Quigg Golden - Coronavirus: Dealing with it under the Public ......Dealing with Covid-19 under the...

Coronavirus: Dealing with it under the Public Works Contracts

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Agenda

• Force Majeure

• Frustration

• Current Government Guidance

• The Contract Mechanisms

• Main forms, minor works, short form

• Standard conditions of engagement


Force Majeure


Force Majeure

What is force majeure?

• Under Irish law, there are limited remedies available to parties when a contract becomes impossible to perform

• To get around this, parties usually include an express term on how such a scenario will be dealt with should it arise

• They do this by adding what is commonly know as a “force majeure” clause into the contract

• These clauses typically cover exceptional scenarios that are outside of the control of both parties such as epidemics, war, natural disasters etc.

The law likes contracts

So add in a clause

Which deals with those exceptional scenarios


Force majeure is a creature of contract


Force majeure is not a recognised legal

doctrine in Irish law


The Public Works Contracts do not have force majeure clauses


The Doctrine of Frustration


The Doctrine of Frustration

What is frustration?

• A legal doctrine whereby parties to a contract are discharged from further performance under the contract

• In Irish law, principles set out in McGuill v Aer Lingus (1983):

• For the classic statement of the doctrine, see Davis Contractors v Fareham UDC (1956):

(1) the “frustrating event” must not be caused by one of the parties;

(2) the contract must not make provision for the event; and

(3) the frustrating event must render further obligations radically different.

https://www.casemine.com/judgement/uk/5da0478b4653d07dedfd483b

https://www.bailii.org/uk/cases/UKHL/1956/3.html


The Doctrine of Frustration - Illustrations

Metropolitan Water Board v. Dick Kerr & Co (1918)

https://www.bailii.org/uk/cases/UKHL/1917/2.html


The Doctrine of Frustration - Illustrations

Unlucky Firm Limited v Luckless City Council (2021)


Dealing with Covid-19 under the PWC

• CF1 – CF5 are all materially the same

• CF6 (the short form) is slightly different

• Clause 4.5 = Instruction to suspend = CE

• No provision for order of public authority

• Clause 4.8 = Notification requirements



Is it a CE or DE?

Notify it Deal with it

Cl 4.1

HSE

OGP

https://www2.hse.ie/conditions/coronavirus/protect-yourself.html

https://constructionprocurement.gov.ie/category/news/


Sub-clause 4.1 Co-operation should be used as the vehicle to assess the likely impact of the

Covid-19 response measures on the progress of the works, the issues currently arising and any

potential mitigating measures that can be taken. Where the issues arising are linked to the impact

of Covid-19 response measures the Employer should adopt a proactive and collaborative

approach to address the issues

Link to DPER Guidance Note

https://constructionprocurement.gov.ie/19-march-2020-note-on-procurement-and-contractual-matters-associated-with-the-covid-19-response-measures/



Co-operate, Co-operate, Co-operate

Mandatory obligation, the parties SHALL co-operate

4.1.2(5) = to minimise the effects of suspension



Delay Events Compensation Events



Is Covid-19 a Compensation Event?

• Look at Schedule 1K

• 1K.1 = ER gives a Change Order

• 1K.3 = ER suspends work under clause 9.2

• 1K.7 = ER fails to deal with impossibility under clause 4.5.4 (CF1/3 only)

• 1K.8 = Employer does not allow access under clause 7.1

“an instruction... to change constraints…”


It is important to ensure that the oversight, supervision and inspection roles continue and where this is not possible, or if for any reason the works cannot be executed in compliance with health and safety regulations, it may be

necessary to close the site for a period of time.

…any decision to close the site will be taken in consultation with the Employer. Should it arise the ER should direct the Contractor to suspend

the works under sub-clause 9.2.





Unpacking Clause 9.2 – Suspension

• ER directs Contractor to suspend

• Contractor MUST do it;

• Protect, store and secure + maintain insurances

• ER directs Contractor to resume

• Contractor due Contract Sum adjustment & EoT (if clause 10 complied with)

• Suspension > 3 months

• Contractor may ask for permission to recommence

• If no permission within 28 days

• Contractor may give termination notice - see cl 12.4(2)



Is Covid-19 a Delay Event?

