International Construction Law Review
THE “PREVENTION PRINCIPLE” AND CONDITIONS PRECEDENT: RECENT AUSTRALIAN DEVELOPMENTS
GORDON SMITH
Partner, Baker & McKenzie, Wong & Leow, Singapore
INTRODUCTION
The “prevention principle” operates to invalidate a liquidated damages clause where the owner causes completion of the works to be delayed, leaving the owner to prove its damages at large, and the contractor obliged only to complete the works within a reasonable time. The exception to the operation of the prevention principle is where the contract contains a clear and specific mechanism for extending time for owner-caused delays, and the owner or contract administrator has validly extended time.1
The prevention principle is founded upon the broader notion that a party cannot impose a contractual obligation if that party has prevented the other party from complying with the obligation. Lord Denning, in Amalgamated Building Contractors Ltd
v. Waltham Holy Cross UDC
, said2
: “… the building owner cannot insist on a condition if it is his own fault that the condition has not been fulfilled.” Brooking J in SMK Cabinets
v. Hili Modern Electrics Pty Ltd
3
described the prevention principle as being “grounded upon considerations of fairness and reasonableness”.
Many standard forms of construction contract require a contractor to give notice of an event which may entitle him to an extension of time, with the rationale being that early notice enables the owner or contract administrator to verify the claim and to monitor the event and its impact upon progress of the work.4
These types of clauses are to be construed contra proferentem
and are generally not regarded as conditions precedent to a contractor’s entitlement to an extension of time unless express and clear language is used,5
and there is usually a defined duty on the contract administrator to consider the contractor’s entitlement to an extension whether or not the contractor has made an application to extend.6
More recently, some standard forms and owner’s drafted contracts stipulate contractor’s notices as “conditions precedent” to an extension of
1 Peak Construction Ltd
v. McKinney Foundations Ltd
(1970) 1 BLR 111.
2 [1952] 2 All ER 452 at 455, applying Roberts
v. Bury Improvements Comrs
(1870) LR 5 CP 310.
3 [1984] VR 391.
4 See, for example, Aoki Corp
v. Lippoland (Singapore) Pte Ltd
[1995] 2 SLR 609, per
Khoo J at 615.
5 Bremer Handelsgesellschaft mbh
v. Vanden Avenne-Izegem
PVBA [1978] 2 Lloyd’s Rep 109.
6 As held in London Borough of Merton
v. Leach
(1985) 32 BLR 51 in relation to clause 23 of the JCT Standard Form of Building Contract 1963.
[2002
The International Construction Law Review
398