Extension of Time Claim Procedure

EOT and Loss and
Expense Claim
Mr Tse Sek Chuen

Director
Widnell Ltd
A) Extension of Time Claim
1) General
a) In the absence of express Contractual power

to extend the time for completion, the
Architect could not do so.
b) Failure by the Architect to properly exercise

the power to extend time will relieve the
Contractor from his liability to pay liquidated
damages and the time for completion may
become ‘at large’.
A) Extension of Time Claim (Cont’d)
c) Assessed at the time when the Works

are actually carried out and not when
they were programmed to be carried out.
d) E.O.T. clause is put into the Contract to

cater for the delay caused by:-
1) Employer or the Architect
Without E.O.T. Clause, the

completion of works delayed by the
Employer/Architect will also relieve
the Contractor from his liability to pay
liquidated damages and the time for
completion may become at large.
d) (Cont’d)
2) Neither party of the Contract
i) As a fair sharing of the risk between

the parties.
ii) Under those events caused by neither

party which are expressly provided in
the Contract, the Contractor is entitled
to E.O.T. only. No monetary
compensation will be paid to the
Contractor.
d) (Cont’d)
iii) Under those events caused by neither

party which are expressly excluded
from the Contract, the Contractor is
to take up the risk, no E.O.T. will be
granted.
e) Under no circumstances will the

Contractor be entitled to receive
financial compensation for the delay
caused by the Contractor himself.
2) Time at large
a) Where no time for completion is specified,

time is said to be ‘at large’ and a term
for completion within a reasonable time
will be implied.
b) Where the time fixed by the Contract for

completion has ceased to be applicable
and the Contractor is continuing to work
under the Contract.
c) If a Contractor is delayed by the

Employer where the conditions of
contract make no proper provision for
extending the completion date for this
type of delay.
d) Where time is at large the Contractor/

subcontractor’s obligation is to finish
within a reasonable time.
e) LD will become inapplicable.

3) Major obstacles to EOT claim
a) Late or lack of notice from the

Contractor.
b) Failure to recognise delay that results

in contemporary records not being
kept.
c) Failure to regularly update the

programme.
d) Poor presentation of the claim to

show how the progress of the work
has been delayed.
e) Insistence on the part of the Employer’s

professional advisers, that unreasonably
detailed critical path programmes are
essential in order to assess the effects
of the delay.
4) Events Qualifying For Extension of Time
a) RICS (HK Branch) 1986 Edition
i) Clause 23
(a) Force majeure.
(b) Inclement weather
(rainfall in excess of 20
mm in a 24 hours period)
and typhoon signal No.
8 or above.
i) Clause 23 (Cont’d)
(c) Fire, storm, tempest.
(d) Civil commotion, local combination of

workmen, strike or lockout.
(e) Architect’s instructions issued :-

i) discrepancies in contract
documents
ii) variations
iii) postponement of any works
(f) Main Contractor not having
received in due time necessary
instructions, drawings, details or
levels from the Architect for which he
specifically applied in writing.
(g) Delay on the part of nominated
subcontractors or nominated
suppliers which the Main Contractor
has taken all practicable steps to
avoid or reduce.
(h) Delay on the part of artists,

tradesmen or others engaged by the
Employer.
(i) Opening up for inspection of any

work covered up or of the testing of
any of the work, materials or goods.
(j) Unforeseen shortage of labour.
(k) Unforeseen shortage of materials.
(l) Discovery of antiquities.

