COVID-19 – Contract Claims

COVID-19

We would like to reassure you that it is business as usual for MPG.  However we have received a number of concerned calls from clients and in response have drawn up the help list of bullet points below:

Look at the operational provisions of your contract:

  1. Are you obliged to submit a revised programmed due to disruption or notify your client;
  2. Does your contract obligate you to give early warnings of delays, if so you must do so promptly;
  3. Does your contract require regular progress reports, if so clearly set out impacts the disease has on the project.

Can you make a claim?

The starting point for your rights and obligations, should you find yourself affected by Coronavirus, will be your contract. None of the standard form contracts (e.g. JCT and NEC3/4) refer expressly to epidemics or spread of diseases.

Outbreak of illness does not fall within the meaning of “excepted risks” used in most of the standard forms so, contractors may have to rely on other clauses in the contract such as suspension, force majeure and prevention, or change in law.  Contractors may not be able to point to one clause for a full remedy, and may have to rely on multiple provisions – used in conjunction with the common law – in order to be granted both time and money.

What about common law remedies?

Contractors may also consider common law remedies but the primary basis of entitlement should be the relevant and applicable terms of the contract.

Is it Force Majeure?

Does your contract contain force majeure clauses, unexpected circumstances outside a contracting party’s reasonable control.  Check what events this covers and you may be able to claim costs arising from the impact.  Check also with regards to any subcontractors you may have.

What if the contract doesn’t contain a force majeure provision or what about claiming Impossibility/ Frustration/Prevention?

Can you argue the effects of Coronavirus itself or of government action aimed at combating it (such as mandatory quarantines) have prevented or frustrated the parties’ performance of your contract, or made performance impossible? If you can’t make a claim or classify Coronavirus as an event of force majeure, you might be released from further performance.  Prior to asserting either the occurrence of a force majeure event, or that a contract has been frustrated, it is very important to take legal advice.

What is the position under an un-amended NEC3 Contract

If you have entered into an un-amended NEC 3 contract Coronavirus may be a Compensation Event under 60.1 (19).  This covers an event which stops the contractor completing the work at all or by an agreed date, an event that couldn’t be prevented, would have been judged as an event with such a small chance of occurring it would be unreasonable for the contractor to consider it when entering into the contract.

What about an unamended JCT contract?

Clause 2.26.14 of the JCT Design and Build Contract identifies “force majeure” as a Relevant Event which entitles the contractor to an extension of time and  entitles either party to terminate the construction contract under clause 8.11.1, it is not a Relevant Matter and gives no entitlement to losses and expenses.

What about insurances?

If your operations are impacted by Coronavirus, you may have in place insurance that responds to at least some of your losses. Business interruption insurance policies in particular may cover disruption caused both by the disease itself and by public policy responses to it, such as enforced quarantines. However, there are often exclusions in such policies. it is important that you notify your insurers promptly.

Conclusion
There may be a number of remedies under your contract that can be used to grant relief from performance if the coronavirus has an adverse impact on any of your construction projects. These may be e.g. force majeure or claims for extensions of time and relief from liquidated damages. However, it will very much depend upon the exact wording of the contract itself and the impact of the virus on the project and any other surrounding circumstances.

For further more detailed information please contact us directly and we will be able to provide advice specific to your circumstances and contract.

MPG Project Management Team

Since the New Year our PM team has continued to keep pace with demands for their services. We have had a very busy start to 2020 with a number of new and exciting projects including a large redevelopment project in London’s Soho Square, Royal Free Hospital, Union Square in Manchester and the Afghan Embassy.