The CLC expects the legal landscape to become fraught in 2021 and fears the consequences.
In a new , it says: 鈥淭here remains a real concern that in 2021, as we reach the completion of projects entered into pre-pandemic and the end of financial/tax years, businesses will become embroiled in costly and long-running disputes over the effects of Covid-19 on projects.鈥�
It adds: 鈥淚ndications were that 2021 may bring the perfect storm of: a negative economic environment; EU exit; reduced construction market activity; the end of government business support schemes; the introduction of reverse charge VAT; and a significant increase in the number of claims across the supply chain.鈥�
The contractual practices working group of the CLC business models workstream has been monitoring the scene. It found: 鈥淚t is inevitable that there has been an increased number of notifications /claims. It is likely that the number of disputes will increase in 2021.鈥�
It has also noticed an increase in the number of claims under construction contracts being rejected because of Covid-19.
鈥淚nitial indications found that whilst parties may be inclined to settle an entitlement to additional time for completion, there is a reluctance to agree financial losses, costs and expenses (which is the greater source of contention). It is too early to know what will happen with those rejected claims.鈥�
It looks like lower value disputes, that are easier to settle, are being settled, but bigger, more complex ones are stacking up.
鈥淚t is expected that there will be a rise in the number of claims that turn into more formal disputes during 2021. Data shows that this is a natural progression but dependent on numerous factors. The key triggers for which are reaching final account, tightening cash-flow within industry, financial reporting requirements, project/client type and reduced good will.鈥�
The note concludes: 鈥淎s society and industry continue to grapple with the pandemic, the CLC business models workstream would remind the sector that without proper fair and reasonable administration of construction contracts, Covid-19 could have a significant and detrimental effect on the industry. An industry which is expected to play a central role in helping the economy recover from the effects of Covid-19.
鈥淭he CLC asks that industry works together to support the long-term health of our sector by constructively resolving all contractual disputes arising from the pandemic.鈥�
鈥淭he CLC asks that industry works together to support the long-term health of our sector by constructively resolving all contractual disputes arising from the pandemic.鈥�
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