EXTENSION OF TIME CLAUSES
Nearly all building and construction contracts and many other types of contracts contain extension of time clauses. How these clauses operate is that for the party carrying out works, according to a set program, if they are going to be delayed they are required to give a notice to the other side.
If that notice is not given then no matter what the cause of the delay they will be in breach if they do not complete their works by the specified date in the contract.
As ridiculous as it sounds we have seen many situations in construction where delays have been caused by a head contractor however the building/sub-contractor has failed to properly serve the correct extension of time notice. This has then lead to them being liable to pay liquidated damages at the rate specified in the contract per day resulting from a delay that was in no way their fault and was in fact the fault of the other side, who they have to pay.
Contracts need to be carefully interpreted to ensure compliance with extension of time clauses as the courts will not consider the unfairness of the above scenario. The courts will only consider the express written wording of the contract and what the contract itself requires.
The courts will only interpret written contracts according to the wording of those contracts and not be referenced to outside or surrounding circumstances including by what the parties may claim they meant by the wording.
This is almost always misunderstood especially by clients who have drafted their own contracts. This rule of interpretation follows the reasoning of the High Court in the case of Codelfa.
Only when there is an inherent ambiguity in the wording used will the courts even hear outside evidence. If the exact wording is clearly capable of being interpreted then that’s what the courts will do.
Bad drafting, often by non lawyers, can lead to catastrophic scenarios.