COVID-19 Key Considerations
For construction contracts and disputes
Industry is facing unprecedented times. The COVID-19
pandemic has forced every stakeholder in the construction
pyramid to adapt to new challenges resulting from a shifting
landscape of site closures, weakened supply chains and
intensive new health and safety requirements. Construction
may become more expensive and slower as new procedures
are followed, and uncertainties are clouding the industry as
the effects of the COVID-19 pandemic continue to evolve –
including possible future waves and governmental action.
As a result, obvious and obscure clauses have come to the
forefront as parties issue and receive claims for additional
money and time linked to the COVID-19 pandemic. This has
also forced stakeholders to engage in front-end dialogue on
issues such as project structuring, pricing, scheduling, occupational
health and safety, changes in law protection, force
majeure remedies, suspension rights and termination rights.
What follows are insights on key points that parties
may wish to look for in construction contract clauses dealing
with the pandemic, as well as potential considerations
when addressing existing disputes and those to come. Firms
should use this to assist as they navigate concerns, address
potential risks to business and ultimately, strategize for the
new normal.
Contracting and construction
How is COVID-19 addressed? For contracts finalized pre-
COVID-19, the impacts of the pandemic are most commonly
captured by the existing force majeure clause. However, it is
imperative for parties issuing or addressing pandemic-related
claims to identify all of the possible clauses throughout the
contract that may be triggered, not just the force majeure
clause. For example, governments and public health officials
have responded to the pandemic in a number of ways, including
by issuing stop-work orders and new health and safety
requirements like physical distancing and the use of PPE.
This may have contractual implications across a number of
different provisions within many standard form contracts
used in the industry.
Since the start of the COVID-19 pandemic, there has been
a trend in industry towards moving COVID-19 out of the
force majeure and other clauses to its own section. This not
only makes contracts easier to administer, but helps to clarify
that there are no other contractual remedies for COVID-19
impacts except as set out in the COVID-19 clause.
What are the contractual remedies? Generally, from a
contractor’s perspective, there are two possible remedies for
these types of events: additional time to complete the work
and additional compensation for increased costs. However,
each has its complications. Regarding time, should a contractor
be allowed additional time for all impacts or only those
that affected the critical path? Regarding compensation,
what types of costs are compensable? Are PPE and additional
rental equipment, or additional labour costs for extra
cleaning included? What about productivity impacts from
performing work in a more physically distanced way and the
indirect costs that may flow from the extension to the construction
schedule? What about supply chain impacts that
can have knock-on effects on other aspects of work, and
By Elliot Smith and Lia Bruschetta, Osler Hoskin & Harcourt LLP
LEGAL
LANGSTRUP/123RF
PILING CANADA 49
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