COVID-19 Based Contractual Rows Not Inevitable, Claim Lawyers

Contractors should take steps that are suitably appropriate to manage the spread of Covid-19 first and foremost.

They are being urged to achieve between themselves and their employers an approach to coronavirus-related issues that is fair to both parties and avoids disputes down the line.

Guidance on NEC contractual matters came from UK-based lawyers working for the American legal firm Duane Morris.

“It is predicted that at least 20% of the UK’s workforce may be unable to work at any one time when the virus is at the peak of its spread,” said Duane Morris partner Steve Nichol.

To mitigate the risk, many companies are stopping non-essential business travel, encouraging work from home and adopting self-isolation policies.

“As the pandemic grows, so may the restrictions,” Nichol warned.

The construction industry is heavily dependent upon an accessible and, above all, mobile workforce – any restriction on the movement of labour is a problem. “For many, the notion of working from home is a non-starter,” he said.

Delays may be inevitable. “The question, as ever, is: who foots the bill?”

For those using the NEC suite of contracts, the starting point is clause 19, and the corresponding clause 60.1(19). Both clauses are mercifully free of obscure legal terms such as force majeure, Nichol said.

“Instead, both adopt the same three-stage test for establishing whether such an event has occurred. Each requires that an event has occurred if (i) it stops the contractor either from completing the works at all, or from completing by the completion date; (ii) neither party could prevent; and (iii) it was so unlikely to occur that no reasonable contractor would have allowed for it when entering into the contract.”

If all three limbs of the test are satisfied, the contractor is entitled to a compensation event and the project manager can issue instructions to decide how the event should be addressed.

“In practice, limb (i) will be a matter of fact and proof, and limb (iii) should be straightforward.  The key question is likely to be whether the contractor could have prevented the event,” said Duane Morris associate Tanya Chadha.

“Contractors cannot prevent the current pandemic. Depending on the definition of the “event”, contractors can prevent some of the consequences of the pandemic and that may lead to disputes with employers.” […]

To read the full text of this article quoting Duane Morris attorneys Steve Nichol and Tanya Chadha, please visit the New Civil Engineer website.