Construction contracts often require contractors to carry out their works “regularly and diligently”. Alternative wording such as “with due diligence” or “with due expedition and without delay” is used to the same effect. What does it actually mean?
In the context of a delay dispute, the Court will usually look at the drafting of the clause in context of the whole agreement using normal rules of contractual interpretation.
The leading case is the 1994 Court of Appeal decision of West Faulkner Associates v London Borough of Newham which interpreted the phrase to mean:
“to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work”.
The important rule of thumb is to consider whether the relevant party has made successful progress towards meeting its contractual obligations.
In this context, the words “regularly” and “diligently” are to be considered together given that the natural meaning of the words overlap. However, the Court has also said that a contractor’s employment can – in certain circumstances – be terminated if he fails to do either.
The position was clarified in the following two TCC cases.
SABIC UK Petrochemicals Ltd v Punj Lloyd Ltd
In this case the contractor was contractually obliged to carry out and complete the works “with due diligence”. The Court confirmed that words were to be considered in direct relation to the discharging of its contractual obligations.
The Court said that the fact of delay was not absolute proof of failure to carry out the works with “due diligence”, but it gave rise to evidence of a lack of due diligence.
It is worth noting that the due diligence obligation does not become any less onerous even the contractual obligation becomes impossible to fulfil. In such cases, due diligence should be used to minimise or mitigate any ongoing breach.
Vivergo Fuels Ltd v Redhall Engineering Solutions Ltd
Vivergo engaged Redhall as the contractor to carry out piping and mechanical work. Following delays, which Vivergo alleged were exacerbated by Redhall’s failure to provide a programme of works, Vivergo requested that Redhall rectify that omission.
Before any programme was provided, Vivergo terminated Redhall’s employment. Redhall then provided the programme, but was subsequently barred from the site.
The Court referred to the guidance in the West Faulkner case and applied it to some helpful examples:
– failure to achieve programmed productivity, e.g. where the contractor has a lack of resources to complete the works would amount to a breach of contract. However, where an employer encourages a contractor to prioritise resources from one part of the project to another to avoid alleged delays, the employer will find it harder to argue that the contractor has failed to deploy its resources adequately, even if it is due to contractor’s earlier lack of productivity;
– failure to supervise its staff on site for a sufficient period of the working day is not a separate ground for establishing a failure to proceed regularly and diligently. However, it provides evidence for the argument that a contractor is responsible for alleged low productivity;
– failure to produce a proper programme for the works is not conclusive evidence of failing to proceed regularly and diligently, as a contractor without a proper overall programme could still complete the works on time if it deployed proper resources.
In this case, the Court held that Vivergo should have issued a default notice prior to the termination notice in order to put the contractor on notice of its breach.
If a contractor makes serious attempts to address failures identified in a default notice before a termination notice is issued (for example, by revising its programme), the employer might not be entitled to terminate.
By failing to follow the contractual machinery, an employer may find itself facing a claim for repudiatory breach of contract.
