Contract Language: Lesson Learned from COVID-19

force max

The impact of the blockade imposed on projects caused by the COVID-19 and the foreseeable repetition of similar situations in the future suggests to review and integrate some contractual clauses to better balance the risks between client and contractor.

The "Force Majeure" clause provides for an excusable delay, but does not allow the recovery of additional costs (non-excusable cost).

This clause should be extended to include cases of contamination by nuclear events, by viruses and bacteria, and by chemical and radioactive agents (NBCR).

Force Majeure events such as NBCR can also lead to the occurrence of "Changes in Law", a situation that contractually usually allows the recovery of costs (excusable cost) but not of time (non-excusable delay).

The further clause to focus on is the "Hardship" which, in some contract models, is underdeveloped or even absent, forcing the contractor to take risks that go well beyond his financial sustainability or making insurance cover excessively onerous where possible.

I suggest that the three clauses mentioned above should be linked and harmonized with the "Resolution" clause in case of a Force Majeure event that extends beyond a certain period and/or generates extra charges beyond a defined threshold.

Golden rule: the allocation of risks between the contracting parties must be logical and balanced, assigning them to the party that can best manage them.

My references

Ottorino Maggiore van Beest

20097 San Donato Milanese MI - Italy

VAT 10640770961


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