Articles from the Silver Law Team on contractual matters, recent case law changes and items of interest in our sectors
July 23, 2020 | Silver Law
As Coronavirus continues to place unprecedented disruption to construction projects throughout the UK construction industry, it has never been more important for contractors to understand their contractual obligations, entitlements, how contracts allocate risk for delay /disruption events and claim relief for time and money.
Whilst many sites have remained open during lockdown, the impact of the pandemic has been dramatic – increased costs, reduced availability of labour, plant, materials and social distancing requirements delaying and disrupting programmes throughout the UK. The CLC reported this month that UK construction output fell 40.1% in April, in main caused by the effects of the pandemic to planned operations.
The Roadmap to Recovery report published by the CLC on 1 June identifies that minimising disruption caused by contractual disputes arising from effects of the pandemic will be key to mitigating damage and loss of output, stressing the need for “[i]ndustry commitment to ensure prompt payment to firms within the supply chain” and “adoption of the Conflict Avoidance Pledge to avoid disputes, and to seek adjudication through the most cost effective process”.
How employers and contractors address the causes of disputes and their resolution will be vital to the success of the broader industry response. Although it remains to be seen whether the crisis will spur firms to adopt a more collaborative approach to business, the industry’s collective response to previous downturns suggests this may be wishful thinking for many contractors.
So what are likely to be to the main drivers of construction disputes arising from the pandemic and what can employers and contractors do to address these issues? Findings in Arcadis’s 2020 Global Construction Disputes Report sheds some light on how they will likely come about.
Based on survey data collected over the past year, the report concludes that two of the three most common causes of construction disputes in the UK are, “Contractor/Subcontractor failing to understand and/or comply with its contractual obligations” and “Poorly drafted or incomplete and unsubstantiated claims”.
These findings certainly chime with our experiences, pointing to human factors and misunderstood contract terms as main underlying causes of disputes.
There are though matter’s that parties can take positive action to address, which must start by employers and suppliers realistically assessing obligations and entitlements under contract and applying the contract terms to the issues they face.
Although an increase in the level of disputes may be inevitable between parties impacted by the pandemic there is every reason to believe that the human factors identified above will continue to play a key role in how disputes come about and how they can be resolved. Parties to construction projects will assist the wider needs of the industry when faced with a potential dispute by reviewing contract terms, seeking to engage with counterparties with reference to the agreed obligations and entitlements under contract and by seeking swift determination of disagreements rather than allowing issues to fester.
Jack Swadling is an Associate Solicitor at Silver Shemmings Ash with broad experience in representing parties to construction disputes in adjudication, mediation and arbitration
This article was originally published in the July/August edition of ‘London Business Matters’ the magazine for the London Chamber Of Commerce & Industry
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