
subcontractor. Again, it may be a question whether the parties contracted with a
builder’s other commitments in mind. In approaching this question, it should be
borne in mind that with the increasing degree of specialist and sub-contracted work
in the building industry, the direct responsibilities of the main contractor have
become correspondingly limited to the provision of a site-organisation, a non-
specialised labour force, and materials and plant, so that in most cases the builder,
by entering into the contract, is, in effect, warranting that he has or will have at least
these available in sufficient quantity for due performance of his obligations. All
66
See Hydraulic Engineering Co Ltd v McHaffie, Goslett & Co. (1878) 4 QBD 670.
53
these are matters which will, no doubt, be taken into consideration when making the
initial “ordinary circumstances” assessment, before considering the actual post-
contract circumstances (Wallace, 1995).
Admittedly, the list of factors tendered by Diplock J in his judgment cannot, on any
stretch of imagination, be considered to be exhaustive. However, it does serve to
indicate the wide range of factors which have to be considered when determining the
question of “reasonableness” with respect to the timing of instructions, additional
drawings and information.
67
(1958) 5 BLR 34.
54
In calculation of reasonable time, Gill (1969) stated that all the circumstances
of the case should be taken into consideration, such as the nature of the works to be
done, the time necessary to do the work, the ability of the contractor to perform68, the
proper use of customary appliances69, and the time which a reasonably diligent
producer of the same class as the contractor would take.70
Chapter IV of the SGA deals with the performance of the terms of the
contract, including the delivery of goods. Where under the contract of sale, the seller
is bound to send the goods to the buyer but no time for sending them is fixed, the
seller is bound to send them within a reasonable time (36(2)). Demand or tender of
68
Attwood v Emery (1856), 1 CB (NS) 110; 26 LJCP 73.
69
Lyle Shipping Co. v Cardiff Corporation [1900] 2 QB 638.
70
Supra note 66.
55
Andersen (1998) presented a paper that focused on the meaning of the term
"reasonable time" as understood by Article 39(1) of the 1980 United Nations
Convention on Contracts for the International Sale of Goods (referred to as the CISG
or the Convention). This provision provides that a buyer notify the seller “within
reasonable time” after he discovers or ought to have discovered that the goods do not
conform to the contract. The objectivity of a term is especially important where the
CISG is concerned, as this is a uniform law which must be interpreted and practised
uniformly. The aim of the determination of "reasonable time" in Article 39(1) will
be to establish a pattern to the application of the provision, and assess whether the
term is an autonomous term applied uniformly.
Article 38 prescribes a duty for the buyer to inspect the goods delivered to
him within a short period. Since Article 39(1) relies not only on the time of
discovery of non-conformity but also on the time a buyer “ought to have discovered
it”, these two provisions are closely entwined. Indeed, Article 38 is prefatory to
Article 39. This relationship with Article 38 usually determines precisely from when
the reasonable time period is to be measured: as the time-frame of reasonable time
pertains to the period after the non-conformity is discovered (or ought to have been
discovered), it is only related to the time of delivery via Article 38. The Article 38
examination need not be carried out immediately after the delivery of the goods
57
(although this is recommendable to avoid all doubts) nor within a set time-frame, but
hurriedly according to the objective circumstances of the case.
While the purpose of the provision would seem to imply that the time-frame
should be reasonable for the seller whose interests it protects, the fact that it
represents a flexible compromise in the interests of the buyer would outweigh this
consideration. By taking “a wide range of factors” into account, and thus the
reasonableness of the time-frame in both the seller's and the buyer's point of view, a
more subjective and fair solution can be reached in each individual case. But when
applying this interpretation to a particular case, the practitioner should be aware that
a wide range of factors does not mean all factors. Not all factors are suitable for
influencing the time-frame in question. The influence of some aspects must be
considered legal misapprehensions in international trade rather than factors of
reasonableness. For instance, what if these factors include purely domestic aspects?
Many determinations of reasonable time glean their identity from the international
practice of Courts and Tribunals when determining “reasonable time” and it is
certainly here that the key is to be found. It is the actual application of the provision
which ultimately defines it.
