Delay, disruption and time extensions

Time is money in construction, for everyone. An owner whose building opens late loses rent or revenue and pays more interest. A contractor whose job runs long pays for supervision, site facilities, equipment and head office support for months it never priced, and may face liquidated damages. Subcontractors lose productivity when they cannot work in sequence. Delay claims are the largest and most complex construction claims, and they turn on the contract's time provisions, on notices given during the work and on the quality of the schedule. This lesson covers the legal framework: who bears delay, how time extensions are earned, liquidated damages, concurrent delay, acceleration and disruption. CON-210 covered schedule analysis; CON-420 covers delay claims in depth.

Types of delay

The law classifies delays by who is responsible and what remedy follows.

• Excusable and compensable delay: caused by the owner or those it is responsible for, such as late drawings, late access, owner changes or suspension. The contractor gets more time and its delay costs.
• Excusable but non-compensable delay: caused by events beyond either party's control, such as unusually severe weather, strikes not involving the contractor, or fire. The contractor gets more time but not money, and the owner cannot charge liquidated damages for that period.
• Non-excusable delay: caused by the contractor or those it is responsible for, such as its subcontractors and suppliers. No time and no money; the contractor may owe liquidated or actual damages.

Only delays that affect the completion date, typically delays to activities on the critical path, entitle a contractor to a time extension. A delay to an activity with float may cost money through disruption but does not usually extend the contract time. This is why a good schedule, updated regularly, is the most important evidence in any delay dispute.

Contract provisions on delay

Under CCDC 2-2020 GC 6.5, if the contractor is delayed by an act or omission of the owner, the consultant or anyone employed by them, or by a stop work order from a court or public authority not caused by the contractor, the contract time is extended and the contractor is reimbursed its reasonable costs. If it is delayed by labour disputes, strikes, lock-outs, fire, unusual delay by common carriers or unavoidable casualties, or by causes beyond its control other than those, the time is extended but costs are not paid. The contractor must give notice of the delay within the period stated, and claims follow the GC 6.6 procedure. Supplementary conditions often add weather definitions and reduce the owner's liability for delay costs.

Written notice: the condition that decides most delay claims

Nearly every contract requires written notice of a delay within a short period after the contractor becomes aware of it, followed by particulars and a claim. Courts have increasingly treated these notice requirements as conditions precedent: if notice is not given in time and in the required form, the claim fails, however meritorious.

Canadian courts generally enforce clear notice provisions. In several appellate decisions, contractors lost large delay claims because they did not give written notice within the contract's time, even though the owner knew about the delay from meeting minutes and correspondence. Courts sometimes accept that informal correspondence satisfied the clause if it contained the required information, or that an owner waived strict compliance, but these are fragile arguments. The safe course is formal written notice, in the form the contract requires, every time.

Liquidated damages

Liquidated damages are a fixed sum per day or week, stated in the contract, that the contractor pays the owner for each day of non-excusable delay after the completion date. They spare the owner from proving its actual losses and give the contractor a known exposure. They also usually operate as the owner's exclusive remedy for delay.

Canadian courts enforce liquidated damages if they were a genuine pre-estimate of the owner's likely loss when the contract was made; a sum that is extravagant and unconscionable compared with any possible loss may be struck down as a penalty, leaving the owner to prove its actual damages. Courts are reluctant to intervene between sophisticated commercial parties.

Liquidated damages cannot be charged for excusable delay, and an owner who causes delay may lose the right to them. If the owner's delay makes the completion date impossible and no time extension mechanism applies, the contractor may argue that time is at large, meaning the contractor must complete within a reasonable time and liquidated damages fall away. Extension clauses exist partly to prevent this result.

Concurrent delay

Concurrent delay occurs when two or more delays, one the owner's responsibility and one the contractor's, affect the critical path at the same time. Neither party can show that it alone caused the overall delay.

Canadian law is unsettled. Many contracts now address concurrency expressly. Without a clause, courts have used different approaches: granting the contractor time but no money for the concurrent period, so that neither side recovers delay damages from the other; apportioning responsibility between the parties; or requiring the claimant to separate the delays it caused from those it did not, failing which its claim may fail. Expert schedule analysis is almost always required.

Acceleration and disruption

When a project falls behind, someone pays to catch up. Directed acceleration occurs when the owner orders the contractor to finish earlier than the contract requires, or to recover delay the owner caused; it is a change and is compensable. Constructive acceleration occurs when the contractor is entitled to an extension, asks for it, is refused, and is required to meet the original date, so it accelerates at its own cost to avoid liquidated damages. Courts recognize constructive acceleration claims where the contractor gave notice of the excusable delay, requested an extension, was refused and actually incurred acceleration costs.

Disruption is a loss of productivity, rather than a delay to completion: crews work out of sequence, trades stack in the same area, work is interrupted and restarted. Disruption is compensable when caused by the owner, but it is hard to prove. The preferred method is the measured mile: comparing productivity in an unaffected period or area with productivity in the disrupted period, on similar work, using the contractor's own records.

Head office overhead

Contractors also claim unabsorbed head office overhead for owner-caused delay: costs of the head office that would have been recovered from this project's revenue during the delay period. Several formulas exist. The Eichleay formula, developed by the US Armed Services Board of Contract Appeals in 1960 and used in federal contracting when the contractor was on standby and could not take other work, allocates overhead by the ratio of contract billings to total billings and divides by the days of performance.

Canadian courts have accepted head office overhead claims using formulas such as Hudson, Emden and Eichleay, but they generally require proof that the contractor actually suffered the loss, for example because it could not take on other work during the delay.