Events of superior force like the devastating Queensland floods are often described in construction contracts as events of force majeure, and may entitle both principals and contractors to relief under the contract.
Force majeure is a creature of contract, and therefore it is imperative that parties to construction contracts affected by the Queensland floods carefully review their contracts to determine how a particular contract responds to an event of force majeure. If force majeure is not addressed, parties will need to review the usual extension of time and cost provisions to determine whether any entitlements to relief exist. In doing so, parties may be required to perform their contractual obligations as far as reasonably possible, and to follow the contract strictly in relation to notification and other requirements.
In reviewing your contracts, the devil is in the detail, and not all contracts will contain force majeure clauses or respond to the same events or in the same manner. This is important because courts will often require strict compliance with force majeure provisions before performance will be excused under a contract. Unless any existing ambiguity is contractually addressed, the ambiguity will be construed against the party who put forward the provision. For this reason, care is advised in reviewing the details of individual contracts and parties should not assume that all contracts will respond in a uniform manner to events of force majeure.
Although each contract must be construed on its terms, below are some general tips that will help both principals and contractors to manage contracts in the immediate aftermath of events of superior force such as the Queensland floods.
Act now
In the aftermath of a major catastrophic event, technical contractual provisions are often not foremost on most people's minds. However, because of the strict timeframes and compliance requirements of many force majeure provisions, parties may need to act swiftly if they are to avail themselves of contractual relief under force majeure provisions in their contracts.
Confirm your contract deals with the event
Contracts may deal with what constitutes an event of force majeure in different ways. In some contracts, an event of force majeure may be widely defined as an event beyond the reasonable control of the parties that prevents performance. However, in other contracts, the force majeure provision may be drafted narrowly to only respond to particular events that prevent performance. Affected parties should carefully review the wording of force majeure provisions in their contracts to confirm that flood events such as the Queensland floods fall within the ambit of the force majeure provision.
Follow the contract strictly
Force majeure is a creature of contract and therefore usual rules of contractual interpretation will apply. For this reason, parties should be careful to strictly follow the requirements of the force majeure provisions in their contracts if they are to avail themselves of relief under the contract.
Check the timeframes for notification
Force majeure provisions often contain strict notification timeframes. Failure to comply with these timeframes may preclude a party from invoking the force majeure relief under the contract, and consequently should be followed strictly. Parties should check whether the timeframes for notification are reoccurring, as force majeure provisions may require you to provide ongoing notification if a force majeure event is continuing.
Check the requirements for notification
Notification requirements may require specific information to be provided in the notice for it to be valid. For instance, a force majeure provision may require the notice to state that it is a notice given under the particular clause, as well as providing notice of the alleged force majeure event and other required details. A general indication of the event in question without complying with the strict contractual wording may be insufficient to grant relief under the contract. For this reason, it is important that project directors, project managers and others do not rely on contractual summaries when preparing notifications and refer to the actual contract wording to ensure strict compliance.
Establish mitigation strategies where possible
Where it is possible to do so, parties should take care to mitigate the effect of a force majeure event. In some cases, the requirement to mitigate may be specified in the contract.
Check your insurance notification requirements
The occurrence of a force majeure event may trigger a notification requirement under project insurance. Parties should review their insurance policies and contact their broker to discuss the requirements.
Document everything
Documenting the occurrence of a force majeure event is critical to ensuring a party can later prove the occurrence, notification and steps taken in responding to the event. This is particularly important in the context of possible disputes that may arise later (particularly in relation to occurrence, extent and response to an alleged force majeure event).
As Queensland takes stock of the present flood damage, requirements to invoke force majeure provisions in construction contracts are likely to be time-critical and may warrant immediate attention. If you would like to discuss how the Queensland floods have affected your contracts and the rights and remedies you might have as a result, please do not hesitate to contact us.
© DLA Phillips Fox
DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com
This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.
