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Construction Update: COVID-19 and Contracts

22 March 2021 | David Morris

It’s hard to believe that it’s a year since I left the office to work from home for the foreseeable future, and that the foreseeable continues on! At GL Law we’d been set up remotely for a while so it was among the easier transitions at that time, but other shifts going on back in March 2020 were not so straight forward.

I had received lots of calls seeking advice on whether construction work could continue, whether it should continue, and where the permissions stood. Wherever they sat in the contractual matrix, whether employers, contractors, consultants, funders or others, clients wanted work to continue on site. No one wanted work to fall behind schedule, and time and budget remained the key constraints that they are, but in some cases working on was not possible when measured against public health.

I wrote an article a year ago now entitled ‘the contract remains king’, and you won’t be surprised to know that is very much still the case.

While some of the big house builders closed sites, and closed very publicly, others pressed on. Many contracts were suspended, but some only briefly, and some for only a matter of days. Now we are well into the recovery phase and we are seeing a lot of those contracts come towards the final account phase if they are not there already, and the cost of those closures, and other effects of the pandemic (and Brexit), are apparent.

In a recent poll we carried out, two-thirds of those asked had been involved in construction contracts affected by the pandemic. Those effects will almost definitely be delay and additional costs caused by increased safety measures; perhaps reduced labour and time allowed on site; self-isolation and quarantine; shortage of specialists, and shifts in materials, labour, programme and maybe even design.

But, who will be responsible for those effects, who will pay for them, and who will suffer?

The short answer is that it depends on what the contract says. We still receive contracts that clients have signed without reading, or within which they’ve read the word ‘coronavirus’, ‘pandemic’, ‘force majeure’ or ‘statutory power’ and think that they’re protected. But, whichever side of the argument they sit on, that might not be the case.

We’ve seen a number of ‘coronavirus’ clauses but they have not always provided the protection that clients would seek. Whether an Employer seeking to put the burden of such issues on the contractor, or a contractor or sub-contractor looking to limit their liability for matters outside of their control, such clauses will often leave gaps that are very subjective – how foreseeable are the issues? Are they outside of the contractor’s control? Have they been sufficiently substantiated? Is the delay caused by a party’s oversight or a statutory power?

There can be little doubt that Covid-19 is a pandemic but, like force majeure, any claim for an extension of time and/or loss and expense will be measured against a contractor’s best endeavours to mitigate that delay, and the foreseeability question will undoubtedly arise. That will depend on when the contract was signed, how early and how often notice was given, and any supporting particulars.

Notes, records and risk assessments must be made and kept. We as lawyers have to drill down into the details to seek to establish what caused the loss; the absence of details can make that very difficult, especially in the case of overlapping delay and/or loss and expense trigger events.

Ultimately, in the standard form JCT and NEC contracts, a contractor’s positive recovery of loss and expense is unlikely. Delay and therefore protection from liquidated damages is easier, but by no means guaranteed. We have seen delay granted readily in comparison to loss and expense, but in the absence of precise wording, even in the event of delay, negotiation between the parties may well be the way to avoid expensive litigation.

No one is going to want to bear the cost of the effects of the pandemic in relation to construction works, but it is likely that someone will have to. Whatever your position on site, keep records, issue notices on time and often, seek instructions, and endeavour to mitigate loss, and you’ll help to put yourself in the best position in order to recover loss.

Specialist Construction Solicitors

For further advice on how we may be able to help, or if you are at all uncertain about the provisions of your contract, please don’t hesitate to contact me by calling 0117 906 9433 or email d.morris@gl.law

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The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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