Collaborating in Construction through the Coronavirus conundrum
In our current uncertain climate, one thing appears to be known to everyone in the construction sector; Covid-19 is causing increasing disruption and we simply do not yet know the true consequences it will have, nor how long it will be here for. Sadly, it would appear that we must look at its impact as a long, not short term, issue.
Articles from legal commentators on this topic are plentiful. There is inevitably much debate on the topics of force majeure and frustration in particular. In addition to such academic and strict legal approaches however, we think that there is room to focus on a slightly different angle in order to keep both Developer and Contractor clients thinking more commercially and proactively about delays due to Covid-19. Where contracting parties want to retain a longer lasting working relationship then this type of approach is going to be key.
What we are encouraging with our Clients is that parties engage in a sensible dialogue which avoids placing a Contractor in a position in which he sees no commercial option other than to commence an adjudication – even if the prospects may be slim – just to see what financial salve may be possible, in light of the scale of delay damages which would be imposed.
Of course, in having such a dialogue both parties must ‘keep their powder dry’. For example (and if we take a JCT approach), a Developer client would not want to act so as to have issued an instruction to a Contractor to take precautions as that could result in an entitlement to the Contractor to claim both time and money (clauses 2.26.1 and 4.21.1). Nor must a Developer start requiring the Contractor to do things which could be interpreted as ‘impeding’ the works, as again that would give the Contractor the right to time and money claims (clauses 2.26.1 and 4.21.5).
A without prejudice meeting however can be used effectively to get a truer understanding for both parties of the nature and extent of the delays being experienced. Is part of the works actually unable to proceed, or is it now ‘just’ a more expensive component? If it is the latter, can the programme be reviewed and amended to lessen or negate costs? Some collaborative thinking will be key to this approach; however with teams who are engaged and sharing the same mindset then it could be a path to maintaining a successful project.
The news on this topic develops apace. We now have daily briefings from Government and the current state of change in policy and legislation is fast. The construction industry is understandably waiting to see what is going to be offered to it by Government and this may steer many into a commercial rather than legal solution.
Do remember though that any commercial solution should be properly recorded in a legally binding settlement or variation agreement. Failing at this last hurdle, could unfortunately undo all the hard work and best intentions of the parties.
Freeths has a national team of expert construction lawyers who are well placed to provide such advice and assistance. The firm has also set up a support hub to assist with key issues arising from Covid-19. This covers a range of topics including contracting, supply chains and employment. A link to the support hub is here: https://www.freeths.co.uk/coronavirus/
If you would like to talk through the consequences for your business, call our Coronavirus Helpline on 0845 404 4111 for a free consultation (on appropriate commercial enquiries only) or e-mail us and one of our Helpline team will get in touch.
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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