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COVID-19 and construction projects: Can collaboration avoid untimely distractions and disputes?

The construction industry is working hard to keep projects rolling and sites open despite the unprecedented challenge presented by COVID-19. With the UK Government’s advice having now intensified around social distancing, self-isolation and many businesses closing in response to COVID-19, construction projects across the UK are likely to be impacted in one way or another with some sites also closing and apparent confusion over others.

Parties are concerned about funding, staffing / supply chain issues, health and safety and the serious potential for projects to fall into significant delay.

This insight, prepared in response to the COVID-19 pandemic, provides practical guidance to those parties currently involved in live construction projects.

Over recent days we have seen a huge amount of legal commentary published in relation to the rights and obligations of parties to construction contracts, including in relation to force majeure, change of law, frustration and termination. 

Understanding your rights and obligations under a contract is always  important, whether in the midst of a global pandemic or not. Certain projects will inevitably have their own particular dynamics dictating a particular approach. However, subject to any such project-specific dynamics, the priority for the industry and its people must be on keeping safe, whilst maintaining as far as possible progress on construction projects, in order to best protect jobs and the wider economy.

Key considerations

With the above critical goals in mind, we expect parties will, unless exceptional circumstances prevail, wish to collaborate to, for example, avoid /minimise any administrative burdens (including those associated with a potential plethora of contractual notices and the like) and in order to prevent matters quickly descending into unhelpful and untimely disputes.

As COVID-19 sadly spreads and the government ramps up its response, the resources available to many businesses will be reduced (at least temporarily) and therefore it is vital that those resources are carefully deployed in pursuit of the ‘bigger prizes’ of project progress/delivery, supporting the wider economy and protecting jobs. When deploying those key resources carefully, senior personnel across businesses will wish to, for example:

  • implement (and review and update) effective and efficient business continuity plans;
  • work on protecting the resilience and health and safety of their people;
  • explore funding options and check insurance policies etc. to keep, where possible, sites open and projects progressing; and, very importantly
  • avoid/minimise, where possible, distractions associated with unnecessary exchanges and/or untimely disputes over delay, force majeure or frustration of construction contracts, certainly at this critical time. There are much bigger issues currently at stake!

Avoiding distractions through collaboration and deferring ‘ownership’ of consequences

Many of the legal articles published over recent days have summarised the position generally on force majeure, frustration and termination and will be informative for parties. It is however the particular nuances and commercial dynamics of each contract (and surrounding project framework) that will dictate what a party can /should prudently do immediately and what it can / should sensibly, postpone. It is the strategic support, skill and experience of advisers as how best to address such tricky issues now and in the weeks ahead that will best serve parties to preserve their positions whilst keeping focussed on those ‘bigger prizes’ to be won.

Save where exceptional circumstances prevail (e.g. particular contractual nuances or other commercial dynamics) parties may understandably wish to defer any detailed discussions over ‘ownership’ of the consequences until a more appropriate time. Where appropriate there is good sense in adopting that approach although parties must be careful not to prejudice their positions in the process.

Reducing administrative burdens and avoiding untimely disputes

During this time parties may benefit from reducing the heavy administrative burden placed on them by certain notice provisions within construction contracts. It is vital though that any agreements to relax or postpone compliance with contractual provisions including particular notices are properly captured and recorded in writing so as to not prejudice a party’s position later on.

In this context too, parties must pay particular attention to any ‘No Oral Modification’ (NOM) clauses as such clauses are often incorporated into substantive Construction and Engineering Contracts at the outset. As determined by the Supreme Court in 2018 such clauses if not respected will render invalid any proposed agreement to vary (including the relaxation or postponement of compliance with contractual notices) contracts if special formalities are not observed e.g. the want of writing or signatures as required by the NOM in that case.[1]  If parties are struggling, due to current restrictions etc, to arrange for the signing of such ‘agreements to vary’ (or indeed agreements generally), a leading electronic signature platform such as ‘Docusign’ may provide a practical solution.

Protect future position through good record keeping

Whether through collaboration or otherwise it is also vital that parties are careful to capture and record contemporaneous evidence as that will assist them to more efficiently resolve, in due course, any issues around the time and money impacts of events associated with COVID -19. As ever, good record keeping is critical. It is well established that the courts favour a non-theoretical approach to proving delay claims[3]. Any delay analysis will only be as good as the data on which it relies[4]. In anticipation of decisions about delay and extensions of time later down the line, it is important that parties keep and ideally share (alternatively, insist upon receiving) key project records including minutes of meetings, any relevant photos (with dates), programmes (also in electronic format) etc. Of course, there may be many reasons, other than COVID -19, why a particular contract is already in delay or becomes in delay and the contractor unable to achieve its completion date.Such good evidence capture and preservation will also enable parties to demonstrate appropriate mitigation measures taken in response to delay events associated with COVID -19 and in compliance with duties to mitigate under relevant contracts or at law.

Informed collaboration and pragmatism for the greater good

Save where exceptional matters/circumstances prevail (as alluded to above), it should be possible for parties to adopt a pragmatic approach by reaching a consensus over, for example, the process of notification(s) and contractual compliance issues whilst sharing and preserving key project records, which should hopefully facilitate an amicable resolution of the time and money impacts of the COVID-19 pandemic at a more appropriate time. To do otherwise, and insist upon a determination of such issues in the short or near term, is likely to distract critical resources away from much bigger issues and will almost certainly put at serious risk the long term health of our people, our Industry and our economy.

Time for a strategic approach underpinned by experienced and calm heads ready to embrace informed collaboration for the greater good?

  1. Rock Advertising Limited v MWB Business Exchange Centres Ltd UKSC 24 [2018]
  2. See for example - Walter Lilly & Company Limited v Giles Patrick Cyril Mackay, DMW Developments Limited [2012] EWHC 1773 (TCC)
  3. Skanska Construction UK Ltd (formerly Kvaerner Construction Ltd) v Egger (Barony) Ltd [2004] EWHC 1748 (TCC)
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.

 

Authors: Sean McCay and Eve Johnstone

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