Construction Contracts: What to do if a strike affects you?

This year has been a challenging year for many reasons. With significant hikes in inflation over recent months, the UK is seeing an increase in industrial action across numerous sectors. Given the present climate, employers and contractors alike may be wondering just how their contract would respond if a strike was to impact a party’s ability to perform its obligations. While current UK industrial action may not have a direct impact on construction projects, it is a timely reminder for parties to familiarise themselves with those contractual mechanisms that may operate in such circumstances. Considering some of the most common standard form contracts used in the construction industry, the issue of industrial action is generally dealt with in one (or both) of two ways: (i) by way of a specific entitlement via an extension of time / additional cost mechanism; or (ii) by way of a force majeure clause.

Specific entitlement

A number of standard form contracts specifically provide that where a strike / industrial action is delaying or will delay the contractor in achieving the relevant completion date, this will constitute an event entitling the contractor to an extension of time (EOT) and (in some cases) an adjustment to the relevant contract sum. 

It is usual for such entitlement to be qualified by the requirement that any strike / industrial action is not one for which the contractor or its employees are responsible.  Where this qualification is not included in a standard form, it is almost always included by employers by way of amendment.

Any mechanism allowing for an extension of time and/or additional cost will generally come with other qualifications affecting the contractor’s entitlement.  In some cases, these may amount to conditions precedent, meaning that any failure to comply will disentitle the contractor to any relief.  Parties will need to consider these mechanisms carefully to ensure they are familiar with any such requirements.

Force majeure

Force majeure provisions are intended to provide protection for parties that are unable to perform their contractual obligations due to unforeseen reasons beyond their control, for example, natural disasters or sudden outbreaks of hostilities. They generally entitle one (or both parties) to the contract to suspend their contractual obligations for the period that the relevant party is impacted by the force majeure event (subject to an obligation to mitigate such impact). If not provided for by way of specific entitlement, strikes / industrial action may well be dealt with under the applicable force majeure mechanism.    

However, the concept of force majeure is a ‘creature of contract’.  There is no doctrine of force majeure in English common law.  This means that, if your contract does not include a force majeure provision, English common law will not imply one for you.  It is, therefore, essential for parties wishing to provide relief in the event of force majeure to do so expressly and to accurately define what events are captured to ensure certainty and reduce the risk of disputes. 

Despite this, standard form contracts take a varied approach to how they define force majeure events.  Some specify a list of events, which may be exhaustive or non-exhaustive.  If exhaustive, any event not specified in the list will not amount to force majeure.  If non-exhaustive, any event not specified in the list may still amount to force majeure if it meets the other requirements of the mechanism.  Where no list is specified, the other general requirements of the clause will need to be considered to determine if a specific event may be captured.

It is often the case that force majeure, where it is made out, will constitute a specific event entitling a contractor to an EOT (but the contractor will need to get across the first hurdle of establishing force majeure before it can take advantage of this specific entitlement).

Contracts by comparison

The table below provides a high-level comparison of how JCT, NEC and FIDIC contracts address the issue of strikes / industrial action. For reasons of space, it does not provide an in-depth analysis of how each mechanism operates in the specific contract but, if you would like more information about this, please feel free to get in touch. 

As can be seen by the above, there is no standard way that strikes / industrial action are dealt with in construction contracts.  If you are concerned that such an event may impact on your ability to perform your obligations, it is important to review the relevant mechanisms carefully to see where any relief may arise and what requirements must be met to achieve this.  If you would like assistance in reviewing your contract or claiming relief, please let us know.