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Construction contracts and COVID-19 disruption

The situation is constantly evolving so parties involved in construction projects should review their contracts periodically to ensure they remain aware of their contractual rights and remedies.  The Cabinet Office has published construction-specific guidance to support the implementation of supplier relief by way of a Procurement Policy Note to ensure service continuity during and after the current outbreak.

The Construction Leadership Council (CLC) has issued construction-specific “best practice” guidance urging the industry to “work together to support the long-term health of our sector by constructively resolving all contractual disputes arising from the pandemic”.

The CLC’s concern is to avoid costly and long-running disputes over the impact of COVID-19 on projects, particularly delays in completion and additional costs incurred.

They advise that despite contractual provisions, parties to contracts should seek a collaborative approach towards successful project delivery and discuss whether an extension of time can be granted or additional costs shared.

However, the parties must still comply with the terms of their contract to include giving early warnings and proper notices.

The guidance has pro-forma letters and notes.  The letters can be used as a template and tailored to reflect the particular contract terms, any amendments, and previous correspondence and developments.

It is suggested that “a dialogue letter” and any subsequent discussions are “without prejudice” and “subject to contract”.

There are also pro-forma contractual notices for use with JCT DB 2016, NEC3 and NEC4 ECC, which set out the relevant contractual clauses and information to be provided in respect of delays caused by COVID-19.

The pro-forma notice for DB 2016 assumes the material cause for delay is the pandemic and that this constitutes a “force majeure” which is a Relevant Event, but this may not apply for every contract.

JCT has published guidance under the JCT SBC 2016 and distinguishes the position between delays caused by COVID-19, for example shortages in goods and labour, and those caused by the government response.

Virtual mediation by way of videos have now started and the Civil Mediation Council has published guidance to members saying that the need for mediation has “not gone away” and Coronavirus “could result in a greater demand for the help that mediators can bring”.

David Brown is a partner at Gullands Solicitors