Unusually heavy snowfall has undoubtedly been a source of chaos and disruption across the country in recent months. The impact has also been plain to see on both construction sites, with contractors downing tools, and on existing buildings, with roofs and guttering giving way under the weight of the snow. But who should bear the cost of the damage and delay? The answer depends to a certain extent on the underlying contracts.
Projects under construction
In general, it is assumed that most competent contractors will factor in, and allow for a degree of adverse weather. There are, however, situations where a contractor will be entitled to relief. The extent of the relief available, and the requirements to qualify for such relief, will depend on the individual building contract, but the selection of the underlying standard form will have a significant impact on how a weather event is treated. For example, under the JCT suite of contracts the contractor may be entitled to an extension of time for a weather event (and accordingly relief from delay damages) but will not be entitled to a claim for loss and expense. On the other hand, under the NEC contract, adverse weather may be treated as a compensation event. The NEC contract does not distinguish between events giving extensions of time and those giving financial relief. Accordingly a compensation event under NEC gives the contractor a potential entitlement to both additional time and money.
The JCT position
The JCT Standard Form of Building Contract 2005 Edition Revision 2 2009 lists "exceptionally adverse weather" as a relevant event which may entitle the contractor to an extension of time.
Beyond that, the JCT suite of contracts does little to expand on what is required to establish "exceptionally adverse weather". The contractor will need to demonstrate that the weather was adverse and that it was exceptional for the time of year at the location. It must also be established that completion of the works (or a section of the works) is likely to be delayed beyond the relevant completion date because of the relevant event. From a practical perspective, weather reports, site diary extracts, notes of maximum and minimum temperatures, together with a log stating the activities that were affected should all help to establish both the weather event itself and that the weather event is the cause of the delay. Under JCT there is also an obligation on the contractor to use his "best endeavours" to prevent or mitigate any delay.
The NEC position
The NEC3 Engineering and Construction Contract provides for a compensation event (with a potential entitlement to both time and money) where "a weather measurement is recorded within a calendar month… at the place stated in the Contract Data… the value of which, by comparison with the weather data… is shown to occur on average less frequently than once every ten years."
The parties state where the measurements should be taken, and which weather measurements will be taken into account. The default measurements are broadly (i) cumulative rainfall; (ii) number of days rainfall over 5mm; (iii) number of days with temperature below 0°C; and (iv) number of days with snow lying at a certain time GMT. The parties are free to add extra weather measurements, for example wind speeds if the project requires the use of cranes. The parties also need to state the weather records that will constitute the "weather data", against which the "weather measurement" is compared. The selection of the source of the data and the years to be included in the weather data could, particularly in light of global warming, be key for a developer who is going out to tender.
At an initial glance, this appears to be a more objective way to assess adverse weather. However, there are issues with this approach. If the place where the weather measurement is taken is not the site, e.g. a nearby Met Office weather station, then there is a risk that there could be snow on the site but not at the weather station. The weather measurement is recorded over a calendar month so very short periods of extreme adverse weather in an otherwise fair month may not qualify despite necessitating the temporary closure of a site. There is also a potential for an unfair outcome if the bad weather straddles a month-end, and would have qualified if it had been within one calendar month, but fails because it is split between two months.
It should be remembered that under NEC, only the difference between the exceptional weather and the weather that is likely to occur less than once in every ten years is taken into account, so the contractor stays on risk for the weather that is within the one in ten years range (e.g. if the weather data states that, in a given month, a total of eight snow days would be likely to occur once every ten years and, in fact, there are nine snow days, the contractor may be entitled to a compensation event for one day).
Impact on the project
In both situations the contractor will also need to show that the adverse weather has actually impacted on the date for completion. In addition to maintaining records, this will to a certain extent depend on how good the programming has been in the first place and how up-to-date the programme is. This is a discipline that is encouraged on NEC projects. Developers may also wish to consider whether the delay is partly due to the contractor's sequencing of the works and/or design of his temporary works. For example, if certain trades are unable to carry out their work because the building is not watertight, is that due to the weather, or to the contractor not having provided for a temporary roof?
Addressing the issues
In any event, contractors should notify the problems and discuss potential solutions with the developer as soon as possible. This is not only to ensure compliance with notice provisions but also to maintain credibility. Where the parties have a good relationship, it may be appropriate to try to reach a mutually acceptable solution early on. This could be of particular importance in terms of maintaining quality on a build. Carrying out certain tasks under some weather conditions can have a negative impact on the quality of the finished product. For example, certain materials may not cure properly at low temperatures while others may be susceptible to water, both resulting in a potential impact on strength. If the contractor is unsure whether he will qualify for an extension of time if he stops work, it might be in the developer's interest to agree a solution rather than run the risk of the contractor carrying on and the quality of the build being compromised. Developers should also be aware of any British and European standards that the contractor is obliged to comply with, some of which relate to whether particular operations can be performed in cold weather.
In addition to the delay caused by work stopping on site, adverse weather can also impact on a project in terms of damage to the works itself, damage to an existing structure which impacts on the works and delays due to materials and machinery not being delivered on time. The impact of such events will depend variously on the provisions of the building contract, the insurance obligations and the terms of any relevant insurance policy.
Completed or existing buildings
What if your building is already complete? During periods of adverse weather, while the risk to life and limb and the associated potential for reputational damage will, obviously, be of greatest concern, increased weight loads caused by the accumulation of snow can have significant implications in terms of property damage (e.g. roof, guttering etc.), damage to contents and business interruption.
The potential availability of recourse will depend on the age of the building and, if it is a recent build (i.e. within ten to twelve years of practical completion), the terms of the relevant contracts and more specifically any limitation periods in the building contracts, consultant appointments and collateral warranties should be examined. Depending on the wording of the contracts, it may be worth considering whether the damage was caused by, for example, a standard of workmanship below that expected of a competent contractor, the use or specification of inadequate materials or perhaps a failure in the design itself. In deciding whether there would be benefit in reviewing the underlying contracts, regard should be had to the level and extent of the damage and whether it is covered by insurance.
The extent to which it may be possible to proceed against the project team will depend on the specific obligations and the terms of the individual contracts. At the end of the day, however, damage may simply be down to extreme weather rather than being anyone's fault. Nevertheless, it is worth bearing in mind that if weather patterns change and snow becomes a more common feature of our climate, the designs required to meet the standard of reasonable skill and care of a competent consultant may also change. For example, the popular trend towards "green designs" could increase the obligation on designers of energy efficient buildings with good insulation to factor in additional loads for snow not melting due to reduced heat loss.
Weather clauses can often be viewed as 'boilerplate' but if the recent weather has not already taken its toll on your project or completed building, from a basic risk management perspective it may be prudent and cost effective to conduct a simple audit of your insurance policies and relevant contracts. With a few months of winter yet to go, ensuring that you know where the documents are and that you are familiar with the weather provisions of your contracts as well as your business interruption, physical damage and public and employer's liability insurance policies could prove valuable should the snow return this year or next. Such an audit will also stand as good preparation for the rest of the year - it's not only winter weather that can cause disruption. Heat waves, floods and storms could all be waiting just around the corner.