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Who should bear the risk of community unrest and strikes?

1 March 2016

At MDA Consulting we work on site and provide onsite commercial support so we often see strikes, community unrest, service delivery protests, taxi protests and other uniquely South African events first hand, which, in most circumstances, disrupt and delay the works.

These events often occur when:

  • the project is situated in a rural or excluded area where there is high unemployment, or
  • if more than one contractor is involved or
  • if the employer is a state owned company.

In these circumstances, all participants to a project lose money or are prejudiced in some way.

In most circumstances the standard form construction contracts make provision for such events under the definition of force majeure or prevention.

In this instance, the contractor will be entitled to submit a claim for an extension of time but not necessarily for payment of additional costs associated with the delay. Based on this, it is clear from the standard form contracts that the contractor may not be adequately compensated for all money lost.

As an example and with particular reference to FIDIC, clause 19 entitles the contractor to claim an extension of time and payment of additional cost – this does not include profit nor make provision for or take into account the disruption of works and decrease in productivity, which is likely to occur.

As the FIDIC is an international standard form contract used for international projects, it could be said that the principle of force majeure and more particularly the model of compensation in an international context is fair. However, within a South African context, the contractor is affected by force majeure events, which are unique to South Africa and over which the contractor has no control.

Based on this, the question remains whether the principle of force majeure and more particularly the model of compensation in a South African context is balanced? This is a concern in the South African construction industry.

At tender stage all parties need to consider the definition of force majeure and all potential risks. These should be dealt with upfront by deciding whose risk the event should be and to include the necessary particular conditions.

Author: Odette Potgieter, senior associate