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Failure to Anticipate Overrun Proves Costly

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

It is not unusual for construction projects to overrun. The contracts for such projects often contain a series of dates specifying when valuations of work done should take place and the stage payments should be made. Normally, this is done by the contractor issuing an application for payment on the appropriate dates.

When works overrun, it is common for a revised timetable for valuations and stage payments to be agreed, with the final valuation and payment normally being made after the date of practical completion of the project.

In a recent case, a construction project overran and the date of completion of the works specified in the contract was missed. The works continued and the contractor doing the work under the contract issued an application for a further stage payment after the specified date for completion of the works as laid out in the contract.

The contract contained no mechanism to govern this contingency and the developer who commissioned the work did not pay. The matter ended up in court, where the question turned on whether the contractor had any right to make further applications for payment after the date specified in the contract for practical completion had passed until the work was actually completed.

The Technology and Construction Court ruled that the contractor had no such right.

Whilst notice has been given that the contractor intends to appeal against the decision, it highlights the importance of anticipating problems that might arise and making arrangements to deal with them – in this case, a contract variation would have sufficed.

For help with negotiating any variation of contract or with any other property law matter, contact us.

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