As a result of the current situation battling with the spread and effects of the COVID-19 virus and the restrictions on working practices and movement we have received enquiries from Contractors, Sub-contractors and Employers seeking advice.
The issues are complex and specific to each contract, which are often amended, so there is no single answer for any single scenario.
It is likely that as the crisis worsens and more time passes, the complexity of each situation is likely to increase which will undoubtably affect productivity.
There is a limit to the extent of advice that can be given without sight of the specific detail, the first generic advice is to communicate, regardless of where you sit in the supply chain. Collaboration is fundamental to help reduce matters from escalation without this relationships are likely to be tested and when normality returns, which it will, who will be around to pick up the pieces and will they be focused upon getting the work done, or maximising their returns? Collaboration is the first step to potential re-negotiation, which could relieve the parties from their obligations entirely with little fuss, who knows, both parties may seek this but not wish to admit it. Be mindful that any negotiation should be carefully considered and formalised correctly.
All parties should remember that all of those engaged in the construction industry, regardless of role or which side of the fence they sit on, share some common goals:
- Getting the work done
- to the quality specified,
- in the agreed time,
- for the agreed price, and
- receive payments in accordance with that agreed.
We are in no doubt that some Employers, Contractors and Sub-contractors will see this sorry state of affairs as presenting and opportunity to capitalise.
There has been much discussion recently about whether the current situation in respect of COVID-19 represents a Force Majeure event, further complicated by the UK Government stating both verbally and recently formally in an open letter, that construction sites should remain operational providing that they can provide and maintain the safe working practices stipulated.
It is important to review the specifics of the particular contract as not all contain Force Majeure as a relevant event as standard, and some that do not include comprehensive definitions.
What is Force Majeure?
Derived from the literal French translation for 'superior force', force majeure clauses are commonly found in commercial English law contracts but the term 'force majeure' does not actually have a recognised meaning under English law. It is commonly defined in contracts as circumstances that are not within a party's reasonable control, often accompanied by a non-exhaustive list of examples.
In NEC contracts Force Majeure is not referred to, but many do contain a Prevention clause which covers similar events which:
- stops the Contractor from completing the whole of the works or completing the whole of the works by the date for planned Completion shown on the Accepted Programme;
- neither party could prevent; and
- an experienced contractor would have judged at the contract date to have such a small chance of occurring it would have been unreasonable to have allowed for it.
The benefit of a force majeure clause relieves parties to a contract from some contractual obligations under certain extreme circumstances outside of either parties control or contemplation and often provide relief in respect of obligations to Time but not Cost of such delay, adopting the “we are all in this together” philosophy.
As the crisis worsens and the more the measures to contain the virus are unsuccessful, the case for force majeure or such provisions only get stronger.
Where the works are suspended or new procedures are formally enforced there may well be justifiable costs to recover and accurate record keeping will be invaluable in proving the value of any impacts. Remember always the need to mitigate any loss suffered as no party is meant to gain, merely put them back in the position they were prior to the event occurring, and that valuation will be in accordance with the provisions of the specific contract.
The second piece of generic advice is to preserve your contractual rights by doing what is says in the contract and follow the processes, actions, notifications and instructions set out.
The third piece of generic advice is to be proactive and discuss the issues that you face, record these formally, even where there is no Early Warning procedure in the contract. Don’t sit back and wait, which under NEC could be detrimental to any claim you may have to increased costs if you exceed the formal notification period.
Whether a party to a contract can invoke force majeure is complex and will depend on many factors including whether the Outbreak falls within the contractual definition of force majeure. This, and the types of protection afforded to parties in the event of a valid force majeure event, will depend on the specific drafting of the contract. If in doubt, legal advice should be sought.
The forth piece of generic advice is to check your insurances to see if you have cover for such a situation.
We have already provided advice to a number of our clients in relation to the Coronavirus outbreak in order to ensure the preservation of their respective rights and are currently working with Employers to determine the correct actions to be taken in maintaining wellbeing of operatives, productivity, reducing the impact of the restrictions to travel and the supply of goods and materials as well as determining the point at which suspension should be considered, its impact in terms of both completion time of the project in hand and any extended obligations to tenants or future operators, as well as potential cost impacts.
With COVID-19 being global, there is likely to come a time when supplies are scarce or impossible to source.
We are also engaged with Contractors and Sub-contractors assisting them understanding their obligations under the terms of their specific contracts; identifying their rights to recover additional cost; protecting their rights to recover additional costs incurred; protection against Damages by identifying their rights to recover time; protecting their rights to recover additional time; recovery of payment for works undertaken to date which may include approaches to obtain payment for works based on milestones or completed activities.
We are finding that too many organsiations are unaware of the obligations and liabilities that they have signed up to and this is something that we can assist with in the pre-contract stage where we believe the following to be invaluable - be proactive and do the thinking upfront .
If you think QuantumCLS can help then please contact us directly where we shall be pleased to assist.