Tokyo Dispute Resolution & Crisis Management Newsletter – June 2020: Coronavirus & Construction Contracts - Causation, Force Majeure and Notice Provisions

King & Spalding

Large construction projects, by their very nature, carry significant commercial and financial risk for the parties involved. Contributing to this overall risk is the reality that an act of nature or other circumstance beyond the reasonable control of the parties can be a real impediment to the timely and successful completion of a project. A topical example is the Coronavirus (COVID-19) outbreak that is currently sweeping across the globe, affecting the ability of parties to perform their contractual obligations, for reasons that include a lower demand for certain goods (e.g., fuel), mandatory quarantine, health of workers and travel restrictions.

It is therefore no surprise that force majeure clauses in construction contracts, as well as other types of clauses that excuse nonperformance, are of particular significance to parties seeking to agree to an appropriate and fair risk allocation for force majeure – a concept which is based on the reasonable and understandable concern of a commercial party that it should not be required to comply with its contractual obligations if its performance is prevented by unexpected circumstances beyond its control.

In addition, it is commonplace for construction contracts on major projects to include mechanisms for contractors to claim extensions of time and/or additional payment from owners. These construction contracts generally require contractors to give notice of the matters relevant to their claim in writing within a specified period from when an event which gave rise to the claim has occurred.

In this newsletter, we examine the recent cases from the courts in Australia, England & Wales and Northern Ireland, as well as provisions of the 2017 Suite of FIDIC contracts, that consider these issues of causation, force majeure and notice in the context of construction contracts.

Please see full Newsletter below for more information.

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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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