Looking beyond Force Majeure

Force Majeure is an often used phrased these days. Previously only part of the opaque lexicon of legal professionals, now a common discussion topic for a broader audience.

So why now?

In base terms, coronavirus is affecting construction activity. Projects will stutter or stop and when they do, clients need to be aware of the contractual implications and their options for managing risk.

So back to that odd term Force Majeure, to paraphrase, this is an unforeseeable event over which neither party to a contract has control. There is much talk about Covid-19 being a Force Majeure event and it’s true that legal discussion seems to favour this being the appropriate interpretation.

So far so good. Building Contracts generally provide for a contractor delayed by such an event to be given extra time – but not cost. A client cannot claim damages for delay but hey – all is fair in love and lockdown.

Does this give the complete picture though..?

Building Contracts also provide for ‘suspension’, a period of nil cost delay to obligations up to a maximum of two months depending on the contract. Either party can prompt this, which again, seems fair but… what happens after the suspension period is over?

Well, it turns out either party can then elect to determine the contract allowing the parties to walk away. The client is left to pick up the pieces, some of which may be unfulfilled Agreement for Lease obligations leading to lost Leases (ouch).

So, Force Majeure may not be the fix-all clause after all – we would advise clients to look beyond this, to quickly assess projects and implement a specific plan tailored to the unique circumstances of each.

Perhaps now the words ‘collaboration’, ‘negotiation’ and ‘pragmatism’ will also make a comeback.

by Richard Taylor