Recently there have been some interesting developments in English construction law cases relating to matters linked to the completion obligations of a contractor. These cases illustrate some of the challenges contractors face in relation to matters concerning the completion of their obligations and related exposure to liquidated or delay damages for failing to complete on time. English law, particularly in the international construction industry, often informs the laws of other legal jurisdictions, both common and civil law, or is adopted as guidance.

Different contracts adopt different terminology, but most construction contracts require the majority of works to be completed under the contract by a specified date. Failure of a contractor to do so may make it liable to pay liquidated damages, which are known as ‘delay damages’ in Fédération Internationale Des Ingénieurs-Conseils (FIDIC) contracts, to the employer, unless the risk allocation under the contract entitles the contractor to relief by way of an extension of time for completion, possibly coupled with additional payment.

However, what happens when a contractor is in so much delay that the employer terminates the contract and claims liquidated damages in compensation?

In Triple Point Technology Inc v. PTT Public Co Ltd, the Court of Appeal noted that there are three approaches to dealing with liquidated damages where the contractor fails to complete the works and a replacement contractor is appointed to complete them: (i) liquidated damages do not apply; (ii) liquidated damages apply up to the date of termination of the contractor; and (iii) liquidated damages apply until completion of the works by the replacement contractor.

Jul-Sep 2019 issue

King & Spalding LLP