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• Delay What Delay?

Introduction

An important decision was made by the Court of Appeal in the case of Shawton Engineering Ltd v DGP International Limited. The case concerned a sub-contract for design work concerning the construction of a process plant at Sellafield. The central issue to be determined by the Court concerned the circumstances in which one party to a contract may lawfully terminate the contract for delayed performance by the other party where that party's contractual obligation is to complete the work within a reasonable time and not by a fixed completion date.

In this case Shawton employed DGP as sub-contractor to carry out design works and during the course of those works Shawton varied the scope of the works. As there was no extension of time mechanism in the sub-contract, the agreed completion date ceased to be relevant and the obligation upon DGP was to complete the works within a reasonable time.

Shawton then wrote to DGP in November 2000 purporting to make time of the essence. When DGP had still not finished the design works by March 2001, Shawton terminated the sub-contract.

The Court of Appeal made a number of findings as follows :-

• Shawton had contributed to the agreed completion date being missed by instructing a variation. As there was no extension of time clause this meant DGB's only obligation was to complete within a reasonable time.
• Because Shawton, throughout most of the year 2000 were not insisting on any time for completion, the time for completion was undefined until Shawton took steps to better define the time for completion by its letter of November 2000.
• DGP were not in delay when Shawton wrote in November 2000 demanding that they complete by March 2001. As DGP were not in delay Shawton were not able to give notice making time of the essence in November.
• In November 2000 a reasonable time for completion was to be assessed afresh by reference to the outstanding work at that time including any variations instructed.
• The November 2000 letter was not a notice capable of making time of the essence because it did not clearly articulate an intention to determine the contract if the date given in the letter was not met.
• A subsequent agreement between the parties that DGP would try to complete by the end of March did not give rise to a new completion date.
• Even if time is not of the essence it is theoretically possible for a party to show that the other's delay is so profound as to entitle them to determine the contract but the delay has to be of such gravity as to deprive the other party substantially of the whole benefit which it was intended it should obtain from the contract.

The Court concluded that Shawton were wrong to terminate the sub-contract.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.