March 25, 2020

COVID-19: Impact of Government lockdown on Construction Projects and the Industry – Force Majeure or Frustration?

Boris Johnson has placed the country in lockdown and the Government’s instructions not to travel unless your journey is absolutely essential are part of new measures to fight the spread of the coronavirus by staying at home.

However, despite the minister for Cabinet Office, Michael Gove, saying that it was fine for construction sites to remain open, we saw that one of the major contractors, Multiplex has shut down its sites immediately. It is a matter of time before other contractors would follow suit and this will have a major impact for all stakeholders in supply chains. So, what impact will this have on parties to building and construction contracts?

Delay Claims

Construction contracts usually consist of specific circumstances which will entitle a contractor or sub-contractor to claim an extension of time to complete the works. However, the contract  such as the JCT standard forms of building contract do not list disease, epidemics or pandemics as delay events. As such in the absence of provisions to cover epidemics or pandemics in the contract, may turn to other specified delay events, such as “Force Majeure”.

Force Majeure

Force majeure is a contractual term that provides for the award of an extension of time if works are delayed due to the occurrence of circumstances beyond the control of the parties. Under English law, there is no standard or universal definition of a force majeure event, therefore one needs to look at what events the parties have included in the contract and what legal consequences they intended when the events are triggered.

Does the pandemic  in itself constitute a Force Majeure?

There is no clear cut answer to this. Any successful claim largely depends on a number of factors, including:

  • Does the contract have a provision for Force Majeure as a delay event?
  • How is “Force Majeure” defined in the contact?
  • Does the definition include wordings such as pandemics, epidemic or similar term?
  • If not, does the definition cover events which are beyond the parties’ control such as ‘acts of God’?
  • What were the intentions of the parties at the time they entered into contract?
  • Does the definition or the contract exclude events that are foreseeable?

The Lockdown and Frustration

As with Multiplex today, it is likely that many contractors and housebuilders would follow suit and close their sites in order to prevent the further spreading of the coronavirus.

It is also very likely that the pandemic and the unprecedented lockdown would have been foreseeable when the parties entered into contract. How would this impact on the construction contract or project?

The government intervention may entitle either party or both to exit the contract on grounds of frustration depending on a number of limited circumstances.

For instance, the contract may be discharged if the lockdown is intended to last indefinitely. While the lockdown announced is intended for a temporary duration and the government minister made it clear that construction sites could remain open, the performance of the contract cannot be said to be impossible. Therefore, the contract cannot be said to be completely discharged.

In terms of a claim for extension of time, depending on the contract provisions, such as whether government intervention is covered within the list delay events, the contractor is likely to succeed in his claim for an extension of time.

In these critical times, we are committed to continue providing our advisory services and all aspects of dispute resolution & adjudication services to support all stakeholders in the construction industry.

For help and advice, please contact us.