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Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world

Construction Claims & Coronavirus

May 3, 2020 | Silver Shemmings

Construction projects of all shapes and sizes face the same risks: delays and additional costs; but these risks have increased exponentially since the outbreak of the Coronavirus.

The first issue to establish before a claim can be made is: which party has accepted the risk associated with the delay event or the additional cost? This will be determined by the terms of the contract the parties have entered into, or, where not expressly stated or agreed, by terms implied by the common law and statutes.

In the UK and on international projects, it is common for parties to use ‘standard’ building contracts such as the JCT, NEC and FIDIC forms that contain essential terms relating to scope, price and time for completion. Often, however, bespoke amendments are made to these standard forms in favour of the party driving the changes, usually making the obligations of the contractor more onerous. This is the crucial moment when risk is re-allocated – way before any construction work has even begun.

There are a number of standard contractual provisions that may be relevant to the issue of the Coronavirus: instructions, changes or variations, suspension, prevention and force majeure. Most of these provisions will entitle a contractor to an extension of time, but only some of them will entitle a contractor to recover the loss and expense it incurs as a result. This is the big issue in construction law right now.

Under the Housing Grants, Construction and Regeneration Act 1996 (as amended in 2009), English law provides that there is a right under every qualifying ‘construction contract’ to regular interim payments, and to seek a decision from a third-party adjudicator within 28 days from any dispute arising under the contract. Adjudication is a very cost-effective and quick process when compared to Court proceedings, and for these reasons, over 90% of all construction disputes that we see are resolved this way.

As the full impact of the current pandemic takes hold economically, the priority for construction projects is cash flow. The best way to maintain this is to enforce your rights early and quickly. Seeking an early and sensible agreement with your contractor or client is the ideal solution, but such agreements need to be carefully worded if they are to be binding and reliable. If an agreement cannot be reached, then adjudication is likely to be the best way to save your project.

To avoid these issues altogether, the parties need to have agreed contract terms that fully meet the requirements of the project by setting down appropriate procedures to manage the risks effectively. Achieving this aim requires specialist legal and commercial advice from construction lawyers throughout the lifecycle of the project

Author Ryland Ash  is dual qualified as a Barrister and Solicitor-Advocate (Higher Rights) and has over 15 years of legal experience in the construction industry. Apart from his work as legal adviser on projects around the world, the focus of his work is dispute resolution and he is an experienced advocate and lead representative in adjudication, arbitration and commercial litigation

This article was originally published in the May edition of ‘London Business Matters’ the magazine for the London Chamber Of Commerce & Industry

London Business Matters May 2020

 

 


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