The following questions, related to contractual issues arising from COVID-19, were posed at the end of our first Construction Clinic held in April 2020. The entire webinar may be viewed on-demand on YouTube. In the webinar, these questions are preceded by a brief presentation on the general Notice requirements that exist regardless of the form of contract.

Question 1

Question: Does the Contractor have any duty or obligation to mitigate delays and costs and, if so, to what extent? (related to FIDIC Red Book 1999).

Answer: FIDIC doesn’t give any explicit obligations to the Contractor to mitigate. However, in most jurisdictions, it’s an implicit requirement that both parties work together proactively for the benefit of each other. So there is an implicit obligation to do what you can to mitigate the circumstances.

The SCL protocol goes further than this and actually says that mitigation should take place but not to the extent that the Contractor should incur additional costs or mobilise additional resources.

Question 2

Question: Should the Engineer instruct the Contractor to carry out mitigation measures if the Contractor is not doing so?

Answer: If I were to put my Employer-side Project Manager hat on, I would be very, very careful about giving the Contractor an instruction to do so, because that could be termed as a Variation. The Contractor could then come back with a claim for the Variation.

Question 3

Question: In addition to claiming an Extension of Time under 8.4, should the Contractor issue Notice of Claim under Sub-Clause 13.7 (Adjustment for Changes in Legislation)?

Answer: I’ve had this question before. Clause 13 deals with Variations, and 13.7 deals with adjustments for changes in legislation that would affect the design or the construction of the works. For example, if the building regulations changed to require something more expensive before the building can be completed and signed off by the local authority that would be a change in legislation that would lead to a Variation. Is it then an argument that does that Variation entitle you to an Extension of Time? Well, this is not really relevant to coronavirus.

Question 4

Question: Under Sub-Clause 19.2, should we give a Notice of force majeure?

Answer: The jury is still out under FIDIC if the coronavirus actually qualifies as a force majeure event. My pendulum is swinging both ways. First of all, FIDIC has five conditions that have to be satisfied, which it does, but then it goes on to qualify “of the type listed” and goes on to name events such as war, volcanoes, etc. etc. My initial thoughts were, it’s not of the type listed, but doing a little bit more research, FIDIC are saying in their User’s Guide that it does not have to be of the type listed. I need to do a bit more research, but my pendulum is now swinging a bit more the other way.

I’m also in the middle of looking at various statements and papers put out by lawyers and trying to get a handle on what they think of the legal application of force majeure. If you think it might qualify as a force majeure event, go ahead and submit a Notice.

If you submit a Notice, there’s nothing wrong with then going back and saying the events being delayed weren’t on the critical path; we won’t be pursuing a claim.

Question 5

Question: At what point should the Engineer consider Sub-Clause 8.8 (Suspension of Work)?

Answer: With the virus, projects could be on lockdown or on delay for whatever reason. If we consider it a force majeure event, possibly the Contractor might be wanting to claim his costs for prolongation. If it’s not a force majeure event, possibly the Contractor won’t be entitled to claim for costs. I think the Engineer and the Employer have got to sit down and think about at what point it is better to instruct the Contractor to suspend and possibly pay for demobilisation and remobilisation costs.

Really what I want to advise everybody: this is an extraordinary occurrence. It’s going to affect everybody. We can’t apportion blame to any party. So, one of the things I want to encourage everybody to do is to start a meaningful dialogue. Sit down with the Engineer, the Contractor, and the Employer, and try to work out what is best for each other and what is best for the project. Pulling out the contract and submitting claims at this point could make a bad situation worse.

The questions covered in this blog were answered by ICCP Executive Officer and Fellow, Andy Hewitt

If you would like to learn more about claims, check out our training partner, Claims Class.

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