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Does the Force Majeure Clause in Your Construction Contract Protect Your Organisation From COVID-19?

on Tuesday, 09 November 2021.

The impact of the COVID-19 outbreak has been felt throughout the construction industry.

At the outset of the pandemic, many construction companies had to ask themselves whether their force majeure clauses were sufficient to protect them against the risk of construction works being suspended and contractual obligations going unfulfilled. Since then, the pandemic has evolved and affected all of our lives in many different ways. So, as we are now approaching the second anniversary of the pandemic with no clear ending in sight, it is worth asking that question again.

A force majeure clause sets out the rules that will apply where some external event - outside of the control of the parties to a contract - gets in the way of performance of the contract. The COVID-19 pandemic is a potentially high-impact event, outside of the control of organisations. But what rights do you have if the contractor is prevented from performing its contractual obligations due to the pandemic?

Force Majeure - C'est Quoi?

It wasn't any English lawmaker who came up with the concept of force majeure - it was the French. And because there is no standard English legal principle of force majeure, the only rules that apply will be the rules that are set out in your contract.

The intended effect of a force majeure clause is to make clear where the risk of the non-performance sits. If the contractor is excused from liability for failing to perform its obligations, then the flip side is that the employer takes the risk of those obligations going unperformed.

Have Construction Sites Been Closed Because of COVID-19?

At the outset of the pandemic in March 2020, there was still confusion over whether construction sites in England could remain open, but the Government swiftly made it clear they would impose no restrictions in that regard, other than that the works should be carried out safely.

The Coronavirus Act 2020 did not make much of a splash as far as construction industry was concerned. It received Royal Assent on 25 March 2020, but did not contain construction-specific provisions.

The Act was followed by the Business Secretary writing an open letter to 'everyone' working in construction, confirming that they could continue to go to work. That, of course, included the construction of the NHS Nightingale Hospitals, the first of which was about to be opened on 3 April that year.

The Prime Minster, having by then personally grappled with COVID-19, went further in his announcement to the nation in May 2020, saying that construction workers should be 'actively encouraged' to return to construction sites as he revealed plans to alleviate lockdown.

At the start of the third lockdown in January 2021, the Business Secretary wrote another letter, saying that firms and tradespeople in the construction sector and its supply chain, including merchants, suppliers and product manufacturers, should continue to operate.

The Government has also published guidance on working safely (with focus on social distancing) with a view to helping construction projects to move forward.

All this means that, as far as construction is concerned, the Government believes the show must go on, provided always that the works can be carried out safely.

How Has COVID-19 Affected the Construction Industry?

As explained above, unlike other industries, the construction industry has been able to operate during the pandemic, at least in theory.

In reality however, the construction industry has suffered from a shortage of labour (as a result of infection and resulting illness, quarantine or self-isolation) and shortages of plant and materials due to delays in their importation or transportation.

Whilst shortages in labour and materials are nothing new to the construction industry, the pandemic has made things worse and continues to do so. Issues with the supply chain continue to adversely affect construction projects. There have also been issues with workers being unable (or unwilling) to cross borders to get to their construction sites.

Does Force Majeure Excuse Performance of the contract?

The starting point at law is that the parties are required to perform their contractual obligations and force majeure is seen as something that may excuse a party from doing so.

Typically, force majeure clauses will provide that - where a party is prevented from, or sometimes only hindered in, performing its obligations as a result of the occurrence of a force majeure event - the affected party will not be liable to the other for failure to perform its obligations as a result of a force majeure event.

Most standard construction contracts, like JCT forms, contain express provision for adjustments to the completion date to be made, in certain circumstances, if the works are delayed by force majeure. Typically, these provisions allow the contractor to claim an extension of time to complete the works. It is less likely that the contractor will be entitled to be compensated in respect of its expenses that are incurred during the delay, e.g. the cost of hiring equipment and machinery that continues to be idly on site while works are suspended.

If the force majeure event continues beyond a certain period of time, one or both of the parties may be entitled to bring the contract to an end. There may also be conditions attached to the force majeure clause before it can apply.

Three Things to Consider When Reviewing Your Force Majeure Clause



What Is the Position Under JCT Contracts?

Force majeure is a Relevant Event under DB 2016 entitling the contractor to claim an extension of time. However, force majeure is not defined and DB 2016 does not include any examples of force majeure type events. JCT later published guidance and suggested that the 'prevailing epidemic impacting upon the works' could be force majeure, but it depends on the circumstances of each case. The situation would need to be assessed on its own facts, looking in particular at whether COVID-19 prevented performance. Force majeure is not a Relevant Matter though, so the contractor is not entitled to claim loss and expense as a result of a force majeure event. So a contractor may be entitled to more time, but not money.

Clause 8.11.1 provides that if, before practical completion, an event of force majeure causes the Works to be suspended for more than the period stated in the Contract Particulars (the JCT's default period is two months), either party may choose to terminate the Contractor's employment under the contract. Clause 8.12 would then require the Contractor to remove any temporary buildings, plant and equipment (unless the Employer pays for them) and provide any as built drawings to the Employer. The clause also provides for a final account between the Employer and the Contractor.

What Is the Position Under NEC Contracts?

Force majeure (by any other name) is dealt with in clause 19 of NEC4 ECC (prevention) and as a compensation event under clause 60.1(19). Compared to JCT forms of contract, the contractor will have more hurdles to jump. In particular, the force majeure event must be one that an experienced contractor would have considered to have such a small chance of occurring when the contract was entered into that it would be unreasonable to have allowed for it. In other words, the event must be unforeseeable, which may be difficult to argue with contracts that were entered into after COVID-19 had been declared a pandemic by the WHO.

However, if a contractor can overcome these hurdles the compensation event allows the contractor, in principle, to recover both time and money as a result of force majeure.  The potential wide ranging impact of clauses 19 and 60.1(19) often result in employers amending or deleting these clauses.

If a clause 19 event stops the contractor completing the whole of the works by the date for planned completion and this delay is forecast to continue for more than 13 weeks, the client, but not the contractor, is entitled to terminate.

What Practical Steps Should Organisations Take?

You should consider the following steps in particular:



What Next?

As said previously, after nearly two years of COVID-19, there is still no ending in sight.

At the time of writing, the BBC is reporting on a rise of the average number of daily confirmed cases, driven by the Delta variant. The Prime Minister has lifted all legal restrictions in England but urged the public to remain cautious, saying the pandemic was not over.

We can only hope that the construction industry will emerge stronger than it was before COVID-19 with a collaborative focus on delivering projects, rather than become embroiled into disputes over who should bear the harm inflicted by the pandemic. We have indeed seen businesses improving on their remote working practices, technology, safety rules and management of risks posed by unforeseen events. It stands to reason that contractors who are resilient to COVID-19 won't have to rely on their force majeure clauses, as projects can continue with only limited interruption. But this may be wishful thinking on my part.

The reality is that shortages in labour and materials are here to stay (at least for the time being), so we may well see more (not fewer) disputes escalating into adjudication, arbitration and court proceedings, all of which can now be conducted remotely. We can also expect that force majeure will play a key part on those virtual battle grounds.

For more information, please contact a member of our Construction Law team, or complete the form below.


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