Time is Money - Or Is It?

Everyone wants their job done yesterday. But seriously, time is a very important element of any contract. When will you start work and when will you finish?

Sometimes contracts (assuming you have one and you should!) don’t have start and finish dates. This doesn’t mean you can start and finish when you want.

The law will imply terms into contracts even if they are not written down.

For example, without a finish date in a contract, the law requires that the work be done in a reasonable time. What is reasonable will depend on the circumstances.

Clearly, it is not reasonable to take a month to install a tap washer. In some circumstances that might be reasonable.

For example, if it is a special type of washer that cannot be sourced locally and must be imported, then it might be reasonable to take a month.

Having no time provision in your contract creates uncertainty. For certainty, you should consider putting a start date and a finish date in your contract.

Then everyone knows what to expect. Sometimes, you might need an extension of time and your contract should include a provision or two about that too.

Some elaborate commercial contracts have provisions that require notice of delay to be given within a certain (often very short) period and if you don’t comply you lose any right to an extension.

You need to be really careful about these ‘time bars’. Make sure you obey them. Even if your contract doesn’t have a start and finish date or any extension of time provisions, it is good practice to tell your customer as soon as you become aware of the delay.

Leaving it until the last minute to notify of a delay will often lead to a dispute. At the very least it will lead to a disappointed customer and that is not good. Many commercial contracts will have a provision for liquidated damages (LDs).

That means, if you are late finishing your work, your customer can hold back a fixed amount for each day you are late finishing.

If a contract does not have LDs you could still be liable for damages for delay but the amount of those damages will depend on the actual loss your customer suffers because of the delay.

That would have to be proved. Examples of damages caused by delay might include interest on borrowings, drop in value of the project (if it is to be sold), loss of income from the project and so on.

Good written contracts should allocate the risk of delay in a sensible way and it is vital that your contract addresses these issues and allocates risk appropriately.

If you don’t have a written contract, you are leaving a lot to chance and that is never a good thing.

If you need advice about contracts or any aspect of your business, call us. It won’t cost you anything for the first call.

Michael Hutton

Partner

Lynch Meyer Lawyers

Ph: 8236 7612 Email: mhutton@lynchmeyer.com.au