3.4 Conclusion
The word “reasonable time” is found in, among others, Supply of Goods and
Services Act 1982, Sales of Goods Act 1957, United Nations Convention on
Contracts for the International Sale of Goods and Landlord and Tenant Act 1988.
This term is also found in construction contracts, contracts of sale and purchase of
land and charterparty.
58
4.1 Introduction
The preceding chapter elaborated on reasonable time and as Gill (1969) puts
it, in a building contract to perform a work where no particular time is specified
within which the work is to be completed, an agreement to complete within a
reasonable time will be implied and a reasonable time for completion will be
allowed.68 The question as to what is a reasonable time is one of fact69 and will be
addressed in the discussion below.
Hence, this chapter will identify and determine the meaning of “reasonable
time” when time is at large. Those meanings are based on decided court cases,
which mainly were held under England law and laws in other Commonwealth
countries.
68
Startup v Macdonald (1843), 6 Man. & G. 593, per Rolfe, B.
69
Fisher v Ford (1840), 12 Ad. & El. 654, per Lord Denman, C. J.
60
Six of the ten cases are cases whereby the time for completion is not
stipulated in the contract. These cases are discussed in detail to give a background of
the cases and then what the judges say about reasonable time in such cases. One
well-known case is Pantland Hick v Raymond & Reid70. In this case, a consignee,
upon whom rested the contractual obligation to unload the appellant’s vessel, and
70
[1893] AC 22.
61
where no time for discharge was stipulated, argued that it had discharged a vessel
within a reasonable time having regard to the fact that there had been a single cause
of delay, being a strike of dock workers over which the consignee had no control and
which prevented performance of the contract.
The appellant contended that the test is what time would have been required
for the discharge of the vessel in ordinary circumstances, and to the extent that the
respondents had to provide labour, they must be responsible if the discharge is
delayed this point. The respondents argued that the test to be applied is what was
reasonable under existing circumstances assuming that, in so far as the circumstances
were extraordinary, they were not due to any act or default on the part of the
respondents.
The only sound principle is that the ‘reasonable time’ should depend
on the circumstances which actually exist. If the cargo has been taken
with all reasonable dispatch under those circumstances I think the
obligation of the consignee has been fulfilled. When I say the
circumstances that actually exist, I, of course, imply that in those
circumstances, in so far as they involve delay, have not been caused or
contributed to by the consignee.
interpreted; and has invariably been held to mean that the party upon
whom it is incumbent duly fulfils his obligation, not withstanding
protracted delay, so long as such delay is attributable to causes beyond
his control, and he has neither acted negligently nor unreasonably.
In the case of The Lyle Shipping Company Ltd v The Corporation of Cardiff72,
by a charter a cargo was to be “discharged with all reasonable dispatch as
customary”. The custom at the port was to discharge into the railway wagons.
Without any negligence on the part of the charterers, but owing to the stress of work,
and a consequent deficiency in the number of wagons available, the ship was delayed.
It was held by the Court of Appeal, that the charterers, having done their best to
procure the appliances that were customarily used for discharging such a ship, and
having used them with proper dispatch, were not liable for delay.
Smith LJ stated:
Now, the contract which the plaintiffs have in this case with the
defendants for the discharge of the cargo, as will be seen from the
71
[LR] 1 CP 385.
72
[1900] 2 QB 638.
63
latest authority upon the subject in the House of Lords - no fixed time
being stipulated for the discharge - is that the plaintiffs will discharge
the cargo within a reasonable time under existing circumstances, or, in
other words, with all due diligence having regard to all the existing
circumstances, and, in my opinion, there is no limit as to what are
existing circumstances, as argued by the plaintiff - namely, the limit of
the user of the port appliances. The case to which I allude is that of
Hick v. Raymond in the House of Lords, and when what is therein laid
down is understood it will be seen that the defendants' contract is what
I have said it is.
