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CHAPTER 8 Delay

Offshore Construction Law and Practice


Page 164

CHAPTER 8

Delay

A The obligation to complete on time

(i) Introduction

8.1 It is conventional in a typical EPIC contract based on lump sum turnkey terms that the Contractor should commit to completion of the work and delivery of the facility to the Company, by a specified date, either ‘ex works’ or at the intended location of operations. If the Contractor fails to achieve successful completion of tests and other conditions of acceptance by that date, the Contractor is in breach. The consequence of such breach is usually the obligation to pay liquidated damages for each day of delay, as we explain in paragraph 8.11 onwards. Therefore, identifying that date with precision is essential. Initially it may be a fixed date, albeit subject to adjustment to take account of subsequent events. Naturally, identifying the new date with precision is equally essential, but often difficult. The new date is usually calculated by adding what may be described as a period of ‘permissible delay’ or an extension of time, to the previous date. Disputes over what this extension should be are routine and often problematic. This is explained in more detail in Chapter 6. If the delay is caused by events for which the Company is responsible, the Contractor may seek not just an extension of time (in essence, an exclusion of its liability to compensate the Company for delay) but also to recover additional costs the Contractor might have incurred as a consequence of Company-caused delay. We explain this in more detail in Section C. In Appendix B, we discuss Project Controls activities during the execution of a project and how these can affect claims for delay, prolongation and additional costs.

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