3 minutes read to understand what is Extension of time (EOT) in construction contract

Q1.What is Extension of Time (EOT) in Construction Contract?

Answer: 

Under the general rule of a construction contract, the contractor is under a strict duty to complete the works on time unless he is prevented or hindered from doing so by the employer. EOT is a relief that may be given to the strictness of the above rule by employer opting to extend the contractor’s time for completion.

Q2. In what circumstances we can apply for EOT in Construction Contract?

Answer: 

Time for completion of a construction contract can only be extended if and only if the contract expressly permits, an employer cannot extend time of completion caused by their own delay for their own benefit unless there is an express provision provided in regard to the same in the contract. Besides that, the contractor on the other hand cannot claim for EOT if the delay is caused by some event which the contract does not expressly provide.

Q3. How does EOT works in Construction Contract?

Answer: 

The employer by extending such time for completion, fixes a new or revised date for completion and in the process preserves the contractor’s obligation to complete the works under the contract by the said revised date. Failure to do so exposes the contractor to claims from the employer for liquidated and ascertained damages (LAD).

Q4. What happen when no EOT granted to set a new completion date following a delay caused by the employer?

Answer: 

Should the employer fail or is unable to extend time for completion for the delay caused by them, the contract time becomes at large, meaning that when there is absent of definite or specific date for completion of the construction contract.

Q5. What is “time at large” in construction contract?

Answer: 

“Time at large” is a common law principle which can be defined as when an original completion date of a contract put “as large” and the contractor just need to complete the works within reasonable time when there is a delay event occurs which attributed to the employer itself and the contract does not allow the completion date to be extended in that event.

Q6. What is the effect of “time at large” to the construction contract?

Answer: 

The consequences of “time at large” are the most undesired situation for the employer as by law the contractor’s obligation is now merely to complete the contract within a “reasonable time” and what is “reasonable time” will be a matter to be determined by the court based on the circumstances of the case and the employer subsequently loses their rights to impose any LAD damages on the contractor. The contractor’s liability is then only for general damages for breach of contract should he fail to complete within the said “reasonable time”.

Q7. What happen when the contractor failed to comply with the notice provision for application of extension of time?

Answer: 

If the construction contract stipulated the condition precedent (i.e. 23.1(a) PAM Contract 2006 (with quantities) and clause 44.,2 of IEM.CE 2011 Form) for the application of EOT where it required notice to the employer, the employer can refuse to extend the time for completion and thereby preserve their rights to liquidated damages when the contractor failed to comply with the notice provision for the application of EOT.

Q8. What constitutes a condition precedent for EOT in Construction Contract?

Answer: 

The contractor shall ascertain whether there are express wordings that stipulates notice requirement is a condition precedent for that contract or a precise time is stated for when the notice is to be served upon the occurrence of the delay under the construction contract, the contract might state that failure to comply with the said condition precedent will render the application fatal.

Q9. What is the effect of omissions on time extension in Construction Contract?

Answer: 

Generally, the abovementioned would be addressed by relevant express provision in the construction contract. (i.e. clause 44.3 of IEM.CE 2011 Form and clause 24.3(d) of CIDB Form). It is common that the contractor administrator is proscribed from reducing the contract period or any previously extended period notwithstanding how many omissions he has issued even if there is a pronounced saving of time.

Q10. What are the consequences when a contractor has failed to complete the works under construction contract by the date for completion and there being no contractual entitlement for him to any further EOT?

Answer: 

It is a repudiatory breach of contract. The Employer basically have two alternatives at their disposal, i.e. accept the contractor’s repudiation of the contract, terminate the contract and pursue a claim for any loss/or expenses that they suffered. Alternatively, they can agree to the breach by affirming the contract and permit the contractor to continue with the same but proceed to claim their entitlements to any loss and/or expenses suffered thereto.

THIS FAQS ARE PREPARED AND PUBLISHED BY MESSRS GAN & ZUL, ADVOCATES & SOLICITORS, KUALA LUMPUR.-CONSTRUCTION & ALTERNATIVE DISPUTE RESOLUTION DIVISION-