COVID-19 Contractual Obligations

25 Mar 2020

The country’s construction workers are continuing to go to work despite Monday evening’s emergency update from the Prime Minister, instructing the British public, “From this evening I must give the British people a very simple instruction: you must stay home. If you don’t follow the rules police will have the power to enforce them, including through fines and dispersing gatherings.

However, this message from the government has caused confusion in the following days for many within the construction industry. Following the update from Downing Street, contractors and sub-contractors began the process of closing their sites, taking on board Boris Johnson’s announcement of ‘you must stay at home’ and deeming their work as non-essential in the current climate.

Yesterday morning however, Cabinet Minister, Michael Gove communicated to the BBC that building work could continue, leaving many workers worried for their and their families’ safety. Adding to this, a number of our clients have explained that their construction workers have received verbal abuse from members of the public, ‘quarantine shaming’ – a new social term to keep the population at home. Politicians are challenging the construction industry for not doing enough to help ‘flatten the curve’.

As it stands, given that the government has deemed construction as an essential workforce – contractors and subcontractors are tied into contracts and are obligated to attend site or face significant charges as a result of contract breaches or late penalty clauses. Many contractors are simply being forced to stay open and are being asked to provide contingency plans to avoid penalty charges and maintain delivery.

In the weeks leading up to Monday’s announcement, delay and disruption in the industry has continued to build for a multitude of reasons: a decrease in labour on site, workers self isolating or returning home before restrictions on travel. A severe lack of progress has been caused by shortages in labour and supplies from China.

This situation leaves the construction industry in an immensely difficult position given that standard contracts (including standard form JCT, NEC and FIDIC) do not specifically reference the unprecedented international crisis that we are facing and will not have been on the agenda when a contract was entered into. The scale of the pandemic we are facing leaves no certain answers to the many questions the industry faces.

As the impact of COVID-19 builds and supply chains are being significantly disrupted, many are asking what will happen if they are unable to complete a project and where they stand legally, based on their contracts. If a party is unable to carry out their contractual obligations, there are two main prospective routes for terminating the contract – force majeure and frustration.

Force majeure is derived from French Law and such clauses alter parties’ obligations and liabilities under a contract when an extraordinary event happens, which is beyond their control, which thus prevents them from fulfilling their original obligations. Where this clause is applied, if COVID-19 was the cause of a party not completing a project, it means they would be entitled to discharge the contract and be excused from their obligations. In English and Scottish Law, force majeure is not general common law, so is not commonly applied to contracts. Even if the clause is included, whether it will relieve a party of their original obligations will depend on the precise wording of the term.

In the event that a contract does not include a force majeure clause, a party may be able to discharge the contract using the English law doctrine of frustration. Frustration is a contract doctrine that can set aside a contract where an unforeseen event has prevented a party from completing their contractual obligations. So, if the outbreak of coronavirus causes the contractual obligations to be impossible it may be that the contract can be ‘frustrated.’

It is not yet clear how our industry will overcome the pandemic and how the impact of delay and disruption will addressed. However, we are expecting to see an increase in delay claims using COVID-19 as an excuse to cover other reasons for projects being held up.

Our practical advice is to maintain daily accounts and evidence based recording (detailed records give a concurrent time frame of events happening during that time), particularly any impacts that could delay and disrupt a project. This will help lessen the impacts of the crisis.


If you would like to deliberate any contractual obligations, please get in touch with us at / 020 3457 2856. We are available to discuss initial concerns.