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What are the rights and remedies for parties of a construction contract?

View profile for Roxanne Antonio
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COVID-19 has been declared by the World Health Organisation as a pandemic that has had an impact on all our lives. It has also had an impact on construction projects up and down the country and overseas.

There will inevitably be interruptions to supply chains and delays to projects as contractors remain off-site for an unknown period of time.

What are the rights and remedies for parties of a construction contract?

The first port of call is to review the contractual position in the parties’ construction contracts.

JCT standard forms of building contract do not include pandemics like COVID-19 in the list of delay events. Instead, parties are likely to turn to other delay events specified in the building contract.

The key clauses to bear in mind are force majeure clauses. The wording of the clause is crucial as there is no established English Law of force majeure. If the contract does not contain such a clause then a party may have to fall back on Frustration. Force majeure pardons what would probably otherwise be a breach and effectively suspends temporarily an obligation to perform the works of the project. However, it may not give rise to any compensation loss and expense, unless the contract provides otherwise.

A force majeure clause should however be construed in each case with a close review of the words which proceed or follow it. It is also important to consider the nature and general terms of the contract as a whole.

Unlike force majeure, which merely suspends performance of the contractual obligation, Frustration will bring a contract to an end. It is more difficult to prove that the contract is physically or commercially impossible to fulfil. It is also a risky approach to take: if a contract is frustrated, the parties no longer need to perform their contractual obligations. If a contractor believes the contract has been frustrated and stops work, then, unless this is justified under the rules of Frustration, it will no doubt amount to a repudiatory breach.

Other compensation events, which could be a consequence of COVID-19, may be changes in the law or the government exercising statutory powers which could fall within the force majeure category.

Future contracts must address the issue directly and construction professionals in negotiation should allocate the risk between them. It is expected that contractors will become increasingly insistent on negotiating provisions that deal specifically with the consequences of the risk of pandemic in construction contracts.

We continue to monitor the impact of COVID-19 on the construction industry.

If you require our expert assistance and are concerned about how COVID-19 is affecting your construction business, do get in touch with our experienced construction & engineering law team.

This article represents our understanding of the law in England and Wales as at 21 March 2020. Its contents are not intended to serve as legal advice and should not be considered as a substitute for taking legal advice.