Like most construction contracts, standard forms SBCC/JCT and NEC3/4 (if secondary option clause X2 is selected) provide that the risk of a change in the law will sit primarily with the employer.
SBCC/JCT forms potentially entitle the contractor to additional time and NEC3/4 forms potentially entitle the contractor to an addition to the contract sum, a claim for loss and expense and/or an extension of time.
COVID-19 is already re-writing the legal landscape – but has there been a change in law to date that would entitle the contractor in a construction project to additional time and/or money?
The Coronavirus Act 2020 has been passed – predominantly focusing on the provision of statutory powers to ease the burden on the NHS.The Scottish Government has declared that:
"the incidence or transmission of COVID-19 constitutes a serious and imminent threat to public health in Scotland and that the powers conferred by Part 3 of Schedule 21 and Part 3 of Schedule 22 of the Coronavirus Act 2020 will be an effective means of delaying or preventing significant further transmission of the virus in Scotland."
In the SBCC/JCT contract, one of the "Relevant Events" (events that entitle the contractor to additional time only) is the exercise of statutory power by the UK Government or any local or public authority, which delays the works.
While the UK Government has not yet ordered the closure of building sites, it has issued orders under existing public health legislation to require self-isolation of individuals, if COVID-19-related symptoms are presented.
We do not believe that this would itself be interpreted as the exercise of statutory power, which would therefore open up the "Relevant Event" ground for contractors.
The imposition of some sort of legislative or statutory bar to sites' operation though, would likely trigger "the exercise of statutory power" for the purposes of obtaining an extension of time.
Under NEC3/4 contracts, a change in the law of the country in which the site is situated is a compensation event (entitling the contractor to time and money).But has the law of Scotland been changed insofar as it relates to construction sites?
To date, the Scottish Government has not given any directions which directly affect building sites.They have certainly issued strongly worded advice and guidance but no "directions" that are expressly stated to be issued under the Act.
As such, it is arguable therefore, that no change in law has been implemented that can be founded upon as grounds for a compensation event under Secondary Option X2 of NEC3/4.
In the absence of a change in law/exercise of statutory powers, a contractor is more likely to argue that the COVID-19 outbreak constitutes a "force majeure" event (SBCC/JCT) or an "act of prevention" (NEC3/4).
As with any change in law risk, the contractor would only be entitled to additional time under SBCC/JCT but potentially could recover time and money under NEC3/4.