In South Africa, the construction industry did not have to deal with the rampant spread of the Covid-19 virus, but a few months ago had to contend with the dangers and upheaval resultant from the political unrest experienced in KwaZulu-Natal and parts of Gauteng. It is well known that the unrest tragically resulted in loss of life and the destruction of public and private infrastructure and property alike, including shopping centres, warehouses, and businesses.
The strikes and looting sprees, by implication, had a direct impact on construction sites situated in the volatile regions. Other construction sites across South Africa were, however, not spared the detrimental effects of the unrest. Firstly, and quite evidently, construction sites were forced to cease operations due to rioting and safety concerns. Labourers and employees (and their employers) were either unable to travel to site as a result of infrastructure damage or blockading and disruptions to public and private transportation. Furthermore, workers were unable to enter the site upon arrival as premises may have been destroyed, or under threat of physical harm. Looting and theft of equipment and materials on site was another valid and very real concern. Following the restoration of relative calm, the procurement and delivery of materials and equipment remained negatively affected due to destroyed infrastructure, the closing of ports in KwaZulu-Natal and road closures to and from places from which materials and equipment were to be transported. Ultimately, the ability of both owners and contractors to fulfil their contractual obligations, for the duration of the unrest and for a period, thereafter, was rendered impossible.
The striking, looting and rioting experienced was due to no fault of either party and can be categorised as what is termed a “Force Majeure” event, for which provision is made in most standard forms of construction contracts. Force Majeure clauses have formed part of construction, and most other contracts for that matter for possibly as long as formal contracts have been in existence and will be the “go-to” clause in instances when events such as those described above arise.
Force Majeure clauses have mainly two advantages, namely that they create a contractual regime by which events such as these may be regulated as well as, stipulating expressly and definitively what the consequences of such events are, as well as the parties’ rights in regard thereto.
The FIDIC Red book 1999[1] refers to “Force Majeure” events, whereas the 2017 FIDIC contracts refer to “Exceptional Events”[2]. Nonetheless, the clauses refer to the same events. Clause 19.1 of the FIDIC Red book 1999 sets out a list of events which may constitute a Force Majeure event. The event, however, must qualify as a Force Majeure event by meeting all the requirements as set out in the contract. These events include, but are not limited to, war, hostilities, insurrection, riots, disorder, strikes or lockouts (with certain exceptions). It is therefore, clear that the FIDIC contracts expressly provide for the unrest experienced in certain parts of South Africa and the parties to the contract could well make use of the contractual mechanisms in dealing with these events.
It is worth noting that Clause 19.4 of the FIDIC Red Book 1999, provides that certain events will entitle the contractor to an extension of the completion date of the project, as well as the costs associated therewith, however other events such as those falling into the category of natural catastrophes will entitle the contractor to only an extension of time to the completion date.
The NEC3/NEC4, does not make specific use of the term Force Majeure, it does, however, provide for prevention events, which:
- prevent the contractor from completing the works, alternatively which stop the contractor from completing the works on the date as stipulated in the latest programme;
- could not be prevented by either party;
- an experienced contractor would have deemed a very slim chance of occurring at the onset of the contract.
In terms of Clause 19.1 of the aforementioned NEC contracts, should such an event occur, it will then constitute a compensation event in terms of Clause 60.1(19), possibly entitling the contractor to an extension to the time for completion, as well as additional costs. Furthermore, Clause 19.1 provides that if an event encompassing all the factors addressed above were to take place, the project manager is obliged to provide the contractor with an instruction informing the contractor how he is to deal with the event. Such instruction issued, should it amount to an instruction to stop work, would, in terms of Clause 60.1(4), constitute a compensation event. Further compensation events to consider are Option X2: (Changes in the law), if agreed to by the parties and Clause 60.1(14) as read with Clause 80.1 (Employer’s risks), which caters inter alia for loss of or damage to the works, Plant and Materials due to riots and civil commotion not confined to the contractor’s employees. It is important for contractors to take special note of the provisions of Clause 61.3, placing an obligation on the contractor to notify a compensation event if the project manager fails to do so and the time barring provisions which follow upon a failure by the contractor to do so.
The JBCC Principal Building Agreements also makes specific reference to and deals with Force Majeure[3] events defined therein as:
“An exceptional event or circumstance that:
(a) Could not have been reasonably foreseen
(b) Is beyond the control of the parties
(c) Could not reasonably have been avoided or overcome”
The definition includes acts such as civil commotion, disorder, riots, strike, lockout by persons other than the subcontractor’s employees or his subcontractors. Therefore, the recent riots or unrest experienced in South Africa, would have fallen squarely within the ambit of the definition.
The recent political unrest would undoubtedly have had adverse consequences on the completion of the works on a number of construction sites. Fortunately, the drafters and compilers of the standard form contracts have made suitable provision for such events. Parties to the contracts, as and when the unfortunate events took place, could have and should have made use of the Force Majeure provisions in order to protect themselves against penalty claims by making upfront provision for a delay in the completion of the works. It is worth bearing in mind though, that although the Force Majeure clauses may well be contained in the contracts, it remains the parties’ respective obligations to mitigate their risks and invoke such provisions in order to protect their rights.
Conclusion
It is highly advisable for parties to consider, study and keep record of all the facts and documentation relating to a particular event and to apply the provisions of their contracts strictly. Timeous notification of events and having facts and records at hand to support claims will limit future risks and provide contractual entitlements where they are due.
[1] FIDIC refers to the “Federation Internationale des Ingenieurs-Conseil”, a suite of standard form Construction contracts.
[3] See for example clause 23.1.6 of the JBCC 2014 and 2018 edition.
