6 WEEKS IN AND WHERE ARE WE?
In a previous article we looked at inability to progress the contract works and the potential to utilise the contract to establish and effect entitlements and liabilities. Some six weeks into the lockdown and with possibly three or four weeks to go, where are we now at?
The simple answer is exactly where we were when this started.
The general view is that the Coronavirus Act is not a change in law under the contract, not least as its principle purpose is not to change or affect contracts but is rather to give Authorities the power to prevent persons and parties from doing things which might spread the virus. So a contractor may incidentally fall foul of the Act when carrying out works, as it restricts and prescribes how he may carry out the works so changing the parameters of his scope or liabilities.
Frustration is a possible remedy, though it requires proof of an unforeseen event that has rendered contractual performance radically different, or that the commercial purpose of the contract is no longer achievable. It is also a very blunt instrument – if the contract is “frustrated”, it is in effect cancelled, both parties are simply released from further performance.
So we are back to Force Majeure, IF the contract contains it and IF the wording can be applied to this situation, which is not always going to be the case.
But where does Force Majeure lead us? In essence it simply creates excusable down time while the circumstance exists. It does not remove or alter any of the contract obligations or liabilities or responsibilities, so even when the ‘event’ subsides and work recommences all such remain in place.
But it is not always the case that after an eight week gap the restart will reflect the position when the interruption occurred.
Changes may need to be agreed to ensure an effective recommencement, a good ongoing relationship, and ultimate completion of the works. Each party will invariably take a stance on such changes, but do they want to butt it out head to head trying to apply a contract which is no longer fits the realities?
Negotiations will be difficult, with huge risks for both sides, and Mediation provides a primary platform through which to clearly, practically discuss and agree those changes without conflict