b) Hong Kong Government Form 1993 Edition
i) Clause 50(1)(b)
a. Inclement weather conditions

and/or its consequences
adversely affecting the progress
of the Works.
b. The hoisting of tropical cyclone

warning signal No. 8 or above.
i) Clause 50(1)(b) (Cont’d)

c. An instruction issued by the
Architect concerning discrepancies
in contract documents.
d. Variations
e. A substantial increase in quantities

of any item of work not resulting
from any error in firm quantities or
from a variation ordered under
Clause 60.
f. The Contractor not being given

possession of the Site or any
portion or part thereof in
accordance with the Contract.
g. A disturbance to the progress of

the Works for which the Employer
or the Architect or a Specialist
Contractor is responsible.
h. Suspension of the Works, except

due to weather, Contractor’s
default or as provided for in the
Contract.
i. Any utility, undertaking or other

duly constituted authority failing to
commence or to carry out in due
time work directly affecting the
execution of the Works.
j. Delay on the part of any nominated

sub-contractor, which would entitle
the Main Contractor to an
extension of time.
k. Any special circumstance of any kind

whatsoever.
ii) Clause 50(1)(c)
The Contractor shall not be entitled to

an extension of time for the following :-
a) Shortage of Construction Plant or

labour.
b) Suspension of the Works

i) Provided for in the Contract.
ii) Clause 50(1)(c) (Cont’d)
b) Suspension of the Works (Cont’d)
ii) By reason of weather condition

affecting the safety or quality
of the Works.
iii) By reason of some default

on the part of the Contractor.
ii) Clause 50(1)(c) (Cont’d)
b) Suspension of the Works (Cont’d)
iv) For the proper execution of

the Works or for the safety of
the Works not arising from
any act or default of the
Architect/Employer.
5) Notice Requirements for EOT
Some notice requirements are condition

precedent to the Contractor’s entitlement
and therefore the Contractor loses his right
to claim if he fails to comply with such a
notice requirement.
a) RICS HK Branch 1986 Edition
i) Clause 23
Upon it becoming reasonably apparent

that the progress of the works is
delayed, the Main Contractor shall
forthwith give written notice of the
cause of the delay to the Architect.
b) Hong Kong Government Form (1993

Edition)
i) Clause 50(1)(a)
As soon as practicable but in any event
within 42 days of the cause of any
delay to the progress of the works
becoming apparent, the Contractor
shall give notice in writing to the
Architect of the cause and probable
extent of the delay.
i) Clause 50(1)(a) (Cont’d)
Any order or instruction issued by the

Architect is likely to cause a delay to
the progress of the works, the
Contractor shall forthwith give notice in
writing to the Architect and specify the
probable effect and extent of such delay.
6) Presentation of EOT Claim
a) Description of the cause delay.
b) The contractual provision which is being

relied upon.
c) The date when the delay commenced
and the period of delay.
d) The date of notice of delay.

e) A summary of records and particulars

relied upon.
f) A description of the event and effects

on progress.
g) A diagrammatic illustration showing the

status of the programme, progress and
current completion date prior to the
commencement of the delay.
7) Programme
a. Effective and realistic programme
b. Delay has affected completion of

the Works
c. Flow time included in the programme

B) Loss and/or Expenses Claim
1) Events Giving Rise to a Monetary Claim
a) RICS (HK Branch) 1986 Edition
i) Clause 11(6)
a) Direct loss and expense arising from
Architect’s variations and expenditure
of provisional sums for which the
Contractor would not be reimbursed
by payment in respect of valuation of
variation, both subject to written
notice.
B) Loss and/or Expenses Claim (Cont’d)
ii) Clause 24(1)
Direct loss and expense arising from:
a) Not having received in due time

necessary instructions, drawings,
details or levels from the Architect for
which the Contractor specifically
applied in writing;
ii) Clause 24(1) (Cont’d)
b) Opening up work for testing;
c) Discrepancy or divergence between

contract drawings or contract bills;
d) Delay by artists and tradesmen or

other engaged by the Employer in
executing work not forming part of
this contract;
ii) Clause 24(1) (Cont’d)
e) Architect’s instructions regarding

postponement
iii) Clause 34(3)
a) Direct loss and expense arising from

the discovery of antiquities
b) Hong Kong Government Form 1993 Edition
i) Definition of ‘Cost’
Clause 1 : “….. expenditure reasonably

incurred including overheads whether on
or off the site and depreciation in value of
Construction Plant owned by the
Contractor but excluding profit.”
The following clauses provide an express
entitlement to the recovery of additional
cost.
ii) Clause 5(b)
Compliance with instructions concerning

discrepancies between documents
iii) Clause 34(2)
Provision of facilities for other Contractor

working adjacent to the site as the Surveyor
considers reasonable.
iv) Clause 48(2)

