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The impact of strikes on construction works

29 October 2014

On Tuesday Construction Enquirer reported crane operators at a leading tower crane hirer have voted in favour of strike action following a dispute over pay. Construction union UCATTT has indicated the impacts will begin on sites within days.

The construction industry has seen its fair share of industrial action over the past year and anecdotal evidence suggests this trend may continue. Therefore in this bulletin we briefly look at who, in the standard forms of contract, holds the risk of industrial action occurring during a project and what should be done if it does occur.

The approach in standard forms

The JCT building contracts and the NEC 3 engineering and construction contracts differ in how they deal with industrial action. The position set out below reflects contracts in an un-amended form and parties should always check what impact bespoke amendments may have.

JCT

Under the JCT ICD 2011, the definition of relevant events includes "strike, lock-out or local combination of workmen affecting any of the trades employed upon the Works…" (clause 2.20.11). However there is no similar provision listed as a relevant matter. Accordingly, contractors may be entitled to an extension of time if the strike (being a relevant event) is likely to cause delay to completion of the works but would ordinarily not be entitled to any associated loss or expense incurred (since there is no relevant matter).

If a contractor is seeking to claim additional time as a result of industrial action it must give the architect/contract administrator notice of the cause of the delay as soon as it becomes reasonably apparent that the progress of the works is likely to be delayed (clause 2.19.1).

Contractors must also always use best endeavours to prevent delay and to proceed with the work and provide the architect/contract administrator with all reasonably necessary information relating to the delay; their ability to claim an extension is conditional upon this (clause 2.19.4).

NEC

The NEC 3 adopts a different system in which compensation events may allow the contractor to obtain both additional time and money for issues that fall within the definition. Industrial action is not specifically referred to as a compensation event, accordingly contractors need to carefully consider if any other provision in the NEC 3 may assist in a claim for additional time or money.

For example clause 80.1 provides that "Loss of or damage to the works, Plant and Materials due to… strikes, riots and civil commotion not confined to the Contractors employees" is an employers risk, which is then deemed a compensation event. Accordingly, the contractor would be entitled to apply for changes to the prices and completion date if the provision applies. However the provision only applies to physical damage that arises from a strike - and in an unamended contract there is no specific provision that allows for additional time or expense that is not related to such damage.

Alternatively, in an unamended form the contractor might wish to try and demonstrate that the strike fell into the category of clause 60.1(19) which provides the following is a compensation event:

"An event which

  • stops the Contractor completing the works or
  • stops the Contractor completing the works by the date shown on the Accepted Programme

and which

  • neither Party could prevent,
  • an experienced contractor would have judged at the Contract Date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for it and
  • is not one of the other compensation events stated in this contract."

If the claim related to the strike falls under either of the above clauses, then the contractor must provide notice as soon as possible, and in any event within eight weeks of the contractor becoming aware of the strike, or it will lose its right to claim adjustments.

Comment

Contractors operating under a standard JCT ICD 2011 will typically be entitled to an extension of time if strike action impacts upon completion but cannot expect to recover additional cost. Under a standard NEC 3 claiming either time or cost is likely to prove more difficult.

Whatever form of contract is used it is important for contractors to provide timely contractual notices of delays and/or additional costs to ensure rights are not lost.

For parties entering into projects in the current climate, they should consider whether the division of the risk of strikes occurring in the standard forms is acceptable or if the position should be altered (for example through amendments to a JCT or noting additional employers risks in the NEC contract data).

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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