The current outbreak of COVID-19, presents never before seen challenges for all businesses including businesses in the construction sector. The length and scope of this global pandemic is still unknown, and it is virtually impossible to predict what overall impact it will have on lives and businesses.
Construction projects by their nature, are susceptible to delays and most construction contracts will state the circumstances where the contractor may be afforded an extension of time to complete the contract works. Under the RIAI 2017 Building Contract there are a number of grounds pursuant to which an extension may be granted which includes delays due to a force majeure event.
The term “force majeure” is a French term which quite literally translates to “superior force”. Force majeure applies where a party to a contract is unable to fulfil its contractual obligations in circumstances where the performance of such obligations has become impractical or impossible due to an event outside of the control of the parties and which was not anticipated by the parties at the time of the contract.
So, what constitutes a force majeure event?
There is no legal definition of force majeure in Irish Law and accordingly the interpretation will depend on the wording of the force majeure clause in the contract. Under the RIAI 2017 Building Contract, the term force majeure is not defined and will generally be interpreted by reference to the intention of the parties when entering into the contract. Certain contracts may specifically make reference to a “pandemic”, “epidemic” and/or “disease” which would cover delays caused due to COVID-19. Most contracts, however, will contain more generic catch all provisions referring to “acts of god”, “natural disasters”, “government action” or “events outside the reasonable control of the parties”. Where a contract does not make specific reference to “disease” or “pandemic”, it is not yet known whether delays caused as a result of COVID-19 would qualify as a force majeure event. It is, however, likely that in the current unprecedented times, courts would take a liberal approach to the interpretation of force majeure clauses.
When faced with a potential force majeure event, the following practical steps should be undertaken:
- Read the contract – a party’s entitlement to claim for a force majeure event will depend on the definition of “force majeure” in the contract. If there is no specific definition, the term will be interpreted by reference to the intentions of the parties at the time of entering into the contract.
- Mitigation - when seeking to rely on force majeure provisions in a contract, it is recommended that parties take reasonable steps to mitigate the impact of the force majeure event.
- Notification – it is important to carefully review the specific contractual provisions governing delays and extensions of time. Time bars are a common feature of construction contracts when making claims for extension of time and / or compensation and a Contractor may lose any such entitlements where notification has not been given to the Contract Administrator within the prescribed period of time under the Contract. Once delays are notified properly they can be assessed and consequent costs (including, for example, liquidated damages claims) can be quantified.
We are available to discuss any construction law related issues that may arise for you during this time of uncertainty. For further information, please contact Aoife O’Dea, on +353 1 639 3000 or visit www.leman.ie.