Construction with COVID-19: Could you need a contractual reset?

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The new normal for construction is a large lurch, and lowered productivity will be unavoidable.

New standards and protocols essentially add up to the familiar prescription: adequate distancing, comprehensive record keeping, due care. What that will entail varies between construction type, site size, and the nature of activity, but clearly it will not be possible to maintain levels of productivity that were being achieved before lockdown.

That will have cost impacts, and could give rise to contractual claims. If the approach is to deal with claims on a case by case basis, a party claiming prolongation costs (delay) and/or disruption costs must show as a minimum:

  • an event has occurred in respect of which it is entitled to recover loss and expense;
  • that the event caused a delay or disruption which reduced productivity in the nature and extent alleged; and
  • that the delay or disruption caused loss, expense, or damage to be incurred.

While this is the legal framework, it is important to note that in these challenging COVID-19 times courts, arbitrators and adjudicators are likely to seek to find justice for those parties who have sought to act as reasonably as possible.

The question becomes whether it is in the best interests of parties to deal with these issues on a piecemeal basis, relying on the allocation of risk under the contract pre COVID-19, or whether a ‘contractual reset’ is required to reflect the new environment. Such a reset may raise some difficult issues, and require some compromise but it may be better in the long run, creating more certainty around the cost consequences.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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