The construction and engineering sector is a vital engine for the Dutch economy. That the construction sector can continue to operate at full capacity is of great social importance. The parties involved must take into account the new circumstances facing the construction sector.
At the beginning of the corona crisis, we already wrote about the following construction-related topics:
In this article, we discuss contracting now and in the future, taking into account the corona crisis. First, we look at various topics in construction contracts where flexibility may be desirable, then we address an important element: risk allocation.
In the current market, flexibility is needed with regard to price agreements, planning, completion date, staffing, accessibility of the construction site and materials to be used, among other things. The desired flexibility can be included in the agreement, even when using a standard set of conditions such as the UAV or UAV-GC.
Using phased working, consultation obligations, monitoring and documentation, it is possible to monitor which circumstances have led to corona-related additional costs, delays and other undesirable consequences. Then, using cost and risk allocation, the consequences can be dealt with. That contractual risk allocation is important has become evident recently.
Due to its major social and economic consequences, the corona crisis has generally been accepted in Dutch case law as an unforeseen circumstance (Art. 6:258 of the Civil Code) for contracts entered into before the corona crisis. As a result, the court may, at the request of one of the parties, dissolve or modify the contract.
The corona crisis (and possibly similar pandemics and events) will no longer qualify as a contingency in contracts concluded from now on. In fact, by now everyone has taken note of (the impact of) the corona crisis and will have to take it into account when contracting from now on.
Among the things we can consider are the consequences that the court attaches to the fact that there is a contingency. When the court modifies or dissolves the contract, it brings about a disadvantage. It has been accepted in literature and case law that this disadvantage should be divided between the parties.
Generally, a 50/50 division is followed when dividing the loss. This allocation key is deviated from when a different risk allocation is included in the agreement. In that case, the risk allocation intended by the parties and included in the agreement is adhered to. Risk allocation is therefore an important element in the agreement.
The contract can specify which party bears the full risk or more risk. Different risk allocations are therefore possible. For example, the contractor may bear the specific risk of (in)sufficient availability of personnel, materials and supplies. Similarly, a client may bear the risk of more general consequences because he commissions construction in the corona crisis.
So reason to discuss it with your contracting party; contracting is tailor-made, especially now!
Do you need advice on drafting a (construction) contract that includes the necessary flexibility and appropriate risk allocation?