The impact of Covid-19 on construction contracts

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It is vital for the construction industry to continue ‘business as usual’ for as long as it can, however, projects are now being impacted severely by Covid-19, due to factors such as supply chain disruption, absences and the potential for site closures in the near future.

John Bryan, Associate Director states;

“As an industry we have got better at communicating and using contractual mechanisms to mitigate risk and doing so is often a condition precedent for financial recovery. Those skills are needed now more than ever. Both JCT and NEC have built in processes that encourage the proactive communication and mitigation of risk, with the other party in the first instance.

For example, early warnings, delay/ compensation event notices, updated programmes and risk reporting/reduction protocols are mechanisms we are all accustomed to, but standards slip and vary greatly between organisations. However in a highly stressed commercial environment, parties are more likely to enforce their contractual position on the basis that the other party has failed to comply with some condition precedent. This can have disastrous consequences.

Review your contract management processes now, to ensure that you can work with your partners to limit the effects of this pandemic, and protect your position if future performance of the contract becomes problematic.”

CIOB also details some key steps contractors must start to make in the current climate.

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