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Fouled by your own side
If you hire somebody to do something, then prevent
them doing it, then you can’t sue them for breach of contract.
Let’s see how this fundamental rule applies to Wembley
“The new signboard up in the stand flashes
‘time at large’ and ‘liquidated damages dumped’, with a smiley
face bobbing up and down in the corner”
‘The promisee cannot insist upon performance
if he prevents the promisor performing.” That’s called the
“prevention principle”. It sounds like “Peter Piper picked a
peck of pickled peppers”.
So, let me ask you: have you heard of the
prevention principle? If you’re involved in Wembley stadium
you’ll have heard it. Multiplex has. So has Honeywell Controls.
Let me also ask, have you heard of “time at large”? Yes, of
course. And have you heard of liquidated damages, extensions of
time? Yes, of course. The latest judgment regarding our
world-class sports stadium discusses all these legal notions.
The judgment is a jolly good read.
Honeywell happily won a £13.5m subcontract
with Multiplex for the design of communication and controls at
the stadium. The promise was to start on 5 April 2004 and finish
by 31 May 2005. Now, those dates are a two-way deal. It’s all
very well to point a finger if Honeywell shows up late, but
what’s the score if Multiplex tells Honeywell it can’t start on
5 April? That’s an act of prevention.
The same goes if Multiplex prevents Honeywell
from finishing on 31 May, or instructs or directs it not to. The
signboard up in the stand flashes “time at large” and
“liquidated damages dumped”, with a smiley face bobbing up and
down in the corner.
If you’ve been hanging around our industry
for the past 170 years, you might have been involved in building
a brewery in Liverpool. Mr Holme was the builder, Mr Guppy the
brewer and the job was worth £1,700. It was a lot of money,
then. The start date was 15 April 1836, and the completion date
was 31 August. Liquidated damages were £40 per week. Snag was,
the brewer couldn’t give possession on 15 April; it was four
weeks later. Then, the builder made a start and was lumbered by
its own problems and more of the employer’s; the first
Liverpudlian pints of bitter were ages late. The employer
deducted liquidated damages, but not of course for those first
four weeks. Dear me, none of this will do, said the court in
Liverpool. Why not? Because the brewer disabled the builder from
making a start – an act of prevention – so the brewer forfeited
the £40 per week damages rule. Do you see why?
In another contract a few years later, a
builder called Mr Dodds agreed with a client called Mr Churton
that he would complete his work on a certain date. He even
agreed to carry out additional works if instructed by the
architect. The architect did instruct and the builder did the
extras. The job ran late for a mixture of causes, but the
employer, when asking for extras, occasioned an act of
prevention and forfeited a claim for liquidated damages,
irrespective of the builder’s culpability. Like the brewery job,
this building contract had no “extension of time” device to deal
with an employer’s act of prevention. That’s when and why
contracts incorporate “extension of time” clauses. To avoid the
“prevention principle” the extension of time clause protects the
employer and preserves its right to liquidated damages.
Come back to Liverpool. It is now 1970. Peak
Construction contracted with the Liverpool Corporation for a
block of flats. The contract document was one of the most
one-sided, obscurely and ineptly drafted in British history. It
contained liquidated damages and an extension of time clause,
but an act of prevention occurred at the hands of the employer
that was not in the list of reasons for extension of time. So
the smiley popped up and down in the builder’s camp. The
liquidated damages fell away.
Wembley was in the news in 1973 when the
hospital near the stadium was in dispute. Lord Denning said: “If
one party, by its conduct renders it impossible or impracticable
for the other party to do its work in the stipulated time, then
the one whose conduct caused the trouble can no longer insist on
strict adherence to the time stated. He cannot claim any
penalties or liquidated damages for non-completion in that
time.”
On the Honeywell contract there were acts of
prevention but they did not make time at large because the
contract contained an extension of time clause with respect to
those events. But a point needs a mention: what’s the score if
there is no extension of time that covers an act of prevention?
Yes, time becomes at large. So what? It means the works are to
be performed in a “reasonable time”. How much time is a question
of fact, and if the performance is not within a reasonable time,
then damages are payable. How much? It will be a sum foreseeable
had you thought about it at the outset. Vague, opaque? Not
really. But that smiley isn’t jumping up and down and smiling as
much as it was.
Readers are invited to forward recent
judgments for reporting in this column (with full
acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple,
London EC4Y 7EU. DX: 37164 Biggleswade
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