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Construction contracts and COVID-19 disruption

The construction industry is naturally feeling the full effect of the COVID-19 pandemic.  The focus currently is rightly on the safety of the workers still attending sites.

With many sites closed for the foreseeable future and it will take time for everything to get back to close to ‘normal’ or whatever normal may be in the coming weeks and months. There will no doubt be issues with labour shortages, materials shortages, general supply chain delays and of course financial pressures as cash flow is squeezed.

We have been actively advising clients on contractual issues. and we have put together some guidance on how to deal with them. Construction Partner and litigation expert David Brown is available to discuss any concerns you have about your building contracts.

  • Notices claiming extensions of time/force majeure claims
  • Surveys of work undertaken at the point of impact
  • Record keeping of resources on site and how works have been affected
  • Changes instructed by the employer, instructions to stop or postpone work or suspend progress.

With all of the above issues it is important to look first at the detail of the contract and the specific wording and the chain of events which has led to the issue. Force majeure clauses are frequently the starting point for parties looking for contractual relief. These are events which are unexpected and outside of a contracting parties’ reasonable control. Typically, they provide that the affected party can be excused from or suspend some or all of their obligations and in some circumstances terminate them.

Force majeure can be dealt with differently in contracts and there is no general principle for it in English Law, so typically the parties in the contract have to define what constitutes a force majeure event.

Force majeure events often result in time relief but not financial relief but there may be other contractual provisions which provide cost relief entitlement.

A contract could be brought to an end where the performance of the contract has been frustrated and where it is impossible to perform as the result of an event that is not the fault of either party. If a contract is frustrated, the parties ongoing obligations will be discharged and the contract brought to an end.

There is no “one size fits all” solution because there are a range of different building contracts, often with bespoke amendments and the circumstances of each project will vary.

Contracts which have not yet been entered into need to be reviewed now the existence and consequences of COVID-19 are clearly known and provisions made to include or exclude its consequences.

The Construction Leadership Council (CLC) has convened a Construction Industry Task Force to provide a focal point for co-ordinating the industry response to Covid-19 and to facilitate communication between the industry and government.  So far the Task Force has given guidance to the industry on Site Operating Procedures, the temporary suspension of work on construction sites and contractual matters arising out of Covid-19, guidance on the Job Retention Scheme and the Self-employment Income Support Scheme, and launched an appeal for the construction sector to donate available Personal Protective Equipment to the NHS.

To discuss your construction contract, contact David Brown