Open dialogue needed to avoid COVID-19 construction disputes

Introduction
Top tips

Introduction

The potential for disputes in construction projects has risen sharply with the performance and enforcement of contracts directly affected by COVID-19. Lockdown restrictions and consequent delays in the supply chain have led to related delays and losses, with many construction sites having to close or work with reduced staff. Add to that the possibility of further lockdowns should cases in Jersey increase and this disruption to projects could carry on for at least the next six months or longer.

In many cases, projects have been suspended. In others, smaller ancillary works programmes have been agreed to ensure that progress does not stall altogether. However, that has paved the way for potential disputes with, for example, delays in the supply chain affecting the manner in which those works are delivered or ancillary programmes and resequenced works being documented improperly.

Many other issues may arise in the course of a construction contract and a failure to manage small frustrations and issues properly at the outset often leads to larger, multi-faceted, costly disputes further down the line.

Parties should avoid getting into a full blown dispute if possible. They should weigh up the time and cost of an adversarial approach, which will only compound delays, against the cost savings and benefit of a collaborative approach to resolving disputes as they arise.

An open and frank dialogue early on between the parties steered as a form of informal mediation or collaboration can quickly put an end to frustrations and disputes and lead the way for a successful, more cost-effective solution to any dispute that may arise, big or small.

Top tips

• Parties should review their existing contracts and carefully consider the effect of COVID-19 when negotiating new contracts.
• Parties should act fairly and reasonably when administering contracts, bearing in mind the impact of COVID-19. For example, how might additional costs be shared? Can works be resequenced or can sectional completion be added? Is a time extension needed? Have relevant notices been properly issued?
• A conciliatory approach to unfulfilled commitments should be adopted to establish a dialogue. Parties should perform a reality test and optimise their position, weighing up the time and cost of an adversarial approach with the cost savings and benefit of a collaborative approach.
• Careful records should be kept. Parties should document any discussions or agreements (eg, to suspend or vary works).
• If an agreement cannot be reached or looks unlikely, parties should consider engaging legal counsel.

For further information on this topic please contact Rebecca Mcnulty or Jonathan Hughes at Ogier by telephone (+44 1481 721 672) or email (rebecca.mcnulty@ogier.com or jonathan.hughes@ogier.com). The Ogier website can be accessed at www.ogier.com.