G20 protests: Who takes the risk?

Barack Obama has arrived safely. The City is in dress-down mode and the Met is on standby. What about building projects that are going on in the City that may be disrupted by the G20 protests? Who takes the risk for this - the owner of the site or the contractor?

What do contracts provide?

As most building projects are procured on either the JCT or the NEC forms of contract, this article will focus on those.

Looking at the JCT first, if the protestors cause a delay to a construction project, the risk of that delay will, on balance, rest with the client. But it is not clear cut and will depend on the severity of the protests as to whether the contractor can satisfy an extension of time claim under the civil commotion provisions or the force majeure provisions or the specified perils provisions in the contract. However, any prolongation costs associated with that extension of time or any disruption costs appear to sit firmly in the contractor's court. One caveat to this is the contractor may be able to recover these costs if it can devise a claim based on breach of contract. Therefore, both parties have an interest in ensuring that the construction works are protected from the protests.

The NEC form of contract adopts a different approach where both the time risk and cash risk arising from any protest is likely to rest with the client. Therefore, it is in the client's interest to ensure that the site is protected from any protestor action if the works are being procured under this form.

Risk management

 
Many clients may take the view that the best way to manage the risk of protestor damage is to shut the site down for the day. In those circumstances who will be liable for the costs associated with this shut down?

Under the JCT, both the time and cash consequences associated with this will be borne by the client as such an event will be a “change” under the JCT and attract relief for the contractor from the time and money risks. Similarly, under the NEC, if the client instructs the site shut down, any time and cost consequences shall fall to the client. The cost of shutting down a site could be significant as the contractor is likely to be able to recover all of its prolongation costs and any disruption costs for it and its subcontractors (the direct costs of repairing any damage is likely to be picked up by the insurers). On a large site, this could run into thousands of pounds.

To minimise the cost consequences, a canny client should have raised the possible shut down idea with its contractor a few weeks in advance and negotiated with them to try and resequence or reschedule the works to minimise any potential loss, perhaps, relying on any delays caused to date by the contractor as a bargaining chip. For contractors, if they suffer any disruption, they should submit their claims to the client as soon as possible.