20th July 2020
The Construction Leadership Council (CLC) published a guidance document on the 14th July 2020, entitled, CLC Covid-19, Contractual Disputes and Collaboration Guidance. The guidance includes options for amending clauses to JCT and NEC contracts to accommodate the effects of the pandemic.
The guidance builds upon the CLC’s Colvid-19, Contractual Best Practice Guidance, which had an aim of encouraging a collaborative approach between the parties as a reaction to the pandemic, to protect employment and ensure business continuity (e.g. at paragraph 1.2 it states; “allow all parties to survive and deliver successful projects”).
At paragraph 1.8 it states;
“……the template drafting in annex 1 is based upon the unamended JCT D&B 2016 and NEC4 ECC.”
The draft clauses therefore concentrate on these unamended contracts but the CLC does state that this is just a starting point and more intricate changes will be needed to be made in each circumstance.
The amendments are on the basis of any pandemic, but the terms can be limited to COVID-19. Also, it provides a mechanism under the contract whereby an extension of time or the award of loss and expense can be awarded when it would have been previously excluded. Any change to an existing contract is to be made by way of a deed of variation.
The guidance provides 3 options for both the JCT D&B 2016 and the NEC ECC:
Option 1 – an extension of time only;
Option 2 – an extension of time and all of the Contractor’s loss and expense incurred in dealing with COVID-19;
Option 3 – an extension of time and for the Contractor to be paid; “a predetermined percentage of the loss and expense incurred.”
It is submitted that the three options provide a clear and balanced path to the resolution of disputes as a result of COVID-19. Option 3 also provides a compromise on the sharing of risk, with a percentage of the loss and expense being negotiated between the parties.
The CLC’s approach reflects the ethos of the UK Government’s guidance document; Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency (published on the 7th May). The 1st July 2020 update states;
“The guidance is that parties to contracts impacted by the COVID-19 emergency should act responsibly and fairly, support the response to COVID-19 and protect jobs and the economy.”