Legal Eye

The volcano which occurred in Iceland had catastrophic effects on air travel. The ripples also washed upon the shores of the construction industry. It is not difficult to imagine that with substantial pieces of equipment and key personnel being imported for use on construction projects, delays in the transport of air freight and passenger transport will inevitably cause delays to construction projects. Tight time scales for completing work are the norm, with little margin for error. Employers looking for their pound of flesh will often include in their contracts substantial daily or weekly sums in respect of liquidated damages, to be paid by contractors if work is finished late. Obligations for payment of these amounts are passed down to subcontractors, to be paid by those responsible for the delays. Delays due to the volcano are therefore obviously potentially a problem for contractors and subcontractors employed on construction projects.

How do the standard contracts deal with a situation where work is delayed, due to a vital piece of equipment, or key personnel not available when required and delays for days and even weeks occur due to the ramifications of a volcano? Standard contracts used in most parts of the world do not include a specific clause to deal with natural disasters such as volcanoes. Contractors and subcontractor suffering from holdups of this kind need to scrutinize the wording of the contract for an appropriate remedy.

The terms force majeure appears in a number of construction contracts, the JCT standard contract which is used extensively on building projects, being a good example and may provide some comfort. If, due to a force majeure, work is delayed and affects the completion date, under a JCT form of contract, the contractor or subcontractor, will be entitled to an extension of time. But what is the meaning of force majeure? It is derived from the French Napoleonic Code. This being the case, one may ask, what is it doing in an English contract? Well you would need to ask the JCT and as it has been in the contract for such a long time, they may not have the answer.

The intention of the wording is to provide an escape from liquidated damages where unforeseen events have a dramatic impact on the performance of the contract. The matter concerned must be outside the control or responsibility of the parties. Those with long memories may recall the 1970’s, when due to a miner’s strike electricity was available on only three days each week. Many contracts as a result were delayed and contractors awarded extension of time on the basis that the lack of electricity was a force majeure. Epidemics such as swine flu, had it taken off, would be a force majeure. Delays due to the effects of a volcano would no doubt, also be regarded as a force majeure.

The ICE standard form of contract, which is used regularly on civil engineering projects, doesn’t have a force majeure clause. However “any special circumstances of any kind whatsoever,” which would include the effects of a volcano, rank for an extension of time.

Some contracts provide respite in respect of Acts of God, whilst other leaves an escape route in the event of an employer’s risk item occurring. Normally employer’s risk is defined in the contract and the wording would need to be examined carefully, to ensure that the likes of a volcano is captured.

However the legal adage “he who alleges must prove” applies. Contractors and subcontractor would have to provide chapter and verse as to the flights which were affected, together with details of the equipment and personnel involved and the resultant effect on the completion date.

It is obvious that if a project is delayed as a consequence of the volcano which erupted in Iceland, there is no quick fix. Contracts will have to be scrutinized carefully and procedures followed, if a successful extension of time is to be secured.

Roger Knowles is a barrister and construction disputes specialist.