Back to basics briefing: 8. Swine flu

Construction firms could be among those that feel the impact the most, as the vast majority are small-to-medium-sized firms with fewer than 25 employees. Most also rely on skilled labour and seamless supply chains to deliver projects on time and on budget.

If a severe outbreak takes hold and staff absentee rates spiral, construction firms risk being unable to meet their contractual obligations and possibly facing breach of contract claims. The results of this can be severe, including loss of income, reputational damage and even a threat to a firm’s survival in the current market.

Too many managers just shrug their shoulders and say ‘what can you do?’ But there is a contingency measure that can be put in place very quickly and involves reviewing the company’s contracts and, in particular, the force majeure terms.

Depending on the circumstances, a bout of swine flu that affects the project works could be considered as force majeure. Where the effects of swine flu are particularly serious, it may also entitle a party to suspend performance of its obligations.

However, for force majeure to apply, it will be necessary to show that an event is beyond the party’s control and that there were no reasonable steps that could have been taken to avoid or mitigate the consequences of the event.

For contracts entered into since the risk of swine flu became public knowledge, this could be harder to demonstrate. An experienced contractor could be expected to provide a contingency in the project programme for delays or employ temporary staff to meet the needs of the construction project if an outbreak occurs.

A failure to take reasonable steps could mean, subject to the terms of the contract, that a contractor bears the risk of disruption to a project.

It is, therefore, advisable to ensure that pandemic flu is covered in any agreement and to forward-plan for any additional clauses that will help ensure force majeure applies. Construction companies should also look at their supply chain and carefully consider whether any of their sub-contractors or suppliers could be at risk of stopping work or reducing supply in the event of a swine flu outbreak.

Again, contracts should be reviewed and it may also be worth expanding the supply network or negotiating a clause in the contract to mitigate against any risk if an exclusive arrangement is in place.

P Stephen Clarke is head of construction at Clarke Willmott