New Zealand’s construction industry, along with the rest of the world, has been dramatically affected by the ‘lockdown’ imposed by the government in the wake of Covid pandemic.

The standard form of contract used here (by far) is NZS 3910, (2013) which is, I’ve been anecdotally told, a derivative of an Australian standard, which is in turn derived from the FIDIC Red Book, a somewhat Darwin-esque, lineage.

The contract has no Force Majeure clause, per se but it does have a similar provision.

This is the ‘Suspension of works’ option enshrined under Clause 6.7.1. The wording in this clause states that “If the suspension of the whole of part of the contract works becomes necessary, the Engineer shall instruct the contractor in writing to suspend the works…”  This is to be treated as a variation and entitles the contractor to both cost and time.

That though, has consequences. Should the suspended contract not be re started within 3 months, the contractor may request the Engineer in writing to permit the suspended works to be continued. If the Engineer does not grant permission within 1 month…then the contractor shall be entitled to treat the suspension as a variation deleting the uncompleted portion of the suspended work from the contract, or where the suspension affects the whole of the contract works, as an abandonment of the Contract by the Principal.

That is a process that could conclude as a claim that the contract has been repudiated by the Principal. Not a place any client wishes to be.  The question that is begged by the structure of the clause is, ‘has suspension of the works become necessary?’

The answer to that is a subjective response.

There are alternatives;

Clause 5.11.10 classifies a change in law as constituting a variation for which, arguably, the contractor receives both cost and time. But this doesn’t run the risk (small though it may be) of repudiation.

This has caused some heated debate on primarily Linked In (words in bold and the proliferation of exclamation marks!).

One faction claims the Engineer should instruct suspension, the other faction believes that there has in fact been a change in law and the contractor should therefore claim under 5.11.10 given the ‘suspension’ has already occurred and therefore a further written notice confirming what has already occurred is pointless; I belong to the latter faction.

The counter argument is that the law hasn’t changed but has simply been expanded as there is already an ‘infectious diseases’ tranche of statute.

My counter to that was, if the law already existed, how is it now a crime to drive 10km to a beach to surf or cycle? It certainly wasn’t before!

The NZ government has now confirmed that the ‘lockdown’ measures do constitute a change in law but notwithstanding that, it is clear many formal suspension notices have been issued.

The likely outcome is the same. The contractor should benefit from both cost and time for what is a completely unforeseeable event and the ultimate outcome of repudiation is I agree, highly unlikely, but why risk it?

There will be further claims arising from the reduced productivity associated the stringent health and safety measures that accompany our return to alert level 3 and the resumption of construction work. On a highway project I’m associated with, the site will have almost 40 individual bubbles, each with strict signing-in and tracking procedures, PPE, toilets and sanitary facilities and daily cleaning, all of which carry cost and time.

My view of working through these unprecedented times is that a collaborative approach is best although that doesn’t mean abandoning the contract altogether.

This is early days and there is a lot of water to yet go under this particular bridge.

Being in the same canoe and paddling in the same direction, can only help.