Covid-19 has been declared by the World Health Organisation (“WHO”) as a pandemic.
Does the pandemic constitute a force majeure as contemplated in the construction industry? Let’s assume that the pandemic falls within the definition of force majeure, what are your obligations and rights as a contractor and subcontractor?
The JBCC Principal Building Agreement and the Nominated/Selected Subcontract Agreement Edition 6.2 both define force majeure as;
“An exceptional event or circumstance that:
Could not have been reasonably foreseen;
Is beyond the control of the parties, and
Could not reasonably have been avoided or overcome.
Such an event may include but is not limited to:
Natural catastrophes including earthquakes, floods, hurricanes or volcanic activity.
Let us deal with the Principal Building Agreement (“PBA”)
In terms of clause 23 of the PBA a contractor is entitled to a revision of the date for practical completion by the principal agent without an adjustment of the contract value if the delay to practical completion is caused by force majeure.
In terms of clause 29.2 of PBA, either party may give notice of intention to terminate the agreement where the progress of the works is continuous.
Similarly clause 23.1.6, of the Nominated/ Selected Subcontract Agreement a subcontractor is entitled to a revision of the date for interim completion by the contractor without an adjustment of the contract value for a delay to interim completion caused by force majeure.
In terms of clause 29.20, of the Nominated/ Selected Subcontract Agreement either party may terminate the subcontract agreement if progress in the subcontract works ceases for a continuous period of 90 calendar days or an intermittent period totalling 120 calendar days, as a result of the force majeure event or the exercise of statutory power by a body of state or public or local authority that directly affects the execution of the subcontract works.
The JBBC: Principal Building Agreement, Edition 4.1 March 2005 does not define force majeure but refers to Vis Major which is generally understood to mean a superior force or event or circumstance beyond the control of contracting parties and which renders contractual performance impossible.
The contractor is entitled to claim a revision of date for practical completion if the circumstances for which the contract is entitled to a revision of the said date is caused by Vis Major; which appears to be a contradiction because if contractual performance is made impossible, then either party may be entitled to terminate the agreement.
In any event a contractor is entitled to a contract value adjustment according to CPAP, if in terms of clause 32.5 of the principal building agreement, the contractor has incurred expense and loss arising from circumstances for which provision was not required in the contract sum and for which reasonable compensation has not been made in terms of clause 32.2. In our view this may include Vis Major.
In addition clause 39 of the PBA provides that either party may cancel the agreement on the cessation of the works for a continuous period of 90 calendar days or intermittent period totalling 120 days due to circumstances beyond the control of either party. Cessation is not defined in terms of the agreement but is generally understood to mean to ‘bring to an end’. In other words if the progress of the works has been stopped for a continuous period of 90 days or intermittent period totalling 120 days, either party may terminate the agreement.
It is extremely important that you understand your contractual obligations and rights immediately so that you may plan accordingly.
It is equally important thing to remember is that you should always take legal advice before you make a decision on any aspect relating to force majeure and more especially in these uncertain circumstances surrounding Covid 19 given the fast paced evolution pertaining to the virus itself as well as the treatment, protocols for dealing with it etc.