Due to progress of the Works being affected
by failure to give possession of site as are
necessary for the Contractor to carry out
the Works.
v) Clause 54(2)
Due to suspension of the Works under
Architect’s Instructions subject to certain
listed exceptions.
vi) Clause 63
Due to progress being materially affected by:-
(a) Late information
(b) Variations issued in Clause 60
(c) Opening up for inspection etc (unless

provided for in contract or unless
inspection reveals a non
compliance).
vi) Clause 63 (Cont’d)
(d) The work or supply of others (except

utilities) engaged by the Employer
which are directly connected with the
Works though not forming a part of it.
(e) Late delivery of materials, plant or

equipment by the Employer.
vi) Clause 63 (Cont’d)
It should be noted that the rules for

evaluating variations (Clause 61) contain
some flexibility in that rates may be
enhanced to cover the material affect on
progress. This should be considered as a
convenient alternative to a claim under
Clause 63(b), particularly when the effect is
disruption to progress, rather than a
prolongation of the Works as a whole.
vii) Clause 66
Additional expenditure incurred by the

Contractor as a result of being instructed
to engage a NSC on conditions other than
the standard form of sub-contract.
2) Notice Requirements for Loss & Expense

Claim
i) General
a) Some notice requirements are
condition precedent to the
Contractor’s entitlement and
therefore the Contractor loses
his right to claim if he fails to
comply with such a notice
requirement.
b) Failure to give notice in accordance

with the contract may bar or severely
prejudice a claim for additional payment
c) Specific notice provisions are inserted

the Contractor must comply with these
requirements
d) Advance warning as possible of the

possibility of an increase in the contract
price
e) Under a duty of care to the Employer in

giving an estimate of the cost of an
intended building
f) Enable the Architect/Engineer/Surveyor

to make assessment
ii) RICS HK Branch 1986 Edition
a) Clause 11(6), Clause 24(1)

Upon written application being made
to the Architect, the Architect is of
the opinion that the Main Contractor
has incurred the loss and/or expense
for which he would not be reimbursed
by payment in respect of valuation of
variation / made under any other
provision in the Contract.
iii) Government of the Hong Kong SAR (1993

Edition)
a) Clause 64(1)
Contractor shall give written notice of

his intention to claim a higher rate
within 28 days of Surveyor’s
notification of the rate.
b) Clause 64(2)
Contractor shall give written notice of his
intention to claim any additional payment
within 28 days of the event giving rise to
the claim.
c) Clause 64(5)
If the Contractor fails to comply with the
notice provision contained in Clause 64(1)
and 64(2), such claim shall not be
considered.
3) Prolongation Claims
Typical heads of claim arising out of

prolongation of the contract period are:
a) Site overheads or preliminaries
b) Head office overheads
c) Loss of profit
d) Cost escalations
e) Cost claims from subcontractors
f) Depreciation on assets
g) Financing charges
h) Delayed release of retention
i) Adjustment of levies
4) Site overheads
a) Actual Costs
The extra site overhead costs due to

prolongation are those incurred after
the original contract completion date
and up to the extended (or actual)
completion date.
Some may prefer the costs incurred
during the actual period of delay.
Documents/information to substantiate the actual

costs incurred:-
i) Staff
- Organization chart/site diary records

showing the staff involved.
- Staff salaries payroll records or

contract of employment.
ii) Plant
- Site and plant records showing
the plant involved.
- Plant hire purchase agreement/

contracts of plant purchase/plant
costs depreciation record.
iii) Insurance/Bond
- Premium receipts for the prolongation
period.
iv) Security/Safety Services
- Security staff payroll records.
- Payment receipt for contracted

