Construction Delays and Extension of time : Legal Implications
28 September 2025 in Building and Construction Law | 5 min read | skip to FAQsThe three main aims of any construction project and the contract are to complete the building project on time, within budget and to a set quality. This article focuses on the time aspect of the project. There are occasions when construction delays occur, and builders are unable to complete the project by the agreed deadline. In these situations, it is essential for both builders and clients or homeowners to understand the legal implications of this. This article examines construction delays and extensions of time in construction law.
The role of Date for Practical Completion in Construction Delays
In any construction contract there is usually a date by which the project must be complete, which is called the ‘Date for Practical Completion’. Conversely, the date that practical completion is actually achieved is called the ‘Date of Practical Completion’.
The date for practical completion is a critical aspect to all construction projects. It is the deadline by which the builder must complete the project. The Home Building Act 1989 (NSW) requires the builder to provide the client with a written contract that includes a completion date, and the builder must comply with this deadline unless an extension of time has been granted.
The date for practical completion needs to be clear and specify the exact date on which the builder must complete the project.
Delays
When a building project is delayed due to the builder’s cause this is called a delay. If the delay causes the builder to be late with completion of the project the builder is in breach of the contract. Specifically, in relation to the clause to achieve practical completion by the ‘Date for Practical Completion’. The client will be entitled to damages for the builder’s breach of contract. Not all delays will result in the builder being in breach of the contract, some delays may be caused by events that entitle the builder to an extension of time.
Extensions of Time
Sometimes delays occur during the construction process which impact on the builder’s ability to complete the project on time. In some cases, the delay may be due to factors beyond the builder’s control, such as bad weather, or a variation directed by the home owner, and the builder may be entitled to an extension of time. For instance, if it constantly rains for a week, the builder may be permitted an extension of time equal to one week. In this case, the date for practical completion will be moved back by one week.
The entitlement to an extension of time will depend on the terms of the contract. The contract should include provisions that outline the circumstances under which the builder may claim an extension of time. In addition, the contract should state the process for the builder to make a claim for an extension of time and any supporting evidence that may be required. Failure to follow the correct claim process may result in the builder being disentitled to an extension of time and being liable for damages resulting from the delay.
Liquidated Damages
In construction contracts, parties may agree on a fixed amount of damages payable if the completion of the project is delayed. These damages are known as liquidated damages. The purpose of liquidated damages is to provide the parties with certainty and avoid lengthy disputes over the amount of damages payable.
If a builder fails to complete the project by the ‘Date for Practical Completion’, the builder will be liable to pay the liquidated damages to the client. The amount of liquidated damages payable will depend on the terms of the contract and should represent a genuine pre-estimate of the damages that would be suffered due to a delay. In some construction contracts, the damages are fixed at a certain amount per day or week. For instance, this may be damages equal to $1,000 per week for every week of delay estimated on the basis of the additional rent that the homeowner must pay. This is called liquidated damages because the damages for breach are liquidated, meaning that the amount is set.
Any provision in a residential building contract for liquidated damages must be reasonable and reflect a genuine pre-estimate of the loss likely to be suffered by the client in the event of a breach. If the liquidated damages are disproportionately higher than the actual loss suffered by the client, the courts may consider them to be a penalty and unenforceable. It would be unusual for the liquidated damages to be too high. It is more common that the building contract specifies an amount of liquidated damages that is disproportionately lower than the actual damages.
Standard form building contracts may include a relatively low, fixed amount for liquidated damages by default. However, a recent ruling by the NSW Supreme Court has determined that any clause in a residential building contract with an amount for liquidated damages that is too low, will not prevent owners from claiming general damages, which refers to the actual damages suffered as a result of the delay.
The effect of Cappello v Hammond & Simonds on Liquidated Damages
The construction law case of Cappello v Hammond & Simonds NSW Pty Ltd involved an HIA building contract in which the liquidated damages clause was set at a default amount of $1 per day for any delay. The builder completed the project seven months late, without requesting an extension of time.
