BCM 643 CONTRACT MANAGEMENT

CHAPTER 1: CONTRACT PROLONGATION AND

EXTENSION OF TIME

PART B: JUN 2012

Question 1

a) What is time a large? Discuss the circumstances when

time would be at large.
(10 marks)

All the major standard forms provide for the Contract

Administrator to grant an Extension of Time on specified
grounds [relevant events].
EOT is grantable on those grounds and no other. Without
these clauses the contract administrator has no inherent
power to extend completion periods.
Thus if the contract administrator issues an instruction
which increase the amount of work to be done or is late in
giving the contractor necessary instructions, the specified
completion date no longer apply.

PART B: DEC 2013

Effect Time at Large

Question 2

Failure to properly grant an EOT, where the delay of

completion is caused by the employer [i.e. act of
prevention] or

Those for whom he is responsible in law i.e. Employer, S.O

or C.A, may have the effect of setting time at large.
The effects are:
1. The original completion date is no longer valid.
2. The contractor is obliged to complete within
reasonable time.
3. Client will lose his right for Liquidated Damages.

a) Explain Time at large

PART B: JUN 2015
Question 1
b) Explain Time at large
ANSWER:
Definition

In general, the contractors obligation to complete the

works by the specified date is removed if the employer
delays the contractor in the execution of the works.
In this situation, time is said to be large and the
contractors obligation is just to complete the works within
a reasonable time.

Case
CASE: Holme v Guppy (1838)
In Holme v Guppy the owner of the property failed to give
possession of the site when due thereby preventing the
contractor from completing on time.

When the employer sought to impose liquidated damages for

delay, the court held that the contractor was not liable to pay
damages for late completion as he had been prevented from
completing on time by the acts of the owner.

Subsequently, in Percy Bilton Ltd v Greater London Council

(1982), HL applied the same principle where the employer had
delayed in nomination of a new sub-contractor.

If the contract contains no specific commencement provision,

then the contractor must be given possession at such a time
as will enable the work to be completed by the completion
date.

The contractor is not obliged to start work on the date for

possession, as such; however, a contractor who does not start
reasonable quickly may be liable for not proceeding regularly
and diligently [PAM98/2005 cl. 21.1] or with expedition and
without delay [PAM98 cl. 23.4, PAM2005 cl. 23.7].

There is no logical or legal connection between the

provisions empowering the S.O to extend time for
completion and those which require him to ascertain and
certify sums to the contractor as direct loss and / or
expense.
Claims for time and money are completely separate.

Time and Money Claims

The grant for an EOT MAY but WILL NOT NECESSARILY

or automatically entitled the contractor to reimbursement
for direct loss and / or expense [Fairweather (H) & Co Ltd
v Wandsworth LBC (1987)].
EOT merely relieves the contractor from his liability to pay
LD.
Standard forms do not require a money claim to be
preceded or granted with EOT.
The contrary is a misconception.

PART B: JAN 2013

PART B: JUN 2012
Question 1
b) Discuss the relationship between time and money claims.
(15 marks)
ANSWER:
Time and Money claims misconception

Time and money [loss and/or expense] are not necessarily

linked.

Question 1
Discuss the significance of grouping relevant events into
those which are attributable to employers fault and those due
to nobodys fault. Highlight in your discussion how this
grouping affects the relationship between time and money
claim.
(25 marks)

PART B: DEC 2013

Question 1
a) What are relevant events

(5 marks)

ANSWER:

Definition

In construction contracts, the delaying events are often

known as relevant events. The relevant events listed
generally cover these types of delays:
1. The first type (Group A)
Delays which are caused by neutral events for which the
Employer has accepted responsibility for, such as force
majeure, inclement weather and utility undertakings.

2. The second type (Group B)

These are the faults of the employer or his representative
eg. Late instruction, late nomination eg NSC, etc.
The identification of group or type of delay is very
important in assessing its time and lost impacts and hence
the granting of EOT.