In the case of Sims & Co. v Midland Railway Co.73, perishable goods were
consigned by the defendants' railway for delivery to the plaintiffs, no time being
specified within which the goods were to be delivered. During the transit a general
strike of railway servants, including the defendants' servants, broke out, and the
defendants were unable to forward the goods to their destination. There was no
evidence that the strike was caused or contributed to by the defendants. The goods
becoming deteriorated the defendants sold them. In an action to recover damages for
breach of contract, to deliver the goods, it was held that in calculating what was a
reasonable time for delivery in accordance with the principle laid down in Hick v
Raymond & Reid 74, the strike of the defendants' servants must be taken into
consideration as one of the circumstances existing at the time of the carriage, and that
therefore the defendants were not liable for the delay.
In the course of his judgment Ridley, J., having cited the passages from Lord
Herschell's judgment in Hick v. Raymond & Reid:
73
[1913] 1 KB 103.
74
Supra note 70.
64
control, and that they are liable for it. I can imagine a case in which it
might be said that the happening of the strike was within the control of
the railway company; but there ought to be evidence of it. Apart from
such evidence the mere fact that there was a strike among the railway
company's servants causing the delay would not make the company
liable; but the strike would be an existing circumstance in the
ascertainment of a reasonable time. I do not say how the matter would
have stood if there had been evidence that the strike was brought about
by some unreasonable demand on the part of the railway company.
There was no such evidence.
75
[1984] 1 All ER 504, 24 Build LR 94.
65
The first issue is concerned therefore with an analysis of the legal relationship
between the parties. The second issue is whether, if CBE are right in their
submission that there was a binding contract as alleged by them, BSC were in breach
of that contract in delivering the goods late and out of sequence. This latter issue is
concerned primarily with consideration of the various events and difficulties which
occurred in production of the nodes by BSC, and deciding whether, in the light of
these events, BSC failed to deliver the goods within a reasonable time as alleged by
CBE.
It was held that the parties had ultimately been unable to reach final
agreement on the price or other essential terms, thus, the contract was eventually not
entered into and therefore the work performed in anticipation of it was not referable
to any contractual terms as to payment or performance. On the question of delivery
within a reasonable time, Goff J stated that:
His Lordship then considered the evidence and concluded that a reasonable
period for the manufacture of the 137 nodes, which were at the request of CBE, was
55 weeks and that since such a period would have gone well beyond 11 April 1980
when the last node was in fact delivered it followed that if, contrary to his Lordship's
previously expressed opinion, BSC had been bound to complete the work within a
reasonable time they would not have been in breach of that obligation. (All but one
66
of the nodes had been delivered, delivery of the remaining node being held up until
11 April 1980 due to an industrial dispute at the plaintiffs' plant.)
The case of Astea (UK) Limited v Time Group Limited76 warns of the dangers
of entering into a contract without setting express deadlines for completion - in
particular when attempting to rely on the law which says that performance must be
carried out “within a reasonable time”. In July 2000, Astea entered into a contract
with Time Group, a computer retailer, to supply Time with software for its customer
call centre. Owing to delays on both sides, the integration and testing of the new
software was delayed and Time withheld payment to Astea on the basis that it was in
breach of section 14(1) of the Supply of Goods and Services Act 1982 because it had
not performed the software contract within “a reasonable time” and had repudiated
the contract by failing to complete the work by 6 March 2001. Time argued that
“reasonable time” meant that Astea had to complete the services as fast as was
humanly or technically possible, subject only to delays that it could not control.
However, the Technology and Construction Court ruled there was no express term to
complete the work by 6 March 2001 and the implied term under s14(1) of the
Services Act applied. Therefore Astea had not exceeded a reasonable time for
performance and Time was ordered to pay. In order for Time's argument to have
some credibility, it needed to issue Astea with a written notice setting out a new
deadline for performance and making "time of the essence", which it did not do.
Both counsel for the defendant and plaintiff endeavoured to seek support for their
respective emphases from the well-known decision of the House of Lords in
Pantland Hick v. Raymond & Reid77.
76
Supra note 59.
77
Supra note 70.
67
- The condition of reasonable time has been frequently interpreted; and has
invariably been held to mean that the party upon whom it is incumbent duly fulfils
his obligation, not withstanding protracted delay, so long as such delay is
attributable to causes beyond his control, and he has neither acted negligently nor
unreasonably.
- Perform with all due diligence having regard to all the existing circumstances, and
there is no limit as to what are existing circumstances.
78
Supra note 70.
