Shipbuilding Contract - Prevention Principle


Adyard agreed to construct two 50m Moorings and Special Operations Support Vessels, Hulls 10 and 11 (“the vessels”) for SDMS. SDMS rescinded the two shipbuilding contracts as the vessels could not meet their respective sea trials dates.

Adyard claimed that SDMS was not entitled to rescind because (a) it was prevented from completing the vessels for sea trials by SDMS’s acts and/or (b) it was entitled to an extension of time to the sea trials date for both vessels and (c) it was delayed by various new design items which were imposed by the UK Maritime Coastguard Agency (“MCA”) or instructed by SDMS. SDMS counterclaimed and disputed Adyard’s claim.   

By the end of the trial, Adyard’s case rested solely on the prevention principle.  Its entitlement to do so as a matter of law turned on whether or not the contract provided for an extension of time in respect of the relevant event. 

Mr Justice Hamblen summarized the prevention principle with reference to the judgment of Jackson J in Multiplex v Honeywell [2007] Bus LR Digest D109 … as follows:

“47…..The essence of the prevention principle is that the promisee cannot insist upon the performance of an obligation which he has prevented the promisor from performing.

48.  In the field of construction law, one consequence of the prevention principle is that the employer cannot hold the contractor to a specified completion date, if the employer has by act or omission prevented the contractor from completing by that date. Instead, time becomes at large and the obligation to complete by the specified date is replaced by an implied obligation to complete within a reasonable time. The same principle applies as between main contractor and sub-contractor.

49.  It is in order to avoid the operation of the prevention principle that many construction contracts and sub-contracts include provisions for extension of time. Thus, it can be seen that extension of time clauses exist for the protection of both parties to a construction contract or sub-contract.”

He also stated inter alia that the authorities on the prevention principle show that:

In a basic shipbuilding contract, which simply provides for a Builder to complete the construction of a vessel and to reach certain milestones within specific periods of time, the Builder is entitled to the whole of that period of time to complete the contract work. 

In the event that the Buyer interferes with the work so as to delay its completion in accordance with the agreed timetable, this amounts to an act of prevention and the Builder is no longer bound by the strict requirements of the contract as to time.

The instruction of variations to the work can amount to an act of prevention.

However, the prevention principle does not apply if the contract provides for an extension of time in respect of the relevant events.  Where such a mechanism exists, if the relevant act of prevention falls within the scope of the extension of time clause, the contract completion dates are extended as appropriate and the Builder must complete the work by the new date, or pay liquidated damages (or accept any other contractual consequence of late completion).

Accordingly, Adyard’s claims were dismissed and SDMS succeeded in its counterclaim.

Reference: Adyard Abu Dhabi v SD Marine Services, [2011] EWHC 848 (Comm)



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