By Nicole Rens, Candidate Attorney
This article will discuss force majeure in relation to the relevant clauses of the Joint Building Contracts Committee Principal Building Agreement, 2000 Edition 5.0 (Reprint 1) (“JBCC”) regarding its enforcement and the rights pertaining to the Contractor and Employer respectively, during this Covid-19 outbreak.
In order to understand the content of this article, it is important to understand the following definitions that are provided for in the JBCC as well as an understanding of the term, force majeure;
Contractor: The party contracting with the employer for the execution of the works as named in the contract data;
Contract Value: A monetary value that initially is equal to the contract sum (which is the negotiated tender amount including tax accepted by the employer) that is subject to adjustment;
Employer: The party contracting with the contractor for the execution of the works as named in the contract data;
Practical Completion: The stage of completion where the works or a section thereof, as certified by the principal agent, is substantially complete and can effectively be used for the purposes intended;
Principal Agent: The party named in the contract data and/or appointed by the employer with full authority and obligation to act in terms of the agreement.
Force Majeure or “Act of God”:
In extraordinary circumstances, when the contracting party is unable to perform, due to an unforeseen event occurring, which the contracting party cannot control, such an event can make performance impossible, due to no fault of the contracting party. An extension of time can be permitted to allow the party to perform, alternatively, it can remove the duty to perform entirely.
The JBCC provides specific regulations that constitute force majeure. Therefore, the common law principal of force majeure need not be explored in this article.
Relevant clauses of the JBCC:
Clause 29, named Revision of date for practical completion, makes provision for events that are considered to be force majeure.
Clause 29.1 and its sub-clauses deal with incidences when the Contractor is entitled to revise the date of practical completion. If these incidences apply, the Principle Agent is not required to adjust the contract value during this period. In other words, the fact that you cannot perform as the Contractor, due to an event listed in this clause does not directly affect the amount of money claimable for services rendered and for work that has been done, or that still needs to be done. The contract sum that was tendered for should not be affected.
In terms of Clause 29.1, instances where the contract value will not be affected are: the adverse effect of weather conditions; the inability to obtain materials and goods; where the contractor has taken all practical steps to avoid or reduce such delay; or making good physical loss and repairing damages to the works where the contractor is at risk etc.
For the purposes of this article, Clause 29.1.4, which relates to events that neither party could prevent, civil commotion, riot, strike or lockout, is most pertinent. This subclause is one of the listed instances where performance will be delayed, but the contract value will not be adjusted.
Clause 29.2 deals with instances where the Contractor is entitled to revise the date of practical completion, however the Principle Agent is permitted to adjust the contract value. In other words, the fact that you cannot perform as the Contractor can affect the amount of money spent on the project and the amount can increase without disagreement from the Employer. The Contractor will be required to submit a schedule of costs with regard to the delay. The Principle Agent, along with the appointed Quantity Surveyor, would be required to adjudicate and then approve the costs.
Instances where the contract value can be amended includes: failure to give possession of the site to the Contractor; making good physical loss; repairing damages to the works where the Contractor is not at risk; and insolvency of the nominated subcontractor, etc.
When only looking at Clause 29.1.4, it seems obvious that the lockdown period due to Covid-19 falls under this category. The confusion comes in when Clause 29.3 is addressed, which states that:
Further circumstances for which the contractor is entitled to a revision of the date for practical completion are delays to practical completion by any other cause beyond the contractor’s reasonable control that could not have reasonably been anticipated and provided for. The principal agent shall adjust the contract value where such delay is due to the employer exercising his rights in terms of the agreement or by the default of the employer.
Uncertainty arises when Clause 29.1.4 and 29.3 are compared. Which clause is the relevant clause that the Covid-19 induced lockdown falls under?
The delay caused by the lockdown is in line with the delays as explained in Clause 29.1.4, as it is an event that neither party could prevent. It does not comply with Clause 29.3, as the Employer’s actions or omissions in terms of the agreement, is not the cause of the delay.
The Process to follow when reporting a delay:
In terms of Clause 29.4.3, the Contractor has an obligation to notify the Principle Agent by way of written notice about a possible delay, by submitting a claim for a revision of the practical completion date, within 20 working days from becoming aware of the delay, or when the Contractor should reasonably have become aware of the delay.
Once there is evidence that there is/was in fact a delay, the Contractor can claim for the delay. The Contractor must be able to prove the number of workdays that have been lost due to the delay.
The Contractor must then propose a new practical date of completion, and the Principle Agent must accept the proposed date.
In the instance of Covid-19, the Contractor has to make the Principle Agent aware of the delay within 20 working days, starting from the commencement date of the lockdown, or when the Contractor became aware of the possible lockdown, or when the Contractor reasonably should have been aware of the lockdown.
The notice must also stipulate the reason for the delay. If the delay is due to the lockdown, the delay is caused in terms of the provisions of Clause 29.1.4.
If the Contractor fails to send the notice, and the 20 working day period expires, the Contractor is prevented from claiming for any losses or payments from the Employer.
The JBCC contains a penalty clause containing the daily penalty amounts that will have to be paid by the Contractor, should the practical completion date not be achieved. This will occur when there is outstanding work that should have been completed before the practical completion date and the Contractor failed to complete the work in time. These penalties vary in terms of each agreement.
Once the delay has been proven and the amended practical date of completion has been accepted by the Principal Agent, work attended to after the original completion date should not attract daily penalties by virtue of the completion date being revised.
Obligation to make payment during the lockdown:
In accordance with Clause 29.5, the Contractor then has 40 working days to submit the amended claim to the Principal Agent. Should the Contractor fail to submit the claim within the relevant timeframe, the Contractor loses his claim.
What are the options?
As the Employer, once receiving the notice that there is a delay, and should the delay comply with Clauses 29.1 or 29.2, you can decide whether to accept the claim and extend the practical completion date.
Alternatively, should there be a valid reason why the practical completion date cannot be extended (e.g. Tenants are moving into the building on the original practical completion date), this is when an acceleration claim occurs. This is when the Contractor gives the employer a price to accelerate and allocate more resources to the project, for the Contractor to use in order to push the project to be completed within the original practical completion date.
With this premium, the Contractor can allocate more labour, machinery and buy anything necessary to push the project to be completed faster and without activating the penalty clause. The accelerated claim will only be valid upon the Employer’s requests.
Whether it is a construction contract, or any other contract that you enter into, it is vital to ensure that you read the clauses carefully and understand your rights and obligations. The JBCC has standard provisions that need to be complied with and are easily accessible.
Should you need any further information pertaining to the JBCC, visit http://jbcc.co.za/, or alternatively contact writer hereof for an opinion.