Many a legal article has now been written concerning the relief that contractors may be entitled to under the JCT suite of contracts as a result of the COVID-19 pandemic with the general position being that contractors are entitled to time but not money. Notwithstanding this, there are certain nuances to the JCT contract* that might perhaps best be at the back of a developer's mind when managing its contractor in the shadow of COVID-19.
A Contractor's Endeavour…
There has been uncertainty as to the extent of the contractor's obligation under clause 220.127.116.11 of the JCT to use its "best endeavours" to prevent delay to the progress of the works during the COVID-19 outbreak. While it should be observed that this does not translate to an obligation on contractors to accelerate the Works to achieve the recovery of progress against the programme at their own cost, it is a stringent obligation that requires contractors to take all those steps in their power which are capable of producing the desired result (potentially to include incurring some additional, but not substantial, costs).
It is important for developers to be cognisant of this obligation that their contractors are under. If a contractor fails to properly discharge this obligation, any potential extension of time may be assessed accordingly (and most likely reduced to reflect the lesser delay that would have resulted if the contractor had properly complied). For instance, in order to successfully obtain an extension of time award where COVID-19 results in labour shortages, the contractor would most likely have to show that its supply chain had made reasonably considerable efforts (including incurring some additional expenditure) to procure replacement labour or to redeploy existing labour to minimise delay.
To suspend, or not to suspend?
Due to Government's recent relaxing of the COVID-19 lockdown, the critical nature of clause 8.11.1 of the JCT appears to have diminished. This provides that the Contractor may terminate its engagement where there has been a prolonged period of suspension of the length stated in the Contract Particulars (the default position being 2 months) by reason of, respectively, force majeure and the exercise by the Government of any statutory power which directly affects the execution of the works.
But if there was to be a second wave of COVID-19 infections, what would actually amount to suspension? The JCT is not clear on this point; it does not set out whether the trigger for suspension has to be an objectively measured external or third party act (such as an edict from the Government to close down all construction sites) or when this threshold is crossed (and the works have entered into a de facto suspension) is something that the Contractor can simply take a view on. As drafted, the only express contractual right that a Contractor has to suspend is in the event of non-payment. Contractors may therefore seek to exploit this and use the threat of suspension to gain better leverage in any commercial negotiations that may subsequently take place if a second wave of COVID-19 was to strike.
How about loss and expense?
In ordinary circumstances, the JCT does not entitle contractors to claim loss and/or expense as the COVID-19 pandemic does not naturally fall within the list of Relevant Matters under the JCT. However, with contractors becoming increasingly determined to recover some form of loss and/or expense, developers should be aware of attempts by contractors to change this position.
On the face of it, the position under the JCT 2016 contracts is relatively straightforward when it comes to granting contractors relief from the impact of COVID-19. However, as with everything, there is some nuance to this issue which developers need to be aware of when dealing with contractors coming up with ever more inventive ways to secure additional money as well as additional time.
*All clauses mentioned refer to the JCT Design and Build Contract 2016
This article was written by Will Cooper, Richard Kniveton and Tristan Michel