A number of times recently I have been asked to advise and prepare submissions on “I Delay, You Pay” arrangements, whereby head contractors have sought to levy liquidated damages on subcontractors for delays caused by the head contractors.
It works like this:
- the subcontract conditions, prepared by the head contractor, contain a Queen of Hearts clause[1], whereby the notice provisions are so onerous that it is vanishingly unlikely that the subcontractor will be able to give a valid notice;
- the extension of the date for completion of the subcontract is subject to the condition precedent of strict compliance with the Queen of Hearts clause;
- the head contract gets delayed, for reasons that have nothing to do with the subcontractor, such that the subcontractor is not given access to the whole of the workface until after the subcontract date for completion has come and gone;
- if there is a clause in the contract entitling the head contractor to extend time notwithstanding the giving of notices, the clause includes anti-Peninsular Balmain wording such that the head contractor is not obliged to so extend time;
- as expected, the subcontractor is unable strictly to comply with the Queen of Hearts clause;
- the head contractor does not extend the subcontract date for completion; the head contractor levies liquidated damages, and sets them off against the subcontract price and/or collects on an bank guarantee provided by the subcontractor;
- sometimes, perhaps, the head contractor collects liquidated damages from two or more subcontractors in respect of the same period of delay, that delay not being the fault of any of those subcontractors.
It hardly needs saying that these “I Delay, You Pay” arrangements are grossly unjust, and they are not implemented by head contractors who value their relationships with their subcontractors. But equally, there are head contractors who are Continue reading
