Job completion deadlines are being blown out by material shortages, so what should you do if you can’t finish on time? Martelli McKegg Associate Kiren Narayan goes over the possibilities
I can’t get any supplies! Said every landscaper in New Zealand at some point over the past two years. The restrictions over the past 24 months have had a significant impact on anyone involved in the landscape industry.
Procuring materials has been a struggle for all – and because supply is not able to meet demand, you just have to wait until you’re next in line and can get what you need.
This has had a significant impact on those who have made commitments to get work done by a certain time, and sometimes those people’s customers can be less than understanding of the plight faced by those facing the supply issues.
So, what can you do to make sure you’re not stung by any penalties for completing late?
Check your contract – extensions of time
If you have committed to carrying out work for a customer and it is quickly becoming apparent that you’re not going to be able to complete the job on time, your first port of call is to check the relevant provisions in your contract regarding the completion of the project.
Check your completion date. Do you think you’ll make it? If not, you’ll need to look at how your contract deals with extensions of time for the completion date.
Each contract deals with delays differently. The first thing to look for is what delays are covered by your contract – some are very wide-ranging and include anything that’s beyond your control, while others are slightly more narrow, and set out a list of specific delays. Check the contract to see whether there are any parts that talk about how you can handle delays.
For example, does the contract state that where there is a delay caused by a “force majeure” event (an event beyond your control) that the completion date can be extended? Or even better, if the contract specifically discusses materials shortages, it will tell you what the consequences are.
If the cause of the delay is covered by your contract, the next thing to look out for is the process you need to ensure that the completion date is extended by the necessary amount. Some contracts allow for an automatic extension of time where the listed delay events have occurred. Others may require you to submit a notice. If a notice is required, ensure you submit your claim for an extension of time within any time limits set out in the contract.
Some forms of contract require those extensions of time to be approved by an independent party. If this is the case, ensure those requests for an extension of time are submitted to that independent party within any contractual time limits.
Variations
Extensions of time are the envisaged way to deal with delays to a project. If, however, there is nothing in your contract which deals with them, you may wish to turn to variations.
Have a look at the variations clause in your contract to see whether it caters for variations of the contract in circumstances where ‘something occurs that is beyond your control that may affect the performance of the contract, or a variation for the period for completion’. While this is not the correct way to deal with extensions of time, some less commonly used contracts rely on variations clauses for all changes to the contract.
That is, sometimes the contract talks about the consequences of events beyond your control in the variations section of the contract.
Similarly, if the clause does allow you to vary the completion date, check to see whether you are required to submit any notices for this. If so, make sure to check whether there are any time limits for doing so and whether there is any particular process for doing this.
Potential consequences
It is important to follow the steps above to avoid any negative consequences of not meeting a completion date. If a completion date is not met, this is a breach of contract and the customer can seek to recover any losses resulting from the delay.
In some contracts, there is a provision for what is called “liquidated damages”, which is an agreed, usually daily sum of money which is an estimate of the loss that would be incurred by a delay. If the contract provides for these, the liquidated damages will accrue until the date the project is completed.
Alternatively, if there is no provision discussing delays, the damage will be calculated in terms of any actual financial damage suffered and proved to be suffered by the client.
For delays which are not of your making, this is clearly not ideal and, for that reason, it is important to follow any contractual processes to extend the completion date. Also, to avoid this situation in the future, make sure future contracts include how to deal with delays.
Kiren Narayan is an Associate in the litigation team at Martelli McKegg. She deals with disputes of all sorts and has extensive experience with commercial and construction litigation as well as estate litigation.
Her phone number is 09 300 7632 and her email is Kiren.narayan@martellimckegg.co.nz. This article is not intended to be relied upon as legal advice.