Mitigating Legal Risks in Construction Project Contracts: The Importance and the Applicability of Force Majeure Clauses

Abstract

Contracts in the construction industry are structured in a manner that splits the risks between different contracting parties; hence risk allocations within the contract affect the price and operation. As most Construction Contracts are long-term contracts, therefore, it is essential to consider having provisions to mitigate foreseeable and unforeseeable risks which may reduce the positive economic prospects and gains, if not, properly evaluated, managed and considered under the contract. For those reasons and many others, the Force Majeure (FM) or the act of God clauses are included in almost all construction project contracts. This paper will provide an analysis of the FM clause in the Public Works Authority (PWA) General Conditions of Contracts (GCOC) for 2018 in terms of the meaning of FM, a list of examples, and the consequences of invoking the FM clause and others. Moreover, the FM clause in PWA GCOC 2018 will be compared with other drafts of the FM clause in other forms of contracts that are used internationally, such as the International Federation of Consulting Engineers General Conditions of (FIDIC) Red Book, 1999 and 2017, and others. This comparison was conducted by taking into consideration scholarly opinions and existing literature on the topic. Finally, the paper addresses the gaps in the existing PWA GCOC FM clause and the applicability of the FM clause in cases such as COVID-19 and then recommends some amendments that could be considered in future contracts.