The last eighteen months have been trying for all participants in the construction industry on account of the general uncertainty created by the COVID-19 pandemic and specific challenges such as travel restrictions, industry shutdowns, enhanced site safety requirements and supply chain upheaval.

However, with vaccination rates steadily rising and restrictions being eased, now is an opportune time to take stock of how the pandemic has impacted and continues to impact construction contracting across Australia.

Initial uncertainty

The three months after COVID-19 was first detected in Australia in January 2020 were characterised by widespread uncertainty as principals, contractors and suppliers alike turned to their contracts (and lawyers) to determine who bore what risk and the associated time and cost impacts, with many finding that:

  • Their contracts were ill-equipped to deal with the unique challenges posed by COVID-19
  • Force majeure was often addressed in black-and-white terms in that contracts were either silent on the issue or afforded relief in a broad range of circumstances
  • Where force majeure relief was available, it was usually limited to a suspension of all affected obligations, and
  • As governments took a more active role in managing the pandemic, change in law became a more common basis for claims.

“New normal”

Once the initial uncertainty subsided, the following trends soon emerged at all levels of construction contracting:

  • More considered and precise definitions of force majeure and change in law and force majeure regimes
  • Increased efforts by suppliers and contractors to obtain financial relief for pandemic impacts in addition to extensions of time, and
  • Principals including broad rights to manage COVID-19 risks, including negative variation, personnel exclusion, suspension and termination rights.

It was also the case on many public sector projects that ultimate clients took a pragmatic approach to COVID-19 impacts and afforded contractors time and financial relief notwithstanding the contractual position and on a best-for-project and society basis.

Into the future

We expect the “new normal” to continue for the foreseeable future as we all come to terms with how to best manage the effects of the pandemic. However, eternal vigilance is critical as:

  • The devil is most certainly in the force majeure and change in law drafting detail
  • “Foreseeability” drafting (“Force Majeure means … excluding any such event to the extent it was reasonably foreseeable by the claiming party on the Date of Contract”) is increasingly being used to deny force majeure relief notwithstanding that many COVID-19 impacts are foreseeable, but not preventable or able to be overcome
  • Your rights in respect of the effects of the pandemic are, for the most part, limited to the ones included in your contract, and
  • Frustration at law is a very high bar.

Further information / assistance regarding the issues raised in this article is available from the author, Joel Sturgeon, Partner or your usual contact at Moray & Agnew

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation at the date of publication. You should seek legal advice on specific circumstances before taking any action.