Fit for purpose?
The Covid-19 pandemic has highlighted that current construction documents are not generally drafted to deal with circumstances like these. Much of the current legal discourse is focused on the interpretation of contractual clauses being challenged and setting out the ground rules for negotiating contracts for new projects.
Future Risk Mitigation
A big issue that will shape future contract negotiation is how the pandemic-related risks are shared between the Contactor and the Employer. Currently, most risk is very much sitting with Contractors, who will potentially be facing increasing margin and cashflow pressure as a result.
Their focus will be to build in clauses for new projects to recover time, but more importantly to define the circumstances where cost can be recovered against this time. We are predicting much more heated discussion around relevant events versus relevant matters/compensation events.
Contractors will be looking for the ‘Golden Bullet’ where there are clear provisions to extend time and recover cost. As a client, you will clearly be looking to minimize your exposure to programme delay and increased build costs.
Contractors will most probably look for a specific re-write of certain clauses for new projects and most likely try to get the definition of Force Majeure clearly defined in the context of the building contract.
COVID-19 related claims in the future could be limited because there will be the argument of foreseeability in play. We predict that Contractors will argue that even if the existence of COVID-19 itself does not qualify for Force Majeure relief, they are able to claim relief where the spread or impact of COVID-19, or other pandemics, impacts workforce and supply chains above a threshold that was foreseeable.
Contractors will not want to bear the risk of such events and equally, you will not want to see longer programmes, and more expensive build costs that could potentially arise from Contractors factoring in eventualities like these. Nor do you want to see loss and expense claims at every turn.
You should consider including amendments expressly allocating the risks between the parties, including programme delay and any associated additional costs, as well as responsibilities in the event of site closure. Amendments should also include site security and de- and re-mobilisation, arising from COVID-19 epidemics and pandemics more widely.
I strongly recommend that you seek specific legal advice in the near future in order to ensure that there is enough time to consider all necessary contractual amendments and provisions that may need to be added to the form of contract, and to ensure that these meet the requirements of all stakeholders and internal governance.
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