Contractual risk assessment

Select two construction contract forms. You can use either:
i. Standard contract forms; or
ii. Bespoke contract forms; or
iii. A combination of standard contract form and bespoke contract form.
Perform contractual risk assessments on clauses that may relate to the effects of
COVID-19 in construction projects. Compare the risk distributions between both the
client and the contractor in both forms

. Scenario-based assignment question
Scenario:
This is a project to construct a hotel in Auckland, New Zealand. The contract is a
lump sum traditional. Below are the chronology of events in this scenario.
On 15 April 2020, the contractor issued a default notice to the client for two pending
payments with a total amount of $300,000.
218.764 CONSTRUCTION CONTRACTS AND ADMINISTRATION
Semester 2, 2020
Page 2 of 10
According to clause 14.3.3 of the contract, the client must rectify this default within 10
working days, and failure to rectify this will give the contractor a right to request the
contract administrator to suspend the progress of the whole works.
Clause 14.3.3 of the contract also provides that following such suspension, the
contractor would be entitled to terminate the contract by giving notice in writing to the
client.
To preclude the contractor from invoking their rights under clause 14.3.3, the client
must make the payments before 30 April 2019. Unfortunately, neither the client nor
the contract administrator responded to the default notice, and no payment was
made until 30 April 2019.
On 25 April 2020, the contract administrator issued a work suspension order to the
contractor on the basis of site safety breaches. The contractor was not operating on
the site in any event, but the contract administrator advised that “all work on site
other than that required to make the site safe is suspended”. The suspension was to
remain in place “until we are satisfied that you can provide a safe working
environment”.
On 30 April 2020 at 5.00 pm, the contractor wrote an email to the contract
administrator requesting the work to be suspended following clause 14.3.3.
On 1 May 2020, at 10.30 am, the contractor emailed the contract administrator about
their intention to proceed with contract termination. A termination notice was attached
to an email shortly after. At 3.45 pm the same day, the client paid the outstanding
amounts of $300,000 to the contractor.
On 15 May 2020, the client challenged the validity of the contractor’s termination
notice and alleged that the contractor had abandoned the contract by persistently,
flagrantly or wilfully neglected to carry out their obligations under the contract.
On 30 May 2020, the client terminated the contract on the grounds of breach of
contract by the contractor and sought to call on their Performance Bond.
Based on the facts above, discuss the issues in the administration of this contract in
respect of:

1. The effect of the work suspension order by the contract administrator;
2. The validity of actions and termination by the contractor;
3. The validity of actions and termination by the client.
4. Propose actions or best-practices that could have been employed by the contract
   administrator to handle the situation above better.
   

Sample Solution