2020-08-12
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JCT main contracts “in the time of coronavirus”

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Posted by Philip Harris on 16 April 2020

Philip Harris - Construction Solicitor
Philip Harris Partner & Solicitor-Advocate

In the construction world, the “golden ticket” or “silver bullet” for the main contractor is to be able to claim both time and money.

The main contractor is, therefore, looking for a relevant event and a relevant matter.

There are at least three things which might give rise to a relevant event and a relevant matter under the JCT DB 2016 Form of Contract.  These are:

  • An instruction for postponement of work under 3.10.
  • A change or something that is treated as a change.

An impediment, prevention or default, whether by act or omission, by the employer, or any of the employer’s persons.

The most straightforward way of dealing with coronavirus matters is to secure an instruction to postpone.  In many situations, it will be perfectly reasonable for the Employer to postpone the works and may indeed be unreasonable not to postpone the works.  The instruction to postpone is a Relevant Matter under 4.21.2, allowing the contractor to claim loss and expense, as well as a relevant event, entitling him to an extension of time under 2.26.2.2.

As a general point, it is imperative that the contractor notifies relevant events and relevant matters properly under the contract, following, in detail, what is required under 2.24 of DB 2016 for relevant events and under 4.20 for relevant matters.

Changes

The main contractor should check whether 2.15.2 has been amended.  If he is lucky and it has not been amended, this may be his “golden ticket”.  Under 2.15.2, if after the base date there is a change in statutory requirements which necessitates an alteration or modification of the Works, such alteration or modification is to be treated as a change.  Statutory requirements is widely defined and includes regulations having the force of law which affect the works or performance of any obligations under the contract.  The Employer may argue that the coronavirus regulations do not necessitate an alteration or modification to the Works, but it is at least arguable that, in the circumstances of the coronavirus and the regulations, changes and modifications are necessary.

The definition of change under 5.1 of the DB 2016 contract is wide.  It includes the imposition by the employer of obligations or restrictions in regard to access, limitations of working space, limitations of working hours or the execution of the work in any specific order. 

The employer may argue that he is not imposing such restrictions. But bear in mind that in relation to both relevant events and relevant matters, these include “changes and any other matters or instructions which, under these conditions, are to be treated as, or as requiring, a change”.  So, a change does not specifically have to be instructed.  There can be a de facto imposition of an obligation or restriction by the employer which is not instructed. Requiring the contractor to continue rather than postponing the works, in all the circumstances of the coronavirus, arguably imposes obligations and restrictions in itself.

However, contractors will want to have an instruction which requires a change because, under 5.6, if the contractor complies with an instruction requiring a change and there is a substantial change in conditions, then he will be entitled to have that valued, not only in respect of the works which are directly instructed to be changed, but also in respect of any other work carried out under substantially changed conditions as a result of that change. 

Employer default

If the employer, perhaps taking a tactical approach, declines to issue an instruction to postpone the work and declines to instruct a change or to recognise any change, then the contractor is forced to rely on the relevant event and relevant matter of impediment prevention or default by act or omission, by the employer, or the employer’s persons, including the employer’s agent.  There may well be a default by way of omission in relation to the employer’s obligations in relation to health and safety and the CDM regulations.  Under 3.16 of DB 2016, each party undertakes to the other that in relation to the Works and site, he will duly comply with applicable CDM regulations.  Please see the our first principles summary of the employer’s CDM obligations here.

Where the main contractor (perhaps backed by his own health and safety advisers) and taking into account the coronavirus regulations and the Government’s guidance to the construction industry, advises and recommends to the employer that it is not safe to go on working, then an employer who simply ignores that advice is arguably not taking the necessary steps to manage the risk to health and safety on site.  An employer in default of its CDM obligations, by omission from his duties, has created a relevant event and a relevant matter.  These must be fully notified.  The default and omission arguably creates an entitlement to time and money. 

So, the employer is faced with a “Morton’s Fork” from the contractor.  The contractor prods with one prong of the fork, requesting an instruction to postpone, or a change instruction, or the recognition of a change.  If this is ignored, then he prods with the other prong of the fork, saying that the employer has defaulted in his CDM obligations.

This may seem sophisticated, but really it is not.  If the JCT had genuinely contemplated a circumstance such as coronavirus, it is likely that it intended to provide for it in time and money, rather than to leave the contractor entirely exposed.

Contractors who are having procurement difficulties should bear in mind that 2.2.1 of DB 2016 provides that all materials and goods for the Works shall “so far as procurable be of the kinds and standards described...”.  Those words “so far as procurable” are likely to become important in negotiations.

Working together

By far the best way forward is to work cooperatively with the employer. This will involve reprogramming where the contract document itself is not varied.

In many situations the fair solution will be to vary the contract (rather than simply vary the Works), or to draw a line which consensually ends the present Contract and start again with a second contract when the future is clearer.

About the author

Philip Harris

Partner & Solicitor-Advocate

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

Philip Harris

Philip has 30 years’ experience as a construction solicitor and advises on all aspects of construction law.

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