Sharing responsibility around contractual obligations
Construction is a complex industry and carries risk for all parties. Therefore, it is vital that a contract is put in place before work starts.
Normally an agreement between the contractor and the client, there are many different types of contract depending on what is being constructed. A common thread though, that runs through them all, is the detail around how the scheme will be built, how much it will cost and when it will be completed.
With the construction sector now working around the new Site Operating Procedures (SOPs) endorsed by the government, the probability is that productivity on building sites will drop significantly. Tie this with problems of getting supplies delivered to site, and it is understandable that contractors have serious concerns around the threat of legal proceedings, for breach of contract due to the delay in completing projects.
However, this concern is also echoed by the clients. With lockdown forcing sectors like hospitality and leisure to close, the income revenue for those businesses has all but dried up. So, some clients are now asking to delay building work until they are back up and running, which although not technically a breach of contract, could have cost implications.
Born out of a belief that if the industry locally is to be properly represented and have a voice nationally, then it is more powerful if everyone comes together, the Suffolk Joint Construction Committee (SJCC) includes representatives from the main construction professions. These include the National Federation of Builders (NFB) and Royal Institute of British Architects (RIBA), the Institution of Structural Engineers (IStructE), Royal Institution of Chartered Surveyors (RICS) and Chartered Institution of Building Services Engineers (CIBSE).
It has been working on behalf of the local construction industry and discussions have taken place on the issues and challenges around COVID-19.
Following his participation in one of the SJCC meetings, the MP for Ipswich, Tom Hunt, wrote to the Government’s Minister for Business and Industry, Nadhim Zahawi MP, raising four points; one of which was government stance on breach of contract for late delivery of contracts.
In his response, the minister commented. “Firms should not be threatening to invoke penalty or other contractual clauses when it should be the priority of all clients and firms to sustain the industry. Our actions at this time will be remembered. All firms should think hard about how their reputation could be damaged by not doing the right thing.”
James Potter is the Vice-Chair of the SJCC, representing IStructE. He commented.
“We are supportive of the difficult decisions that have had to be made in these unprecedented times. We are also aware that further complex decisions will need to be made as society comes out of lockdown and the supply chain and manufacturers remobilise – a process which could take some time.
“In the current, exceptional circumstances, respect, integrity and care have never been more important. Authenticity in the way we deal with people needs to be consistent throughout the supply chain.
“As a committee, we want to advocate early dialogue and reasonable discussions between everyone involved in projects, to act in a sensible and reasonable way and to discourage the use of any penalising contract clauses on either side.
Mark Hart is a member of the Chartered Institute of Building and sits on the SJCC committee representing the NFB. He commented.
“Suffolk’s construction industry is a close community and the last thing we want is it turning on itself. Everyone in the supply chain is in this together, so we need to be collectively sharing the burden of responsibility for an event that is no-one’s fault. How we act over the coming weeks and months could have a significant impact on the stability of the sector and general economy.
From a legal perspective
Sarah Western is a solicitor at Greene and Greene and explains the legal context.
“Whether the contractor is entitled to an extension of time for any delays caused by coronavirus will depend on the terms of their contract. It seems likely these unprecedented circumstances will amount to ‘force majeure’ - an unforeseeable circumstance that prevents either party from fulfilling the agreement. However, this will depend upon the specific wording of the contract and the facts relating to each site.
“It is therefore imperative that both parties consider their contractual obligations carefully when deciding what to do. If disputes are to be avoided, the parties need to work collaboratively to find the best way through this, and of course, to document everything agreed in writing carefully!”
RICS Conflict Avoidance Pledge
An initiative gaining momentum and backing from construction industry leaders nationally is the widespread adoption of a Conflict Avoidance Pledge.
Set up by the RICS, the pledge is being pushed by The Construction Leadership Council, to encourage all organisations to consider their working practices and the way they deal with disputes.
By signing the pledge an organisation commits to:
· work proactively to avoid conflict.
· promote the value of collaborative working with industry partners to identify, promote and utilise conflict avoidance mechanisms.
· develop their capability in the early identification of potential disputes.
The pledge is voluntary and self-assessed and can be signed by any organisation or firm operating in the construction sector regardless of size or location.
Written by Sue Wilcock with quotes by SJCC committee members for an Article in the East Anglia Daily Times. Click here for the full article