Corona Lockdown

As the United Kingdom is locked down due to Covid-19, key questions remain about construction and whether workers should be attending sites.

Until the Government unequivocally dictates that construction sites must be closed, employers and contractors will need to consider the provisions of their contracts in order to determine what rights the parties have in the circumstances, and the impact of their actions.

Generally, within an unamended JCT Design and Build contract, a contractor does not have a right to simply stop working (save in the event of non-payment, in which case the contractor must still serve notice of suspension).

While there is provision for either party to terminate the contract in the event the works are suspended due to events including force majeure, such suspension must continue for the continuous length of time stated in the Contract Particulars (default being two months). Furthermore, other than for non-payment, there is no provision allowing a contractor to elect to suspend the works. Rather, if a contractor elects to stop working, as detailed in our previous blog, the contractor would need to prove that it had to cease working due to circumstances beyond its control and there were no reasonable steps the contractor could take otherwise.

So what should employers and contractors due at this point?

The best course of action is for all parties to work together to determine how to proceed. Some options include:

• agreeing that the current events are a Relevant Event, thereby enabling an extension to the Completion Date without the contractor incurring liquidated damages;
• where possible, continuing work on site for the time being, potentially with alterations in sequencing of work and/or numbers of workers on site in order to adhere to Public Health England’s guidance on distancing;
• agreeing more frequent valuations and payments both to aid contractor cash flow and to ensure projects are valued up-to-date in the event that sites are forced close; and/or
• jointly deciding to suspend works, and agreeing how to allocate the costs for such suspension.

Of course employers and contractors should include any relevant third parties (e.g. funders, landlords, latent defects insurers or any other who may have an interest in the site/project) in such discussions.

Where alterations to a contract are agreed, such amendments must be documented in a deed of variation for contracts executed by a deed. For simple contracts executed by hand, variations should be agreed in writing and signed by the parties.

Parties should also ensure that all insurance in relation to the works and site are up-to-date and remain enforce during any suspension.

The situation might change at any moment if the Government declares that construction sites are to close. Either way, what is clear is that the impact of Covid-19 will be long lasting. Importantly, if the supply chain starts collapsing due to insolvency, projects will not only be delayed, they may also be left uncompleted for some time to come. Hence, it seems best for the industry as a whole if parties work together through open discussion to agree variations to any existing contracts and provisions in any future contracts in order for the construction sector to once again thrive as soon as Covid-19 is tackled.

If you have any questions about this subject, please contact Brenna Baye or any member of the Construction team.

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