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Is COVID-19 a Force Majeure event?

As we all know with the Covid-19 outbreak, we are living in unprecedented times and now more than ever, it’s vitally important that we all protect our commercial interests, or for some ensure that we survive, due to the ongoing COVID-19 pandemic that is severely affecting all within the construction industry.

Therefore, I thought I would write a few blogs aimed at just doing that – protecting your commercial interests and ensuring that you have sufficient records / information going forwards to do that, but to also consider how you may mitigate the risks in any future contracts. This blog concerns how we may claim for additional time and money under the Contract for COVID-19.

Given that construction contracts are performed under a myriad of standard and bespoke forms of Contract, I have set out how we may claim in principle under the Contract and referred to specific provisions of the JCT or NEC as an example. But as always it’s the terms of your contract that matter and this blog should be used a guide to analyse your own contract.

Most Contracts contain a Force Majeure provision. Force majeure generally refers to unforeseeable circumstances which change the performance of contractual obligations.

There is no precise definition under English law and there is little case law on the subject. Keating on Construction Contracts refers to the judgment in Lebeaupin v Crispin [1920] which considered that the term “force majeure” was “used with reference to all the circumstances independent of the will of man, and which it is not in his power to control… Thus war, inundations, and epidemics, are causes of force majeure …” This decision suggests it is likely that Covid-19 would be considered to be an event of Force Majeure, but it’s not certain.

Often whether or not an event is considered a Force Majeure will turn on the wording of your contract and the factual scenario. The test for whether a Force Majeure event has occurred will require three issues to be considered:

• Is the event beyond the control of the affected party?
• Is the affected party’s ability to perform its contract hindered or prevented by the event?
• Has the affected party taken all reasonable steps to avoid or mitigate the event or its consequences?

The JCT Design and Build 2016 at Clause 2.26.14 includes Force majeure as a Relevant Event, but Force Majeure is not included as a Relevant Matter, so whilst you may be entitled to an extension of time, you would not be entitled to loss and expense.

In the NEC4 Compensation Events are listed at Clause 60.1 and include: where an event which stops the Contractor completing the whole of the works by the date for planned Completion Date and which – neither party could prevent, this is essentially Force Majeure. Under Clause 60.1 both time and money can be claimed.

Issue of Notices

I previously wrote a blog on the issue of notices (click) and I would suggest that you read this blog and ensure that your notice of the Force Majeure event complies with the guidelines I set out therein.

The only caveat I would state that is, where issue of the notice is required by hand but is not possible, due to social distancing restrictions, then it makes sense to address this prior to the issue of the notice and agree how it will be served with the other party.

If you require any advice on any matter or would like us to undertake a review of your project then please contact Joseph Bond, Managing Director of Kenzie Consulting Group at joseph.bond@kenziegroup.co.uk.

 

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