Managing risk in construction contracts — can works be postponed indefinitely?

Imagine the scenario - the construction contract is signed. The pre-start meeting is scheduled for Monday. The team is ready to begin work on-site on Tuesday.

Then, just an hour before the meeting, there’s a phone call saying works won’t start tomorrow after all, and may not start until later this year.

A recent judgment in the Technical and Construction Court (TCC) offers a cautionary tale about the risks of delayed starts, especially under bespoke or amended contracts.

Case study — Grain Communications v Shepherd Groundworks [2024]

In this case, Grain engaged Shepherd Groundworks under a framework agreement, where individual work packages were called off through work orders.

The sequence of events —

• September 2023 — Grain issues a work order
• October 2023 —The night before work is due to begin, Grain calls Shepherd to postpone
• The following morning — Grain sends an email saying  “As discussed, it remains our current intention to continue with all Work Orders … However, as mentioned on Monday's call … it currently does not look like we will be able to commence Works on Site … before the end of 2023 … We will continue to keep in touch with you regarding our programme for the Works under these Work Orders and will let you know when anything changes.”
• February 2024 — With no start date confirmed, Shepherd issues a suspension notice under the contract, aiming to terminate the work order

Shepherd argued the email amounted to a cancellation of the work order, in breach of contract. An adjudicator agreed. But the matter went to the TCC — and the court disagreed.

What the court decided — and why it matters

The court looked at the contract’s definition of a variation, which included: “Any addition to, omission from or other change in the Works or the period or order in which they are to be carried out.”

That wording was critical. The court held that —

• The contract allowed Grain to vary the period in which the works were to be carried out
• This meant postponing the start date — even without specifying a new one — was permitted
• The email clearly indicated Grain’s intention to continue with the work order
• The fact the email didn’t specifically mention  “variation” wasn’t decisive and, importantly, didn’t mean the intention was to cancel

In short, the broad variation clause meant the employer could delay works indefinitely without it being a breach.

That decision is a good prompt to check what the outcome might be in your contracts, and whether it would be prudent to draft in express terms setting parameters to what constitutes a “variation” or an acceptable period for any postponement of the works.

What about standard contracts — like JCT or SBCC?

The Grain case involved a bespoke framework contract, so what would the position be under a standard JCT/SBCC form?

• The definition of “Change” in the SBCC Design & Build for (clause 5.1) refers only to the order of execution — not the timing
• All changes are subject to the Contractor’s right of reasonable objection (clause 3.5) and the Employer’s express right to instruct a postponement (clause 3.10)
• These instructions are both Relevant Events and Relevant Matters (clauses 2.24–2.26) — meaning the Contractor may claim time and money
• Clause 8.11 permits termination if the works (or substantially all of them) are suspended for a continuous period — defaulting to two months if not otherwise stated
• Where suspension is due to the Employer acting on negligence by a Statutory Provider, termination is allowed, but the Contractor can’t recover direct loss or damage

In most cases, the Contractor can only end the contract for an impediment or prevention by the Employer if the Employer causes all or nearly all of the work to be delayed for a set amount of time — as defined in the contract. A delay to just a small part of the work usually isn’t enough.

And under an NEC4 contract?

The NEC4 Engineering and Construction Contract provides a more structured process —

• The Project Manager can instruct the Contractor to stop or not start any part of the work
• They must then instruct it to start, re-start or be removed from the Scope
• These instructions are Compensation Events, potentially entitling the Contractor to additional time and money
• If no further instruction is given within 13 weeks, either party can terminate
• If the instruction to stop work stems from Client default, the Contractor may also recover lost profit

Protecting your position — practical steps

The Grain case shows how open-ended contract language can expose both employers and contractors — with limited options to bring about a conclusion whether by forcing a start date or cancellation/termination. To reduce this risk —

• Review how “variation” or “change” is defined — and whether it includes timing as well as the order of works
• Specify maximum periods for delay or suspension in the contract (or check what the default periods are)
• Clarify when and how termination rights can be triggered
• Check if your contract requires a fixed re-start date after a postponement
• Know what constitutes a breach versus a permitted variation or change
• Confirm if delayed starts count as compensation events — and whether you’re entitled to direct loss, expense or profit recovery

Take-away

Standard form contracts like JCT, SBCC and NEC4 usually contain safeguards to regulate project delays — and give contractors routes to recover costs or exit the contract. That won’t always be the case with bespoke forms or amended standard forms.

And, as this case shows, projects could quite easily remain in limbo for months without there necessarily being a contract breach, and without the “delayed” party being able to force some sort of progress or resolution.

If you’d like to discuss a construction contract, please do get in touch with me, or you can keep up to date with our latest commentary on our news and views page.