Scenario Two: Adverse Weather

During a week of gale-force winds, a Contractor and an Employer verbally agree that works on a high-rise building should be halted for a week.

The disruption causes knock-on delays and, one week before the project’s Date for Completion, the Employer receives two letters from the Contractor:

  1. A notice requesting an Extension of Time to complete the works; and
  2. A notification containing an initial assessment of losses allegedly incurred as a result of a Change – namely, the Employer’s instruction that the works be halted for a week”.

How should the Employer respond?

This situation presents an opportunity to consider one of the unique elements of the JCT suite of contracts: the important distinction between the Relevant Event regime (which governs extensions of time), and the Relevant Matter regime (which governs the Contractor’s ability to claim for loss/expense). Unlike in the NEC suite of contracts – where there are only ‘Compensation Events’ allowing for both time and money – this distinction allows the Employer and the Contractor to share the risk of certain delay-inducing events, thereby incentivising both to manage such risks as proactively as possible.

Extension of Time

Given the imminent Date for Completion, the Employer’s first priority should be to consider whether it is obliged to award an extension of time to the Contractor. In our last JCT 101 article, we outlined the requirements, in clause 2.24, which the Contractor should satisfy in its notice so that the Employer can give proper consideration to its claim. If the Contractor has complied with these notice requirements, the Employer must then ask whether the alleged Relevant Event has truly occurred: in this instance, have there been “exceptionally adverse weather conditions” (clause 2.26.8)?

To establish that there have been exceptionally adverse weather conditions, the Contractor will have to use supporting data to demonstrate that the conditions were in fact ‘exceptional’. In the past, the courts[1] have clarified that this test only relates to the conditions (rather than the resulting delay). However, with scarce legal authority or guidance on the issue of what actually constitutes ‘exceptionally adverse weather’, there remains scope for disputes between the parties. General principles of contractual interpretation would dictate that ‘exceptional’ should be given its natural and ordinary meaning and, as such, it would be reasonable to conclude that the weather conditions must have been be both adverse and uncommon for the location and time of year. In this regard, detailed meteorological records will be crucial in establishing the validity of any claim, and utilising Met Office records to contextualise the adversity of the weather conditions within a 10-year period might be a useful strategy for contractors and employers. Finally, the question of when the conditions are assessed will also have a bearing – particularly given that  what constitutes ‘exceptionally adverse weather’ will change from season to season. For this reason, Keating on Construction [2] stresses that the assessment should take place at the actual time of the delayed work, rather than on the basis of the contractor’s programme.

Given that in this instance the Employer agreed that works should be halted due to strong winds, it seems highly likely that the extension of time claim would be valid. As such, the Employer must (in accordance with clause 2.25) notify the contractor of its decision. Owing to the proximity of the claim to the completion date it will be necessary for the Employer to reach such a decision and notify the Contractor sooner than the usual 12 weeks, also stating the time extension given.

Loss and Expense

When considering the Contractor’s claim for costs, the Employer’s starting point is to assess the Relevant Matters listed at clause 4.21 which entitle the Contractor to the reimbursement of loss or expense incurred in specified circumstances. Exceptionally adverse weather conditions do not fall within the ‘Relevant Matter’ regime; however, in the situation outlined above, the Contractor has instead sought to claim that the Employer instructed them to vacate the site/suspend works and that this instruction constituted a Change.

Changes are listed as a Relevant Matter at clause 4.21.1. However, a verbal agreement to halt works due to gale-force winds will not easily fall within the definition of Change given in section 5 of the contract. Designed to compensate contractors for taking on obligations which were not priced into the Contract Sum, the definition of ‘Change’ primarily includes changes to the Employer’s Requirements necessitating alterations and modifications to the works themselves (clause 5.1.1), or the imposition by the Employer of obligations or restrictions which change the way in which the works are to be carried out (clause 5.1.2).

The Contractor could conceivably argue that the Employer imposed a restriction on their access to the site by asking them to halt the works. If this was true, the scenario would indeed constitute a ‘Change’ (and thus a Relevant Matter) and the process of ascertaining the amount of loss and/or expense incurred by the Contractor would begin pursuant to clause 4.20. However, given both the Contractor and Employer verbally agreed to halt the works specifically in response to the exceptional weather, it seems unlikely that a court or adjudicator would decide that the arrangement constituted ‘the imposition by the employer of … [a] restriction” as formulated at clause 5.1.2. Indeed, as exceptionally adverse weather forms part of the Relevant Event regime, it would be hard not to conclude that the objective intention of the parties was for risks such as gale force winds to be shared.

The JCT Approach: Sharing is Caring

The differentiation between Relevant Events and Relevant Matters in JCT Contracts aims to create a category of eventualities for which the risks are shared between the Employer and Contractor. Unlike an event falling outside of both regimes altogether, the Employer cannot claim liquidated damages for delay caused by a Relevant Event. As the Contractor is also unable to claim loss or expense in relation to those Relevant Events which do not also appear in the Relevant Matter regime, the hope is that both parties are incentivised to remedy the delay and resume the works as quickly as possible.

The position taken in JCT contracts on Relevant Events such as exceptionally adverse weather conditions can be interestingly compared to the approach taken in the NEC suite of contracts. With only one regime for ‘Compensation Events’ (which entitles the Contractor to both time and money), NEC’s approach to adverse weather conditions is typically technical; requiring, under clause 60.1(13), a ‘weather measurement’ which is found to occur less frequently than once a decade on average. Needless to say, NEC’s approach necessitates detailed record taking so that a measurable and objective assessment of weather can be assessed after the fact. However, it may be beneficial in respect of certain projects to adopt the “NEC approach” of defining what constitutes adverse weather through an appropriate amendment to the JCT form.

When comparing how the two forms of contract approach adverse weather, proponents of the NEC suite would likely claim that Compensation Events themselves are less likely to occur given the way the contracts encourage collaboration and early intervention. Nonetheless, JCT’s approach – which asks the parties to share the risk of adverse weather conditions – may be more attractive to Employers who simply wish to achieve a fair risk allocation for matters falling genuinely outside either party’s control.

[1] Walter Lawrence v Commercial Union Properties (1984) 4 Con. L.R. 37

[2] Keating on Construction Contracts, 10th edition, section 20-162.

Posted in JCT 101: Common Scenarios Solved.