• Look at Schedule 1K (again)

• 1K.15 = Delay caused by the order of a public authority


Entitlement?Entitlement? Entitlement?No Entitlement?


What if works are suspended (CE), then a law is passed (DE)?

Time

Delay due to suspension

ER suspends under 9.2 = CE

Government order to close = DE

Clause 10.7.2



Who should notify?

• Look at clause 10.3

• 10.3.1 = Contractor must notify the ER

• 10.3.2 = CONDITION PRECEDENT

• Notification requirements• Be issued within 20 Working Days

• Meet clause 4.14 requirements

• Prominently state clause 10.3

This is a clause 10.3 notification

Note clause 9.3.1



Also remember Contractors…

• Compensation Event and Delay Event adjustments are only available if:

The Contractor makes all reasonable efforts to avoid and minimise the adverse effects

of the Compensation Event / delay

See clauses9.3.2(2)

10.1.1(2)


…it is suggested that the ER make use of sub-clause 10.4 Proposed Instruction by requesting

the Contractor for a proposal to address the particular issues as they are identified under

sub-clause 9.3.

Please note that the use of sub-clause 10.4 is without prejudice to the Contractor’s other

rights under the contract.





Unpacking clause 10.4 – Proposed Instruction

• ER may direct Contractor to make proposals for a proposed instruction

• Only a proposal… do not implement

• Within 20 Working Days, Contractor should provide

• Proposal + proposed adjustment to Contract Sum

• Clause 9.3 information regarding delay



How should a Covid-19 Compensation Event be assessed?

• Just like any other Compensation Event

• Look at clause 10.6 (money) and 10.7 + 9.3 (time)

• 10.6.1 = If work is similar to rates…

• 10.6.2 = if work is not similar to rates, or different conditions…

• 10.6.3 = fair valuation based on rates for similar work

• 10.6.4 = labour, plant & materials




Time

Current P Contractor’s cost = €150k

Altered P

Date for Substantial Completion

Contractor’s cost = €250k

Date for Substantial Completion

€∆ = 100k 6 months






• 10.7.1 = Delay cost only if CE (not DE)

• (1) = Delay costs = expenses

• (2) = Delay costs = daily rate of delay cost

Does 10.7.1(2) apply

Per Site Working Day






• 10.7.3 = delay for a period of 7 or more consecutive non-working days

Contractor entitled to “expenses” unavoidably

incurred

Capped at daily rate of delay cost (Sch 2D)



Assessing the time & money impact of Covid-19

• Normal rules apply, Contractor’s must prove:

• That an event occurred

• That it caused a loss

• The value of the loss and/or expense

Records, records, records



When to the termination provisions kick in?

• When one of the reasons for termination apply AND the correct procedure is followed

• Potential reasons in the near future:

• Cl 12.4(4) – work suspended under clause 9.2 (and right has arisen)

• Cl 12.5.1 – termination on election

• Termination sum

• Works properly executed + partially complete work + reasonable costs of removal

• NOT DAMAGES



Onboarding

Relationship


Dealing with Covid-19 under the SCoE

• Impact depends what stage you are at

• Follow HSE guidance

• Clause 4 = notice to suspend (talk about it first)

• Client pays “Percentage of Stage Fee for Suspension” = stated in Schedule B

• Half due with notice, rest after suspension ends


The continued attendance of the various members at meetings is to be facilitated as far as possible by

remote means such as video conferencing. Where this is not possible please ensure that the HSE

Guidance is followed.

Under no circumstances should the service continue if the level of resources are such that they

impact on key health and safety requirements. Should this arise, having exhausted alternatives, the

client should suspend the service in accordance with Clause 4 of the Conditions of Engagement.




Recap

• Force Majeure

• Frustration

• Current Government Guidance

• The Contract Mechanisms

• Main forms, minor works, short form

• Standard conditions of engagement


That’s all folks!

William BrownBEng (Hons) MSc Dip.Law MIEI ACLCM ACIArbSenior Associate

[email protected] William Brown

Admiral_Brown

mailto:[email protected]

Date post:	14-Mar-2021
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Quigg Golden - Coronavirus: Dealing with it under the Public ......Dealing with Covid-19 under the...

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