Contract Time and Completion

• Author: Carol J. Patterson - Ross J. Altman - Stephen A. Hess - Allen Overcash
• Pages: 319-359

. SIGNIFICANCE OF TIME FOR PERFORMANCE

Whether the contractor completes construction on time is one of the three

most critical factors (along with the quality of the work and its price) likely to

determine the owner’s view of the success of the construction contract. More-

over, disputes between contracting parties concerning the construction process

occur more frequently about the timeliness of the contractor’s performance

than any other single cause. As a result, the legal issues relating to time of per-

formance are a key element of construction law.

Historically, time was not considered such a crucial element of a construc-

tion project. The uncertainties of the construction process were considered so

great that timely completion was not deemed a material element of a con-

struction contract, unless the contract contained an express agreement to that

effect. This rule persisted well into the 20th century. Indeed, the Nebraska

Supreme Court reafrmed the principle as late as 1971.1 If time of performance

1. Kingery Constr. Co. v. Scherbarth Welding, Inc., 185 N.W.2d 857, 859 (Neb. 1971) (nding

that time is material only if expressly so stated in the contract, because delays are foreseeable in

construction). The rule was also more recently referenced in D&D Underground Utilities Inc. v.

Walter Martin Excavating Inc., 2015 WL 13427765 (E.D. Ky. 2015).

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Contract Time and

Completion

ANDREW D. NESS

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CONSTRUCTION LAW

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is not considered a material element of contract performance, then failure to

complete the work by the agreed completion date amounts only to breach of

an immaterial performance obligation. Such a non-material breach will sup-

port damages for the breach, but is not sufcient to justify contract termina-

tion or allow the owner to cease performing its own contract obligations.2

This historical common law rule does not comport with the reality of the

21st century. In an era when owners make rm commitments to host a nation-

ally televised football game on a given date, even before ground is broken on

the stadium construction, timeliness of performance can often be the most

important element of the contractor’s performance. No one would seriously

argue that the old rule ts today’s realities.3 However, cautious owners nev-

ertheless typically specify in a construction contract that time of performance

is considered material, so as to avoid any doubt. A provision that time is con-

sidered “of the essence” can be accomplished by a simple statement, such as:

Time limits stated in the Contract Documents are of the essence of the Con-

tract. By executing the Agreement the Contractor conrms that the Contract

Time is a reasonable period for performing the Work.4

. CONSTRUCTION SCHEDULINGCRITICAL PATH

METHOD SCHEDULES

In addition to the needs of modern life, advances in planning and scheduling

techniques have reduced the uncertainties of the construction process previ-

ously considered inherent and beyond reasonable control. The key advance in

this respect is the development of network analysis systems for construction

project scheduling, particularly the critical path method, or CPM. CPM was

invented in the 1950s by E.I. DuPont DeNemours & Co., and, enabled by the

2. D&D Underground Utilities Inc. v. Walter Martin Excavating Inc., 2015 WL 13427765, at *11

(E.D. Ky. 2015). This case involved an oral subcontract with no agreed completion date and no

agreement that time was of the essence, so the subcontractor’s obligation was simply to complete

within a reasonable time. While the subcontractor breached that obligation, its breach was not a

material or “total” breach, and did not relieve the general contractor from its contractual obliga-

tions. The general contractor was allowed to recover its delay damages, however, by way of an

offset against the amount owed the subcontractor.

3. “Anyone actively involved within the construction process knows that time is of the essence

whether such is stated or not. . . . To the vast majority of entities involved in the construction

process, time is an absolute implied material feature of every contract.”

Michael s. siMOn, cOn

-

structiOn claiMs & liaBility

§ 12.2 (1989).

4. American Institute of Architects, AIA Document A201–2017, General Conditions of the

Contract for Construction § 8.2.1 (2017) [hereinafter AIA Document A201–2017].

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Contract Time and Completion 321

increasing availability of computers, was widely introduced for construction

project scheduling in the 1960s. CPM quickly became the accepted standard.

A basic understanding of CPM scheduling principles is critical to assessing and

resolving issues relating to time and delays on construction projects.

The rst step in preparing a CPM schedule is breaking the project down

into the individual activities involved in constructing the project and assigning

a planned duration to each activity. Once the activities and their durations have

been identied, the next step is to determine the interrelationships between

the activities. These relationships are added via logic restraints between activ-

ities, such as Activity B cannot start until the completion of Activity A, or

Activity C can start when Activity B is 50 percent complete. The activity logic

ties determine the sequence of the activities during construction, considering

physical, safety, and resource constraints. When adding logic ties, the three

basic questions regarding each activity are:

1. What activities must be completed before the activity in question can

start?

2. What activities can be performed concurrently?

3. What activities must follow the completion of the activity in question?

The completed schedule is a network of dozens, hundreds, or thousands of

activities (depending on the project complexity and level of detail needed for

effective management) and all the logic connections among the activities. Once

the network is built, the critical path through the network can be determined.

The critical path of a network represents the chain of interrelated activities that

takes the longest time to complete from the beginning to the end. This longest

continuous chain of activities establishes the overall project duration, assum-

ing each activity requires the time allotted to it. The longest path is called the

critical path, because if one of the activities along the critical path is delayed

by one day, and no other activity along the critical path is changed, the project

completion will be delayed one day.

Activities not on the critical path have, to some degree, “oat.” The

amount of oat time for an activity represents the number of days by which

an activity can be delayed without affecting the existing critical path and the

project’s forecasted completion date. Float is important because it represents

the amount of exibility that is available for use without delaying the project.

This exibility can be used, for example, to shift resources from a oat activ-

ity to another task that is critical and taking more time than anticipated. The

CPM schedule is a key project management tool that, among other benets,

allows managers to identify the most important activities (those on or close to

the critical path), to quickly identify emerging problems that threaten timely

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