The impact of the Coronavirus pandemic can have severe financial consequences if your construction contract risks are not properly managed.

Liquidated damages, increases in the price of labour (due to inefficiencies caused by social distancing and now having to work 7 days a week in some cases), increased costs for materials or equipment used or ordered (for example in some cases cabling prices have increased by over 20% in a month) for incorporation in or associated with the project are some of the major reasons for future and/or current cost overruns.

 

Liquidated Damages Exposure

The majority of construction contracts have liquidated damages clauses exposing subcontractors to substantial damages, calculated on a daily rate, should construction projects not be completed by the date for practical completion.

In the current Coronavirus pandemic environment contractor’s exposure to liquidated damages may be affected by the suspension of works or parts of the site being shut down, productivity and progression of the works may also be diminished due to inefficiencies caused by social distancing or stringent OHS requirements further delaying projects.

 

**DO NOT WALK OFF-SITE BEFORE GETTING PROPER LEGAL ADVICE**

 

We have received numerous enquiries from members on the verge of walking off-site, because of compounding Coronavirus pandemic issues making site conditions untenable. Walking off-site may expose you to substantial Liquidated Damages and significant damages for breach of contract. Some contracts even make provision for the Principal/ Builder to claim general damages over and above Liquidated Damages.

 

Expansion of Times Claims (EOT Claims)

A site shutdown caused by the Coronavirus pandemic may allow you to claim an Extension of Time (EOT). A change in legislation restricting work methods (i.e. social distancing on site) may be grounds for claiming an EOT or variation. Delayed supply of material caused as a result of the Coronavirus pandemic may also be a Force Majeure event under your contract, allowing you to claim an extension of time. These all depend on the terms of your contract.

Please ensure that any claims for EOTs, delay damages, disruption costs and costs of suspending works (if the contract provides for these) are made within the strict timeframes provided by the contract and made in the proper form. Failure to make any EOT claims or claims for additional costs incurred in a timely manner may result from you being barred from making such claims at a later stage.

 

Read Your Contracts and Get Advice

CTI Lawyers have resources in all states to assist you in putting together EOT claims, which in respect of some contracts may include you claiming costs due to a site being closed down through no fault of your own.

Please note: this is general advice and should you have any issues which require legal advice, contact CTI Lawyers for advice relating your specific circumstances and specific contractual provisions.