Based on the currently sparse, legal literature and arbitration practice regarding concurrent delays (parallel delays), the current understanding implies that a concurrent delay entitles the employer as well as the contractor to an extension of time as both parties are responsible for a delay. However, due to the concurrent delay, it rejects the employer’s as well as the contractor’s potential claims in relation to the delay costs against the other party.
Thus, this gives rise to more considerations in relation to the contractor’s entitlement to acceleration cost in case of delays caused by the employer’s as well as the contractor’s circumstances.
Acceleration prevents a delay of the construction, thus extended construction time and its costs. Thus, the prevention of the delay means that the contractor will not be able to claim an extension of time and delay costs and that the employer will not be able to claim delay penalties as the construction project is handed over on time. However, the contractor will be able to claim the acceleration costs paid by the employer if the conditions for acceleration claims have been met.
As delays attributable to the contractor’s as well as the employer’s circumstances, according to the above, generally mean that the contractor can claim time, but not money, more considerations arise in relation to the contractor’s claim for costs due to acceleration caused by delays attributable to the contractor’s as well as the employer’s circumstances.
The considerations can be divided into the following three scenarios:
- The contractor’s acceleration costs cannot be claimed paid by the employer as the parties are only granted time and not the associated costs in case of concurrent delays.
- The employer must fully pay for the contractor’s acceleration as the contractor prevents the delay because of the acceleration, thus an extended construction time and its costs.
- The employer must pay for the contractor’s acceleration less the parties’ estimated costs in case of an alternative, extended construction time which did not prove relevant because of the contractor’s acceleration. The following example will explain this.
During construction, delays have occurred that are attributable to the employer’s as well as the contractor’s circumstances. It is therefore a matter of concurrent delays. The contractor therefore accelerates. The contractor’s acceleration costs amount to DKK 50,000. If the contractor had not accelerated, it is estimated that the contractor’s costs for an extended construction time would have amounted to DKK 15,000. The contractor’s costs for an extended construction time are also estimated to amount to DKK 15,000. Thus, the contractor’s acceleration costs are deducted from the parties’ estimated costs in case of an extended construction time, and the contractor will then receive DKK 20,000 in acceleration costs (DKK 50,000 – DKK 15,000 – DKK 15,000).
Concurrent delays in arbitration practice
TBB 2018.649
Summary
Introduction
The case was about a non-profit housing society for which 40 attic flats were to be built in an existing housing block. Following the completion of a call for tenders, the employer and the contractor concluded a main contract on 10 February 2012.
Construction was initiated on 10 April 2012 and was handed over on 30 August 2013. According to the time schedule, construction was supposed to be finished on 31 May 2013, and the delay therefore was 65 days or 13 weeks.
The parties agreed that the delay added up to 13 weeks. However, the parties disagreed on whom was responsible for the delay having occurred and, in those regards, whether the contractor was entitled to an extension of time and financial compensation or whether the employer was entitled to daily penalties.
The claims
The contractor claimed an extension of time for all 13 weeks and furthermore claimed compensation according to section 27, subs. 1, no. 2 of AB 92 referring to the fact that the delay was attributable to the employer’s circumstances.
On the other side, the employer claimed daily penalties for the entire period of delay and thus believed that the delay was to be attributed to the contractor’s circumstances.
The delays in brief
The 13-week delay can be divided into three main causes:
- The start-up phase – the design of longitudinal steel beams
- Lack of clarification regarding the selection of materials for kitchens and floors
- Other circumstances
The delays due to main causes 1 and 2 involved situations where both the contractor and the employer were responsible for part of the delay, and it was therefore a matter of parallel delays. The delay due to the third main cause was only attributable to the parties individually.
Adjustment in terms of time
Of the 13 weeks, the contractor was granted a total extension of time for 11 weeks while the employer was entitled to daily penalties for the remaining 2 weeks.
Two weeks of the total extension of time for 11 weeks granted to the contractor by the arbitration tribunal also involved delaying conditions caused by the contractor’s circumstances. Thus, the contractor was granted time for the parallel delay.
The financial adjustment
Contractors generally are entitled to compensation if a delay is due to the employer’s circumstances and if the employer is guilty of any errors or neglect, see section 27, subs. 1, no. 1 of AB 92. The arbitration tribunal found that this was the case for the 11 weeks for which the arbitration tribunal had granted the contractor an extension of time. However, the arbitration tribunal noted that for 2 out of the 11 weeks, there were also delaying conditions attributable to the contractor’s circumstances (thus parallel delay).
The contractor was therefore only entitled to compensation according to section 27, subs. 1, no. 1 of AB 92 in respect of delay which was not also due to the contractor’s own circumstances. The contractor was therefore only entitled to payment due to a 9-week extension of time.
