Posted by Simon Forsterling | 20 March 2020 | Construction & Infrastructure
In the tropics, we get “the wet season”, a known extended period of wet weather that affects all construction projects. Increasingly and further south in Australia we are affected by cyclone patterns, and “east coast lows” as part of this season (the Wet Weather Season).
The Wet Weather Season is something more than mere odd days of inclement weather, but less than a natural disaster or ‘act of god’ that may qualify as a force majeure event under a construction contract. It has the potential to severely impact a contractor’s productivity for an extended period, causing a contractor to incur increased costs of production and additional overhead holding costs (Wet Weather Season Costs).
Some contracts may set specific entitlements for a contractor to claim holding or delay costs for inclement weather, but this is typically not the case. Contractors are usually restricted to an EOT only for bad weather. In these types of contracts, and especially if the contract specifically excludes all rights at law for delay damages, including for delay caused by the principal (or ‘acts of prevention’), Wet Weather Season Costs will be very difficult to successfully claim.
More often than not, a contractor’s only express right to claim delay costs (in addition to an EOT) arises where delay has been caused by the Principal.
Consider the simple scenario where:
In the above scenario, the contractor may be entitled to delay costs for the initial five week period of principal caused delay, but it is a grey area as to whether a claim for Wet Weather Season Costs during the four weeks of additional delay could be made out, in the absence of a specific entitlement for this. The four weeks additional delay during the Wet Weather Season may only give rise to an EOT (preventing the principal claiming liquidated damages from the contractor). This is arguably unfair on the contractor given that if the principal had not caused delay which pushed the program into the Wet Weather Season, the contractor would not have suffered the additional four weeks of Wet Weather Season Costs.
No doubt the principal would argue that despite the effect of the first delay on the critical path, the contractor should be entitled to EOT only for the delays due to inclement weather, even though the program would not have pushed into this period, had the principal not delayed by five weeks.
There is limited case law dealing with recovery of Wet Weather Season Costs (and particularly the reduced productivity component) in scenarios like this. In Thiess Watkins White Construction Ltd v Commonwealth (unreported, Giles J, Supreme Court of New South Wales, 23 April 1992), an earlier principal caused delay pushed the critical path program into a period of inclement weather. The terms of the construction contract permitted the contractor to claim delay costs for principal caused delay, but not to recover costs for inclement weather. Nonetheless, the Court held that the contractor was able to recover its costs on the days when it could not work due to inclement weather during the extended period.
The limited guidance from the Courts on this issue probably points to resolution of claims outside courts, rather than an absence of such claims being made. Certainly, if the contract provides for delay costs where they arise as a result of a principal caused delay, and the contractor can show an extended effect on the critical path compounded by inclement weather, the principle outlined in Theiss might be applied, which is good news for contractors.
In order to pull together an arguable claim for Wet Weather Season Costs a contractor would need to be able to show that:
Preferably it would be best to negotiate a clause establishing a defined Wet Weather Season as an qualifying cause for a delay damages entitlement, where the Principal has caused the critical path to move into that period.
There are a host of other factors that will influence the decision to proceed with a claim for Wet Weather Season Costs that would need to be considered on a case by case basis. These factors might include the specific contractual provisions, categories of costs claimed, concurrency of causes of delay, insurance and mitigation issues, the forum for dispute resolution and commercial factors.
Provided the hurdles can be adequately addressed, a claim for Wet Weather Season Costs would rely heavily on good records having been kept, including:
Other documents that may be of assistance would include tender documents and correspondence between the parties.
The ability to claim Wet Weather Season Costs arising from delay caused by the Principal is not easy or a settled position at law, it is premised on having an entitling clause for delay costs, and relies on the above hurdles otherwise being addressed.
Without at least some entitlement to costs arising from principal caused delays having been negotiated into the contract, a contractor would have almost no chance of recouping serious delay costs for extended wet weather exposure caused by a principal.
Our experience is that most construction contracts in Australia do not contain an adequate mechanism to deal with the risk of unbudgeted Wet Weather Season Costs. In light of more extreme weather patterns, and resultant increase in costs to projects and associated disputes, this is an aspect that should be given more thought in future construction contract negotiations if the Wet Weather Season may impact the works.
If you would like assistance negotiating contract clauses or handling a dispute in relation to delay costs, please contact Simon Forsterling, at Nexus Lawyers (firstname.lastname@example.org).
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This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.
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