Industry expert John Merlo says it is only a matter of time before the effects of COVID-19/Coronavirus spread to the construction industry’s current and future projects.
John Merlo from Merlo Law, says construction workers, contractors, architects and engineers will certainly be impacted by COVID-19/Coronavirus.
“The Coronavirus is affecting everything from travel to site to work environments, including construction projects on the ground, to apprentices going to college and to toolbox meetings."
Time is of the essence with your construction contract
With the virus expanding in the Australia, John Merlo expects the impact on all construction activities to become more profound. As construction workers become laid-off, stood down, infected, and sick and quarantined, labour shortages will inevitably arise. These delays are going to have vastly profound impacts not only with ongoing construction projects, but also with projects in the pipeline.
Owners and contractors will be involving their lawyers far more often in a bid to stay alive in turbulent times.
John Merlo says time is often of the essence and clauses involving time will become even more relevant. There are many clauses that will be relevant relating to the contractor’s schedules, such as substantial completion, delays, extension of time, liquidated damages, set-off and other contractual provisions.
Often there are strict and fatal time bars in construction contracts which stop your right to recovery, to damages, and to claim delay. Those time bars could be the difference between life and death for companies and partnerships right now.
Termination for convenience of construction contract
Termination for convenience is also a major risk right now says John Merlo.
“I foresee much argument over clauses like the ones mentioned and excuses by contractors for shortages in labour caused by the COVID-19/Coronavirus.”
“There will be heated discussions between Contractors, Engineers, Construction Managers and Principals and Owners regarding the impact of COVID-19/Coronavirus, and the various contractual provisions regarding delays, extension of time, substantial completion, frustration and force majeure events and whether such events give a good excuse to invoke the ‘Termination for Convenience’ clause of the contract in order to hire a contractor who can provide sufficient labour force to complete the project in a timely manner.”
Don’t take a risk – talk to John Merlo now to protect your position.
Certainly the scheduling of the contractor’s work is of utmost importance to all contracts says John Merlo. With the emergence of the COVID-19/Coronavirus and labour shortages, in an industry already plagued by shortages, reviewing your time clauses is essential and absolutely paramount.
“I also suspect that the lawyers for Head Contractors, Principals and Owners will be reviewing the contracts of their clients to see what they’ve agreed to do, and what contractual rights and duties exist in light of the conditions caused by the spread of the COVID-19/Coronavirus."
Many will be reviewing agreements to see if timely performance is excused by the labour shortage caused by this virus, he says.
Several of the major standard form contracts include provisions designed to deal with extreme circumstances beyond a contractors control. John Merlo says there will be more than a few debates about the words and phrases therein, and all contractors should seek to have a lawyer clarify, sharpen and close out the possibility of exclusion, ambiguity or limited utility in those provisions.
Contractors should also be exceptionally wary about any non standard boutique or amended standard form contracts – and get advice from John Merlo immediately before signing.
John Merlo reminds all contractors that the usual practice of not signing a contract and starting work is exceptionally fraught with risk with the emergence of the COVID-19/Coronavirus, and all contracts should be submitted for review and action immediately.
Litigation and dispute resolution
John Merlo says as a result of COVID-19/Coronavirus there will be a massive increase in claims relating to contractual scheduling and project obligations; adjudication, mediations, arbitrations and litigation over contract terms such as delay clauses, force majeure provisions, liquidated damages and other terms will certainly be filed.”
Construction worker protection and contractually mandated healthcare facilities might increasingly also come into being, he surmises.
In addition to contract provisions relating to work and labour scheduling, timing and completion of work, John Merlo says other clauses or covenants may start to be implicated in disputes between owners and contractors as a result of COVID-19/Coronavirus. For example, Principals and Owners ought to consider drafting new terms requiring testing or to quarantine of workers involved in segmented areas of a project, or even of inbound labour forces before they are released into the wider project. John Merlo says major infrastructure built environment and construction projects may conceivably need to establish operating facilities, for quarantine or other medical facilities.
Social distancing
Social distancing has become mandated by the federal and state governments. John Merlo says there may be Principals, Owners or Contractors suspending work for stated periods, relying on ‘social distancing’ policy which may or may not be being used legally or allowed under the contract terms.
Advice should be taken without delay says John Merlo.
This publication considers legal and technical issues in a general way. It is not intended to be legal advice. Any legal advice is qualified on the basis that the reader should immediately confirm the information relied upon with Merlo Law. We look forward to being of assistance.
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