The recent storms and flooding will have delayed projects by, for example, causing transport disruption to labour and suppliers.
Sites are also unlikely to have been adequately protected to repel the effects of the extreme conditions.
We expect many readers will have opened their contracts to see how such weather conditions and consequent delays were dealt with.
Reports record that the storms were on the ‘one-in-20’ (year) scale. Building contracts vary in how they allocate risk of costs and delays of such events.
For illustration, we look at the JCT and NEC standard forms.
First, under the JCT (2011), extreme weather may constitute a relevant event, allowing an extension of time, if it is decided to come within one or more of:
- “Exceptionally adverse weather conditions”
- “Loss or damage occasioned by any of the specified perils”
- “Force majeure”
We expect that a one-in-20-year storm would be sufficiently ‘exceptional’ to qualify under the “exceptionally adverse weather conditions” relevant event.
Although a storm is expressly included in the definition of a ‘specified peril’, an extension of time based on this relevant event seems conditional upon physical loss and damage being suffered – that may not always be the case.
“As with any extension of time claim, it will be critical to take reasonable steps to try to mitigate the effect of the delay”
The meaning of ‘force majeure’ has developed over the years and covers the more extreme causes of delay.
As with any extension of time claim, it will be critical to take reasonable steps to try to mitigate the effect of the delay. What is reasonable will depend on the circumstances but could, for example, involve moving manufacture offsite or resequencing construction.
One important point to highlight under the JCT is that there is no entitlement to loss and expense because extreme weather does not constitute a relevant matter. The financial risk is therefore taken on by the contractor or subcontractor.
NEC 3 difference
Under the NEC 3, the contractor may be entitled to an extension of time and money (as a compensation event) if adverse weather conditions have caused delay and additional cost.
“The criteria are stricter under NEC and the contractor or subcontractor will bear the risk of any weather conditions that fall outside these criteria”
The threshold under the NEC is an objective test: generally, if the weather conditions occur less frequently than once in 10 years, it will constitute a compensation event. On that basis, a one-in-20 year storm would pass the threshold.
The criteria are stricter under NEC and the contractor or subcontractor will bear the risk of any weather conditions that fall outside these criteria.
That said, the parties will often decide what weather conditions will constitute a compensation event, bearing in mind the kind of works being undertaken and the specific details of the site. Again, the contractor will be expected to take reasonable steps to mitigate the effects of delay.
In summary, we expect most contracts will provide some protection for delays caused by the storms.
However, we expect that the immediate priority for many was simply to protect the site from the elements and then to get the project back on programme as quickly as possible.
In our experience, collaborative efforts to this end are often the most successful.
Digby Hebbard is a partner and Beth McManus is a solicitor in Trowers & Hamlins’ contentious construction team