Following on from our previous article UK construction - will now be the time for collaboration? which examined how to mitigate the impact of the coronavirus pandemic on building contracts, we now look to examine the possible impact on professional appointments.
As lockdown rolls on and more sites are closed, a greater number of employers and contractors are now beginning to examine the services of design consultants. While initially much of their work could be completed from home, parties are now seeking to avoid a situation in which ongoing design overtakes the actual progress of the project, or having to pay for services which just cannot be undertaken in the current situation. Equally, consultants may find they need to review their contracts to protect their own position.
Of course, specific contractual terms will differ. It is important for all parties to review their contracts for each project. We have created a suggested list of items to consider:
- Delay: Generally, consultants’ appointments do not offer extensions of time or force majeure clauses . However, they can include clauses regarding a consultant’s obligation to abide by a set programme or project schedule and to exercise reasonable skill and care. Some appointments require the consultant to notify the employer of potential delays to the project.
- Additional costs: There is likely to be a mechanism by which consultants can claim additional cost, and parties should consider whether this could be triggered.
- Notice: Some appointments require the consultant to provide prior notice to the employer of any likely delay or additional cost. Any ability to claim additional time or cost can be conditional upon this notice.
- Variations: Employers often have a right to vary the services under the appointment, which can include the omission of work (and consequent reduction in fees).
- Suspension: Most appointments will give the employer the right to suspend at any time, perhaps following the provision of notice. There may also be a right of suspension for the consultant.
- Payment and instalments: In the event of any delay or suspension, many appointments will allow the employer to amend the payment or instalment dates so as to correspond with the work actually carried out.
- Termination: Does the employer have the right to terminate at will? Does the consultant? If not, does either party have the right to terminate on specified circumstances, and are any of those circumstances fulfilled?
If the contract is still being negotiated, then parties should ensure that the contract explicitly deals with the possible impacts of the outbreak. Particular attention should be paid to liability and obligations with regard to additional cost and delay. It is also advisable to ensure that the contract is capable of execution by electronic signature.
In this case, the parties may also want to consider on what contractual terms they are acting until the contract is finalised. Will the parties be held to common law standards? Has either party sought to rely on standard terms, such as RIBA (Royal Institute of British Architects), or their own terms and conditions? (But beware of a contract race scenario here.)
Consultants can be particularly vulnerable on those projects on which they have begun work but have not yet been paid and where construction work has not yet started on site. There is an increased risk of delay, suspension, termination of the whole project or even the insolvency of other parties. We recommend discussions between employers and consultants so that both understand the practical position as well as the contractual.
As per our previous articles, we highly recommend construction professionals take a collaborative approach to the current crisis. In discussions between the parties, it may come to light that finalised contracts may not adequately deal with the situation, and it is often at the option of the parties to amend the contract. Any agreement to amend should be evidenced in writing. While this is often an explicit contractual obligation, written evidence may also assist at a later date if claims are made or a dispute arises.
Parties may have to be creative in their solutions, in order to protect themselves but also ensure all those with whom they usually engage are also able to weather the storm.
It is likely that there will be a slight delay before the worst impacts of this outbreak are felt, as outstanding payments are made and order books clear. Hopefully those impacts will be counteracted by increased investment in public sector and infrastructure work, and an industry wide push to protect construction professionals.
In the meantime, parties should be reviewing their positions and co-operating to achieve the best possible outcome for all involved.
This article was co-authored by Gina Watson, Consultant and Tegan Johnson, Solicitor Apprentice.