At the beginning of December 2019, the corona virus/COVID-19 started spreading from the Hubei province in China. Lately, the spread has increased intensely. In Denmark, most industries are also affected, including the construction sector. This raises the question as to the legal consequences for many of the country’s current construction sites.
Contractor's right to extend time limits
There is no fixed legal definition of force majeure under Danish construction law, but the basic conditions are normally that (1) the circumstances must be external, (2) that it is clear in advance that the contractor could not have predicted the circumstances and (3) that the contractor cannot prevent the circumstances. Normally, there also has to be an event of an extraordinary nature.
The following appears from section 39 (1), paragraph c of AB18 (section 24 (1), no. 3 of AB92 is almost identical):
“The contractor is entitled to extend time limits when the work is delayed due to: (...) c) war, extraordinary Acts of God, fire, strikes, lockouts, blockades, vandalism or similar matters occurring through no fault of the contractor and beyond the contractor’s control.”
It is obvious that COVID-19 has occurred through no fault of the contractor and beyond the contractor’s control. The question is therefore whether COVID-19 can be compared to the examples in the provision, see the wording “or similar matters”.
Based on recent statements from the Danish authorities, including the recommendations concerning quarantine if you have been in contact with a person infected with COVID-19, that you should not meet more than 100 persons indoor, that you should avoid public transportation during rush hours, closing of schools and institutions, etc., it is our clear opinion that this is an extraordinary situation.
However, you may discuss whether it is enough to constitute force majeure as long as the authorities only make recommendations, requests etc., and do not issue specific orders or prohibitions. However, based on the clear recommendations from the authorities led by the government, it is our overall assessment that at present, COVID-19 is of such extraordinary nature that it must be characterised as a force majeure situation even though there are (at the moment) no prohibitions.
The contractor is therefore entitled to extend time limits in case of delays that may be related to COVID-19.
Causal connection and burden of proof
Can the contractor simply lean back and do nothing further? No, in addition to complaining in due time, the contractor must also prove that there is a connection between COVID-19 and the extension of the time limit claimed.
The contractor is also entitled only to extend time limits concerning delays which could not have been prevented even though reasonable measures had been taken, e.g. staggered working hours etc.
Financial consequences
The right to extend time limits immediately raises the next question as to the financial consequences that the extension will result in for the construction sector.
The answer to this question is found in section 27 (3) of AB92/section 43 (3), paragraph a of AB 18. It appears from these provisions that, in this situation, the contractor is not entitled to compensation or damages. The contractor will get the time, but has to pay the expenses.
Overall assesment of Covid-19’S consequences for the construction sector
It is Horten’s overall assessment that, at present, COVID-19 must be characterised as a force majeure situation, which may entitle contractors of ongoing construction works to an extension of the time limits, see section 24 (1), no. 3 of AB92/section 39 (1), paragraph c of AB18. It is, however, a condition that the contractor complains in due time and can prove that COVID-19 has caused a delay of the alleged scope, including that the contractor has exercised due care compared to what may reasonably be expected to minimise the delay.