EOT and Causation

In relation to EOT, proof of causation is a fundamental requirement. As the link between a Relevant Event and delay to completion, it brings with it relief from liquidated damages. And on construction projects of any size this can make the difference between financial success and failure.

This post looks at some of the necessary ingredients for proving causation.

Consider for example, a 2-day variation instructed 1 day before the contract completion date. Is the Contractor entitled to 1 day EOT, regardless of what other events may have been delaying the Works, or whether the variation had any impact on actual progress? Is entitlement established by simply focusing on the event itself and how it relates to the contract completion date?

These questions were considered by the English Commercial Court in the case of Adyard Abu Dhabi v SDS Marine Services [2011]. The case itself revolved around whether the Buyer could rescind 2 shipbuilding contracts and reclaim sums it had paid to the Shipbuilder. The Shipbuilder in turn argued that the Buyer could not rescind as it had caused delays to the project.

The basis of the Shipbuilder’s EOT claim was, in essence, the same as that suggested above in the 2-day variation example. Its case was that causation could be proven by narrowly looking at the timing of the Relevant Event and its relationship to the contract completion date. As such, relative progress of any other works necessary to complete the project could be ignored.

The Court however rejected this approach, pointedly describing it as wrong as a matter of principle, authority and common sense. In its view, notional or theoretical delay would not suffice – causation in fact had to be proven.

In reaching its decision, the Court set out an example of the extreme consequences of such an approach. The basic facts of that scenario were:-

The Contractor was many months in delay due to its own fault.

Then, 1 week before the original completion date, the Employer varied the paint colour of a wall.

At the time of the variation, because of Contractor delays, the wall had not even been built.

The new paint took 5 weeks to procure, but still arrived before the wall was built and ready to be painted.

Now according to the Shipbuilder’s case, in such circumstances the Contractor would be due 4 weeks EOT. This being calculated by adding 5 weeks to the date on which the variation was instructed and comparing the impacted completion date with the original contract completion date.

The Court, siding with the Buyer, intimated that in line with common sense and what is fair and reasonable, where the employer’s actions had not actually delayed progress by a single day, EOT would be nil. In effect the paint variation was not on the contemporaneous critical path.

This case therefore reinforces some basic requirements for demonstrating causation in relation to EOT claims:-

The analysis should be comprehensive and consider all prerequisites to completion. As such it should include all programmed activities and not be restricted to just those directly related to a specific event.