Members of the Builders Merchants Federation (BMF) have raised serious concerns about materials shortages, particularly roofing and timber supplies, and the impact this may have on the construction sector.

Employers, contractors and sub-contractors may be wondering how their building contract will respond to delays to a project, caused by those shortages.

How a building contract allocates risk between the parties for materials shortages, depends on the cause of the shortfall. If a contractor/sub-contractor wishes to claim for additional time and/or money due to this issue, they must investigate the cause.

The reports from the BMF suggest that the consequences of COVID-19 and Brexit may be having an impact on the shortages – we discuss both issues below.

Impact of COVID-19

If the materials shortages are caused by the effects of COVID-19, this may be classed as a force majeure relevant event under the unamended JCT/SBCC form of contract (see for example, clause 2.26.14 in the Design and Build 2016 Edition). Force majeure is generally understood as an event that is outwith the control and contemplation of either party at the time of contracting. If the contractor/sub-contractor can establish that a materials shortage will have an impact on the completion date, they will be entitled to an extension of time and relief from delay damages. However, force majeure does not create an entitlement to loss and expense.

If you are operating under the NEC 4 form of contract, you may be entitled to both additional time and money associated with the delay, as part of the compensation event (CE) mechanism. The CE that is most likely to be triggered is found under clause 60.1(19). This covers events that neither party could prevent; that a reasonable contractor would have judged as having such a small chance of occurring, it would not have priced for it; and stops the contractor from completing the works. This is generally known as 'prevention'.

Contractors/sub-contractors should be aware that: (1) their contracts may have been amended such that entitlement to time and/or money is either restricted or removed; and (2) if their contracts were entered into after the COVID-19 pandemic commenced, the employer will likely argue that they should have both programmed and priced for knock-on effects, such as materials shortages.

Impact of Brexit

Delay related claims for difficulties in procuring materials caused by Brexit are likely to be much more difficult to establish, as employers will argue that contractors/sub-contractor should have made an allowance for such risk and priced/programmed for it. Certainly, in the contracts we have seen being negotiated for the past few years, it has been commonplace to request that a 'Brexit' clause is added to the drafting to provide express rights in relation to these sorts of issues. If, however, a contractor/sub-contractor can say that the effect of Brexit was too uncertain/unforeseen that they were unable to account for the effects of a materials shortage, this may again trigger an entitlement to an extension of time based on force majeure under JCT/SBCC (but no entitlement to loss and expense). Similarly under NEC4, the 'prevention' CE may also be triggered, creating an entitlement to both time and money.

An additional relevant event/CE that might potentially also apply is generally known as a 'change in law' provision. This can be found under clause 2.26.12 of the SBCC D & B 2016 contract, or Option X2 under NEC 4. Before relying on a change in law provision, the contractor/sub-contractor will be expected to set out the specific change in law that they consider has resulted in the materials shortage. The end of the Brexit transition period has resulted in significant changes to the terms of trade between the UK and the EU, introducing new customs and VAT requirements and procedures, as well as detailed rules of origin that govern whether tariffs apply to imported products. These changes are complex, so parties should carefully consider whether they can rely on a change in law argument for seeking additional time and/or money to cover the circumstances of the claim.

As noted above, contractors/sub-contractors should watch out for any amendments to the standard forms, which either restrict or remove entitlement to time and/or money caused by Brexit. Generally we find that parties have made provision for the effect of Brexit in their contracts, so if you are administering the contract you should check for any relevant Brexit clauses.

Gather evidence and ensure compliance with notice provisions

As with any event that delays progress on site, both parties should accurately record its impact in writing, whether by emails, minutes of meetings, letters or site diaries. The success or defence of a claim for additional time and/or money is largely dependent on the strength of the evidence which documents the delay experienced.

Contractors/sub-contractors who are making a claim should also ensure that any notice provisions are fully complied with and pay particular attention to any requirement for early warning notices or condition precedent clauses.

We would reiterate that parties should carefully check their contract as soon as it becomes apparent that materials shortages are affecting progress and seek legal advice if necessary.