Coronavirus: Impact on Construction Contracts

Under the Joint Contracts Tribunal 2016 Design and Build Contract, ‘force majeure’ is a ‘Relevant Event’ which may entitle the contractor to an extension of time. This can be found at clause 2.26.14 of the JCT Design & Build contract.

Force Majeure – clause 2.26.14

‘Force majeure’ can be summarised as the occurrence of an event or circumstance beyond the control of the parties which prevents one or both of them from fulfilling their obligations under the contract. However, the Contractor must constantly use their ‘best endeavours’ to prevent delay ‘however caused’ (clause 2.25.6.1 of the JCT).

It is our view that the English courts would hold the current COVID-19 outbreak as a force majeure event.

Change in Law – clause 2.26.12

The other relevant event which may become relevant depending on the steps to be taken by the UK Government is clause 2.26.12 which is a change in law that directly affects the carrying out of the Works, for example if the UK imposed a lock down, and legislation was enacted to enforce such lock down. At time of writing (26 March 2020), the ‘restrictions’ placed on the UK by the Prime Minister do not have legal force, and Micheal Gove has said that construction should continue on site so long as social-distancing measures were followed. This sentiment has been echoed by communities and housing secretary Robert Jenrick.  However, operating construction sites is becoming increasingly difficult with labour shortages, the practical implications of being able to manage the social distancing on site and material shortages.  Many sites are closing despite no legislative intervention from the UK Government.

Can the Contractor claim Loss and Expense?

Unless the JCT has been amended, generally the contractor will not be able to claim any prelim costs or any sub-contractor delay costs for force majeure or change in law relevant events.

Can either Party terminate the Contract?

If the force majeure (or other related event) causes suspension of the works and such suspension continues for a period of two months (unless this time period is amended in the JCT), either party may be able to terminate the contract (clause 8.11).