Delay Damages (Clause 19.4)
If the owner causes a delay in the completion of the building work, the builder may be entitled to delay damages. These damages are intended to compensate the builder for any additional costs incurred due to the delay.
To claim delay damages, the builder must:
- Establish the delay, and identify the cause of the delay as an act, default, or omission of the owner;
- Identify the delay damages, which include the actual increase in cost to the builder to carry out the building works plus the builder’s margin applied to that cost.
Establishing the delay and the cause of the delay can be difficult for the builder. It is essential to keep detailed records of:
- all activities on the construction site
- any changes made to the original plans or specifications
- any delays caused by the owner
- and any actions taken by the builder to mitigate the delay
If the builder can establish the delay and the cause of the delay, the owner will be liable to pay delay damages. This may include additional costs such as materials, labour, equipment, and any other costs directly related to the delay.
It is important for both parties to understand their obligations under clause 19.4.
- Owner’s Responsibility – The owner should take all reasonable steps to avoid causing delays and should promptly respond to any requests for information or approvals from the builder.
- Builder’s Responsibility – The builder should maintain detailed records of all activities on the construction site and promptly notify the owner of any delays or changes to the original plans or specifications.
Clause 19 of the HIA contract is a crucial provision that governs delays in the completion of building work. Both the owner and the builder must understand their obligations under this clause to avoid disputes and ensure that the building project is completed on time and within budget. By following the procedures set out in clause 19, both parties can protect their interests and ensure a successful outcome.
There Are Risks to the Builder Under Clause 19.4
Examples of risks to the builder under clause 19.4:
- Burden of proof: The burden of proving the delay caused by the act, default or omission of the owner rests solely on the Builder. The Builder would need to provide evidence that clearly establishes the delay and the cause of the delay. Failure to provide sufficient evidence may result in the Builder being unable to claim delay damages.
- Difficulty in calculating delay damages: Calculating the delay damages can be challenging as the Builder would need to prove the actual increase in cost to carry out the building works as a result of the delay, which could be difficult to quantify. In addition, the Builder’s margin applied to that cost would also need to be established, which could be a complex exercise.
- Adversely impacting the relationship with the owner: Claiming delay damages may cause tension and strain the relationship between the builder and the owner. The owner may see this as an aggressive move and may react negatively, resulting in a loss of trust and a more difficult working relationship.
- Time and cost involved in legal disputes: If the builder and the owner are unable to reach an agreement on the entitlement to delay damages, the dispute may end up in legal proceedings, which could be time-consuming and expensive.
Overall, while clause 19.4 provides the builder with a remedy for delays caused by the owner, it also poses significant risks and challenges. The builder must carefully consider the costs and benefits of claiming delay damages under this clause, and ensure they have sufficient evidence to support their claim.
There Are Risks to the Owner Under Clause 19.4
Subclause 19.4 states that for every day the subject of an extension of time caused by an act, default or omission of the owner, delay damages are due and payable to the builder. The purpose of this provision is to compensate the builder for the additional costs it incurs as a result of the delay caused by the owner’s act, default, or omission.
The risk to the owner under this subclause is that if the owner is found to be responsible for the delay, the owner will be liable to pay the delay damages to the builder. Delay damages may include the total increase in cost to the builder to carry out the building works, plus the builder’s margin applied to that cost.
In practical terms, this means that if the owner requests a variation to the work or fails to provide the information required by the builder in a timely manner, and this results in a delay to the completion of the project, the owner may be liable to pay delay damages to the builder. This can result in additional costs to the owner and may affect the profitability of the project.
It is therefore important for the owner to ensure that they cooperate with the builder and provide any information required in a timely manner to avoid delays and potential liability for delay damages. The owner should also carefully review any variation requests made by the builder and assess the potential impact on the project timeline and cost before agreeing to them.
How We Can Help
Clause 19.4 of the HIA Contract is a vital provision for both builders and owners to understand. While it provides a remedy for delays caused by the owner, it also poses significant risks and challenges. Builders must establish the delay and cause of the delay, identify the delay damages, and maintain detailed records to support their claims. Owners, on the other hand, must take reasonable steps to avoid causing delays, cooperate with the builder, and carefully review any variation requests before agreeing to them.
As a specialist construction lawyer with over 10 years of experience, I strongly advise both builders and owners to seek legal advice when dealing with disputes related to delay damages under clause 19.4. Legal representation can help protect your interests and ensure a successful outcome.
Don’t hesitate to contact a legal professional to guide you through the complex issues surrounding clause 19.4 and other provisions of the HIA Contract.