Is the current “lockdown” a compensation event in terms of the NEC 3 Engineering and Construction Contract?
Option X2 found in the secondary option clauses provides the following “X2.1 a change in the law of the country in which the site is located as a compensation event that occurs after the contract date. The project manager may notify the contractor of a compensation event for a change in the law and instructed to submit quotations. If the effect of a compensation event which is a change in law is to reduce the total defined cost, the prices are reduced.”
Do the regulations issued by the Minister of Cooperative Governance and Traditional Affairs on 25 March 2020, and which specifically provide, for a restriction on the movement of persons and goods in terms of regulation 11B constitute a change in the law? Regulation 11 B(1)(b) provides that all businesses and other entities shall cease operations during the lockdown, save for any business or entity involved in the manufacturing, supply or provision of essential good or service. sic”
The regulations were issued by the said Minister in terms of section 3 of the Disaster Management Act 2002. This in our opinion constitutes a change in the law. Even if it is argued that it does not constitute a change in the law clause 60.1 appears to be applicable.
Presumably, in order to effect compliance with the law, the project manager would have given an instruction to the contractor to stop work. Theoretically this would constitute a compensation event in terms of clause 60.1(4).
Similarly clause 60.1(19) provides that a compensation event is an event which stops the contractor completing the works or stops the contractor completing the works by the date shown on the accepted programme, in circumstances which neither party could prevent, and an experience contractor would have judged at the contract date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for it, and is not one of the other compensation events stated in this contract.
It is important to note that contractors must notify the project manager of a compensation event within eight weeks of becoming aware of the event.
NB: Please note that this article is for informational purposes only and not for the purpose of providing legal advice. Should you require more information on this topic or any issue arising out of this please contact The Construction Platform on 011-2342125 or Kevin Allardyce on 082 8702634 or by email at firstname.lastname@example.org