As the summer period ends, one topic that continues to rattle on within the construction industry is material delays and cost increases. We asked 3 experts to provide questions and answers on this:
- David Rogers, Deputy Editor, Building Magazine
- Laura Sherliker, Associate Director, The Fairhursts Design Group
Given there is a well-known and widespread materials shortage, are contractors still liable for materials not turning up to their sites? What can and should be done by clients and contractors to reduce contractual liability on this and to avoid disputes?
Liability for material shortage will usually depend upon the terms of the contract and the circumstances which led to the shortage.
Some contracts specifically allocate the risk of material shortage, with the Contractor assuming the risks except in circumstances where a ‘relevant event’ or ‘compensation event’ has occurred.
Under JCT D&B 2016, on receiving notice of a ‘relevant event’, under Clause 2.25 the Employer may award the Contractor an extension of time for completion of the works, relieving them of delay damages. Contractors however are not entitled to claim for the loss and expense incurred as a result of this delay.
A relevant event is an event (described within its contract) not caused by either of the parties, but which affects the ability to comply with the timescales of the project.
The NEC equivalent of relevant events are ‘compensation events’ and under NEC3 Clause 60, a compensation event may entitle the Contractor to an extension of time or an additional payment.
Force Majeure events fall within the definitions of both ‘relevant’ and ‘compensation’ events under JCT and NEC respectively. As such, if the Contractor can show the material shortage was a direct result of Covid-19 or Brexit, they may be protected against any claims for delays to completion.
However, if the contract was entered into after the outbreak of Covid-19 or following Brexit, the consequences of these events were arguably reasonably foreseeable, so are unlikely to be considered Force Majeure.
Although it may seem like the obvious answer, read the terms of your contract.
What are the top tips to communicate with the client about material delays?
If there are delays in the supply, delivery or simply provision of materials on a project, one of the likely consequences is that new/alternative materials will be suggested and introduced in order to keep the project programme moving.
It’s really important to communicate this to the client at the earliest possible point when you are aware of or think there might be delays to the programme, or consequences from any changes to the nature of the materials used.
Should new materials be used, it is critical to check the following:
- Is the new material meeting the specifications outlined in the original contract?
- Are the client’s requirements still going to be met from the original contract?
- Are fire safety requirements considered and met with the introduction of the new material?
- Do the materials work or fit with other materials from a technical point of view?
- Do they comply with any contractual requirements as to deleterious material?
What is most important is to allow time for this process to happen. This process is also in addition to any time that may already have been lost or will be lost from issues surrounding problems with materials.
What is crucial is to get all the relevant parties and specialists to sign off a critical change to the design. If not, this can have bigger implications on budget and programme later down the line.
The above comments also apply broadly to problems arising from other current issues such as the pingdemic, holidays and difficulties with labour.
These are the views of the author and not of Barton Legal, and should is not to be treated as advice or guidance