Geopolitical tensions, from the ongoing conflict in Ukraine to disruptions in the Strait of Hormuz, are testing the resilience of construction supply chains. Contractors are increasingly turning to force majeure clauses to seek relief from delays and rising costs. However, under the FIDIC Conditions of Contract for Construction (Red Book), the criteria to invoke force majeure is stringent, requiring contractors to meet a high evidential bar.
What Happened
The construction industry is grappling with significant disruptions due to geopolitical events. With the ongoing conflict between Russia and Ukraine, and other regional instabilities, supply chains are under pressure, causing delays and increased costs. Contractors often look to force majeure clauses for relief, but these provisions under the FIDIC Red Book require contractors to demonstrate that they were "prevented" from fulfilling their contractual obligations due to exceptional events like war or riots. To claim an extension of time or recover costs, contractors must show that the event directly caused critical delays or costs, and they must comply with strict notice requirements within 14 days of becoming aware of the event.
Why It Matters for the AECM Industry
For the AECM industry, understanding and navigating force majeure clauses has become increasingly critical. The stringent requirements of these clauses mean that contractors cannot simply rely on increased difficulty or cost as grounds for relief. They must provide clear, substantiated evidence that an event made performance nearly impossible. This situation underscores the importance of meticulous contract management and the need for contractors to maintain comprehensive records of project delays and costs. Furthermore, the scrutiny of claims, as seen in the recent Black Sea scenario where a contractor's claim was challenged due to prior delays, highlights the risk of over-reliance on force majeure without thorough documentation and analysis.
What's Next
AECM professionals should closely monitor geopolitical developments that could further strain supply chains. Contractors need to ensure they are fully compliant with contract notice provisions and prepared to provide detailed substantiation for any claims. As geopolitical instability persists, the industry may see increased legal scrutiny of force majeure claims, emphasizing the need for robust risk management strategies and contingency planning. Staying informed on international developments and maintaining flexible supply chain strategies will be crucial for mitigating risks and navigating potential disruptions.
Source: https://www.globalconstructionreview.com/when-war-is-no-excuse/
