COVID-19: Coronavirus & Force Majeure – Are You Entitled To Relief?

Construction contracts like many other types of commercial contract, will, in the vast majority of cases nowadays, include force majeure (or in its English translation ‘superior force’) clauses in one form or another. It is important to note however that ‘superior force’ is not an established or recognised principle under the laws of Northern Ireland.

Where such contracts do address it, they will often say that major unforeseeable events outside of either of the contracting parties’ control, which prevent one or both of the parties from fulfilling their contractual obligations, will effectively release the parties from their liabilities. Given the increasing impact of travel and working restrictions arising from Coronavirus within the construction industry, particularly in terms of the supply chain, it is crucial that organisations party to construction contracts review the terms they have signed up to (or are about to!), from employers and main contractors, to consultants, sub-contractors and suppliers.

Whilst there are many forms of construction contract, from standard forms to those of a bespoke nature, and every contract will need to be reviewed individually, here in Northern Ireland, and the wider United Kingdom as a whole, many, if not the vast majority of construction contracts will be based on a form selected from the NEC, or JCT suites of contracts. So what do they say in relation to force majeure, and more specifically, pandemics such as Coronavirus?

Before getting into each form, it is important to note that there are very specific notice requirements and periods within which a party who considers that a force majeure event has arisen must adhere to before serving such a notice on their contracting counter party for that notice to be valid, so pay close attention to these requirements.

NEC3 (and NEC4)

Whilst there is no express reference to ‘force majeure’ in the NEC standard form, it refers to an event which:

• “stops the Contractor completing the works by the date shown on the Accepted Programme [or by an agreed date];
• neither party could prevent; and
• an experienced contractor would have judged to have such a small chance of occurring at the time the contract was entered into that it would have been unreasonable for him to have allowed for it”
• as being a compensation event allowing the contractor to apply for an extension of time and additional cost.

Whilst the words ‘such a small chance of occurring’ will be helpful to contractors already engaged in contracts who are applying for an extension of time due to the impact of Coronavirus (and unhelpful to employers receiving and assessing such applications), it will be the reverse in respect of contracts which are signed now (or indeed, those which have been entered into in recent weeks and arguably, months, since the outbreak of Coronavirus).

JCT (2011 and 2016)

The unamended JCT Design and Build Contract identifies “force majeure” as a Relevant Event. This entitles the contractor to an extension of time. However, it is not a Relevant Matter which would give the contractor entitlement to loss and / or expense as well as an extension of time.

As such, it appears that if Coronavirus were to be interpreted in the contractor’s favour as a “force majeure” event, or if the employer agrees it is so, the contractor will be entitled to an extension of time provided the notice requirements set out under the contract are complied with.

The above examples from these standard forms are a brief summary only. It is clear however Coronavirus may indeed constitute a force majeure event but this is open to interpretation by the contracting parties, or, where agreement is not reached either way, the courts themselves. Ultimately, without the inclusion of a detailed definition of ‘force majeure’ as an amendment to such standard forms, or in a bespoke form of contract, Coronavirus as a ‘force majeure’ event will remain a grey area.

If you need advice regarding force majeure, in terms of your existing, or soon to be entered into contracts, including what they mean for you, as well as renegotiating such terms whether entered into already or not, the team of top tier construction law experts here at Cleaver Fulton Rankin would be happy to provide such advice.

In relation to public sector contracts, as of Friday 20 March, the Cabinet Office / CPD issued Procurement Policy Note 02/20 (see link below) setting out information and guidance for public bodies on payment of their contractors and suppliers to ensure service continuity both during and after the current outbreak of Coronavirus. We are currently reviewing this PPN and will shortly be following up with a separate article in relation to it. We will also be able to provide you with detailed advice on what this means for your organisation.

Please find out more here.

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Construction team at Cleaver Fulton Rankin for further advice or information.

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