Cost Recovery for COVID-19 Disruption Claims in the Philippines
November 03, 2020DownloadsDownload Article
The COVID-19 epidemic has caused major disruption to projects around the world, with many finding it difficult, or impossible, to fulfil their contractual obligations as a result. The Contractor’s knee-jerk reaction is to cry “Force Majeure” (FM) and follow the contractual provisions governing such a claim.
However, depending on how the FM clause is worded, this is generally known to award delay only with recovery of costs rare. In addition, FM claims usually open the contractor up for Employer rebuttal; claiming the event was foreseeable and the contractor was ill prepared.
Certain Civil Codes, although adding clarity to what constitutes a FM event, may also be silent on the entitlement for costs. In the Philippines, Article 1267 of the Civil Code states:
“When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.”
Being released from an obligation due to a FM event does not equate to entitlement to recover costs. However, Article 1174 states:
“Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.”