With the inevitable progress of climate change, extreme weather events in Australia occur more frequently than ever before. This calls for better management of these extreme weather events across the Australian construction industry to minimise the economic impact.
In the Australian market, while a small percentage of construction contracts attempt to define “inclement weather” and its consequences, most simply adopt the use of the words “inclement weather” as if there is a universal understanding of its nature and extent, and project impact. Clearly, there is no such universal application and the project impact of these events can vary widely.
The ability for a contractor to claim an extension of time is often the only contractual remedy provided, no matter how severe or extreme the weather event. Construction contracts commonly provide that inclement weather (in the absence of categorisation), relief in the form of a qualifying cause of delay such that the contractor, upon giving the required contractual notices, may claim an extension of time to the date for practical completion.
Better contractual co-ordination and management during extreme weather events will minimise project delays, cost overruns and disputes. Parties are advised to take the initiative, by incorporating clear contractual terms that provide for written notification of the impact and ongoing project management of these events.
The balance of this article recommends criteria for defining inclement weather events and offers recommendations as to a contractual management process to mitigate the project impact.
It is recommended that construction contracts adopt a criteria for categorising weather events as moderate, severe or extreme. Depending on the nature of the project, the works performed and the features of the site, that criteria may be:
(1) more than 7mm of rain/day and/or winds of over 30km/hr and up to 50km per/hr, and/or temperatures exceeding 35 degrees celsius may be described as “moderate”;
(2) more than 30mm of rain/day and/or winds of above 50km per/hr, and/or temperatures exceeding 38 degrees celsius may be described as “severe”; and
(3) more than 100mm of rain/day and/or winds of above 100km per/hr and/or temperatures exceeding 42 degrees celsius may be described as “extreme”.
Other weather phenomena may also be categorised as above, including hail and snow events, and visibility issues caused by airborne smoke haze, dust, ash or fog measured by reference to a haze index. Ultimately, any weather event that does not qualify as at least moderate, may be expressly excluded as a qualifying cause of delay. Otherwise, it is recommended that all categories of weather events constitute a qualifying cause of delay in the traditional sense.
A subcategory of qualifying causes of delay may be introduced as “undisputed causes of delay”. An undisputed cause of delay would include those weather events (at least) categorised as severe or extreme, and although are subject to similar contractual notifications as all other qualifying cause of delay, should introduce further written notifications and separate claim management process.
It is recommended that, in the circumstances of an undisputed cause of delay, delay costs are applied (as a genuine pre-estimate) in connection with severe or extreme events. Any delay costs may be capped at a maximum number of days, after which the contract is deemed to be frustrated. Below we outline a recommended claims management process to operate in connection with other standard clauses.
Where an undisputed cause of delay occurs, the parties jointly adopt a claims management process which requires them both to issue initial written notifications within 48 hours of the event, specifying the delay cause, the delay impacts and durations, and any damage or rectification required to existing structures or works performed on site and relevant insurance coverage.
To the extent that works or property damage occurred, this will typically be covered by project or works insurance, or other insurance taken out by the contractor. The parties with their exchange of initial written notifications should also nominate the damage and the relevant policy coverage. Should insurance coverage be the subject of dispute, the dispute clause may be triggered.
Otherwise following initial written notifications, each party be given the opportunity to submit a claim and proposal for interim preservation of the site, rectification works to be carried out and estimated delay impacts and related delay costs within a further 48 hrs (assuming an assessment can be carried out within that time), otherwise within 5 business days. Following the submission of claims, the parties arrange a meeting between senior representatives with the aim to agree on interim site preservations, rectification work and delay impacts and costs and a revised program of works consistent with those other matters within 7 days.
After 7 days if no resolution is reached, and/or a revised program of works agreed, either party may trigger the dispute clause with the aim of reaching an agreement on appropriate interim preservations, rectification and delay impacts together with a revised program of works. No other issues are to be introduced by that dispute process, unless related to the weather event at issue (excluding insurance).
In Lucas Earthmovers Pty Ltd v AngloGold Ashanti Australia Ltd, the Federal Court considered the contractor’s claim for breach of contract and damages, including a claim for delay damages in connection with delays due to inclement weather. The parties delay experts adopted different approaches to calculation of the number of inclement weather days, and in the absence of any specified contractual criteria, calculations were based on daily rainfall project records, local readings published by the Bureau of Meteorology and plant use data.
Because no actual or standard measure of inclement weather was nominated in the contract, it was for the Court to determine the appropriate measure in deciding which calculation was more accurate. It is recommended that where weather event criteria are adopted in the contract, an applicable standard measure of that criteria is also specified. This ensures consistency in calculation of delays and delay costs by expert assessment or otherwise, minimising the likelihood of dispute and related costs.
For more information about construction contracts more broadly, see our recent article here. For information our about services, see here.
Troy Legal recommends that parties adopt a contractual criteria for better defining inclement weather events and specify how those criteria are measured, together with a contractual management process (of the type described above) to mitigate project impacts from severe and extreme weather events.
Troy Legal specialises in drafting and advising clients on construction contracts and can protect your business from the economic impact of extreme weather events.
Need Legal Advice?
Julian Troy is founder and director at Troy Legal. With over 23 years experience in construction law, Julian cuts to the real issues and provides simple and effective advice to construction businesses across SEQ and Australia.
Troy Legal supports principles, owners, consultants, contractors, subcontractors, and suppliers in SEQ with contract reviews, disputes, and payment recovery. For tailored advice and guidance, reach out to Troy Legal today. Call (07) 3854 2315 or contact us online.
