Law firm MDA Attorneys says local construction projects are being negatively impacted on by indefinitely delayed shipments of construction materials from China, as a result of the outbreak of the coronavirus.
Consequently, South African contractors are sharpening up on the terms of their contracts and the financial impacts that the virus could further have on projects in South Africa.
MDA director Natalie Reyneke says construction contracts typically place the risk of material delivery, and the resultant delays on contractual completion times, squarely on the shoulders of contractors.
“However, contractors may have a reprieve if their contracts have adequate provisions to allow for time extensions. The impact of the virus may be a force majeure event, which is an unforeseen circumstance that prevents either of the parties from fulfilling their obligations under the contract.
“Two of the standard form construction contracts also allow for time extensions when contractors cannot obtain materials or there is a shortage as a result of an unforeseeable epidemic,” she explains.
Project delays have significant cost implications. When an event occurs that is beyond the control of the parties, they usually share the risk.
What this means is that a contractor would bear the monthly expense of being on site for longer than expected if there are delays, and the project owner would take the risk of other costs and expenses incurred owing to late project completion.
“If the contractor has to be granted an extension of time to complete the project, the project owner cannot levy delay damages against the contractor for that extended time.
“To avoid delay damages, contractors must ensure that they quickly identify possible contractual remedies and submit required notices in terms of their contracts, or they could find themselves losing millions due to the viral outbreak,” Reyneke advises.
She confirms that MDA’s clients are receiving delayed shipment notices that indicate the cancellation of shipments, with calls for patience from customers as China does its best to fight the epidemic.
“In times of such uncertainty, we advise our clients to ensure that they proactively mitigate possible damages.”