68
4.2.2 Reasonable Time where the Stipulated Date has ceased to be Applicable
by Reason of Prevention or Breach
The remaining four cases are cases whereby the stipulated date for completion
in the contract has ceased to be applicable by reason of acts of prevention or breach.
Where, as a condition of its performance, time is of the essence of a contract for the
sale of goods and, on the lapse of the stipulated time, the buyer continues to press for
delivery, thus waiving his right to cancel the contract, he has a right to give notice
69
fixing a reasonable time for delivery, thus making time again of the essence of the
contract, which, if not fulfilled by the new time stipulated, he will then have the right
to cancel. The reasonableness of the time fixed by the notice must be judged as at the
date when it is given. In similar circumstances, in the case of a contract for work and
labour done, the person who has ordered the work can give a valid notice to the
contractor making, time again of the essence of a contract. A reasonable time meant,
in accordance with well-known authorities, a reasonable time in the circumstances as
they actually existed, that is, that the plaintiffs would not exceed a reasonable time if
they were prevented from delivering by causes outside their control, such as strikes or
the impossibility of getting parts, and events of that kind; and that on the evidence in
this case it could not be said that a reasonable time was in that sense exceeded.79
In CCECC (HK) Ltd v Might Foundate Developement Ltd & Ors81 it was
stated that in order to establish a time at large argument, it requires two-stages, that
are establishing that there was an act of prevention by the Respondent which caused
delay and that the delay is not covered by the extension of time provision. The
79
Rickards v Oppenheim [1950] 1 KB 616
80
Etablissements Chainbaux S.A.R.L. v Harbormaster Ltd [1955] 1 Lloyd’s Rep. 303
81
[2001] HKCU 916.
70
In this time at large issue, it was found that the Claimant was delayed by the
Respondent’s lack of payment as they depended very heavily on these interim
payments. There were admitted late payments running into millions of dollars. An
act of prevention by the Respondent sets time at large and that the Respondent is not
entitled to deduct liquidated damages and it now has a reasonable period in which to
finish the Works. A reasonable time for the completion of the Works is calculated.
In calculating this time, the Claimant is entitled to rely on the effects of non-payment
and late payment of interim payments.
82
In the case of Shawton Engineering Ltd v DGP International Ltd , the
appellant, Shawton Engineering Ltd, was the sub-contractor to a joint venture, KAT
Nuclear for the design and manufacture of a number of packages as part of the
construction of premises and process plant at Sellafield for handling nuclear waste.
The appellant sub-contracted the design work of five of these packages (numbered
S468, S469, S511, S512 and S514) to the respondent, DGP International Ltd. The
sub-contract for each package originally had a fixed completion date. In the event, in
one of the contracts, there were variations instructed before and after the original
completion date. On the other four contracts, the variations were all instructed after
the original completion dates. By October 2000, the respondent was being asked to
explain the reason for the delay. By letter dated 7 November 2000, the appellant said
that it had to insist that within seven days the respondent provide it with an acceptable
timeframe for completion of all contract works. Eventually, the respondent had not
completed its work on any of the packages and the appellant terminated or purported
to terminate the contracts. The appellant claimed against the respondent for breach of
contract. There was no contractual mechanism for extending time on account of the
variations. The parties agreed and HHJ Gilliland QC accepted that the effect of the
82
[2005] EWCA Civ 1359.
71
variations was that the respondent became obliged to complete its work within a
reasonable time.
It was held that what was a reasonable time had to be judged as at the time
when the question arose in the light of all relevant circumstances. One such
circumstance was that the respondent had originally agreed fixed time periods
(although upon a misapprehension as to the work content); another was the true work
content. These worked in opposite directions. The mere instruction of a variation
after the original date for completion would not by itself necessarily mean that a
reasonable time had to be assessed afresh by reference only to the variation and
whatever work happened to remain at the date of the variation (which is what the
judge appeared to say); it was possible that a modest variation instruction given after
an original completion date had passed could, depending on all the circumstances,
result in an obligation to complete by a date in the past. However, the question was a
composite one, and the circumstances here included that the variations were
significant in scope and that the appellant was not insisting on, nor particularly
concerned about, early completion of the respondent's work. The original completion
dates and periods had cased to be of any relevance. This overlaid to extinction any
question of calculating time periods by reference to the original dates for completion
and the work content of variations. The judge was right to hold that the appellant had
not established what was a reasonable time for completion; and that, on 7 November
2000, the reasonable time for completion was to be assessed afresh, mainly with
reference to the outstanding work content including variations. Therefore, the
respondent was not in breach for delay on 7 November 2000 and the appeal failed.
