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Time Bar and Benefitting from One's Own Wrong- Perspectives from Common Law and Chinese Law

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Time Bar and Benefitting from One's Own Wrong- Perspectives from Common Law and Chinese Law Projects (Engineering and Construction) Time Bar and Benefitting from One's Own Wrong- Perspectives from Common Law and Chinese Law Introduction "it appears that [the Contractor] were disabled by the act of [the Employer] from the performance of that Picture a common scenario. A project is delayed. contract; and there are clear authorities, that if the The Contract provides for the deduction of liquidated party be prevented, by the refusal of the other damages, which the Employer decides to impose. contracting party, from completing the contract within The Contractor argues that the Employer should the time limited, he is not liable in law for the grant an extension of time and should be liable for default ...... The plaintiffs were excused from extra costs. In reply, the Employer relies on the performing the agreement contained in the original Contract which required the Contractor to give notice contract ...... the plaintiff were therefore left at large; within a specific period, failing which the Contractor and consequently they are not to forfeit anything for would be deprived of its entitlement to extra time and the delay " costs. Given that the Contractor had failed to give the requisite notice, the Employer states that the The above decision is consistent with the following Contractor's claim is "time barred". However, this legal concepts in many Common Law jurisdictions: may mean that the Employer profits as a result of its own breach of the Contract. - Prevention principle, ie a party cannot insist upon the performance of a condition where This article compares the judicial attitude in Common that party is the cause of that non- Law jurisdictions as well as in the PRC regarding the performance, or put simply, a person cannot above issue. Practical tips will be given at the end of benefit from his own wrong this article. - Time at large, ie if the prevention principle is successfully engaged, time is "at large", in Benefiting from One's Own Wrong and other which case (1) the contractual completion Related Concepts date ceases to be binding, (2) the works must be completed within a reasonable time Most modern construction contacts contain an (rather than a fixed time) to be determined by extension of time clause. The reason behind these the Court or the Arbitral Tribunal, (3) the provisions may be illustrated by an old English case Employer can no longer claim liquidated known as Holme v Guppy (1838) 3 M & W 387. In damages (given that liquidated damages is a that case, a Contractor undertook to carry out contractual mechanism which depends on carpentry works in the construction of a brewery in the contractual completion date), and (4) the 4.5 months. Liquidated damages would be payable if Employer can claim general damages (ie the works were not completed within that time. The actual damages suffered by the Employer as Contract did not contain any extension of time clause. a result of the delay), which damages will be As it turned out, the Employer caused delay to the assessed by the Court or the Arbitral Tribunal Project (delay in allowing the Contractor to enter the site). The Court decided that the Contractor was not As can be seen above, if time is at large, the liable for any liquidated damages. The Court's completion date of the contract becomes uncertain reasons were as follows: (reasonable time as determined by the Court or Arbitral Tribunal), and the damages receivable by the www.hoganlovells.com "Hogan Lovells" or the "firm" refers to the international legal practice comprising Hogan Lovells International LLP, Hogan Lovells US LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses, each of which is a separate legal entity. Hogan Lovells International LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia. The word "partner" is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing. Rankings and quotes from legal directories and other sources may refer to the former firms of Hogan & Hartson LLP and Lovells LLP. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. New York State Notice: Attorney Advertising. © Hogan Lovells 2011. All rights reserved. Employer becomes uncertain (general damages to Walter Construction Group Ltd (1999) BCL 449 be assessed, rather than liquidated damages). supported such view. However, Courts in other jurisdictions such as England, South Africa and Hong In order to reduce the uncertainty, most modern Kong did not support such view (see for example the construction contracts would include delays caused comments in the decision by the English Court in Multiplex Construction (UK) Ltd v Honeywell Control by the Employer as a ground for extension of time. System (No. 2) [2007] BLR 195). For example, Clause 8.4 of the FIDIC Contract provided that if there is " any delay, impediment or Generally Chinese Courts recognise and would be prevention caused by or attributable to the Employer, prepared to enforce time bar clauses. An example of the Employer's Personnel, or the Employer's other which can be found in the following case: contractors on the Site ", an extension of time may be granted. Henan Luozhoujie Highway Limited Company v Time Bar Beijing Urban Construction No. 2 Construction Engineering Limited Company As construction contracts become more (Case No. [2008] Yu Fa Min Yi Zhong Zi No. 19) sophisticated, the trend is to impose time bar clauses against the Contractor whereby the Contractor is (in Chinese: 河南省漯周界高速公路有限责任公司与北 required to give notice of any relevant delay. The 京市市政二建设工程有限责任公司建设工程合同纠纷 notice may operate as a condition precedent, ie if the Contractor fails to give the requisite notice, the 案，[2008] 豫法民一终字第 19 号) Contractor would be deprived of its entitlement to any extension of time and/or costs. In March 2001 the Employer and the Contractor entered into a contract for the construction of a For example, Clause 20.1 of the FIDIC Contract highway. The Contract provided that the Contractor provided that the Contractor should give notice not should submit its claims to the Employer within 21 later than 28 days " after the Contractor became days from the date of the incident, failing which the aware, or should become aware " of an event or Contractor would not be entitled to payment of the circumstance resulting in delays. If the Contractor claim. In the course of the works, the Contractor fails to do so, " the Time for Completion shall not be incurred additional costs due to variation ordered by extended, the Contractor shall not be entitled to the Employer resulting in additional work. However, additional payment, and the Employer shall be the Contractor did not submit its claims within the discharged from all liability in connection with the requisite 21 days period, and submitted its claims claim ". after completion of the project. The Higher People's Court of the Henan Province However, there are learned authors who took the held that the contract provisions were valid and view that where the event or circumstance resulting binding on the parties. Given that the Contractor in delays was caused by the Employer (eg failure by failed to submit the claims within the requisite 21 the Employer to give possession of the site, the days, the Court held that the Contractor did not meet imposition of change in the works, failure by the the procedural requirements provided by the Employer or its representatives to give instructions), Contract. The Court also found that the Contractor there are conceptual difficulties to allow the Employer failed to keep the original claim materials or copy the to "benefit from his own wrong" by imposing same to the Employer as required under the Contract, liquidated damages against the Contractor, even if and thus substantially failed to give further evidence the Contractor failed to give the requisite notice. to support its claims. Accordingly the Court Cases decided by Common Law Courts such as the dismissed the Contractor's claims for payment. Australian case of Gaymark Investments Pty Ltd v As can be seen in the case above, although the Practical Tips delay was caused by the Employer (who gave variation orders resulting in additional work), the Whether you are operating within the PRC or other Court nevertheless enforced the time bar clause Common Law jurisdictions, it would be prudent to against the Contractor. ensure that all contractual provisions are complied with. Thus if you are a Contractor, you should However, in the case below, while the delay was also ensure that all time bar requirements have been caused by the Employer, the Court did not enforce complied with. You may need to incur time to read the time bar clause against the Contractor. and understand the Contract, and to undertake measures to ensure that deadlines are not missed. Puyang Highway Administration Bureau Nonetheless, depending on the wordings of the v Contract, relatively short and simple notice of claims China Xinxing Construction and Development can be prepared without incurring too much time and Company costs. The Contract may only require you to describe the event or circumstance, without the need (Case No. [2008] Yu Fa Min Yi Zhong Zi No. 151) to give details of the amount of the claim. There is no need to give a notice of claims in a hostile manner.
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