Outside the United States, requests for constructive acceleration generally fail. However, in a recent Australian case, such a claim was successful. Does this now pave the way for entrepreneurs to deploy constructive acceleration claims?

introduction

“Constructive acceleration” is used to describe the case where a contractor requests an extension of time (“EOT”) for the completion of its work, but the employer wrongfully fails to grant the EOT, with consequence of the contractor deciding to expedite the work in order to meet the unadjusted contractual completion date. A claim based on constructive acceleration is a claim for additional costs that a contractor incurs by taking expediting actions, such as using additional factory labor or resources, or paying a bonus for overtime.

The prevailing legal theory of an implied expediting request is that the contract administrator’s failure to grant an EOT constitutes a breach of contract attributable to the employer, and that the additional cost incurred by the contractor to expedite represents a loss recoverable as damages. Acceleration is “constructive” because it does not arise from any express instruction given to the entrepreneur to accelerate. This occurs because the contractor attempted to complete the work on the unadjusted date, in order to mitigate what would otherwise be the delay of the project.

One of the potential difficulties with constructive acceleration claims arises when the contract is administered by a third-party consultant, such as an architect or engineer, and the contract does not (expressly or by implication) make the contract administrator the employer’s agent with respect to the assessment of EOT claims. In such a case, failure by the contract administrator to grant an EOT when it should have been granted may not constitute conduct attributable to the employer and for which the employer may be held liable for damages. interests.

This potential difficulty does not arise, however, when (i) the contract is administered by the employer or his representative; or (ii) the employer and the contract administrator wrongly agreed to deprive the contractor of its true right to EOT. This latter situation arose in a recent Australian case.

V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] CSV 849

The case concerned a dispute between V601, the Principal, and Probuild, the Contractor, regarding the development and construction of a residential and commercial development project in the State of Victoria, Australia.

• The Contract was a modified Australian Standard Contract Form AS4902-2000 (the “Contract”).
• The principal sued for damages under the contract. In its defence, the contractor argued that the project manager, acting on behalf of the principal, had not authorized its EOT claims. The contractor therefore made a counterclaim for the cost of expediting its work to meet the unadjusted completion date, i.e. it made an implied expediting claim.
• The contractor argued, among other things, that it had “accelerated” the execution of the works in an attempt to reduce or overcome one or more of the delay events which were the subject of its EOT claims, or, alternatively, to attempt to achieve practical completion by the date of practical completion certified by the main contractor.
• The contractor argued that it was entitled to recover costs incurred to expedite this work, due to the project manager’s failure to (i) approve updated versions of the programs; and/or (ii) award the full EOT it was entitled to receive.

The court granted the contractor’s request for implied acceleration, concluding that:

• the principal, through its project manager, breached the contract by failing to award and indemnify the contractor for its EOT claims. It was important for the court to reach this conclusion that the principal and the project manager had engaged in “contractually wrongful conduct” in agreeing to deprive the contractor of its appropriate EOT rights;
• the contractor could in principle recover the additional costs it has incurred in its efforts to overcome and minimize delays in the works;
• the contractor’s acceleration costs were necessary and reasonable costs incurred to mitigate delays in the works;
• the contractor’s acceleration costs were foreseeable by both parties; and
• the Contractor has taken all necessary and reasonable steps to expedite the work and overcome or reduce delays to achieve practical completion on the practical completion dates.

Business implications

The facts of V601 vs. Probuild were relatively rare, insofar as the principal and the project manager had obviously colluded in order to frustrate the justified EOT claims of the contractor. Unjustified interference by an employer with the duties of a contract administrator constitutes a breach of contract, which opens the employer to a claim for damages for what foreseeably arises from such breach – which may include ( like here) a request based on constructive acceleration.

We can distinguish V601 vs. Probuild of those more usual cases where the employer and the administrator of the contract not misunderstand each other. Perhaps the contract administrator, acting sincerely but in error, will simply “mistake” and not grant EOT where EOT should be granted. Laws in England, Australia and other common law countries (except the United States) have not taken the line that any failure to grant an EOT by a contract administrator, while an EOT should have been awarded, opens the door to a constructive acceleration claim.

For this reason, as the Society of Construction Law Delay & Disruption Protocol noted in 2002, “it is not recommended to make a claim for so-called constructive acceleration”. The 2017 edition of the Protocol warns that this constructive acceleration is “rarely recognized in English law”.

Nevertheless, conceptually, the common law Is it that allow implicit acceleration requests to be made in certain circumstances. This is vividly illustrated by V601 vs. Probuild where a request for constructive acceleration was successful. The case also illustrates the empirical notion that wrongfully denying a justified EOT claim simply stores a problem for another day.

Denisa Olaru (White & Case, Trainee Solicitor, London) contributed to the development of this publication.

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