- The fact that the experts had agreed what was an appropriate extension of time
together with the originally agreed period was a fair indication of what should be
regarded as a reasonable time for completion of the work, but that is in effect to
treat the originally agreed period as being a reasonable period
The following tables (Table 4.1 and Table 4.2) summarize all the cases
discussed above and give a clearer view on the explanation and meaning of
“reasonable time” for each case and as well as the type of contracts involved.
73
Table 4.1: Reasonable time where no time for completion is specified in the contract/contract is silent as to time
Type of Contract/
No Cases Explanation and Meaning of “Reasonable Time” Contractual
Relationship
1 Taylor v The Great Northern - Reasonable time means a reasonable time looking at all the Carriage of goods/
Railway Company [LR] 1 CP circumstances of the case. Owner of Goods
385 - Circumstance in the case: carrying goods on the railway company’s and Railway
line within the usual (a reasonable) time was unavoidably obstructed. Company
2 Pantland Hick v Raymond & - Lord Watson said that when the language of a contract does not Shipping/
Reid [1893] AC 22 expressly, or by necessary implication, fix any time for the Shipowner and
performance of a contractual obligation, the law implies that it shall Consignee
be performed within a reasonable time. The rule is of general
application, and is not confined to contracts for the carriage of goods
by sea. In the case of other contracts the condition of reasonable
time has been frequently interpreted; and has invariably been held
to mean that the party upon whom it is incumbent duly fulfils his
obligation, not withstanding protracted delay, so long as such
delay is attributable to causes beyond his control, and he has
neither acted negligently nor unreasonably.
- Within a time which is reasonable under the existing
circumstances, assuming that those circumstances, in so far as
they involve delay, are not caused or attributed to by him.
- Circumstance in the case: unloading of cargo was interrupted by a
strike of the dock labourers which delayed the discharge.
74
Table 4.1: Reasonable time where no time for completion is specified in the contract/contract is silent as to time (cont’d)
Type of Contract/
No Cases Explanation and Meaning of “Reasonable Time” Contractual
Relationship
3 The Lyle Shipping Company - No fixed time being stipulated for the discharge - is that the plaintiffs Shipping/
Ltd v The Corporation of will discharge the cargo within a reasonable time under existing Shipowner and
Cardiff [1900] 2 QB 638 circumstances, or, in other words, with all due diligence having Charterer
regard to all the existing circumstances, and there is no limit as to
what are existing circumstances - namely, the limit of the user of
the port appliances.
4 Sims & Co. v Midland - Reasonable time under the existing circumstances Carriage of goods/
Railway Co. [1913] 1 KB - Circumstance in the case: a general strike of railway servants, Purchaser of goods
103 including the defendants' servants, broke out, and the defendants were and Railway
unable to forward the goods to their destination. Company
75
Table 4.1: Reasonable time where no time for completion is specified in the contract/contract is silent as to time (cont’d)
Type of Contract/
No Cases Explanation and Meaning of “Reasonable Time” Contractual
Relationship
5 British Steel Corporation v - What constitutes a reasonable time has to be considered in relation to Supply of Material
Cleveland Bridge & circumstances which existed at the time when the contract obligations in Construction/
Engineering Co Ltd [1984] 1 are performed, but excluding circumstances which were under the Steel manufacturer
All ER 504, 24 Build LR 94. control of the contractor. and Contractor
- These principles are applied by first considering what in ordinary
circumstances was a reasonable time for performance and then
considering to what extent the time for performance of the
contractor was in fact extended by extraordinary circumstances
outside his control. Whether a reasonable time has been taken to do
the works cannot be decided in advance, but only after the work has
been done.
