While construction is deemed an essential industry at present, depending on levels of compliance with social distancing, the incidence of COVID-19 in the industry and WH&S concerns, the time may come when delays will be forced upon a project by reasons of lack of productivity, reduction in staff, or product and labor shortages because of government intervention.
There is a real risk that your current contracts do not properly protect you from delay or cost claims in these circumstances.
Start Reviewing Contracts Now Before the COVID-19 Pandemic Worsens
Clients should logically start a review of their contracts currently underway now so that those which may expose your business to such claims should the COVID-19 pandemic (or the business disruption from the virus) worsen, are identified. Once identified contractors might choose to “get on the front foot” and propose changes to the contract by way of a deed of variation which might for instance deal with issues such as:
- Suspension of obligations affected by COVID-19;
- An obligation to mitigate any loss to the project in terms of timing;
- Extensions of time;
- How increases in costs should be dealt with; and
- How delay damages are dealt with.
We can draw up an appropriate deed that might commence the discussion as to how these matters are proposed to be dealt with. We can also assist in any negotiations and finalise the deed once an agreement is reached.
We expect that these matters will be more easily dealt with now when the parties can discuss and work out what should happen in a sensible negotiation and enter into a clear agreement if things get worse. The alternative is that you wait until significant delay and costs disputes are being made, you discover your contract does not protect you very well and you then have to spend significant sums on adjudication, arbitration or litigation during or even worse at the end of the project.
Given some lead time, you should be able to negotiate a better result compared to leaving these matters to a time when business pressure means relationships are under greater strain. This approach will also be far more cost-effective than dealing with each contractual dispute that arises should the COVID-19 restrictions mean you are unable to comply with your obligations through no fault of your own. It will also give you peace of mind in carrying out your current works under contract.
Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).