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Fri February 26 2021

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Study finds rampant confusion over Covid liabilities

11 Feb One in three construction contracts are not fit to address the effects of notifiable Covid-19 events, it is being claimed.

The inadequacy of contract conditions is leaving clients bearing responsibility for additional costs and time delays, according to research from quantity surveying firm Turner & Townsend.

The study found that the majority of liability arising from Covid -19 events was believed to be held by the contractual ‘employer’ – the party that engages the contractor, rather than the supplier.

The findings highlight a need for greater clarity over contract terms, according to the authors,  particularly with 83% of respondents experiencing a pause or temporary site closure because of Covid -19, and a further 72% reporting reduced productivity levels.

45% of those surveyed reported an increase in contractual disputes since the start of the pandemic, while a third said that their contracts were unfit to address the effects of notifiable Covid -19 events – partly due to the interpretation of liability for unforeseen events and reliance upon force majeure clauses. 

Furthermore, 43% of respondents considered that Covid -19 events were not sufficient on their own to claim additional time and/or money.  

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Just about everyone, it seems, is looking for answers to these problems:  63% of respondents have sought contractual guidance from the government due to the uncertainty; another third have consulted their industry bodies or sought professional advice.

With contractors still cautious about existing contract provisions and liability for cost and time events caused by Covid -19, the research found that 49% are building in Covid -19 related costs in their tender submissions.

Nick Jones, associate director, contract services at Turner & Townsend, said: “The Covid -19 pandemic hit live projects with delays, site closures and reductions in productivity. Almost a year on though and we still do not have enough clarity on the liability within construction contracts. This needs to be addressed, and quickly, particularly with new projects coming online thick and fast as part of the push for economic recovery.

“As contractors and clients alike now seek to recover losses incurred during the pandemic, it’s important to seek specialist advice. If 2020 has taught us anything, it is that all parties will now want to ensure clarity for Covid -19 event liability through the drafting of expressly worded contract terms, and the contractual ‘employers’ may also be looking to address the current imbalance of risk and responsibility for the future.”

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