6 Astea (UK) Limited v Time - His Honour Judge Seymour thinks that consideration of a reasonable Supply of Goods
Group Limited [2003] time for performance “... is likely to include taking into account and Services/
EWHC 725 (TCC) any estimate given by the performing party of how long it would Provider of
take him to perform…” Software and
- The focus of attention is likely to be upon the allocation of Manufacturer and
resources to performance of the relevant contractual obligations. Retailer of
In any sphere of commercial or personal life it is necessary for Computers
decisions to be made as to the relative priority of matters which need
to be dealt with and as to the resources which it is appropriate to
allocate to such matters.
- It would be wrong in principle to proceed that an obligation to do
something within a reasonable time was equivalent to an obligation to
do it as soon as was practicably possible, subject only to not being
held responsible for causes of delay without one’s control.
76
Table 4.2: Reasonable time where the stipulated date has ceased to be applicable by reason of prevention or breach
Type of Contract/
No Cases Explanation and Meaning of “Reasonable Time” Contractual
Relationship
1 Rickards v Oppenheim - A reasonable time meant, a reasonable time in the circumstances as Sales of Goods/
[1950] 1 KB 616 they actually existed, that is, that the plaintiffs would not exceed a Motor trader and
reasonable time if they were prevented from delivering by causes Purchaser
outside their control, such as strikes or the impossibility of getting
parts, and events of that kind; and that on the evidence in this case it
could not be said that a reasonable time was in that sense exceeded.
2 Etablissements Chainbaux - Reasonable time has to be considered in the light of the circumstances Sales of Goods/
S.A.R.L. v Harbormaster which prevailed after the contract. One has to consider what is the Buyer and Seller of
Ltd [1955] 1 Lloyd’s Rep. reasonable time provided for. marine engines
303
77
Table 4.2: Reasonable time where the stipulated date has ceased to be applicable by reason of prevention or breach (cont’d)
Type of Contract/
No Cases Explanation and Meaning of “Reasonable Time” Contractual
Relationship
3 CCECC (HK) Ltd v Might - A reasonable time for the completion of the Works is calculated. In Construction
Foundate Developement Ltd calculating this time the Claimant was entitled to rely on the Contract/
& Ors [2001] HKCU 916. effects of non-payment and late payment of interim payments Contractor and
(Acts of prevention by Employer). Employer
4 Shawton Engineering Ltd v - It was submitted that the fact that the experts had agreed what was Construction
DGP International Ltd an appropriate extension of time together with the originally Contract/
[2005] EWCA Civ 1359 agreed period was a fair indication of what should be regarded as Subcontractor and
a reasonable time for completion of the work, but that is in effect Sub subcontractor
to treat the originally agreed period as being a reasonable period,
notwithstanding that that period was agreed to under misapprehension
- Assessing a reasonable time meant having regard to all the
circumstances, one of which was that the true work content which the
respondent undertook was far greater than it had anticipated. What
was a reasonable time had to be judged as at the time when the
question arose in the light of all relevant circumstances. One such
circumstance was that the respondent had originally agreed fixed
time periods (although upon a misapprehension as to the work
content)
78
4.3 Conclusion
Judge Seymour also seemed to think that consideration for a reasonable time
for performance “…is likely to include taking into account any estimate given by the
performing party of how long it would take him to perform…”. Such estimated
completion period would be a reasonable point from which to assess reasonable time
for performance.
83
Supra note 59.
79
84
Supra note 81.
85
Supra note 82.
CHAPTER 5
5.1 Introduction
- The condition of reasonable time has been frequently interpreted; and has
invariably been held to mean that the party upon whom it is incumbent duly fulfils
his obligation, not withstanding protracted delay, so long as such delay is
attributable to causes beyond his control, and he has neither acted negligently nor
unreasonably.
- Performance is done with all due diligence having regard to all the existing
circumstances, and there is no limit as to what are existing circumstances.
- The fact that the experts had agreed what was an appropriate extension of time
together with the originally agreed period was a fair indication of what should be
regarded as a reasonable time for completion of the work, but that is in effect to
treat the originally agreed period as being a reasonable period
82
5.4 Conclusion
As Lord Ashbourne puts it in the case of Pantland Hick v. Raymond & Reid86:
86
Supra note 70.
83