The contractor’s claim was DKK 2,184,875 exclusive of VAT for a number of circumstances linked to the delay of the construction. As the contractor had not presented further documentation for all expenses, the arbitration tribunal assessed the contractor’s claim regarding an extended construction time at a total of DKK 900,000.00 exclusive of VAT based on an estimate. Thus, approx. 41 % of the contractor’s claimed expenses were sustained.
The fact that there were delaying circumstances attributable to the employer as well as the contractor (parallel delay) for two out of the 11 weeks did not result in the employer being able to extend its claim for daily penalties with another 2 weeks.
The employer’s claim for daily penalties was DKK 6,761,043.00 exclusive of VAT corresponding to 65 days of daily penalties. The parties agreed that the daily penalties amounted to 104,016.00 exclusive of VAT per day. Thus, the arbitration tribunal assessed the employer’s claim for daily penalties as follows: 10 days (corresponding to 2 weeks out of the total of 13 weeks with which the construction was delayed) of DKK 104,016.00 exclusive of VAT, thus DKK 1,040,160.00 exclusive of VAT. Thus, approx. 15 of the employer’s claim was sustained.
Assessment
The essential part of the ruling is that the arbitration tribunal found that delay due to concurrent causes (parallel delay) does not affect the contractor’s entitlement to an extension of time but is of importance to the financial unsettled matter between the parties as none of the parties can advance financial claims for the same part of the delay.
For the period in which there were parallel delay causes, time was granted to the contractor, but no money was granted to the employer or the contractor as on the one hand, the employer was prevented from claiming daily penalties and on the other hand, the contractor was prevented from claiming compensation/indemnity according to section 27 of AB 92.
As the arbitration tribunal grants the contractor time but money to any of the parties for the part of the delays for which both parties are responsible, the arbitration tribunal’s reason for its decision must be considered an application of the Malmaison doctrine, see paragraph 4.1.2.
The Malmaison doctrine must be said to bring much predictability. When the parties consider whether to take legal action in connection with a dispute resolution, the doctrine seems appropriate as predictability is a significant factor. Whether we can expect the Malmaison doctrine to be just as acknowledged in Danish law as in English law is uncertain, but the TBB 2018.649 ruling prepares the way for the principles of the doctrine in Danish law.
Concurrent delays in relation to acceleration costs
Based on the currently sparse, legal literature and arbitration practice regarding concurrent delays (parallel delays), the current understanding implies that a concurrent delay entitles the employer as well as the contractor to an extension of time as both parties are responsible for a delay. However, due to the concurrent delay, it rejects the employer’s as well as the contractor’s potential claims in relation to the delay costs against the other party.
Thus, this gives rise to more considerations in relation to the contractor’s entitlement to acceleration cost in case of delays caused by the employer’s as well as the contractor’s circumstances.
Acceleration prevents a delay of the construction, thus extended construction time and its costs. Thus, the prevention of the delay means that the contractor will not be able to claim an extension of time and delay costs and that the employer will not be able to claim delay penalties as the construction project is handed over on time. However, the contractor will be able to claim the acceleration costs paid by the employer if the conditions for acceleration claims have been met.
As delays attributable to the contractor’s as well as the employer’s circumstances, according to the above, generally mean that the contractor can claim time, but not money, more considerations arise in relation to the contractor’s claim for costs due to acceleration caused by delays attributable to the contractor’s as well as the employer’s circumstances.
The considerations can be divided into the following three scenarios:
The contractor’s acceleration costs cannot be claimed paid by the employer as the parties are only granted time and not the associated costs in case of concurrent delays.
- The employer must fully pay for the contractor’s acceleration as the contractor prevents the delay because of the acceleration, thus an extended construction time and its costs.
- The employer must pay for the contractor’s acceleration less the parties’ estimated costs in case of an alternative, extended construction time which did not prove relevant because of the contractor’s acceleration. The following example will explain this.
During construction, delays have occurred that are attributable to the employer’s as well as the contractor’s circumstances. It is therefore a matter of concurrent delays. The contractor therefore accelerates. The contractor’s acceleration costs amount to DKK 50,000. If the contractor had not accelerated, it is estimated that the contractor’s costs for an extended construction time would have amounted to DKK 15,000. The contractor’s costs for an extended construction time are also estimated to amount to DKK 15,000. Thus, the contractor’s acceleration costs are deducted from the parties’ estimated costs in case of an extended construction time, and the contractor will then receive DKK 20,000 in acceleration costs (DKK 50,000 – DKK 15,000 – DKK 15,000).