Group A (Neutral Events) -> EOT only

Group B (Employers Responsibility) -> EOT + possible
compensation (under separate clause*)
Group C (Contractors Fault) -> Liquidated Ascertained
Damage (LAD)
For delays under Group A and B, the Contractor will be
issued a Certificate of Delay and Extension of Time
For delays under Group C the Contractor will be issued a
Non-Completion Certificate (CNC)
Group B however may also entitle the contractor to money
compensation.
* Generally known as Claim for Loss and/or Expenses. In
most contracts, this clause immediately follows the EOT
Clause. For example, in PAM form this comes under
Clause 24 which contain many of the grounds or matters
(Group B only) in Clause 23.
As was mentioned earlier, in most contracts, compensation
or Claim for Loss and/or Expenses clause is placed
immediately after the Extension of Time clause. It also
repeats if not all, some of the grounds for extension of time
(relevant events) in EOT clause above. This is the start of
the problem in practice.

Time and Money claims misconception

Time and money [loss and/or expense] are not necessarily

linked.
There is no logical or legal connection between the
provisions empowering the S.O to extend time for
completion and those which require him to ascertain and
certify sums to the contractor as direct loss and / or
expense.

Claims for time and money are completely separate.

Time and Money Claims

The grant for an EOT MAY but WILL NOT NECESSARILY

or automatically entitled the contractor to reimbursement
for direct loss and / or expense [Fairweather (H) & Co Ltd
v Wandsworth LBC (1987)].
EOT merely relieves the contractor from his liability to pay
LD.
Standard forms do not require a money claim to be
preceded or granted with EOT.
The contrary is a misconception.

PART B: JUN 2013

Question 1
Delays in construction projects can be considered as either
excusable or non-excusable. Elaborate further on the
ramifications of this basic division of the delays in accordance
with the relevant provisions in most standard forms of contract.
(25 marks)
ANSWER:
Excusable and Non-excusable Delay

Definition
Excusable delay is one that will give out good reason for
an extension of the contract performance time. It excuses
the party from meeting a contractual dead-line.
Common excusable delays for a contractor under the
terms of many contracts include design problems, ownerinitiated changes, unanticipated weather, labour disputes,
and acts of God. Other types of excusable delays for
contractors include delays in receiving owner-furnished
equipment, unknown or differing site conditions, and late
contract award
Non-excusable delay is one for which the party assumes
the risk of the cost and effect, not only for itself but possibly
for the consequential impact on others as well.
For example, the subcontractor working under the main
contractor will also affected if the contractor experience
non-excusable delay in its performance of the contract
work due to its own mismanagement. The main contractor

may be responsible to the subcontractors, but not the

owner.

ANSWER:

Groups in Excusable and Non-excusable Delay

1. Under Excusable Delay

Group A (Neutral Events) -> EOT only

Group B (Employers Responsibility) -> EOT + possible
compensation (under separate clause*)

2. Under Non Excusable Delay

Group C (Contractors Fault) -> Liquidated Ascertained
Damage (LAD)
For delays under Group A and B, the Contractor will be
issued a Certificate of Delay and Extension of Time
For delays under Group C the Contractor will be issued a
Non-Completion Certificate (CNC)
Group B however may also entitle the contractor to
money compensation.
Relevant Events to EOT
*refer notes

Clause 26.4 of CIDB 2000 form, provides for the granting

of an EOT for any ground set out in Clause 24.1(e)to (q)
after the issue of CNC. Such extension shall be added net
to the time for completion and, according the employer
shall reimburse the contractor the LAD recovered from the
said EOT.
This provision is becoming more common in construction
contracts and serves to avoid problems like those raised in
the case of Balfour Betty Building Limited V Chestermount
Suffered a delay caused by the employer whilst in a period
of his own culpable delay (for which he was paying LAD)
CASE: Balfour Betty Building Limited V Chestermount
Properties

May 1989
Date of completion (contractor failed to complete)
Feb- July 1990
Architect issued instruction for additional fit-out works.
Oct 1991

PART B: JAN 2013

Question 2
e) Explain Non-completion and LAD

Contractor complete building works

Feb 1991
Fit out complete

Architect granted 199 days for EOT for fit out works
May 1989 + 199 days = November 1989

PART B: JUN 2012

Question 3
b) Explain Force majeure
ANSWER:

