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Coronavirus and construction

The construction sector has remained open during the current crisis as it has been left to the industry to self regulate in determining whether it is safe for a site to remain operating.

Sites can continue to operate where it is possible to work whilst managing to achieve social distancing by keeping workers 2 metres apart.

In assessing whether this is possible, contractors should be carrying out risk assessments to ascertain where and how this is possible. This may mean that sites may as a result have to shut completely or continue on a fully operative basis. It may also mean that due to the nature of particular sites and the ongoing work, there may have to be partial closure or a limitation on the jobs that can be undertaken.

Even if at present work is able to continue without interruption it is therefore important to review the contract right now. A number of construction contracts contain programme obligations. Will a revised programme be required due to disruption? Wii the programme not be met? Does the contract obligate the contractor to give early warnings of delays and cost overruns. This may be necessary if an extension of time or payment of additional cost is later claimed.

As the crisis has developed both contractors and developers have however made sweeping decisions which have affected whether and how work can continue. However the decision has been made and whichever party has made it, this will have implications on the contract and its performance.

Additionally, there are a number of circumstances where the circumstances arising may depend on extraneous factors, the most obvious being as follows:

  1. Government/local authority instruction that the site (or sites generally) must close
  2. Site labour (whether employed by main contractor or sub-contractors) are unable to work due to ill-health/self-isolation/fear
  3. Materials are delivered to site late as suppliers become affected by coronavirus.
  4. Material costs increase due to a reduced supply arising from coronavirus or the impact on market prices
  5. The employer team (including client design team) become too ill to issue instructions or for other reasons cease to perform obligations.

In any situation the starting point as to how the matter can be resolved will be by reference to the contract.

There are a number of forms of standard contracts in the industry and none provide identical provisions to the other in respect of how responsibility is attributable and whether there may be remedy. There then is of course further variation as standard terms are departed from.

Additionally, there may be further remedies which arise.

In many situations either party may wish to assert that a closure or delay has arisen as a result of Force Majeure.

Force majeure events are, unexpected circumstances outside of a contracting party’s reasonable control which prevent it from performing its contractual obligations. Force Majeure can only be relied on where there are express provisions in the contract to set out what may happen in such situations. The protection afforded by the clause will depend on its wording.

It is further unlikely to be the case that the event itself of this crisis will be enough to qualify as a force majeure event and the parties will have to consider all the surrounding circumstances as they apply to that particular site and that particular contract.

Where Force Majeure is unavailable as provisions are absent from the contract or do not apply to the circumstances arising, there may be common law remedy afforded Frustration.

A party may be released from its contractual obligations by the frustration of a contract where extraneous events have rendered it impossible to perform the obligations under the contract. Frustration is an extreme remedy as it results in the contract being discharged and the financial outcome as a result can be complicated. The test for whether a contract has been frustrated is also stricter than typically what contracts will provide for a force majeure event to arise.

Advice at every step is crucial. Noble Solicitors can guide you through these complicated areas and provide not just advice but representation where required.

For any initial enquiry, please call 020 3709 2402