Law and regulation of concurrent delay in Ukraine

The concept of concurrent delay is unknown under Ukrainian law.

There is no definition of concurrent delay as such.

Even though the concept of concurrent delay is not developed, the Civil Code of Ukraine, the Commercial Code of Ukraine and secondary legislation set out provisions on contractual delays, including under construction contracts (i.e. risks and responsibilities of a defaulting party, rules for defective performance/non-performance, liability). In addition, the issue of concurrent delay may be regulated by the terms of the contract.

Under the general rule, the contractor is not responsible for the delay, if it has been caused by the delay of the employer, and vice versa. 

Under the law, there is no automatic extension of construction works completion term (the “Extension”). However, there is no statutory restriction for the parties to include provisions on the Extension into the construction contract (either automatic or subject to an additional consent). In case the construction contract does not regulate the issue of the Extension, the Extension will require amendments to the construction contract.

Under the law, a party is entitled to request the Extension subject to amendments to the construction contract in the following cases: (a) a force majeure event; (b) a breach of contractual terms by the employer (e.g. delays in transferring an advance payment, delayed provision of construction materials, equipment); (c) changes to the design specifications and estimates; (d) third parties actions affecting the performance of works, which are not under control of the contractor; (e) other circumstances, which may influence the works completion terms. 

If the parties cannot reach agreement as to the Extension in the above cases, the dispute may be referred to the court. The court will carefully analyse whether there are justified and legitimate grounds for the Extension, and whether the requested Extension is proportional to claimed grounds. Should the contract between parties provide for specific procedure for requesting of the Extension, the court will analyse whether such procedure was followed by the requesting party. The cases on such issues rarely come before the courts in Ukraine, as parties usually negotiate such issues and agree acceptable solutions.

If a delay is due to the contractor’s fault, the contractor will be required to pay a penalty or a fine, as provided for in a contract or established by law, and compensate employer’s damages in full. If a delay has been caused by the employer (failure to provide a construction site, non-performance of the obligation to transfer the design specifications and estimates, etc.), the contractor will not be accountable for the delay or suspension of the construction works and may claim compensation of damages caused by the breach of the employer’s obligations.

There is no specific case law relating to concurrent delay in Ukraine. However, in case of a dispute regarding the concurrent delay, courts may take into consideration the following factors: the nature of each event; interconnection of events; gravity of a contractor’s/employer’s breach; whether each party took sufficient efforts to mitigate the situation

In case of any delay under a construction contract, the affected party usually sends a notification to the defaulting party specifying the breach of contractual obligations. In practice, a confirmation of such notifications serves as a valid evidence of delay under a construction contract before a court. In case of force majeure circumstances, it is usually required that a suffering party provides a confirmation issued by the Chamber of Trade and Commerce evidencing a force majeure circumstance and its duration. Third party actions also require documentary evidence. 

It is up to the parties to regulate contractually the entitlement to the extension of time and/or additional costs and their affiliation with a specific cause

There is no limitation under Ukrainian law to assign the risk of concurrent delay to a specific party, and the respective contractual provision would generally be considered as valid and binding. Nevertheless, the outcome of a potential court dispute is unclear as there is no settled case law dealing with validity and enforceability of concurrent delay provisions.

An event that is at the Contractor’s risk under the contract (a “Contractor Risk Event”) will result in five weeks delay to completion, delaying the contract completion date from 21 January to 25 February. Independently and a few weeks later, a variation is instructed on behalf of the Employer which, in the absence of the preceding Contractor Risk Event, would result in delay to completion from 1 February to 14 February.

7.1 Is the Contractor entitled to an extension of time in respect of the variation? If so, for how long?

Under Ukrainian law, the Employer has a statutory right to change the design specifications and estimates during the course of performance of the construction works, i.e. to introduce a variation to the agreed works if (i) the cost of the additional works does not exceed 10% of the total cost of construction works and (ii) the nature of works remains unchanged. Such variation does not require the Contractor’s consent. If the cost of the additional works instructed by the Employer exceeds 10% of the total cost of the construction works, the Contractor is entitled to terminate the construction agreement and to claim damages from the Employer.

In the above scenario, the Contractor is not entitled to the automatic extension of time. It will be liable for the delay caused by the Contractor Risk Event for a period from 21 January to 25 February. It will not be liable, however, for completing the Variation during the period from 1 February to 14 February. At the same time, other works, performed in the period from 1 February to 14 February, which are not affected by the Variation, would not be excluded from the Contractor’s liability (unless differently regulated by the construction contract).

The extension of time for completion of the Variation occurring after the agreed works completion date should be agreed by the parties in writing, and this is the Contractor who should initiate the Variation and the extension. Such extension would normally only apply to the works, which are subject to the Variation (the parties, however, are free to agree on the extension of the whole contract). Practically, a daily rate for delay damages should apply for the whole period of delay caused by the Contractor Risk Event. However, at the time of agreeing the Variation, the Contractor would have some leverage to negotiate the damages waiver for a period of 1-14 February or any other period

7.2 Assuming the Contractor is contractually entitled in principle to recover delay-related costs relating to the variation, for what period (if any) could it recover those delay-related costs?

If the Works Variation does not result in works completion delay, i.e. all works after the Works Variation can be completed by 25 February, the Contractor would not be entitled to claim delay-related costs. If, however, the Works Variation results in works completion delay, i.e. the scope of works changed by the Works Variation results into works completion taking place after 25 February, the Contractor will be entitled to claim delay-related costs starting from 26 February until completion of the works. These costs would ordinarily be claimed as part of the cost of the Variation.