29 September 2020

Should new contracts being let on the JCT/SBCC standard forms include COVID-19 bespoke amendments to remove any uncertainty as to which party carries the time and cost consequences of the pandemic? Construction lawyer Fraser Hopkins considers.

It’s well understood that adjudication is a quick way of resolving construction disputes, on an interim basis at least (albeit the adjudicator’s decision is usually the ‘final word’). In the period since statutory adjudication for construction disputes was introduced in 1998 the courts have been at pains to give effect to adjudicators’ decisions. In general terms, the only situations where the court will not enforce the decision is where the adjudicator breaches natural justice or acts beyond the limits of his/her jurisdiction.

At the beginning of ‘lockdown’ much was written in the construction press about whether the COVID-19 pandemic entitled contractors, through operation of the mechanisms in the JCT (and Scottish equivalent SBCC) standard form building contracts, to:

1. additional time to complete projects (through awards of extension of time to the completion date); and/or
   
   
2. additional payment for the those extended periods, and/or other costs incurred (through payment of loss and expense).

Much of these discussions centred around whether, for contracts already let and on site, the pandemic would fall within the generic provisions in these contracts (dealing with force majeure and the exercise by Government of statutory powers which directly affect the works) that trigger an entitlement to time and/or money.

Now that we are living with the pandemic, and the construction industry has emerged from lockdown, the focus is switching to whether new contracts being let on the JCT/SBCC standard forms should include specific COVID-19 bespoke amendments to remove any uncertainty as to which party carries the time and cost consequences of the pandemic. This is important as while it might reasonably be said that, for a contract let in the summer of 2019, the emergence of the pandemic in the early part of 2020 is a force majeure event (i.e. an exceptional event beyond the control of the parties and which could not reasonably have provided against when entering into the contract) the same cannot be said now, where COVID-19 has been declared a pandemic by the Word Health Organisation (WHO) and is considered an epidemic within the United Kingdom. That is, the pandemic is now perfectly foreseeable and can be provided/priced for at the point of signing a building contract.

Interestingly, while the authors of the JCT/SBCC standard forms have not offered any revised wording for their suite of contracts to cover the pandemic, they have issued an article that comments upon amendments to their contracts suggested by the Construction Leadership Council (CLC). See:

Future Projects: the impact of Covid-19 and Brexit

The comments made by JCT identify many of the issues with bespoke COVID-19 drafting (not just the CLC’s suggested drafting) that are now being suggested for inclusion in building contracts, including:

• How do you define the pandemic, if at all? Should this be with reference to whether WHO or the UK (or Scottish) Government call it a pandemic and what date should trigger it?
• Should it be limited to COVID-19 or more broadly to include any mutation of COVID-19 or any virus having an equivalent or similar impact?
• Should it be limited to the effects caused to the restriction on movement of workers to and from, or within the site, or should it include the effects caused to the movement of workers to and from, or within, factories supplying materials to the site from within the UK or beyond?
• Should it include for the impact of Government intervention through legislation and/or guidance and what if this arises from a ‘local’ lockdown only? 

The broader the COVID-19 drafting, the greater is the protection that will be afforded to the contractor (and vice versa) – this point playing into the recent call by the UK Government for ‘responsible contractual behaviour’ on the part of parties to building contracts.

Inevitably, for new contracts being let, where the time and cost consequences of the pandemic will fall depends on the relative strengths of the negotiating positions of the parties. Experience tends to suggest the contractor is in the weaker position and will likely be confined to only a limited entitlement to time and no money for the impact of the pandemic. However, whether under a JCT/SBCC or any other form of building contract, advice on the negotiation of such provisions is key to managing business risk.

For any questions you may have, please contact:

Fraser Hopkins, Partner fho@bto.co.uk / T: 0141 225 4858