FORCE MAJEURE CLAUSES IN ON-GOING CONSTRUCTION PROJECTS: THE IMPACT OF COVID-19

Andrew Singer QC addresses the contractual position with on-going construction projects.

Andrew Singer QC

 

The JCT standard forms of Building Contracts contain express “force majeure “ clauses. The 2016 edition version is at clause 2.29.15. “ Force Majeure” is a Relevant Event under the Contract.

The NEC 3 and NEC 4 forms of contact contains at clause 60.1(19) a clause described in the Guidelines as a force majeure clause although it does not use the phrase. The event gives rise to a Compensation Event.

GUIDANCE FROM KEATING

According to Keating on Construction Contracts (10th ) ed, at 20-166 ff

 ” a  statement of its meaning in French law by Goirand, approved by McCardie J in Lebeaupin v Crispin134 as applying to many English contracts, says:
“Force majeure. This term is used with reference to all circumstances independent of the will of man, and which it is not in his power to control … thus, war, inundations and epidemics are cases of force majeure; it has even been decided that a strike of workmen constitutes a case of force majeure.”

COVID-19

There seems little if any doubt that COVID 19 is an epidemic ( indeed it has been declared a pandemic) and amounts to force majeure and will therefore give rise to an entitlement for the contractor to seek extra time to complete the works. At the present time that could be a long delay.  The JCT contract also provides for loss and expense to be paid to the contractor in respect of certain Relevant Events but Force Majeure is not one of them. It may be possible to argue that measures taken by Government in the face of covid 19 amount to other Relevant Events which do provide for loss and expense to be paid.

THE NEC 3 AND 4 POSITION

The NEC 3 and 4 position is better for contractors as that carries a right to time and money. Again at first blush it looks as though COVID 19 will be a Compensation Event. The NEC 3/4 forms do require certain claims for Compensation Events to be made within a limited time frame from knowledge of them.

PRACTICAL GUIDANCE

So if you are or act for a contractor under the JCT form in an on going project you need to be looking at the specific contract in place and  making claims for extra time as soon as delays start to be encountered due to the effects of COVID 19 and considering whether any other Relevant Events might assist in seeking to recover the costs of delays.

In NEC 3/4 projects Compensation Event notifications should be made within contractual time frames.

Of course, individual contracts need to be considered to see whether any particular amendments have been negotiated which impact on the general position.

FRUSTRATION

The separate issue of whether COVID-19 is a “frustrating event” is beyond the scope of this note.

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