Most construction contracts will contain provisions setting out the parties' rights and obligations when the principal seeks to suspend the works. However, the situation is not always clear cut. In deciding whether to exercise a right to suspend, it is important to be mindful of:

• Whether the suspension clause applies to the situation for which the principal wishes to suspend and if not, whether the suspensions clause allows the principal to suspend of its convenience; and
• The contractor's entitlements which may arise as a result of exercising a right (or purported right) to suspend, including the effect of a suspension directed where there is no such entitlement.

Does the suspension clause apply?

It is important to consider whether or not the contractual right to suspend allows you to suspend the works for convenience, or for the reasons you want to suspend.

Taking the standard-form AS4902-2000 design and construct contract as an example, a suspension under clause 33.1 may only be directed 'if the Superintendent is of the opinion a suspension is necessary:

• Because of an act, default or omission of the Superintendent, the Principal or its employees, consultants, agents or other contractors (not being employed by the Contractor); or the Contractor, a consultant, a subcontractor or the employees or agents of any of them;
• For the protection or safety of any person or property; or
• To comply with a court order.'

Therefore, while the COVID-19 pandemic may, in the circumstances of a particular project, give rise to the need to suspend works to protect health and safety of workers, or may do so in the future (e.g. as a result of a government order), meaning that clause 33.1(b) may reasonably apply, there is no express right to suspend the works for convenience.

It is also important that principals be mindful that the decision to exercise a right to suspend will usually result in time or cost consequences, or both.

What if there is no express right to suspend or the suspension clause is not operative?

If there is no express right to suspend the works, or the suspension clause does not give you the right to suspend the works for the cause for which you wish to suspend, there are often other mechanisms in the contract which may, in substance, allow the works to be suspended. These include:

• Force majeure clause;
• Change in law / legislative requirements;
• Unilateral extension of time (EOT); and
• Variation order or direction.

Force majeure

Your contract may have a force majeure clause which may be operative in the circumstances. Close attention should be paid to whether a force majeure event (as defined in the contract) has in fact occurred. However, the existence of force majeure may not give full rights to suspend as usually the existence of a force majeure only gives relief from obligations affected by the event of force majeure. And, as with suspension rights, the force majeure may give rise to time and cost consequences.

Change in law

If the need or requirement to suspend arises due to a government order or directive, consider what your contract says about a change in law / legislative requirements. Often the clause will require the contractor to comply with the changed law, but will also entitle the contractor to make a claim for time and costs resulting from the change.

EOT

Most commercial construction contracts allow for the Superintendent to give directions (in accordance with the contract) and also typically provide a unilateral right to grant an EOT. Taking the standard-form AS4902-2000 again as an example, clause 32 provides that :

'The Superintendent may direct in what order and at what time the various stages or portions of WUC shall be carried out. If the Contractor can reasonably comply with the direction, the Contractor shall do so. If the Contractor cannot reasonably comply, the Contractor shall give the Superintendent written notice of the reasons.'

Arguably this provision could be used to direct a suspension (although it is not clear, and note the wrongful suspension point below).
If clause 32 is able to be used to suspend the works, then clause 34.5 provides:

'Notwithstanding that the Contractor is not entitled to or has not claimed an EOT, the Superintendent may at any time and from time to time before issuing the final certificate direct an EOT.'

However, while exercising rights under the above clauses may have the effect of causing the contractor to delay or postpone the performance of the works, it will need to be exercised cautiously for two reasons:

• The contractor may be entitled to make a claim for delay costs. The quantum of those costs will be contract-specific. Some contracts will provide for actual costs incurred by the contractor, which would ordinarily include all time-related costs and could, in certain circumstances, include demobilisation and remobilisation costs. Other contracts will simply provide a fixed daily rate; and
• If clause 32 cannot be used, then the effect of the exercise of the rights under clause 34.5 is only that the relevant date for completion is extended. Put another way, the contractor could simply use the additional time to take longer to perform its works as opposed to ceasing performance.

On the second point, another issue to be aware of is the contractor's entitlements for failure to give access to the site. If the date by which the principal is required to give access to the contractor under the contract is unchanged, the contractor may be entitled to claim additional costs and time. Further, failure to give access by the time specified in the contract is often a default event under the contract and the contractor may be entitled to notify the principal of a breach of the contract, which if not remedied, could lead to termination and attendant consequences.

Close examination of the relevant contractual clauses is required. If the outcome is unclear, it may be prudent to endeavour to negotiate and agree the suspension, and then clearly record agreement with the contractor by a short variation deed to accurately reflect the changes in relevant dates and the commercial impact of those changes.

Variation

Like the EOT clause, the variation clause is sometimes used as a catch-all clause for principals to issue various directions or instructions to contractors, but some directions may not necessarily fit into the intent of that clause. Suspensions, changes to access dates, changes to work sequencing or programming, etc are sometimes effected by a variation order. The legitimacy of such a direction will depend on drafting of the relevant definition of the subject of the direction in the variation provision. For example, a widely drafted definition of 'WUC' (for Work under the Contract) may be sufficient. However, variation clauses are often drafted to allow changes to 'the Works', rather than these types of changes. .

Consider the definitions of Variation and Works in the GC21 (2nd Edition) respectively as an example:

Variation: Any change to the Works including additions, increases, omissions and reductions to and from the Works, but not including such changes in respect of the development by the Contractor of the design for the Works (including development of shop drawings and other Contractor’s Documents) in accordance with the requirements of the Contract. (emphasis added)

Works: The works to be designed, constructed and handed over to the Principal on Completion by the Contractor, including all work and items of the types referred to in clause 8.1 and Variations, but excluding Temporary Work. The term applies to the Works as a whole and also to any part of the Works unless the context requires otherwise. Contract Information item 3 briefly describes the Works. (emphasis added)

These definitions mean that a variation must be concerned with a physical change to the Works that are delivered, not a change to the time, sequence or method by which they are performed. The logic behind this being that there are other contractual mechanisms providing rights and corresponding relief for these types of changes.

Nevertheless, a variation may be readily agreed by the contractor as a means to effect a suspension as variations typically give rise to an entitlement to additional costs to perform the variation and a right to claim an EOT and further delay costs. However, if the principal wishes to avoid future unknown effects of (and claims arising from) issuing a variation direction (e.g. a future EOT and delay costs claim by the contractor), the parties should endeavour to negotiate and agree the variation, and a record should be made of the parties' intent with respect to their liabilities and entitlements consequent upon the variation direction. For example, if it is the intent that the contractor accepts a lump sum for stand down costs in exchange for revised access and completion dates, this should be reduced to writing and agreement clearly communicated between the parties.

What are the consequences of a wrongful suspension?

There may be several reasons for wanting to suspend works, such as cashflow, health and safety, resourcing, or to get through existing dispute resolution processes the parties are involved in. The scenarios above describe methods of achieving a suspension of the works, although this will always need to be carefully considered on a contract specific basis because there are severe consequences for a wrongful suspension.

If a principal suspends the works without a corresponding contractual right, this will likely be an act of repudiation as it would evince an intention of the principal that it was not ready, willing and able to perform its obligations under the contract. A contractor would be entitled to accept the repudiation, terminate the contract and seek damages. In the current climate, this could be the window of opportunity that a contractor under pressure is looking for in order to avoid losses on a difficult project. If you are in doubt about your right to suspend, seek appropriate legal advice.