Does your contract hold up to the Coronavirus? What can we expect over the next few weeks?
The adverse impact of the coronavirus on the construction industry is becoming a reality. Employment, project time delays, performance, contracts and insurance are all areas of concern.
Guy Thomas, Construction and Engineering expert at DTM Legal advises on key steps to take to limit your risk of the COVID-19 pandemic. Every situation is different, so please do not hesitate to contact Guy Thomas to discuss your matter in specific detail.
Each project will have its own set of issues and complications. Some will be looking for extensions of time due to restrictions of contractors not being on site or delays in the supply and delivery of plant and material. Ultimately what is in your contract will determine your rights and obligations.
The current situation is moving and changing fast and on a daily basis. Here is our advice as to how best to counteract the next few weeks and steps to take to limit your risk.
- Project delays and schedule obligations
In all construction contracts there will be project schedule obligations. There no doubt will be delays due to absences from staff, contractors and suppliers, offices and sites may close and there may be delays to plant and material deliveries. We advise you review the operational terms in the agreed contract and notify your client that the schedule may not be met and check whether you need to submit a new schedule taking into account the disruptions. This will depend on whether this is a standard form contract and whether they include government intervention and force majeure clauses giving rise to the extension of time.
The current pandemic is considered a ‘force majeure’ event. You must ensure that this is accepted as the cause of the delay. The precise drafting of the contract will determine this.
If no provisions for ‘force majeure’ exist then review with the client and discuss whether a variation in the contract or another clause as listed below can be applied to deal with any delays associated with the coronavirus pandemic.
- Change in law
- Special circumstances
- Instruction by the engineer
- Delay as a result of flexible working arrangements
- Delay in delivery of materials
Careful analysis of the facts and the contract provisions is paramount to ensure best entitlement for the contractor. Multiple provisions may need to be relied upon.
Other forms of contract may have been amended in line with this ethos of dealing with issues as they arise.
You need to check but if in doubt, the best advice is to notify, applying the contract at the time, working with the other party to discuss and deal with compensation events as they arise and don’t save them until the end of the project.
- Do you need to give regular reports on progress?
If you do, it is important to explain how the project has been affected by the coronavirus. Do you need to update and maintain a contract programme? If so, how can you realistically keep abreast of fast-moving changes? The only advice is to keep abreast of current Government Guidance and take advice.
- How do we get relief from liquidated damages?
This will be determined if you are able to get an extension of time and relief which will depend on the force majeure inclusion in the contract. There may also be the option to suspend the contract.
- What is the position on Insurance?
You may have in place insurances that responds to at least some of your losses. Business interruption insurance may, in particular cover disruption caused by enforced quarantines and public policy. It is important however that you check any exclusions as insurers tend to regard pandemics as governmental risks. Make sure you notify your insurers promptly to ensure your right to a pay-out. If you are about to renew insurances be aware of changes to policies excluding cover.
- Monitor Government Guidance.
Policies and Guidance is changing daily. Ensure you are in line with all policies imposed.
- Review the grants, loans and access to help that the Government have put in place
The current pandemic will be with us for a while and its consequences for far longer. There are many possible means of relief for parties affected by the coronavirus. However, the level of relief will depend on the precise wording of the contracts that are in place and the impact that the pandemic has on the project.
Please refer to DTM Legal’s COVID resource centre for recent advice for Employer’s and Businesses. But if you want to talk, please contact 01244 354 800. We are here for you.