security services.
v) Site Facilities e.g. site office, toilet, store

room, etc
- Actual cost records as appropriate.
b) Preliminaries BQ
1. Time-related items
2. Non-time-related items
3. A price per day/week/month to

apply to the prolonged period
4. Very simple means of establishing an

additional payment for site overheads
5. Not complying with the provisions of

most standard forms of contract which
require loss and expenses or costs to be
paid
5) Head office overheads
Components of head office overheads

may be listed as follows:-
a. Rent and rates of offices, plant and

yards;
b. Maintenance and running costs;
c. Directors’ salaries and expenses;

d. Head office, technical salaries and ‘on

costs’ (surveyors, planners,
purchasers and the like);
e. Head office administrative staff

salaries and ’on costs’ (accountants,
typists, messengers, cleaners,
maintenance staff);
f. Administrative expenses, such as
postage, printing, stationery,
telephones;
g. Traveling expenses, including the

provision of motor cars for directors
and staff;
h. Legal and professional fees;
i. Depreciation.
i) The actual cost approach
1. Cost of the actual head office

overheads affected by the delay
2. The difficulty arises in identifying
the increased expenditure directly
and indirectly arising from the
delay on the project in question
3. Generate a timesheet, showing the

time which they have spent on the
project , compared with the time
spent on the project during the earlier
period of construction
4. Other head office costs such as
accounts, secretarial and clerical staff,
rent, services, stationery, etc,
effectively exist to support key staff
A global claim ie: where a Contractor claims his

total head office expenditure and deducts from
that total the amount included in its tender.
Documents/information shall be provided by the

Contractor to substantiate the actual costs
incurred:-
- Actual cost records, e.g. time sheet,

contract of employment, etc.
- Auditor’s account showing the detailed

breakdown of administrative expenses
covering the whole contract period.
ii) The lost opportunity approach
The lost opportunity approach uses a

formula for its calculation, which is simple,
cheap, quick and produces a reasonable sum
of money for very little effort.
There are three formulae commonly used for

head office overhead calculations: the
Hudson formula, the Emden formula and the
Eichleay formula.
a) Hudson’s formula
Head Office Overhead Contract

Percentage Sum Period of
x x
100 Contract Delay
Period
Note: The Head Office Overhead

percentage in the Contract
The formula adopts the head office overhead

percentage from the contract as the factor
for calculating the costs. This may bear little
or no relation to the actual head office costs
of the Contractor and therefore Hudson’s
formula is often criticized as unrealistic.
b) Emden’s formula
Head Office Overhead Contract

Percentage Sum
Period of
x x
100 Contract Delay
Period
Note: The HO/Profit percentage is head office

percentage, arrived at by dividing the
total overhead costs and profit of the
Contractor’s organization as a whole by
the total turnover.
This formula has the advantage of using
the Contractor’s actual head office/profit
percentage rather than the one
contained in the contract and has
received judicial support in a number of
cases.
c) Eichleay formula
ie: Value of work during

contract period Total Head Office
Overheads
Total value of work for the x
During contract
company as a whole period
during contract period
= Head Office Overheads Allocated to

the Contract
Head Office Overheads

Allocated to the Contract
x Period of Delay
Contract Period
= Amount Claimed
1. Comparing the value of work carried

out in the contract period for the
project with the value of work carried
out by the contractor as a whole for
the contract period.
2. A share of head office overheads can
then be allocated in the same ratio and
expressed as a lump sum to the
particular contract.
3. The amount of head office overhead

allocated to the particular contract is
expressed as a weekly amount by dividing
it by the contract period.
4. The period of delay can then be multiplied

by the weekly amount to give a total sum
claimed.
6) Loss of profit
a. Some contractual provisions only

provide for recovery of additional
cost or expense, a claim for loss of
profit is not permissible
b. The Contractor to show some evidence

that he was given the opportunity to
tender for other projects and that he
could not reasonably take advantage of
these opportunities because of the fact
that his resources were retained on the
delayed project
c. the Contractor would be advised to keep

a record of the following:-
i) All tenders submitted and

awarded so that a success ratio
can be established;
ii) All projects for which the Contractor

was invited to tender, but which
were declined or a deliberately high
tender submitted.
If the Contractor can demonstrate that, on the

balance of probability, he would have been
able to obtain other contracts during the period
of overrun, that alone ought to be sufficient to
establish the claim in principle.
7) Cost escalations
If the contract is fixed price there is no

mechanism for adjusting the contract sum
for fluctuations in prices of labour and
materials
Published indices, eg: “Index Numbers of the

