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What happens when materials cannot be procured?

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Posted by Philip Harris on 11 February 2016

Philip Harris - Construction Solicitor
Philip Harris Partner & Solicitor-Advocate

The JCT 1998 edition, Private With Quantities form of building contract provided at clause 25.4.10 that the Contractor was entitled to an extension of time on the grounds that the Contractor was unable to secure essential labour and materials for reasons beyond his control and which he could not reasonably have foreseen at the base date. These grounds were “relevant events”. In other words, they entitled the Contractor to seek and obtain an extension of time.

Quality and standards

Clause 2 of that form of contract said that the Contractor was to carry out and complete the contract works in compliance with the contract documents using materials of the quality and standards therein specified.

Clause 8 required that all materials and goods “shall, so far as procurable, be of the kind and standards described in the Contract Bills ….”.

So the requirements to provide the specified goods and materials were subject to the proviso that they were only to be provided “so far as procurable”.

When the JCT published the Standard Building Contract With Quantities 2005 Edition, it contained no relevant event which entitled the Contractor to an extension of time on the basis of inability of the Contractor to secure labour and materials.

There were however relevant events:

under 2.29.6 consisting of, “any impediment, prevention of default either by act or omission, by the Employer, the Architect/Contract Administrator, the Quantity Surveyor or any of the Employer’s Persons”; and

under 2.29.11 consisting of, “strike, lock out or local combination of workmen affecting any of the trades employed upon the Works or any of the trades engaged in the preparation, manufacture or transportation of any of the goods or materials required for the Works”. 

So, if the Employer prevented or impeded materials being secured and/or if a strike affected the ability to procure materials that would be a relevant event entitling the Contractor to claim an extension of time.

Clause 2.3 of the JCT 2005 Edition continued the proviso that materials and goods shall “so far as procurable, be of the kind and standards described in the Contract Bills”.

So under the 2005 edition, materials were to be provided in accordance with the contract only “so far as they are procurable”.

Standard Building Contract

This proviso continues into the current 2011 edition of the Standard Building Contract.

It must follow that the Contractor does not have to provide specified goods which are not procurable. 

What then is the consequence of removing the old “relevant event” of the Contractor’s inability to secure goods for unforeseeable reasons not within his control at the base date? If goods are simply not procurable, to quote Oscar Wilde, “even for ready money” for a period of time (say three weeks), then the contractor is not obliged to procure them in that period. He is not in breach of contract. He is excused from procuring them by their lack of procurability. If the Employer will not extend time for this lack of procurability where there is a clear cause preventing procurement which is not the Contractor’s fault, then will the machinery for extending time not break down? Will time then not become “at large”, so that the Contractor has a reasonable time in which to carry out his works? There is support for this in the case of Peak v McKinney 1 BLR III in which the Court decided that if the Employer was responsible for any delay for which there was no specific extension provided, then time was at large. Arguably requiring the procurement of materials which are no longer procurable is an Employer delay and, in the absence of a clause extending time for it, time becomes at large. 

The alternative argument is to say that the mechanism for extending time under the JCT Contract since 2005 known as the “Adjustment of Completion Date”, is a carefully considered risk apportionment mechanism. Since it does not specifically identify a relevant event based on lack of procurability of materials, the risk that materials cannot be procured rests with the Contractor. He does not get an extension of time simply because materials cannot be procured. The JCT took away that entitlement to an extension of time deliberately, when it drafted the 2005 edition and subsequent editions. 

But if the Contractor is only required to procure materials so far as they are procurable, he is not at fault; so why should he be penalised in any way? It must be strongly arguable that he is entitled to a variation instruction to deal with the lack of procurability and any delay in administering that instruction is a relevant event, and the issuing of the instruction itself gives rise to a relevant event.

So, what should happen when materials are not procurable, and who is responsible? 

Assuming a Contractor cannot procure material and confirms this quickly to the Employer and Contract Administrator, where does responsibility lie for taking the next step? Who should decide what that step is? The answer may lie in the definition of variations at 5.1.2 of the Contract Conditions and in the final sentence of 2.3.1 of those conditions.

According to 5.2.1, the imposing by the Employer of an alteration in the execution or completion of the work in any specific order is a variation. So it seems that, if he wishes to do so, the Employer may change the sequence of working in the hope that the material which cannot be procured will become procurable later. Alternatively, under 5.1.1, the Employer can simply alter the kind or standard of materials to be used. That too will be a variation and a relevant event.

Clause 3.2.1 says that the Contractor shall not substitute any materials or goods without the Architect/Contract Administrator’s consent, “which shall not be unreasonably delayed or withheld”. 

Whilst the dynamics of the contract and how they are supposed to work are not particularly easy to interpret, where goods become unprocurable, the best answer may be that both the Architect/Contract Administrator and the Contractor are required to be dynamic. The Contractor is required to proceed regularly and diligently and this may carry with it an obligation to investigate other materials and goods which may be substituted, so that he can then request the consent of the Architect/Contract Administrator under 2.3.1. The Architect/Contract Administrator is then required not to unreasonably delay in giving his consent.

Deferment of possession

There is a perfectly reasonable argument, however, that it is for the Architect/Contract Administrator to administer the contract. There are a number of options available where materials prove not to be procurable, which may include deferment of possession of part of the site, where the work is being done in sections, resequencing the works, or substituting materials. Having advised that a material is not procurable, the Contractor is entitled to await such an instruction. Any delay in giving that instruction is a prevention or default by the Architect/Contractor and is a Relevant Event.

If the Architect/Contract Administrator issues an instruction under 5.1.2 altering the order of works, then pursuant to 3.10, the Contractor may give notice of reasonable objection to the Architect/Contract Administrator.

So there is quite a complex dynamic to be worked out where the Contractor notifies the Architect/Contract Administrator that materials are not procurable. Either variation instructions or a delay in issuing variation instructions  create an entitlement to extensions of time, even though the Contractor’s ability to secure essential materials is no longer a Relevant Event. 

What does “so far as procurable” mean? 

This must, to some extent, be a matter of degree, short of an absolute physical impossibility of procurement. A material which is physically procurable within a war zone at huge personal risk is probably not procurable. 

What is procurable has probably changed as the world has become smaller and transport and communication has improved. A natural product grown only in a remote region of China, but which can be ordered on the internet, may generally be procurable. It may then become not procurable when an earthquake devastates that region. A trade embargo may make a common material legally no longer procurable. Climatic conditions and events may make both natural and manmade products unprocurable.

A contract may be entirely frustrated where essential materials which were to form part of the contract are destroyed or no longer exist.

The conundrum of what is to be done when materials cease to be procurable is not easy to resolve.

The removal of a specific Relevant Event of inability to secure essential materials has not resolved that conundrum. It may have intensified it.

About the author

Philip Harris

Partner & Solicitor-Advocate

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

Philip Harris

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

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