PART B: JUN 2013

Question 2
a) Explain Force majeure

Is a common clause in contracts that essentially frees both

parties from liability or obligation when an extraordinary
event or circumstances beyond the control of the parties,
such as war, strike, riot or an event described by the legal
form act of God prevents one or both parties to fulfilling
their obligations under the contract.
In practice, force majeure clauses do not excuse a partys
non-performance entirely, but only suspended it for the
duration of the force majeure.
It is generally intended to include occurrences beyond the
reasonable control of a party, which has a materially
adverse effect on the ability of such party to perform its
obligations, any results of the usual and natural
consequences of external forces and any circumstances
that are specifically contemplated in the contract.
CASE : MAFSOUKIS v PRIETMAN AND CO (1915)
A shipbuilding contract provided relief from liability to pay
liquidated damages. If the vessel was delivered late due to
force majeure or various specified type of strikes. Evidence
was tendered by both sides from civil lawyers. Delay due
to breakdown of machinery constituted force majeure.
However, FM did not extend to cover bad weather football
matches or funeral because these are the usual incidents

interrupting work and defendants in making their contract

no doubt took them into account.

PART B: JUN 2013

Question 2
c) Explain Liquidated Damages
PART B: DEC 2013
Question 2

d) Explain LAD
PART B: JUN 2015
Question 1
a) Explain Liquidated damages
ANSWER:

Payable only for contractors failure to complete on

time or any extended time.
When liquidated damages are agreed, the employers only
remedy for late completion is a sum not exceeding the
specified amount [cap]. No option of claiming
unliquidated damages.
Date of completion must be inserted in the appendix. If
no date inserted, the employers right to liquidated
damages will be lost [time at large].
The liquidated damages provision will be unenforceable
by the act of prevention or caused by the employer
and not covered by the EOT. Will result time at large.
Although section 75 of the Contract Acts 1950
distinguishes no difference between penalty and LD. It is
important for the figure inserted in the appendix to be a
genuine pre-estimate of the likely loss suffered by the
employer if the works are not completed on time.
The amount ordered by the court for LD will not exceed the
specified amount in the appendix [the cap].
The issue of certificate of delay [i.e. clause 22] is a
condition precedence to the employers right to LD.

Case

Definition

PAM clause 22.

PWD/JKR clause 40.
Liquidated damages are a monetary amount fixed and
agreed at the off set of the contractor by the parties in
advance.
The damages payable in the event of a specified breach
of contract.

CASE: Temloc v Erril Properties (1987)

Fact
In Temloc, the problem on LDs provisions occurred when the
employer completed the Appendix to the JCT Contract
specifying the figure for LDs as nil.

Held
The Court of Appeal interpreted this provision as meaning that
the parties had agreed that the employer would have no claim
for damages for late completion in any situations and there
was no fall-back mechanism in the contract for recovering any
general damages for delay.
This illustrates how significant it is for the parties in any
construction contract to complete the LDs provisions properly.
If the parties agree to exclude liquidated damages, it should be
addressed in clear and express language that they will be
deleting the liquidated damages regime but retaining the right
to recover general damages for any breach.

relevant event is causing a delay or disturbance to your

work progress? Compare this process in PAM 2009 form of
contract to that in PWD 2010 (203A) Standard Form of
Contract. Highlight major differences between these two
(2) processes.
(20 marks)
PART B: DEC 2014
Question 1
Extension of time is given to the contractor because the
construction work cannot be completed before or on the date
completion of work. It is given as of right and not as of
privilege to a contractor. Discuss the reasons for it being given
and the procedure as provided by PWD 203A (Rev 201/1) and
PAM 2006.
(25 marks)
ANSWER:
Reasons

PART B: DEC 2013

Question 1
b) What is the procedure to be followed in the application and
approval of extension of time once you discovered a

Procedures For application of EOT

PAM 2006 = Clause 23.1(a)

