The vast flooding and devastation caused by Cyclone Gabrielle across Hawkes Bay and Gisborne continues to significantly impact people, homes and businesses across New Zealand including damage to key infrastructure and disruption to construction projects.
It is important to understand the obligations and actions required under your building contract. Below, we have outlined some of the relevant provisions (based on NZS 3910:2013) that may assist when reviewing the effect on your construction project.
Safety of site and staff
The safety of staff on site is paramount. An initial site assessment should be undertaken to assess risk and any damage (including any council notices to comply with) to ensure the site is safe for staff to enter and resume works. This includes the parties keeping each other informed of any hazards or other risks to and from the site.
The Contractor is responsible for the care of the Contract Works (clauses 5.6 and 5.7) from the time it obtains possession of the site until Practical Completion as well as the protection of persons and property. This includes mitigating any safety risks or environmental impacts and repairing loss or damage.
Notification
Events such as this reinforce the need for cooperation and early communication among contractual parties to manage risk, avoid disputes and safely resume construction activity. This also provides an opportunity to create contingency plans and assess the continuing financial viability of the project.
Parties should also check contractual arrangements with other relevant parties, for example subcontractors and insurers. Contractors should review supply agreements and communicate with suppliers to help anticipate any delays to supplies and possible increases to costs.
NZS3910 contains several clauses where early warning is required. Clause 5.21 requires parties to notify each other of any matters which could impact on the price or completion date. Failing to do so may impact what the Contractor could recover.
Contractual claims
The following are likely to be relevant if your construction project is affected by delays and repairs because of the recent weather events.
Extension of time
Contractors may be able to bring a claim for an extension of time. However, such claims do not usually entitle the Contractor to any compensation for time related costs as it is a non-fault cause of delay.
Clause 10.3.1 provides a list of relevant circumstances where a Contractor is fairly entitled to an extension of time, including:
- For weather sufficiently inclement to interfere with the progress of the works,
- For loss or damage to the Contract Works or Materials,
Flooding, - And any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of the Contractor.
Clause 10.3.2(b) requires the Contractor to notify within 20 working days of circumstances giving rise to an extension of time. Under the standard NZS3910, failure to notify within this period is not an automatic time bar but the Engineer to the Contract is not bound to consider extension of time requests submitted outside this period. It is vital to check your contract to ensure that any time bars there are to the submission of claims are complied with.
Variation
A Contractor may be permitted a variation to the contract and obtain the cost of that variation in the following circumstances:
- Clause 5.6: If the weather events have caused loss or damage to the Contract Works, Materials or the site which are not covered by insurance, it will be treated as an excepted risk and any repair work will require a variation.
- Clause 9.1 provides that a Contractor may be permitted a variation where the scope of the repair works goes beyond the scope of the Contract Works. A variation may also be granted where the Engineer to the Contract changes the scope of works (clause 9.1) or instructs the Contractor to suspend the works (clause 6.7).
- Clause 9.5: A variation may be permitted if a Contractor encounters unforeseen physical conditions on the site which substantially increase its costs. However, this only relates to physical conditions that have resulted because of weather away from the site. For example this would cover flooding caused on the site due to heavy rain away from the site but not due to heavy rain on the site itself.
- Clause 9.2 requires the Contractor to notify the Engineer within 1 month of becoming aware of a matter giving rise to the variation.
Insurance
It is important to work with your insurance broker and review all insurance contracts and policy documents to understand what events are covered. You should keep comprehensive records which could be used as evidence for any insurance claims. This includes keeping records, photos of damage and key communications where appropriate.
Clause 8.1.6 requires floods and/or landslips to be specifically identified in Special Conditions for the insurance to cover it. If it’s not specifically covered, the Contractor will need to pursue a variation.
Ongoing disruption
There is likely to be disruption for some time across New Zealand. Construction activities will continue to be hindered as sites are cleaned up and access is restored.
This articles only provides a brief overview of generic NZS3910 clauses that may be relevant in flooding related events. It is paramount you review your own contract, insurance policies, supply agreements and unique circumstances to ensure you comply with any procedural or contractual requirements.
The response to the Christchurch earthquakes and more recently COVID, demonstrates the importance of early engagement between all parties so as to agree the best strategy for moving forward. Communication is therefore key.
Should you have queries about this article or we can assist, please get in touch with a member of our Construction and Projects Team
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
