International Construction Law Review

Chantal-Aimée Doerries KC; Professor Douglas Jones AO

International Construction Law Review

Document

THE DOCTRINE OF PREVENTION AND THE DOCTRINE OF PENALTIES: UNIFORMITY AND FREEDOM OF CONTRACT1

Trevor Thomas

Partner, Corrs Chambers Westgarth

1. INTRODUCTION

The doctrine of prevention (or the prevention principle) stands for the proposition that a party “cannot insist on a condition if it is his own fault that the condition has not been fulfilled”.2

In a construction context, the doctrine of prevention most commonly arises where there is a fixed time obligation (typically for the completion of the works). For example, in Holme v Guppy it was held that, if a party engaged to perform under a contract “be prevented, by the refusal of the other party, from completing the contract within the time stipulated, he is not liable in law for the default”.3

Typically, the ultimate effect of this doctrine is to render the liquidated damages regime unenforceable due to the fixed time obligation being put “at large”; as was discussed extensively in Peak v McKinney.4

The doctrine of penalties aims to protect the legal objective that damages are intended to be compensatory rather than punitive. It looks to whether the remedy for the non-observance of a contractual stipulation is “in the nature of a punishment”.5

In a construction context, the doctrine of penalties also most commonly arises in the context of liquidated damages, as discussed in the seminal case of Dunlop v New Garage.6

Here too, where the doctrine applies and liquidated damages are held to place the payee in terrorem, the ultimate effect will be the same – the liquidated damages regime will be unenforceable and the principal will need to rely on a common law claim for damages for delay.

1 This paper was awarded a “Commendation” for the Brooking Prize 2022, presented by the Society of Construction Law (Australia).

2 As noted 70 years ago by Denning LJ in Amalgamated Building Contractors Ltd v Waltham Holy Cross Urban District Council (CA) [1952] 2 All ER 452, 455.

3 Holme v Guppy (Ex) (1838) 3 M & W 387, 389 (Parke B).

4 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (CA) [1976] 1 BLR 111.

5 Legione v Hateley (HCA) [1983] HCA 11; (1983) 57 ALJR 292; (1983) 152 CLR 406 (“Legione”).

6 Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (HL) [1915] AC 79 (“Dunlop”).

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