In this case, a key consideration was whether the liquidated damages clause contravened Section 18B(1)(d) of the Home Building Act 1989 (NSW), which obligates builders to complete residential building work within the timeframe specified in the contract. Additionally, section 18G voids any contractual provisions that amounts to an attempt to override any statutory warranty.
The Supreme Court determined that the liquidated damages clause did not limit the owner’s ability to claim damages beyond a nominal amount, as this would contravene section 18B(1)(d) and be void by operation of section 18G. The Court held that the owner could seek general damages for delay in addition to liquidated damages.
The ruling has implications for both builders and homeowners. Homeowners now have the potential to claim damages beyond the nominal liquidated damages amount stated in the residential building contract in cases where the amount nominated for liquidated damages is insufficient. The building and construction legal team at BSM Sydney Lawyer are happy to give further personalised advice to both builders and homeowners.
How can BSM Sydney Lawyers assist you?
The building and construction lawyers at BSM Lawyer Sydney have several decades of experience in the construction industry and are renowned as industry experts. Our Sydney lawyers have been involved in construction projects ranging from multi-million dollar constructions to individuals adding an extension to the family home. We pride ourselves on our personalised and highly responsive service to all of our clients. The BSM Sydney construction lawyers are across all aspects of construction law and have been involved in landmark legal decisions in the construction industry. Our senior construction lawyers offer a free 20-minute consultation.
FAQS
What is the Date for Practical Completion in a Building Contract?
The date for practical completion is the deadline by which the builder must complete the project. The Home Building Act 1989 (NSW) states that this date should be included in the building contract.
What is the Date of Practical Completion in a Building Contract?
The date of practical completion is the date that the building project is actually completed. This may differ from the contractually specified date for practical completion.
What is Considered a Delay in a Building Project?
A hold up in a building project that is caused by the builder is defined as a delay. If the delay causes to the project to go past the date for practical completion, (as specified in the contract), the builder may be in breach of the building contract and the client may be entitled to damages. Not all delays will result in the builder being in breach of the contract.
BSM Construction Lawyer Sydney are building contract experts and can help resolve your building dispute.
What are Extensions of Time in a Building Project?
Extensions of time in a construction take into account delays that occur that impact on the builders ability to complete the project as stated in the contract. These factors are often beyond the builders control, such as adverse weather or home owner variations, and extend the date of practical completion. These provisions must be clearly specified in the building contract and specify how the builder can make a claim for an extension of time and any supporting evidence that may be required.
BSM Construction Lawyers Sydney are experts at drafting watertight building contracts.
What are Liquidated Damages in Construction Contracts?
Liquidated damages are fixed damages that are stipulated in a building contract payable if the completion of the project is delayed. These help provide certainty and avoid disputes as they are set out in the contract. The liquidated damages must be reasonable and reflect a genuine pre-estimate of the loss likely to be suffered by the client in the event of a breach of the date for practical completion by the builder.
What happens if the Liquidated Damages are too Low?
If the liquidated damages are insufficient in a construction contract, the homeowner can claim general damages through the court system. The precedent for this is the construction law case of Cappello v Hammond & Simonds NSW Pty Ltd which involved an HIA building contract. The liquidated damages clause was set at a default amount of $1 per day for any delay and the builder completed the project seven months late, without requesting an extension of time.
The experienced construction lawyers at BSM Lawyers Sydney are experienced negotiators and litigators and can represent you.
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About the Author
Curtis Newbitt-HillBachelor of Laws I Bachelor of Commerce majoring in Economics I Graduate Diploma of Legal Practice I Admitted to the Supreme Court of NSW & the High Court of Australia
View profileCurtis Newbitt-Hill is a Senior Associate at Brander Smith McKnight and holds a Bachelor of Laws and a Bachelor of Commerce with a majoring in Economics from the University of Wollongong. He also holds a Graduate Diploma of Legal Practice from the College of Law. Curtis is admitted to the Supreme Court of NSW and the High Court of Australia. Curtis has a special interest in and has extensive experience in building and construction law. He is respected as an industry expert, providing practical and personalised legal assistance in building contract drafting, review and negotiation, dispute resolution strategies, major and minor building defects, delays and extensions of time and NCAT strategies.