Conditions Precedent
The following items are conditions precedent before the
Contractor can seek for his entitlement to EOT under
most construction contract:
1. Notices of Delay
o Most standard form of contract require the
Contractor to submit written notice of delays to
the architect or S.O.
o A time limit is often imposed on submission of
such notice.
o The starting point for the submission period is
generally either the start of the event giving rise
to the delay (e.g. PAM), an objective test, or
when it becomes reasonably apparent that an
event is likely to cause delay (e.g. PWD) a
subjective test.
o The Malaysian Standard Forms
Only PAM 2006 forms requires the giving
of notice as a condition precedent to the
right of extension of time.
The PAM Contract 2006 Clause 23 states:
if the Contractor is of the opinion that the
completion of the Works is or will be
delayed beyond the Completion Date by
any of The Relevant Events stated in
Clause 23.8 he may apply for an extension
of time provided always that the Contractor
shall give written notice to the Architect his
intention to claim for such an extension of
timeThe giving of such written notice

o
o
o

shall be a condition precedents to an

entitlement of extension of time
Other forms such as the Government PWD
Form of Contract do not impose such condition.
The PWD Form of Contract Clause 43 states:
upon it becoming reasonably apparent that the
progress of the Works is delayed, the
Contractor shall forthwith give written notice of
the causes of delay to the S.O.
CASE: Peak Construction (Liverpool) Ltd v
McKinney Foundations Ltd [1970]69LGR1
The decision in the above case led to
the fear that in the event of an
employers delay, if the contractor failed
to serve notice and was thus prevented
from claiming an extension of time, it
may be open to argument that time was
at large because the employer had
prevented completion and no extension
of time was possible.

2. Detailed Particulars of EOT Claimed

o The term particulars or relevant information
referred in the PWD 203A(Rev.2007), PAM
2006 and FIDIC 1999 for construction forms
imply that the contractor is to prepare a written
submission of the effect of the delaying event
had on the works schedule.
o The effect is best demonstrated by a delay
analysis, which would constitute scheduling
documentation as prescribed in the form.

In addition, the contractor is to submit a

proposal for reducing or preventing the delays.

3. Scheduling documentation
4. Contractors proposal to reduce or prevent the
delays

BCM 643CONTRACT MANAGEMENT

CHAPTER 2: Construction contract claims
PART B: JAN 2013
Question 2
c) Explain Hudson and Emdem Formulae

ANSWER:

HO/profit percentage
Contract sum
Period of
100
Contract period (e.g in
weeks)
delay (in
weeks)

Hudson Fomula

It assumes the profit budgeted for by the contractor in his

prices was in fact capable of being earned by him
elsewhere had he been free to leave the delayed contract
at the proper time.
At best it requires adjustment to be made for the various
factors for which recovery is not permitted, e.g. the
contractor's own inefficiency.
It ignores the contractor's duty to make realistic attempts to
deploy his resources elsewhere during any period of delay.
The value of the final account may well exceed the
contract sum. Thus, any proper valuation for variations
must include an element of reimbursement for overheads
and profit and hence there is risk of duplicating recovery.
The use of the formula as it stands results in profit being
added to the profit already in the contract sum so that, at
the very least, the Hudson formula as first set out should
read `Contract sum less overheads and profit' rather than
`Contract sum'.
The formula can also produce under-recovery where
inflation during the period of delay increases the overhead
costs envisaged at the time of tender.
First so called because it appears in the 10 th edition of
Hudsons Building And Engineering Contracts (p.599), the
formula has since been much critised. The formula was
expressed as:

It is sometimes said that Hudson's formula has received

judicial approval and the judgments in J. F. Finnegan &
Son Ltd v. Sheffield City Council (l989) and Whittal
Builders Co Ltd v. Chester le Street District Council (1985)
are often cited in support of that contention. On a close
reading of those and similar reported English cases, it
appears that, strictly speaking, reference was not in fact
made to Hudson's formula. In Finnegan, having referred to
Hudson's formula the court then went on to apply another
(the Emden) formula (qv) which, unlike Hudson's
approach, is based on a percentage taken from the
contractor's organisation as a whole. In Whittal the court
adopted a formula based on average and essentially
notional figures.

