Friday, July 1, 2011

Extensions Of Time

In a forum an individual asked whether an vehicle accident would allow for an extension of time for performance. There are three occasions where a supplier would be allowed an extension of time:
1. When there is a force majeure.
2. When the buyer caused the delay.
3. When the contract contemplated other circumstances that would warrant an extension of time.

 The first step in any question is to read the contract. If there is a force majeure provision in your contract or purchase order you would look to see what situations are contemplated by it and how broad it is. The failure to deliver on time would be excused by a force majeure event but you would need to look at the circumstances to determine whether it constituted a force majeure. A simple accident, if there was no damage to the material may not create an excusable delay. You would be expected to take alternate actions to meet the delivery.  If the material was damaged and the accident was caused by another party, you would need to check whether that would constitute a force majeure.  Let’s assume that your contract had the following force majeure clause that is fairly broad:

“Neither party shall be liable in damages or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including, but not limited to Acts of God, Government restrictions (including the denial or cancellation of any export or other necessary license), wars, insurrections and/or any other cause beyond the reasonable control of the party whose performance is affected.”
A motor vehicle accident wouldn’t be an act of god, its not a government restriction, it isn’t part of a war or insurrection so the only way possible to claim an extension of time would be to argue that it was a cause beyond your reasonable control.  To prove that you should get an extension of time, you would need to prove that the accident and the damage to the material were beyond your reasonable control.  If you were at fault or even partially at fault in the accident, you might not meet the standard that it must be beyond your reasonable control. If you weren’t at fault, but you failed to pack or package the material in a reasonable manner to prevent damage, you wouldn’t meet the standard of it being beyond your reasonable control.

Sometimes suppliers want the failure of their sub-contractors or suppliers be justification for an extension of time. The key is was that failure beyond their reasonable control in their meeting the contract obligations. What you don't want is for the supplier to simply sit back and do nothing and then be excused because their supplier failed to perform.  I would want proof that that they weren't able to meet the delivery with an alternative supplier. I would also want proof that they exerted reasonable or best efforts to manage their supplier to meet the delivery date.  If they did both I might agree that the failure of the subcontractor to perform was beyond their reasonable control.  What I would never agree to is language that excuses the supplier from performance simply because their supplier(s) failed to perform.  

The key is what did you agree in either the contract or order?