King & Wood Mallesons

Asia-Pacific 100 position: 3

Employers beware of delay-related risk

The English Court of Appeal recently handed down its judgment in Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd, overruling the High Court decision that the employer had been entitled to terminate a construction contract on the grounds that the contractor’s extensive delay in performing the works amounted to a repudiatory breach of the agreement. The decision confirms that it will only be in exceptional cases that delay in construction contracts will amount to repudiation, thereby giving the other party the right to terminate the contract.

A construction company, Telford Homes, was contracted by Ampurius Nu Homes Holdings to construct four blocks (tiled ‘A’, ‘B’, ‘C’ and ‘D’) for a 999-year lease for a consideration of £8m. During the course of the contract, Telford experienced financial difficulties and stopped work on blocks A and B, but it continued work on blocks C and D. Almost a year after work was halted on blocks A and B, Telford recommenced the work on these two blocks. This was seemingly unbeknown to Ampurius, although Telford had suggested that it would recommence work when it had organised further financing.

Shortly thereafter, Ampurius informed Telford that it had terminated the contract. The main ground for termination was that the continued works on blocks A and B potentially interfered with the marketing of blocks C and D, which were nearing completion…

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