Coronavirus An Employer Or Contractor Risk?
|Author:||Ms Brenna Baye|
|Profession:||Edwin Coe LLP|
With the escalation of coronavirus infections in the UK, contractors, consultants and developers must consider the impact of the virus on their projects. Within the sector, the questions which are likely foremost in parties' thoughts include (a) a contractor's ability to claim an extension of time if its workforce is either struck down by or unable to attend Site due to coronavirus, and (b) whether a developer is entitled to liquidated damages should the contractor be delayed for coronavirus-related reasons.
As always, the first place one must turn for answers is the contract.
It seems unlikely that any concluded construction contracts contain a 'coronavirus clause'. Instead, parties should consider what, if anything, their contract states about extensions of time in relation to force majeure.
Within English law, there is neither a definition nor a recognised legal doctrine of force majeure. Rather, it is a contractual method by which parties expressly allocate the risk for events which fall within the contract's definition of force majeure. For example, in a JCT Design and Build Contract, force majeure is a Relevant Event but not a Relevant Matter - while the employer takes the time risk (and is unable to claim liquidated damages), the contractor incurs the cost risk (and cannot claim loss and expense). Accordingly, the risk for a force majeure event is 'shared' between the parties.
However, various standard form contracts, including the JCT forms, do not actually define force majeure. Generally, in such situations case law has established that force majeure involves acts, events or circumstances outside the reasonable control of the parties. Yet, it is thought that the JCT force majeure clause has a restricted meaning since events such as war, strikes, fire, etc. are expressly addressed within the JCT suite as Relevant Events. In any event, while nothing is of course certain, it seems arguable that an epidemic and/or governmental restriction on the movement of persons (should such occur) would be an event outside the reasonable control of the parties to a construction contract.
The burden is on the party seeking to rely on the force majeure clause to prove:
(a) the occurrence of the event - likely not too hard a burden in the case of coronavirus; (b) that the event prevented/delayed performance; and (c) non-performance was due to circumstances beyond the party's control and there were no reasonable steps the party could take to avoid the...
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