How to Calculate the Time Limit on Liability-Exempt Delay in Construction Work of Builder Units Due to Convid-19

(By Nie Shengnan)Just before the Chinese Spring Festival 2020, Convid-19 broke out across our country. The government has taken a series of measures to control the spread of the disease, including spring festival holiday extension, increases in the number of inspectors, closure of highways, delay of work and business resumption, quarantine at fixed places and times, etc. These measures are bound to affect the term of work on construction projects. How to calculate the time when the majeure force incident appears and disappears is an issue that the parties involved are very concerned about and is very likely to cause disputes when builder units claim exemption of liabilities based on force majeure clauses.

1.Time when the force majeure incident arising from the pandemic appears

The starting time of the force majeure arising from the pandemic should be determined by the local government’s first-level response to a major public health emergency. If the government department concerned issues a shutdown notice, the time when the force majuere incident appears is the notice date.

For builder units, the force majeure incident this time arose from administrative measures taken by governments and departments concerned to prevent the pandemic, not from the pandemic itself. Some believe the force majeure incident appeared on the date when the National Health Commission first included Convid-19 pneumonia in Category B infectious diseases in the Infectious Disease Prevention and Treatment Law of the People’s Republic of China on 20 January 2020 and started to take Category A infectious disease prevention and control measures. As targets of Category A measures are patients, people with novel coronovirus, suspected patients, medical institutions, affected areas, medical tests, etc., which have no substantive effect on construction projects, it is not advisable to take 20th January as the date when the force majeure incident appeared.

The time when the force majeure incident arising from the pandemic appears should be the time when the local government starts level-one significant unexpected public health incident handling process. For example, the level-one significant unexpected public health incident handling process was started in Shanghai on 24 January 2020,from which measures are taken including not limited to restricting or canceling public activities involving a large number of people, stopping working, doing business and taking classes, requiring people from specific regions to Shanghai be quarantined for 14 days, etc. The above measures taken by the Government of Shanghai have substantive effect on labor, material and equipment supply for construction projects.

2.Time when the pandemic disappears as a force majeure incident

The time when the force majeure incident disappears is the date when the local administration gives approval for work resumption. For construction projects that cannot be resumed until measures such as examination are taken as explicitly required, the date of the work resumption certificate issued by the authority concerned is the date of the work resumption.

The Notice on Taking Tougher Action to Prevent and Control the Pandemic in Construction Sites issued by Shanghai House and Urban and Rural Construction Commission on 2 February 2020 clearly states that construction sites in Shanghai cannot be open for work resumption or new work before 1 a.m. on 9th February and after 20th February construction sites may open for work resumption and new work in late or different times according to the situation and the actualities of the site. Businesses cannot officially resume work until they meet all the eligibility for work resumption in the Notice and file a work resumption application with and pass the eligibility examination of the construction administration. Shanghai House and Urban and Rural Construction Commission issued the Notice on Coordinating and Advancing Work on Pandemic Prevention and Control and Work Resumption in Construction Sites on 4 March 2020, stating that to encourage construction sites to resume work in a good order in the current stage businesses that have submitted the commitment online are seen as having completed the recordation process and can resume work. On this account the time when the force majeure incident disappears differs in two situations. The builder units seem to be able to resume work from the earliest date of 10 February 2020. Actually, most builder units cannot pass the administrative authority examination of the eligibility for work resumption on the earliest date due to their lack of qualifications, workers, etc. It is obviously unfair to builder units to see 10th February as the time when the force majeure incident disappears.When the prevention and control measures taken by the government department concerned becomes less severe and is no longer a big obstacle for builder units to resume work after the publication of the notice dated 4th March, the force majeure incident disappears. For builder units who passed the work resumption examination during the period from 10th February to 4th March, the force majeure disappears when the construction project is given the government approval for work resumption. For other builder units, the force majeure incident disappears on 4th March.

The Answers to Questions about the Application of Laws to Cases Involving Convid-19 (Edition II) published by Shanghai High People’s Court includes similar opinions of the supreme court on the above issues. According to Shanghai High Court, the time when the force majeure incident arising from Convid-19 appears should be determined on a case-by-case basis by taking into consideration the actual effect of Convid-19 on the performance of the contract concerned, attainment of the purpose of the contract or exercise of rights of the parties involved. In general, it accords with the time when the provincial government of the place where the contract is performed or the parties involved live starts and terminates the significant unexpected public health incident handling process.

Despite the uniform legal basis, the time when the force majeure incident appeared due to the pandemic may change from case to case. Prevention and control measures taken by the government of the place of the construction site and the situation of the construction business concerned should be considered. Regardless of when the force majeure incident appeared, the builder unit needs to issue a force majeure notice to the construction unit at the time when they believe the substantive effect of the pandemic on the performance of the contract appears and the time when such effect disappears. They also need to give an explanation of the force majeure incident and its effect on the performance of the construction contract to the construction unit and its affiliates such as supervisors, subcontractors, material suppliers and tenants respectively. This will give them advantages in arguing about the extension of the term of construction work without disadvantages.

 

Lawyer Contacts

You Yunting

86-21-52134918  

youyunting@debund.com

 

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