The COVID-19 pandemic has rocked the world and construction projects on a national level have also been affected. The legal implications of this are very different depending on location and the specifics of the contracts. In the dispute of these contracts, much attention is being paid to the precise wording and how it is used, the FIDIC and NEC are two examples. As the COVID-19 situation is on the risen more issues are expected to develop.
As yet, the situation has not gotten to the point where all projects have been called off, at least not for the most part. But, the situation has caused these projects to be delayed and disrupted, often because it is the supply chains themselves that have been shut down. Many current projects have been stopped altogether and will resume at some point in the future.
Internationally, many governments have called for a shutdown of certain businesses. But as a general rule, it has not been the construction industry that has been ordered to shut down; a huge relief for companies such as APL Kwikform.
There are several reasons for this impact on construction and engineering including:
The most important of these is the necessity for construction and infrastructure projects.
Then there is the fact that these projects don’t usually include many of the risks involved in working in close contact with other people. This makes those working at a construction site better able to comply with health and safety precautions provided for people who continue to work during this time.
But, in all these cases where work will continue there will still be important health and safety precautions to consider and safety and risk assessment will still be conducted as per government, scientific and medical guidelines.
With this in mind, many governments have called for a cessation of all businesses that have been categorised as non-essential, this includes the vast majority of construction projects. In many places, construction projects have been required to close down and cease operations. Contractors have also been allowed to suspend their work with full time extensions until the emergency has passed.
Contractually, the emergency situation presented by COVID-19 provides contractual options for those facing the consequences of these unforeseen events. The provisions typically fall into two major categories
The first category responds to ‘force majeure’. This refers to circumstances that were unknown and unforeseeable at the time the contract was made. These circumstances are outside of the control of the affected party, cannot be prevented and result in this party’s inability to meet their contractual obligations.
It is easy to see how the situation presented by the COVID-19 crisis can fall into the category of a force majeure event. In addition to the FIDIC forms, there are forms of contracts that a force majeure event will allow the contractor to receive additional time in which to make up for the delays caused by this unexpected event. But, they will not be entitled to compensation for any of the costs incurred by this delay, unless such a deal was agreed upon beforehand. As always the exact wording used is essential to avoiding confusion in this situation.
Force majeure will usually only apply to those contractual obligations that have been directly affected by the event in question. This brings into question which type of activities can be continued and which must be postponed. The point where a force majeure involves situations that “cannot be overcome” is another important point as contractors can take many measures to ensure that work continues unaffected. Indeed many employers are refusing to recognise a force majeure because of this very reason.
Due to the passing of laws and restrictions in place to address the pandemic, many construction and engineering projects have been affected. When the easy and fluid transportation of goods and people through countries is impacted, the situation becomes a lock-down mandated by the law. This in itself can have a greater effect on the capacity for a contractor to perform their duties, than the actual COVID-19 pandemic.