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Contractual Schedule Benchmarks are a Double-Edged Sword

A contractor and a subcontractor attach a schedule to a contract, a schedule with fancy details (probably a Gantt chart) and done on Primavera or other professional management software. The schedule lays out the critical path and every major activity and the date by which each activity needs to be performed. The Subcontractor does not meet one of those dates and the Contractor withholds money for delay damages, viewing the whole mess as a straightforward failure by the Subcontractor. Not so fast, Contractor, there is more to it than that and, in fact, the Contractor might be facing a bigger claim against it for its own breaches of contract or other entitlement that exists for the Subcontractor. This is what occurred in Hendriks Construction Ltd. v. Jackie, 2015 ABQB 782, in which a design build, fixed price contract contained a scheduled completion date of forty weeks from all approvals being received. Construction commenced prior to approvals having been actually issued by the city authority and continued for over 40 weeks until completion, however only 35 weeks had elapsed since the approvals had been received. The Owner claimed a delay set off against the design-builder as a result of the delay. The Owner was denied a set-off for delay, as the contract was clear that the schedule was based off a specific benchmark; it did not matter that construction commenced early, rather what mattered was the contractually agreed event from which the schedule began to tick. The take-away for contract schedules from this case is that a contractual schedule benchmark will be enforced, regardless of when construction commences. In addition to Hendriks, below are some further items to note when drafting a schedule to be inserted in the contract:

  • If a scheduled event has been agreed in the original contract, it cannot then be unilaterally adjusted without consequences that give rise to an entitlement to the other party for relief;

  • A delay by one party on their own obligations is, in itself a breach of contract, giving rise to exposure for the resulting damages, such as lost productivity and additional costs, to the other party;

  • The baseline schedule in a contract is key in determining a schedule delay claim – identification of each event, its cause and its result is necessary to determine the contractual entitlement for damages to each party.

Clear documentation of delay events, their cause, meeting contractual notice obligations and clear drafting on each party’s respective schedule risks is essential to addressing a schedule delay claim. We would be pleased to discuss how these issues can be addressed at the time of contract formation and over the course of the project to help prevent substantial revenue loss and costly project distractions. Please contact Corey Sandquist at directly.

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