Foot-and-mouth and money

The perception of the general public, quite rightly, is that the foot-and-mouth epidemic is primarily a tragedy for the farming community and those associated with it.

But consequent difficulties with access have not only contributed to the apparent delay to the democratic process; they have also caused problems for the construction industry, particularly with utilities contracts and more traditional projects in rural areas.

While blame is often apportioned where the construction and engineering industries are concerned, the foot-and-mouth epidemic is rare not only in its frequency, but also in that its consequences cannot be attributed to any party to a contract.

Drafting contracts
Those drafting contracts, whether standard form or project-specific, cannot be expected to cover every eventuality, and the current epidemic was not within the consideration of parties entering into contracts. The English legal system does not generally provide for those who cannot satisfy contracts because of an unexpected event outside their control. However, the law will generally step in if the contract contains a clause excusing either party from its contractual obligations during the period that an unforeseen event effects the project. This form of exemption clause is known as a "force majeure" clause.

The general definition of force majeure is contained in the 1920 case of Lebeaupin vs Crispin, where it was referred to as "all circumstances independent of the will of man, and which it is not in his power to control . . . thus, war, inundations and epidemics are cases of force majeure." Many contracts, including the JCT Standard Form Contract 1998, contain force majeure provisions. Such a clause is often accompanied by a definition of force majeure peculiar to the contract. However, if the contract includes a clause that does not specifically define the phrase, English law appears to say that force majeure includes an epidemic like foot-and-mouth.

Definitions of force majeure must be read carefully, as if they are not sufficiently full or clear and do not include epidemics, it could be argued that they do not cover foot-and-mouth. For issues such as entitlement to extension of time and loss and expense, this question may be critical.

Those drafting contracts, whether standard form or project-specific, cannot be expected to cover every eventuality

Also, a force majeure clause may stipulate that certain steps must be followed and/or notices given to the other party within a specified time before the clause can be invoked to excuse the party from performance. Failure to comply with such steps may result in the potential protection of the force majeure clause being lost.

While the force majeure clause may save a party from contractual difficulties due to inevitable project delay, this still leaves the issue of the cost of delay. While a contractor may be entitled to a time extension, if it is not entitled to recover losses it will inevitably suffer. In addition or alternatively to the force majeure clause there may be general entitlements to monies due to delay caused by prohibition of access to site. These entitlements may be linked with, or in addition to, a clause entitling a party to an extension of time and/or financial recompense due to the exercise of a statutory power directly effecting the execution of works.

Limiting your losses
Legislation relating to foot-and-mouth disease, such as the Foot and Mouth Disease (Amendment) (England) Order 2001, may, by prohibiting entry on to land and limiting general movement in and out of areas, entitle a contractor affected by such legislation to rights under its contract, both in relation to lack of access and the exercise of statutory power.

Contracts may specify complex procedures regarding the suspension of works by an employer. If followed correctly, the procedures may alleviate the economic pain suffered by a contractor due to problems with site shutdown and/or limited access. One hopes that given the no-fault nature of the current epidemic, employers will be sympathetic to contractors' predicaments. A common-sense attitude to the difficulties and their financial repercussions is likely to prove in the best interests of both parties.