Coronavirus: remedies for Hong Kong construction contractors

The current outbreak of the coronavirus, officially Covid-19, is an issue of concern for construction organisations including the Hong Kong Construction Material Association Limited and the Construction Site Workers General Union, as construction contracts are being badly affected.

While it is hoped that employers will take a sympathetic view of the impact of the outbreak on construction works and grant contractors extensions of time and additional costs, experience shows that contractors need to be ready to protect their own interests if disputes arise. Contractors should take action. Doing nothing and hoping for the best is not an option.

Contractual basis

Common standard form contracts used in Hong Kong include:

• the MTRCL Entrustment Contract (MTRC);
• the Hong Kong Government General Conditions of Contract for Civil Engineering Works 1999 edition (GCC 1999);
• the Airport Authority Hong Kong General Conditions of Contract for Building Civil Works August 2011 edition (HKAA 2011);
• the Standard Form Building Contract published by the Hong Kong Institute of Architects 2005 edition (HKIA 2005); and
• the NEC3 ECC (NEC3).

With the exception of MTRC, none of these standard form contracts refer expressly to epidemics or spread of diseases. MTRC clause 55.1 requires the contractor to comply with orders and regulations issued by the government if there is an outbreak of illness of an epidemic nature, but does not provide for extensions of time or payment of additional costs.

Outbreak of illness does not fall within the meaning of "excepted risks" used in most of the standard forms that might otherwise have entitled contractors to time or money. So contractors may have to rely on other clauses in the contract such as:

• suspension;
• force majeure and prevention;
• change in law;
• instruction by the engineer;
• delay in delivery of materials;
• variation;
• delay as a result of the engineer's flexible working arrangements; or
• special circumstances.

Consider the relevant contract provisions

The standard forms of contract often provide routes for the granting of extensions of time and additional cost due to the coronavirus on one basis or another. However, contractors will need to carefully analyse the relevant facts and their particular contract provisions and amendments.

Some examples of possible bases of entitlement under the common standard form contracts used in Hong Kong are:

Contractors may also consider common law remedies such as claiming damages for breach of an implied term – for example, that the employer will not hinder the contractor from carrying out and completing the works. However, the primary basis of any entitlement should be the relevant and applicable terms of contract.

It is not always clear which route will be the best basis of entitlement for the contractor. Contractors may not be able to point to one clause for a full remedy, and may have to rely on multiple provisions - used in conjunction with the common law - in order to be granted both time and money. Contractors will need to carefully analyse the terms of the contract as well as any special conditions in order to determine their entitlement, and legal advice should be sought if necessary.

Contractors should act promptly to protect their interests by making formal notifications and providing the necessary particulars in accordance with the contract and on time. This is especially important as a number of standard form provisions operate as conditions precedent to entitlement. It is also essential that contractors record the effect of the outbreak of the coronavirus on the works in terms of both time and cost.