With the inevitable progress of climate change, extreme weather events in Australia occur more frequently than ever before. This calls for better management of these extreme weather events across the Australian construction industry to minimise the economic impact.
In the Australian market, while a small percentage of construction contracts attempt to define “inclement weather” and its consequences, most simply adopt the use of the words “inclement weather” as if there is a universal understanding of its nature and extent, and project impact. Clearly, there is no such universal application and the project impact of these events can vary widely.
The ability for a contractor to claim an extension of time is often the only contractual remedy provided, no matter how severe or extreme the weather event. Construction contracts commonly provide that inclement weather (in the absence of categorisation), relief in the form of a qualifying cause of delay such that the contractor, upon giving the required contractual notices, may claim an extension of time to the date for practical completion.
Better contractual co-ordination and management during extreme weather events will minimise project delays, cost overruns and disputes. Parties are advised to take the initiative, by incorporating clear contractual terms that provide for written notification of the impact and ongoing project management of these events.
The balance of this article recommends criteria for defining inclement weather events and offers recommendations as to a contractual management process to mitigate the project impact.
It is recommended that construction contracts adopt a criteria for categorising weather events as moderate, severe or extreme. Depending on the nature of the project, the works performed and the features of the site, that criteria may be:
(1) more than 7mm of rain/day and/or winds of over 30km/hr and up to 50km per/hr, and/or temperatures exceeding 35 degrees celsius may be described as “moderate”;
(2) more than 30mm of rain/day and/or winds of above 50km per/hr, and/or temperatures exceeding 38 degrees celsius may be described as “severe”; and
(3) more than 100mm of rain/day and/or winds of above 100km per/hr and/or temperatures exceeding 42 degrees celsius may be described as “extreme”.
Other weather phenomena may also be categorised as above, including hail and snow events, and visibility issues caused by airborne smoke haze, dust, ash or fog measured by reference to a haze index. Ultimately, any weather event that does not qualify as at least moderate, may be expressly excluded as a qualifying cause of delay. Otherwise, it is recommended that all categories of weather events constitute a qualifying cause of delay in the traditional sense.
A subcategory of qualifying causes of delay may be introduced as “undisputed causes of delay”. An undisputed cause of delay would include those weather events (at least) categorised as severe or extreme, and although are subject to similar contractual notifications as all other qualifying cause of delay, should introduce further written notifications and separate claim management process.
It is recommended that, in the circumstances of an undisputed cause of delay, delay costs are applied (as a genuine pre-estimate) in connection with severe or extreme events. Any delay costs may be capped at a maximum number of days, after which the contract is deemed to be frustrated. Below we outline a recommended claims management process to operate in connection with other standard clauses.
Where an undisputed cause of delay occurs, the parties jointly adopt a claims management process which requires them both to issue initial written notifications within 48 hours of the event, specifying the delay cause, the delay impacts and durations, and any damage or rectification required to existing structures or works performed on site and relevant insurance coverage.
To the extent that works or property damage occurred, this will typically be covered by project or works insurance, or other insurance taken out by the contractor. The parties with their exchange of initial written notifications should also nominate the damage and the relevant policy coverage. Should insurance coverage be the subject of dispute, the dispute clause may be triggered.
Otherwise following initial written notifications, each party be given the opportunity to submit a claim and proposal for interim preservation of the site, rectification works to be carried out and estimated delay impacts and related delay costs within a further 48 hrs (assuming an assessment can be carried out within that time), otherwise within 5 business days. Following the submission of claims, the parties arrange a meeting between senior representatives with the aim to agree on interim site preservations, rectification work and delay impacts and costs and a revised program of works consistent with those other matters within 7 days.
After 7 days if no resolution is reached, and/or a revised program of works agreed, either party may trigger the dispute clause with the aim of reaching an agreement on appropriate interim preservations, rectification and delay impacts together with a revised program of works. No other issues are to be introduced by that dispute process, unless related to the weather event at issue (excluding insurance).
In Lucas Earthmovers Pty Ltd v AngloGold Ashanti Australia Ltd, the Federal Court considered the contractor’s claim for breach of contract and damages, including a claim for delay damages in connection with delays due to inclement weather. The parties delay experts adopted different approaches to calculation of the number of inclement weather days, and in the absence of any specified contractual criteria, calculations were based on daily rainfall project records, local readings published by the Bureau of Meteorology and plant use data.
Because no actual or standard measure of inclement weather was nominated in the contract, it was for the Court to determine the appropriate measure in deciding which calculation was more accurate. It is recommended that where weather event criteria are adopted in the contract, an applicable standard measure of that criteria is also specified. This ensures consistency in calculation of delays and delay costs by expert assessment or otherwise, minimising the likelihood of dispute and related costs.
For more information about construction contracts more broadly, see our recent article here. For information our about services, see here.
Troy Legal recommends that parties adopt a contractual criteria for better defining inclement weather events and specify how those criteria are measured, together with a contractual management process (of the type described above) to mitigate project impacts from severe and extreme weather events.
Troy Legal specialises in drafting and advising clients on construction contracts and can protect your business from the economic impact of extreme weather events.
Need Legal Advice?
Julian Troy is founder and director at Troy Legal. With over 23 years experience in construction law, Julian cuts to the real issues and provides simple and effective advice to construction businesses across SEQ and Australia.
Troy Legal supports principles, owners, consultants, contractors, subcontractors, and suppliers in SEQ with contract reviews, disputes, and payment recovery. For tailored advice and guidance, reach out to Troy Legal today. Call (07) 3854 2315 or contact us online.
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