In the 2017 case of North Midland Building Ltd v Cyden Homes, the TCC held that the prevention principle did not apply and any right to an extension of time was wiped out because of concurrent delay caused by North Midland. The TCC held that the concurrency delay exclusion did not set time ‘at large’ and the prevention principle did not affect the enforceability of such a clause.
The prevention principle means that a party may not enforce a contractual obligation against the other party where it has prevented the other party from performing that obligation. If the employer causes an act of prevention, then the contractual completion date and associated liquidated damages are replaced with an obligation to complete within a reasonable period, with an entitlement to claim unliquidated damages. The parties agreed that if North Midland was responsible for an event which caused delay, at the same time as delay caused by a Relevant Event (which included an act of prevention), then the delay caused by the Relevant Event would not be taken into account when assessing the extension of time. See our previous briefing on this case
The Court of Appeal upheld the TCC’s decision that contractual provisions which seek to exclude a contractor’s entitlement to an extension of time in circumstances of concurrent delay are enforceable. Further there was no authority to suggest that parties cannot contract out of some or all of the effects of the prevention principle. The Court found that the prevention principle was an implied term which could be overridden by the express terms of a contract.
Lord Justice Coulson provided:
“A building contract is a detailed allocation of risk and reward. If the parties do not stipulate that a particular act of prevention triggers an entitlement to an extension of time, then there will be no implied term to assist the employer and the application of the prevention principle would mean that, on the happening of that event, time was set at large. But it is a completely different thing if the parties negotiate and agree an express provision which states that, on the happening of a particular type of prevention (on this hypothesis, one that causes a concurrent delay), the risk and responsibility rests with the contractor.”
The Court further rejected an argument that in cases of prevention, a term can be implied into the contract which prevents liquidated damages from being levied. If such a term was implied it would conflict with the concurrent delay exclusion.
This case confirms that concurrent delay exclusions will be upheld and will not result in time being set at large or hindering the right to claim liquidated damages. It is likely that concurrent delay exclusions will become more common in the light of this decision.