Due Diligence in Construction Contracts

May 22, 2014

In Sabic UK Petrochemicals Limited v Punji Lloyd Ltd [2013]EWHC 2916 (TCC) the Court considered the meaning of the obligation in the contract to carry out the works “with due diligence”. Mr Justice Stuart-Smith decided that it meant to proceed “continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual obligations.” The Judgment, much of which is case specific, goes on to make it clear that if one of the specific contractual objectives becomes impossible to achieve there is no reason to consider that “due diligence” obligation will become less onerous, and indeed may require the contractor to take accelerative or other measures. Delay, of itself, does not automatically demonstrate a lack of due diligence, and whether it does will depend upon the construction of the contract and the other contractual obligations undertaken by the contractor.