Costs of Labour and Selected Materials used
in Government Contracts” by the Hong Kong
Government Census and Statistics
Department.
Invoices and trade agreements to show actual

price increases.
8) Cost claims from subcontractors
Where the Contractor incurs liabilities

under his subcontracts or supply
contracts as a result of a event for which
he is entitled to recover cost.
9) Depreciation on assets
Where a montary claim arises from a

substantial delay to the contract period,
necessitating the Contractor’s plant and
equipment to be held on site for much
longer than planned, then the Contractor
incurs a depreciation in the value of those
assets. This loss would be recoverable.
HK Government Form 1993 Edition clause 1(1)

defines “cost” as including “depreciation in value
of Construction Plant owned by the Contractor”.
The calculation may be based on actual market

values, if available, or representative values taken
from accounting practice.
10) Financing charges
a. A debt which is paid late does not

entitle the recipient to interest at
common law
b. The interest or finance charges are
an integral part of the cost or loss
and expense
c. If the value of work increase, the

additional financing ought to be
recovered in the rates for variations
Documents/information shall be provided to

substantiate his claim:-
i) Documentary proof of overdraft facilities

or money borrowing to finance the
expense.
ii) Evidence of draw down of the overdraft

facilities or money borrowing.
iii) Borrowing ratio of the company.

11) Delayed release of retention
A direct cost arising from the disruption

to progress which the Contractor would
usually be entitled to recover.
The period by which the release of

retention will be/has been delayed
multiplied by the finance charges incurred.
12) Adjustment of levies
The value of the contract increases as

a result of the payment of additional
sums against claims.
13) Disruption and loss of productivity claims
a. Works may be disrupted without a

delay to the contract completion
date.
b. Establish that a planned orderly timing
and sequence of events was affected
by causes within the Employer’s
control to the extent that the
Contractor was prevented from
carrying out the work in that planned
orderly timing and sequence.
c. Many disruption claims fail because

the Contractor is unable to show that
the additional costs were caused as a
result of matters for which the
Employer/other party was responsible.
d. To compare actual productivity during

a period of disruption with productivity
during a period when no disruption
was evident.
This method does not take into

account errors in the tender.
e. i) Daily disruption schedules may be

used: the record, for example.
ii) Access to a particular area was
not available to the specified time,
or in the specified condition
iii) Labour and plant left idle as a

result for a recorded period of
time
e. iv) Or a site instruction received at a

recorded time necessitated the
transfer of noted resources,
resulting in demobilization and
remobilization.
f. The site diary could be better completed

with relevant information.
g. All such records must then be verified

and signed by the supervision consultant
as an accurate record.
14) Acceleration claims
a. An express term of the contract or a

separate agreement
b. The Contractor is not entitled to
unilaterally decide to accelerate and
expect the Employer to pay the
acceleration cost.
c. The Contractor is required to

demonstrate the cost of resources
which would have been employed had
no acceleration measures been taken.
d. The acceleration costs might consist of:-
i) Deployment of additional plant,

formwork
ii) Deployment of additional workforce
iii) Working overtime
iv) Additional overhead and profit

thereon
15) Quantum meriut
a. “the amount the Contractor

deserves” or “what the job is worth”
b. Payment on a quantum meriut may

arise:-
i) Where there is no contract at all;
ii) Where changes are made under a

contract to a degree which renders the
work carried out substantially different
from that contracted.
16) Ex-gratia claims
Claims which the Employer is under no

contractual obligation to pay.
17) Common law claims
Claims for damages for breach of

contract at common law.
18) Adjustment for overheads and profit in

variations
Refer to wording of loss and expense

clauses eg:
a. RICS (HK Branch) 1986 Edition clause 24:
“If … the Architect is of the opinion that the

