Weatherproof: construction contracts and bad weather8.04.2012
What are the typical legal considerations if a building project is delayed because the builders have to stop work as a result of bad weather?
Regardless of the contract between the parties (although the precise position will depend upon what the contract says) the general considerations are whether the contractor is entitled to time and money, how bad does the weather have to be, did the weather actually delay the project, is the contractor entitled to relief under any other provision of the contract, has the contractor given notice on time, what if the contractor has no right to relief and what if the parties disagree about the contractual position?
A contractor is assumed to have contemplated the possibility of bad weather so he is not normally excused his performance. However, exceptional bad weather and storms or snowfall which could not be reasonably anticipated may be “an act of God”. There were no reported cases arising out of the hurricane in Britain in October 1987 dealing with such an act of God bringing a contract to an end.
Generally speaking, bad weather is treated as a “neutral” event under most building contracts. In other words the builder is normally entitled to an extension of time for completion of the works, but not to payment for any loss and expense it suffers as a result of the stoppage caused by bad weather.
The consequences of a contract overrunning normally include a financial penalty on the builder, so it is important that he makes an application to whoever is looking after the contract for an extension of time on the basis that the delay was not caused by him as he could not have prevented the bad weather. In order for an extension of time to be granted, the builder should give full details to the Contract Administrator on the delay to progress and identify any event which in his opinion is a Relevant Event and give an estimate of any expected delay in the completion of the works beyond the relevant completion date. For example clause 2.2.7 of the JCT Standard Building Contract 2011 makes this provision.
In this particular contract, a Relevant Event includes “exceptionally adverse weather conditions”.
It can become extremely complicated to work out what delay was caused by the inclement weather. This is especially so if the project is also subject to delay for other reasons, such as contractor default. So as a result, even exceptionally bad weather will not automatically result in an extension of time.
To summarise, in order to obtain an extension of time under a contract which has this provision the builder must make an application for it and it will only be given if the bad weather is likely to delay completion. The weather is likely to have been exceptionally adverse in order to qualify for an extension of time.
Under the JCT Suite of Contracts the builder is unlikely to be entitled to compensation for any loss and expense that he suffers as a result of stopping work. There is provision for a Relevant Matter under JCT Contracts which relate to loss and expense but these are intended to cover variations to the work and any impediment, prevention or default by an act or omission of the Employer
or the Contract Administrator, for example.
However, in other forms of contract the Contract Administrator may have a discretion as to whether he awards time and money for the delay and in some contracts this is dealt with as a “Compensation Event”. The NEC form of contract adopts an “all or nothing approach” and if a compensation event occurs the contractor will be entitled to both an extension of time and additional payment.
If the parties to a construction contract cannot agree on the effect the weather has had, they may refer the dispute to adjudication.
If the contractor has no right to relief then he will have to bear the consequences of bad weather out of his own pocket which may include financial penalties (liquidated damages), increased labour costs and other costs arising from disruption to its work. Although most builders will allow some contingency for delay and increased costs when they tender for a project, in the current economic climate the contractor may have tendered on a tight margin and cut its contingencies to a minimum so the bad weather will have a direct effect on the contractor’s profit margin.