As the pandemic continues and a further lockdown in place, there remains a real concern that parties to construction contracts will become embroiled in costly and long-running disputes over the effects of COVID-19 on projects. This is reflected in the latest report from the Construction Leadership Council (CLC).
The Contractual Practices Working Group of the CLC Business Models Workstream recently conducted a questionnaire and a series of interviews with a range of leading industry professionals in the field of construction claims and disputes and contracting parties in the supply chain. Many respondents represent a significant client base from within the construction supply chain and across many sub-sectors. The aim was to help improve the CLC’s understanding on the impact of COVID-19 on contracts and the possible nature and volume of potential claims and disputes now, and in the future.
Of concern is the increase in the number of claims under construction contracts being rejected because of COVID-19. Initial indications found that whilst parties may be inclined to settle an entitlement to additional time for completion, there is a reluctance to agree financial losses, costs and expenses (which is the greater source of contention).
It is too early to know what will happen with those rejected claims. However, there have been positive early signs of commercial settlement to avoid disputes, but at present lower value disputes were considered easier to pursue, leaving COVID-19 related disputes – being more complicated – to a later date in 2021.
The CLC continues to monitor the situation with respect to the potential for widespread disputes and urges all parties to act fairly and responsibly to preserve the competence, capability and capacity within industry to meet the challenges of 2021.
A snapshot of current thoughts and perceptions is published in the summary note here.