Main Contractor has been involved in direct loss
and/or expense for which he would not be
reimbursed by a payment made under any other
provision in the Contract by reason of the
regular progress of the Works … having been
materially affect … then the Architect shall
ascertain … the amount of such direct loss and
expense.”
b. HK Government Form 1993 Edition

clause 63:
“If … the Architect is of the opinion that the

Contractor has been or is likely to be involved in
expenditure for which the Contractor would not
be reimbursed by a payment made under any
other provision in the Contract by reason of the
progress of the Works … having been materially
affected … then the Architect shall ascertain the
Cost incurred …”
c. A variation causes a delay to the

contract period for which prolongation
costs are paid then it is necessary to
deduct from the prolongation costs the
amount of profit and overheads included
d. Only those variations causing the delay

in question should be considered
e. Any variations which do not cause the

delay or which is not the subject of the
prolongation claim, should be ignored
19) Time limits on recovery
a. Within six years of the cause for

contracts under hand
b. Within 12 years for contract under

seal
20) The duty of mitigation
a. What steps the Contractor

takes to mitigate the effects of
the delay.
b. What steps the Contractor

takes to mitigate the losses.
The End
Thank You
Mr Tse Sek Chuen

Widnell Ltd
www.widnell.com
The End
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EOT and Loss and

Mr Tse Sek Chuen

a) In the absence of express Contractual power

b) Failure by the Architect to properly exercise

c) Assessed at the time when the Works

d) E.O.T. clause is put into the Contract to

1) Employer or the Architect

Without E.O.T. Clause, the

2) Neither party of the Contract

i) As a fair sharing of the risk between

ii) Under those events caused by neither

iii) Under those events caused by neither

e) Under no circumstances will the

a) Where no time for completion is specified,

b) Where the time fixed by the Contract for

c) If a Contractor is delayed by the

d) Where time is at large the Contractor/

e) LD will become inapplicable.

3) Major obstacles to EOT claim

a) Late or lack of notice from the

b) Failure to recognise delay that results

c) Failure to regularly update the

d) Poor presentation of the claim to

e) Insistence on the part of the Employer’s

4) Events Qualifying For Extension of Time

a) RICS (HK Branch) 1986 Edition

(d) Civil commotion, local combination of

(e) Architect’s instructions issued :-

(h) Delay on the part of artists,

(i) Opening up for inspection of any

(j) Unforeseen shortage of labour.

(k) Unforeseen shortage of materials.

(l) Discovery of antiquities.

b) Hong Kong Government Form 1993 Edition

a. Inclement weather conditions

b. The hoisting of tropical cyclone

i) Clause 50(1)(b) (Cont’d)

e. A substantial increase in quantities

i) Clause 50(1)(b) (Cont’d)

f. The Contractor not being given

g. A disturbance to the progress of

i) Clause 50(1)(b) (Cont’d)

h. Suspension of the Works, except

i. Any utility, undertaking or other

i) Clause 50(1)(b) (Cont’d)

j. Delay on the part of any nominated

k. Any special circumstance of any kind

ii) Clause 50(1)(c)

The Contractor shall not be entitled to

a) Shortage of Construction Plant or

b) Suspension of the Works

ii) Clause 50(1)(c) (Cont’d)

b) Suspension of the Works (Cont’d)

ii) By reason of weather condition

iii) By reason of some default

ii) Clause 50(1)(c) (Cont’d)

b) Suspension of the Works (Cont’d)

iv) For the proper execution of

5) Notice Requirements for EOT

Some notice requirements are condition

a) RICS HK Branch 1986 Edition

Upon it becoming reasonably apparent