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Topics: Procurement Management, Risk Management, Scope Management
Does COVID-19 constitute a Force Majeure?
Maybe many of you have gone through contractual terms and obligations to review and close some projects "healthy & safely" but never had to discuss these terms again (great!)

Does COVID-19 now constitute a force majeure in your country or region? do you think it should?
Do you think it matters if the contract was signed before, during, or after the virus spread and becomes a global crisis
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Nasser -

It always comes down to the contract - if it specifies pandemics as a Force Majeure inclusion it is easier than if it didn't. There also needs to be some evidence that the contractor is unable to fulfill their obligations directly as a result of the pandemic or accompanying restrictions brought about by the local authorities.

With projects where physical constraints require work from locations which have been impacted by restrictions, this may be easier to prove, but knowledge work or project with intangible deliverables may not be covered.

Kiron
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1 reply by Nasser Alkaabi
Apr 21, 2020 3:23 AM
Nasser Alkaabi
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Hi Kiron, thanks for your feedback, this case is probably there because pandemic is not clearly listed
Not at all. We lived Flu-A and others things before. The problem is the same from lot time ago: the lessons learned are the least learned lessons
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1 reply by Nasser Alkaabi
Apr 21, 2020 3:24 AM
Nasser Alkaabi
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That's a great statement to share Sergio
It depends on the nature of the project. If it includes displacements or other conditions that violate the quarantine, the most probable is that the project be suspended, otherwise, if it's office work, such as Programmation, design, or any other kind of activity that can be developed without leaving a building, the project may continue, coordinating the remote work of the team. Other aclaration is that projects that are suspended can be reinitiated later, once we have overcome the pandemic.
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1 reply by Nasser Alkaabi
Apr 21, 2020 3:26 AM
Nasser Alkaabi
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valuable input Veronica, actually the office (engineering work) has been completed and the pending in this project is the physical work that requires day to day interaction
This COVID-19 is just another external dependency in your contract/project. Typical contracts keep contingencies to address these kind of factors. In my opinion there is nothing more needed from a contract perspective.
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1 reply by Nasser Alkaabi
Apr 21, 2020 3:28 AM
Nasser Alkaabi
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I agree with you Debasish but not in case there's a liquidated damage
Apr 20, 2020 1:54 PM
Replying to Kiron Bondale
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Nasser -

It always comes down to the contract - if it specifies pandemics as a Force Majeure inclusion it is easier than if it didn't. There also needs to be some evidence that the contractor is unable to fulfill their obligations directly as a result of the pandemic or accompanying restrictions brought about by the local authorities.

With projects where physical constraints require work from locations which have been impacted by restrictions, this may be easier to prove, but knowledge work or project with intangible deliverables may not be covered.

Kiron
Hi Kiron, thanks for your feedback, this case is probably there because pandemic is not clearly listed
Apr 20, 2020 3:46 PM
Replying to Sergio Luis Conte
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Not at all. We lived Flu-A and others things before. The problem is the same from lot time ago: the lessons learned are the least learned lessons
That's a great statement to share Sergio
Apr 20, 2020 5:44 PM
Replying to Verónica Elizabeth Pozo Ruiz
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It depends on the nature of the project. If it includes displacements or other conditions that violate the quarantine, the most probable is that the project be suspended, otherwise, if it's office work, such as Programmation, design, or any other kind of activity that can be developed without leaving a building, the project may continue, coordinating the remote work of the team. Other aclaration is that projects that are suspended can be reinitiated later, once we have overcome the pandemic.
valuable input Veronica, actually the office (engineering work) has been completed and the pending in this project is the physical work that requires day to day interaction
Apr 20, 2020 11:06 PM
Replying to Debasish Sahoo
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This COVID-19 is just another external dependency in your contract/project. Typical contracts keep contingencies to address these kind of factors. In my opinion there is nothing more needed from a contract perspective.
I agree with you Debasish but not in case there's a liquidated damage
Unless the contract specifically addresses the issue (not likely), the pandemic in itself may not constitute Force Majeure but if the government declares certain activities required to perform the contracted services illegal because of the pandemic, which could not have anticipated by the contractor, then Force Majeure could apply.

The second point relates to what the contract allows as remedy for Force Majeure, typically it allows for lost time thus extending contract completion but does not provide for compensation.

As and example, with construction work (physical deliverable) if the law prohibits you from carrying out the work for three months then there would be a three month extension to contract completion. However if there is no such law and the contractor chooses to shut down some or all the work then Force Majeure most likely would not apply.

In the absence of a law, if the owner directs the contractor to stop work then the owner is in breach of contract for not providing reasonable access to the site.
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1 reply by Nasser Alkaabi
Apr 23, 2020 10:54 AM
Nasser Alkaabi
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That's right Peter, the contract doesn't address the pandemic
The government did't say per se its illegal, but you can't have your resources under your control.
Apr 21, 2020 10:37 AM
Replying to Peter Rapin
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Unless the contract specifically addresses the issue (not likely), the pandemic in itself may not constitute Force Majeure but if the government declares certain activities required to perform the contracted services illegal because of the pandemic, which could not have anticipated by the contractor, then Force Majeure could apply.

The second point relates to what the contract allows as remedy for Force Majeure, typically it allows for lost time thus extending contract completion but does not provide for compensation.

As and example, with construction work (physical deliverable) if the law prohibits you from carrying out the work for three months then there would be a three month extension to contract completion. However if there is no such law and the contractor chooses to shut down some or all the work then Force Majeure most likely would not apply.

In the absence of a law, if the owner directs the contractor to stop work then the owner is in breach of contract for not providing reasonable access to the site.
That's right Peter, the contract doesn't address the pandemic
The government did't say per se its illegal, but you can't have your resources under your control.
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1 reply by Peter Rapin
Apr 23, 2020 1:49 PM
Peter Rapin
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There are two key considerations successfully claiming Force Majeure in a contractual context: 1) that the event and its effect could not have been predicted by the parties to the contract at the time of signing the contract, and 2) that the party claiming Force Majeure has no means of avoiding or managing the event - outside of your control.

However, as I stated before, the remedy available even if Force Majeure is successfully argued is typically limited to a time extension.
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