Scoring extensions and avoiding penalties

Steria Limited v Sigma Wireless Communications Limited provides useful guidance on whether giving written notice can ever be a condition precedent to an entitlement to an extension of time, and the form such a notice should take. Here are some handy hints to remember when entering into an agreement.

• State expressly whether or not giving written notice of delay is a condition precedent to an extension of time. In many cases, careful drafters will include such an express statement in order to put the matter beyond doubt.
• Remember, if there is genuine ambiguity as to whether or not notification is a condition precedent, it is likely that notification will not be construed as being a condition precedent.
• Give careful consideration to the wording of any clause providing for an extension of time. Ensure that any written notice of delay is properly given (in accordance with the requirements set out in the clause) and within time.
• Ensure that any written notice of delay emanates from you (unless the contract provides otherwise).
• Think long and hard about the consequences of a liquidated damages clause before agreeing to it. Where two substantial and experienced companies agree to a liquidated damages clause in their contract with knowledge of the difficulties which can occur where one party seeks to recover damages from the other for delay, the court is unlikely to strike it down as a penalty.
• Often the party liable to pay liquidated damages argues it is a penalty, so make sure you discuss in detail and record the method of any assessment you have agreed.