On 14 July 2020, the Construction Leadership Council (CLC) COVID-19 Task Force published guidance to address the contractual challenges presented by the pandemic.
This guidance consists of the following documents:
- Guidance on future-proofing contracts;
- Guidance on record keeping; and
- A Summary Guide.
Andrew Croft, Senior Associate at Beale & Co is a member of the COVID-19 Task Force and helped to draft the CLC guidance. Beale & Co are again proud to have been involved in this key contribution to the industry and to assist parties in navigating the contractual issues caused by the pandemic.
Future Proofing Contracts
The objective of this future proofing guidance is to help parties accommodate the impact of COVID-19 within contracts going forward. It builds on the contractual best practice guidance, which was published on 7 May 2020 (see this note).
The guidance now includes options for amending the JCT Design and Build Contract and the NEC3 and NEC4 Engineering and Construction contracts, to cater for impacts of the pandemic on delivery of the works/services.
The options are either: 1) only an entitlement to an extension of time, 2) an entitlement to an extension of time and additional costs, and 3) an entitlement to an extension of time and a percentage of additional costs.
The guidance also includes drafting entitling either party to terminate if a pandemic event continues for a period of time, which is to be agreed on each contract.
These suggested contractual amendments aim to provide a useful starting point on how parties can deal with the issues presented by the pandemic contractually.
The primary aim of the CLC guidance, in relation to contractual best practice and future proofing contracts, is to encourage parties to be fair and responsible in the performance and enforcement of contracts impacted by COVID-19. However, the CLC recognises that this collaborative approach is not always possible in practice and agreement may not be reached in relation to delays and/or additional costs arising from COVID-19.
As a result of the crucial role that record keeping plays when disputes arise, the CLC have also published guidance on record keeping. Good records can help parties resolve claims more efficiently and, can help to mitigate delay and/or additional costs if shared contemporaneously. The guidance advises on the types of records that parties should be keeping and how these records should be kept.
The CLC COVID-19 Taskforce have also prepared an accompanying Summary Guide, to the contractual best practice guidance, to help parties navigate discussions with employers/contractors. The guide identifies the following steps that can be taken to encourage a collaborative solution to be reached and to moderate the impact of the pandemic:
- Establish concurrent conversations.
- Reality test and optimise your positions.
- Realistically offset the time and monetary costs of adversarial behaviour, against the savings and benefits of a collaborative commercial dialogue.
- Use the resources to formalise your deal.
Making use of the guidance
This new CLC guidance will be useful to all parties involved in construction projects. There is a fear amongst many in the industry that COVID-19 will result in costly and long-running disputes over the effects on project delivery under contracts. The guidance on future proofing contracts should be considered by all parties who are entering into new contracts in the construction industry going forwards, and also by parties who are seeking to amend their current contracts. Further, the record keeping guidance provides some useful tips which will assist in resolving claims in relation to COVID-19 if they do arise. The Summary Guide is an accessible tool which will assist those across the industry in seeking to resolve issues arising from COVID- 19 and moderate its effect contractually.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.