Emdem Formula

Question 2

b) Explain Heads of claim

In an attempt to improve upon the Hudsons formula, an

alternative was published in Emdens Building Contrast
and Practice. Emdens Formula is:

This formula has the advantage of using the Contractors

actual head office/ profit percentage rather than the one
contained in the Contract and has received judicial support
in a number of cases, notably Whittal Builders Co Ltd v
Chester-le-Street District Council [1985] and in J F
Finnegan Ltd v Sheffield City Council [1988] where Sir
William Stabb QC, said:
However, I confess that I consider the plantiffs methof of
calculation of the overheads on the basis of a notional
contract valued by uplifting the value of the direct cost by
the constant of 3.51 as being to speculative and I infinitely
prefer the Hudson (Emden was intended*) formula which,
in my judgement, is the right one to apply in the case, this
is to say, overhead and profit percentage based upon a fair
annual average, multiplied by the contract sum and the
period of delay in weeks, divided by the contract period.
*the percantage based upon actual head office costs is
Emdens and not Hudsons formula.

PART B: DEC 2013

ANSWER:
1. Head office overheads and profits.
Head office overheads are made under two quite
distinct bases:
The opportunity cost methods based on formula
approach or;
Actual increased overhead cost expended as a result of
delay. This is subject to proof that the expenditure had
in fact been incurred, or was likely to be incurred.
Which is the more correct method?
Depends very much on the merits of each case, bearing
in mind the wording of the contract and evidences
available.
CASE: Wraight Ltd v PHT (Holdings) Ltd (1968)
The loss of establishment charges i.e. head office
overheads and profit were considered as direct losses.
Where a project is delayed due to default of the
employer, the contractors is not earning anything from
the contract during the delayed period and thus entitled
to claim damages arising from being prevented from
earning elsewhere.
Common formulae used:
i.
Hudson formula
ii.
Emden
iii.
Eichleay
2. Site overheads.
These are direct expenses. These claims are allowed on
time variable components, for instance:-

i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.

Maintenance of site
Buildings
Plant and equipment
Pumping and dewatering
Electricity
Water
Telephone
Site staff
Insurance
EPF
Site allowance
Travel
Etc.

3. Idle plant and equipment on site.

a) Evidence of employment elsewhere, if no delay, is
necessary.
b) Absence of the above, assessment can be made on
the following basis:
i.
Depreciation during idling period.
ii.
Financing cost of machine.
iii.
Cost of maintenance.
iv.
Wages thrown away.

PAM 2006

4. Additional financing cost on work delayed by employer.

PART B: JUN 2015

Question 1
e) Explain loss and/or expense
Definition

Recovery of loss and/or expense by the contractor is

equivalent to damages at common law
The term used in PAM and PWD/JKR contract reflects the
various heads of claim which are available at common law

Under clause 24.1, the important point to remember under

this clause is that it is only if the regular progress of
Workshas been or likely to be materially affected
that the contractor can be compensated.
If the regular progress of the works is not materially
affected e.g. because the contractor has time in hand or
has sufficient slack in his programme, the happening of a
relevant event entitles him to no extra.
Further, under clause 24.1, in certain circumstances only
(24.3), the contractor is entitled to extra payment i.e.
direct loss and/or expensefor which he could not be
reimbursed by a payment under any other provision in this
contract.
A claim under clause 24.1 can only arise as a direct
consequences of one of the fourteen (14) specified matters
including defaults by the employer generally (clause 24.3
(g)).
The loss and/or expense must be have been caused
directly by the event relied on.
In Saintline v Richardson, Westgarth & Co (1940),
Atkinson, J. stated that direct damage is that which flows
directly from the breach without intervening cause and
independently of special circumstance while indirect
damages does not so flow.

In conclusion, clause 24 provides an alternative means of

recovery to a claim for damages at common law.
It does not affect the contractors right to common law
claims.
The benefit of claim under clause 24 is that contractor
receives payment through contractual mechanism.

PWD 203A

This provision is under clause 44; Claim for Loss and

Expense. The events for compensation are as stated
under sub-clause 43.1(c),(d),(e),(f),(i).

The new form (PWD 2007) makes the giving of notice

(within 30 days of the occurance of the event) and full
particulars as a condition precedent to an entitlement to
direct loss and expense.

The new form also requires the contractor to submit

particulars of his claim for direct loss and expense which
accords with the practice in the industry.