We reflect on a challenging year and consider what 2021 might look like, while suggesting some new year’s resolutions along the way.

Conclusion of contracts

The new working from home requirements as a result of the pandemic brought with it some challenges with ensuring contracts were signed and concluded correctly and within required timescales.  Electronic and counterpart signing has become more popular over the last few months to deal with these challenges, and there’s no doubt that that trend will continue throughout 2021 and beyond.

If you are signing electronically, we recommend using a suitable platform like DocuSign which can provide enhanced levels of security. If you are signing in counterpart with electronic delivery, make sure there is an accepted method of delivery agreed between the relevant parties. In all circumstances, check that signatories are authorised to sign and bind the relevant company.

Procurement of collateral warranties

In 2020, we were witness to difficulties in the procurement of collateral warranties throughout the supply chain - and Covid-19 didn’t help matters. As well as logistical issues with getting warranties signed and delivered, some supply chain members sought to use the granting of a warranty as a bargaining chip to increase cash flow in challenging economic circumstances. We also saw significant changes in the professional indemnity insurance market meaning some supply chain members were not able to meet previously agreed levels and bases of cover. It is likely that PI insurance will be a hot topic for 2021.

Be up front with your supply chain about the requirements for collateral warranties at an early stage.  Check that your contract contains clear contractual provisions dealing with delivery of collateral warranties to specific third parties in a pre-agreed form, with wording to deal with non-availability of insurance on reasonable terms and perhaps financial consequences for non-delivery. Ensure that these provisions are consistent (so far as appropriate) with any equivalent provisions in related contracts up or down the contractual chain. Put in place robust administrative processes to ensure that collateral warranties are requested at the earliest opportunity, and be wary of recent changes in the professional indemnity insurance market when committing to specific levels of cover with counterparties.

Suspension & Termination

While traditionally no-one worried too much about suspension and termination provisions and the standard form positions were rarely amended, 2020 saw more attention being paid to these clauses as a result of the Covid-19. That theme is likely to continue in 2021 with parties now a lot more focussed on what get-out options might be available to them during these difficult times.

Check the termination and suspension provisions in your contracts meet your requirements and be wary of the stark differences in approach across the standard form contracts. Consider whether to include bespoke drafting for Covid-19 as a specific trigger for suspension and/or termination and review the consequences of doing so fully.

If you are looking to terminate your contract, make sure you have sought advice on the termination triggers being met. Termination is the nuclear option when there are no other solutions left, and can have serious consequences if you terminate incorrectly.

Notices

In this new reality of working from home, do your notice provisions fit with how you’re conducting business in the post-Covid-19 world?

We are seeing an increasing number of notices being served by email on the basis of offices being closed, but you should revisit your contracts to ensure that service of notices by email is actually a valid method of service. Critical notices are generally not permitted to be served by email and you may need to consider amending your contract to allow it.

If you can only serve notices by post, do you want to serve an email copy at the same time so that you know the recipient actually receives it? If you can serve notices by email, think carefully about who they should be sent to – is that staff member around or should it go to a project specific mailbox (which you can’t forget to monitor!)? You also need to think about how you will prove that notice has been received.

However, the critical message still remains to ensure valid service of notices - make sure you follow the exact contractual requirements.

And it’s not all Covid-19 related…

Delays to construction projects are inevitable. Contractual clauses dealing with delay will remain an important risk management tool for the parties. Therefore, the Supreme Court’s decision dealing with the appeal of the judgment in Triple Point Technology Inc v PTT Public Co Ltd is likely to be received with interest. The main issue in the case is whether or not a liquidated damages clause survives termination. The decision of the Supreme Court, which is expected imminently, may offer clarification on this important issue, for contract negotiators and litigators alike.

Could 2021 finally be the year that the Prescription (Scotland) Act 2018 comes into force? It seems unlikely, but almost three years after the Act was passed, we are still awaiting commencement provisions which will bring the new act into force. What is certain is there will be more court decisions on the application of the current law of time bar. The advice remains the same – if you have a claim to pursue, raise an action (either in the court or arbitration) early.

The VAT Reverse Charge is due to be implemented on 1 March 2021 after the implementation date has been delayed twice. This is a significant change for the industry introducing new rules on the way VAT is collected.

All in all, while coronavirus is still going to impact the sector in the coming year, there will be lots of other interesting changes to grapple with at the same time.

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