What does COVID-19 mean for architects administering ABIC contracts? Christopher Larcos and Shanna Beaton of Moray and Agnew Lawyers outline key considerations.

The commercial, legal, and economic impacts of the COVID-19 (coronavirus) global pandemic are escalating. Contractors in the Australian construction industry are urgently considering the contractual relief to which they may be entitled as changes to work methods, and disruptions to supply chains and project timeframes become almost a certainty. Architects administering contracts, whether it be the ABIC Simple Works Contract (ABIC SW 2018) or otherwise, should therefore expect an increase of the number of claims from contractors.

Adjustments to the Date for Practical Completion and Adjustment of Time Costs

The first consideration for most contractors will be whether they can claim for either or both of the following as a result of delays caused by the pandemic:

• an extension of time, which is referred to in ABIC SW 2018 as an adjustment to the date for practical completion; and
• delay costs, which is referred to in ABIC SW 2018 as an adjustment of time costs

Reasons may include, for example, shortages of materials or labour, or even site shutdowns.

The answer will depend on the terms of the relevant contract, and so must be assessed on a case-by-case basis. However, the unamended version of ABIC SW 2018 limits the circumstances in which a contractor is entitled to claim either an adjustment to the date for practical completion or an adjustment of time costs to those causes listed in clauses L1 and L2 respectively, none of which will be triggered by delays (or increased costs) caused by the COVID-19 outbreak.

Having said that, clause L2 does allow contractors to make a claim for an adjustment to the date for practical completion (but not an adjustment of time costs) for delays caused by “other circumstances exceeding the allowance shown in item 21 of Schedule 1”.

Architects will need to carefully consider how this item 21 in Schedule 1 has been filled out when assessing claims, as it may entitle the contractor to claim an adjustment to the date for practical completion for delays caused by COVID-19. For example, if item 21 listed “any cause beyond the contractor’s reasonable control” as a circumstance in which the contractor is entitled to claim an adjustment to the date for practical completion, delays caused by COVID-19 are likely to trigger the contractor’s right to make such a claim where delays exceed the allowance stated in item 21.

Scenarios architects may encounter

Under the unamended version of ABIC SW 2018, however, it is unlikely that a contractor will be entitled to relief where, for example:

• the contractor is unable to source intended materials (from China or elsewhere) where similar materials can be sourced elsewhere;
• a tradesperson is unavailable because they have to self-isolate for two (or more) weeks, even where sourcing an alternate tradesperson will come at a premium; or
• a site is closed because a labourer has tested positive for COVID-19.

Force majeure

Force majeure is a contractual mechanism designed to provide relief to parties affected by unforeseeable events that are beyond their reasonable control. In Australia, there is no common law concept of force majeure. Instead, whether a party is entitled to force majeure relief hinges on the terms of the relevant contract.

The unamended version of ABIC SW 2018 does not include a force majeure provision, leaving contractors open to COVID-19 risks. However, a force majeure clause may be inserted as a Special Condition to ABIC SW 2018 where owners wish to provide the contractor with relief for such events.

The Association of Consulting Architects has developed a Special Condition to address force majeure events – this is available to members through the ACA Member Toolbox.

Force majeure clauses in the construction context:

• may: list events such as pandemics or epidemics;
• usually:
  • define what constitutes a force majeure event with an exhaustive list of events that are “beyond the reasonable control of the affected party”;
  • require that the affected party must not have caused or contributed to the relevant event, and must take reasonable steps to overcome its effects;
  • require that the force majeure event prevents the performance of some or all of the affected party’s contractual obligations; and
  • provide that if these pre-conditions are satisfied, the affected party is excused from performing all affected obligations for so long as it is prevented from doing so by the force majeure event; and

• always: require careful consideration of whether the party claiming relief has actually been delayed by the relevant event, and has taken reasonable steps to overcome or mitigate such effects. For example, in Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd (2006) 236 ALR 115, Kiefel J held that: “Impractability of performance is not generally recognised as a ground of discharge of a contracting party’s obligations.” The unavailability of, or delay in the supply of, goods and materials from an intended supplier may, therefore, not be sufficient to trigger relief as the contractor will need to demonstrate that it could not fulfil its contractual obligations by sourcing materials elsewhere, even if it is uneconomic or less profitable to do so.

Changes in law

Change in law clauses in the construction space usually provide that where an unforeseen legal requirement adversely affects the ability of a party to perform its contractual obligations, the affected party is entitled to claim an extension of time and delay costs, and sometimes a variation.