Practical legal tips for contractors in times of corona

The corona crisis is affecting the Dutch economy. With the help of the protocol "Working safely together" by the government and the construction and engineering industry, attempts are being made to allow construction projects to proceed safely as much as possible in times of corona. Still, corona brings challenges, including for the roofing industry. In this article, we discuss situations that can lead to problems and try to provide guidance on how to deal with them.

1. Materials are no longer available / personnel drop out

It is conceivable that certain building materials are not available or not available in a timely manner. For example, the lockdown in China has caused solar panels to not always be available quickly enough. Staff may also drop out due to corona, precautionary or otherwise. As a result, projects may be delayed, which may mean that the agreed delivery deadline is no longer met and a late delivery penalty may be due. What to do.

To avoid damages as much as possible, you should request a deadline extension from your client as soon as possible. This is because if you are entitled to an extension of the deadline, you will not be liable for damages if the completion date is exceeded. With Article 6:75 of the Dutch Civil Code (force majeure), Article 6:248 of the Dutch Civil Code (reasonableness and fairness) and Article 6:258 of the Dutch Civil Code (unforeseen circumstances), the law provides legal bases for invoking an extension of the deadline, but above all, check what the contract stipulates regarding extension of the deadline! In case of a delay caused by circumstances beyond your control (such as import restrictions around construction materials or employee illness), you must - according to most legal and contractual rules - meet the following conditions:

• The exceeding of the delivery deadline is caused by the corona crisis;
• The Contractor shall alert the Employer as early as possible of any delays in construction or completion dates;
• Delays are avoided as much as possible, for example, by proposing to the client to work with alternative - equivalent - materials;
• The contractor shall detail the specific circumstances causing the delay and why it could not have been avoided by precautionary measures.

So it depends on the specific circumstances of the case whether you have a right to an extension of time.

2. The client wishes to (temporarily) stop or terminate the construction project

There are several reasons why a client may (temporarily) halt or (in an extreme case) terminate a construction project in times of corona. As a contractor, what can you do when a construction project is halted or (in an extreme case) terminated by the client?

a. Client does not deem it safe

When continued work is irresponsible, it must be possible to stop a project; safety comes first. There is always some justification for this in the law or the applicable conditions, such as force majeure or the operation of reasonableness and fairness. If it is truly unsafe to continue working then a reasonable outcome is that both parties bear their own delay damages.

Thanks to the "Working Safely Together" protocol and any additional policies of the contractor itself, it is indeed possible to continue working safely in most cases. The question is then whether stopping the project by the principal is justified, also given your reasonable interests as the contractor. If you can make a plausible case that safety is sufficiently guaranteed, you may be able to oppose the shutdown of a project, and a principal cannot unilaterally shut down or terminate a project.

However, the client does have the right under the law to "terminate" the contract with a contractor (e.g., a roofer) at any time. No reasons need be given for termination, but the financial settlement is "contractor-friendly. Upon termination, the client is obligated to pay the contract price less the savings resulting from the termination, plus the costs associated with the termination (such as the cost of collecting materials). Therefore, it is not attractive for a client to terminate the contract.

b. A lack of financial resources.

I. Cooperating in renegotiation

If a construction project is (temporarily) halted by a client due to financial motives, it is advisable to enter into discussions with your client. The performance of a contract is governed by reasonableness and fairness pursuant to which the parties must take each other's reasonable interests into account. This may also lead to a duty to renegotiate in the event of unforeseen circumstances, such as corona. Should you fail to reach a reasonable solution in renegotiations with the client, the client may apply to the court for modification or dissolution of the contract. In such a case, it cannot be ruled out that the court may rule that you should not expect the principal to maintain the contract unchanged because the corona crisis may not be part of the principal's "normal entrepreneurial risk. The judge in such a case will proceed to the requested dissolution or modification of the contract, and has a lot of freedom in doing so. In other words, insufficient cooperation in renegotiations may lead to overall termination of the contract.

II. Unilateral cessation or termination by client

The principal may invoke force majeure or unforeseen circumstances. It cannot be said with certainty whether a principal, who is in dire financial straits due to the corona crisis and therefore can no longer (fully) fulfill the contract, can invoke force majeure or unforeseen circumstances. In an initial court ruling on the corona crisis, for example, an appeal to unforeseen circumstances did not succeed. Nevertheless, in these noisy times, an invocation of force majeure or unforeseen circumstances is very likely to succeed more often than usual. When the client invokes force majeure, also check what your contract regulates about force majeure. If a client's claim of force majeure succeeds, you cannot claim damages from the client. You can, however, claim dissolution of the contract when the principal invokes force majeure.

c. A new assignment is not put into execution

Because of uncertainty in the market, many projects are being put on-hold. This is not always possible. If there is a legally valid agreement (for example because signatures have been placed or an agreement has been reached by e-mail) there is in principle a right to performance. In such a case it may be wise - if consultation does not help - to set a deadline within which you, as the contractor, will still be given the opportunity to perform the work (and thus be able to demand payment).

Closing

Creating a construction project is collaborative work par excellence. This particular time demands even more of the collaboration between client and contractor. Talk to your client about the impact of the corona crisis on the construction project, such as the consequences of delayed deliveries or financial difficulties. If necessary, reopen (contact) negotiations to reach new agreements so that you and your client can get out of the crisis time together. Helping each other leads to relationships for life and that is how there is still something to be gained in this crisis.

Do you prefer personal advice? Feel free to call us or send me an e-mail. Our colleagues from service area construction are here for you!

Stay up to date on legal implications of coronavirus?

• Go to pvdb.co.uk/corona
• Follow us on LinkedIn