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3 April 2020

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The Corona Virus and force majeure in commonly used forms of JCT

Posted by: Ross Wellman

The key issues

Staff

Even as late as this morning (3/4/2020) the Government are still not telling people working on construction sites to not do so. Many are self-employed and therefore feel somewhat compelled to work so that they have some income until they are able to tap into the financial assistance from the government. Also the Government do not want a total lockdown, we are told, for the sake of the economy. Of course they still want everyone to practice social distancing.

Goods and Services etc

Many businesses have temporarily closed down so they comply with the Government edict. This may mean supplies of goods and services cannot reach construction sites. Many contractors work on a “just in time basis” and therefore it is unlikely that there will be large stocks of construction materials on site.

Some utility companies may be operating a skeleton staff. Local Authorities may not be signing off works for building regulations. It may just not be possible for building contracts to be run in the way they have to from a health and safety point of view.

Site Closure

Some employers are just closing down sites. Particularly but not exclusively this is happening in the residential market. Some developers may see no point in finishing retail and other premises unless tenants or purchasers are already committed to deals.

JCT commonly used contracts

By far the most commonly used form of building contract is the JCT Design and Build contract. The JCT Standard Form is a close relative in terms of drafting. I will confine this article to those two contracts and specifically the latest forms and therefore the reference numbers in those 2016 forms.

Force Majeure

Employers and developers, contractors, professionals and sub-contractors are all considering the terms of their contracts to see how this situation may be regulated.

Force majeure, as the phrase suggests, is a concept derived from French Law, specifically Article 1218 of the Civil Code. It is defined as “an event outside of the control of the debtor which could not reasonably been foreseen at the time of conclusion of the contract and which effects cannot be avoided by appropriate measures, prevents the debtor from performing its obligations”.

Accordingly there are three prerequisites:

  1. The event needs to be outside of the control of the contractor;
  2. The contractor must have been in a situation where it could not have reasonably foreseen the event;
  3. The event could not be avoided by taking other steps. In other words it is impossible to overcome.

There is no such equivalent law in English Statutes. Also and as discussed below force majeure is not defined in the JCT contracts that we are considering. Another consideration is that because these are standard forms the chances are that this provision is likely to be construed narrowly in favour of the employer. There is limited case law and that case law does not deal with force majeure in JCT contracts. In addition there are the usual contractual rules that will in any case apply i.e causation and mitigation. Contractors will need to prove it is the virus or government intervention which has led to the non- performance and not some other factor and mitigate any delay.

Extensions of time

When looking at these contracts we need to consider the provisions allowing the contractor for extensions of time. Accordingly the relevant clauses are clause 2.26 in the Design and Build and clause 2.29 in the Standard Form. These define the “relevant events”. I will just focus on the reference in each case to force majeure. This is specifically mentioned in clause 2.29.14 in the Design and Build and 2.29.15 in the Standard Form.

Force Majeure 

As indicated above there is limited guidance for considering this event as stipulated in the contracts that can assist. However there is one case that is the focus of our minds and that is Lebeaupin V Crispin of 1920. In this case McCardie J stated the following:

“Force Majeure.  This term is used with reference to all circumstances independent of the will of man, and which is not in his power to control…thus, war, inundations and epidemics are cases of force majeure;”

It should be noted that this case arose during the outbreak of Spanish Flu which killed millions globally.

McCardie in this case also stated that “any direct legislative or administrative interference would of course come within the term”. However he made it clear that in each matter careful consideration would need to be given to the other terms of the contract. Here it should be noted that some of the events that might otherwise have been considered as force majeure are specifically mentioned as relevant events. Accordingly in these contracts force majeure must be other event or events not specifically already mentioned as relevant events.

If force majeure is stated to be the relevant event the consideration needs to be given as to whether it is the sole reason for the contractor not to perform. If there are other reasons outside of the list of relevant events then this could cause issues for the contractor (See Seadrill Ghana Operations v Tullow [2018] and Thames Valley v Total Gas [2005]). In the latter case force majeure was not held to apply just because the contract was “economically more burdensome.”

Conclusion

The situation and potential use of the relevant event of force majeure is untested in the court of law in relation to these contracts. The position is unclear and any claim under the contract will be as uncertain as the length of time we shall have to continue social distancing.

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Ross Wellman - Partner

To discuss how Glaisyers can assist you contact Ross Wellman on ross.wellman@glaisyers.com or via 0161 832 4666.

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