[00:00]
Hi there, Jacob Austin here and welcome to episode 144 of the Subcontractors Blueprint. The show where subcontractors will learn how to ensure profitability, improve cashflow and grow their business. Today's episode is a very current topic, it's all about force -major. What that actually means for subcontractors. Why it almost never is the cost recovery that you might like. And what you should be doing at tender stage and on site to protect yourself when the material market turns against you.
[00:34]
So, let's dig in. If you've been pricing work over the last couple of years, you'll already know this problem. Steel prices have moved sharply after the Ukraine conflict. Timber spiked post -pandemic and has never fully settled back down.
[01:07]
Copper, fuel and imported materials have all been hit by volatility. And that's before you factor in the current round of trade restrictions, uncertainty and war in the Middle East and how this has been playing out across global markets in the last couple of years. You price a job, you win it. Three months later the materials you quoted are 15 or 20 % more expensive. Programme slips, your procurement window shifts, suddenly you're buying in a more expensive market than the one that you priced in.
[01:42]
When that happens, the first thing people ask, does the force -major clause help me? And the honest answer for a lot of subcontractors on most domestic subcontracts is no. Not on cost, and sometimes not even on time. That's the conversation and the warning I want to leave you with today, not the theoretical version, but the version that tells you what you're actually holding when you sign a fixed price subcontract. What the contract does and doesn't give you.
[02:13]
And what you need to do before you sign and ask your onsite to have any realistic chance of recovering significant market movements. Now let's start with the basics because there is a widespread misunderstanding of what force -major actually is under English law. And that's because there is no standard doctrine of force -major in English law. It doesn't exist by default. And so you can't call on that unless your contract expressly includes that concept and a clause around it.
[02:44]
On top of that, that their clause will be applied as its written. And that means there's big variety in what counts as a qualifying event, what thresholds trigger it, whether it gives you time or money or both. And what notices you have to serve. All of that defends entirely on your own specific contract and the words in that. There's no fallback because if there isn't a clause there, it isn't available. And that's the start of the problem for subcontractors because many domestic subcontracts, as we know even the standard ones get heavily amended by main contractors to often not include that force -major clause at all.
[03:25]
Or they include one that's been stripped back to give the contractor maximum flexibility and the subcontractor very little. And then where it does appear, the JCT and the NEC positions are very different. And to work in our marketplace, you need to understand both. Under a JCT subcontract, whether that's the standard building subcontract or the design and build subcontract, or some other subcontract based on JCT's principles. Force -major is typically listed as a relevant event that can give you an extension of time.
[04:01]
What it doesn't do under the standard form is give you any additional money. JCT sits on a traditional risk allocation model. The contractor and the subcontractor each bear their own risk of price fluctuations. So, force -major under JCT in most cases is a time only remedy. You might get your program extended, but you won't get a cost increase paid. The NEC works a little differently. Under NEC compensation event frameworks, certain force -major type events can give you both an entitlement to time and cost recovery.
[04:41]
But they have to be properly notified in the fashion that the contract sets out. So the NEC contract is more generous in principle, but it's more procedurally demanding. If you miss the notification window, if you fail to submit your quote on time, then you lose that entitlement regardless of how legitimate the underlying event is. And that means if you miss that time bar, that you're no longer entitled to an extension of time, which you would be under a JCT contract.
[05:13]
On top of that, force -major type events are often tinkered with by our friendly main contractors, meaning that leaves them in a place where they might get some relief, time, cost or both, but it doesn't necessarily flow down to you. What you receive depends on what your actual subcontractor says, and if that document is silent, there's a very real chance that the main contractor is absorbing the benefit of the force -major without passing any relief down to you, meaning that you bear the cost, but they keep the protection for themselves.
[05:49]
Even if force -major is triggered and you do get time, that only removes your LAD exposure for the delay. It doesn't compensate you for the additional cost or materials you're buying at potential higher prices. It doesn't cover the cost of your prelimbs if you're on site longer as a result. On a fixed price subcontract, cost increases are your problem, unless your contract says in writing something different. Now where subcontractors can get caught out with this is that they can assume that if something genuinely outside of their control causes a cost increase, the contract will provide a route to either charge more money or for an extension of time, and sadly that assumption is wrong.
[06:35]
Force -major clauses tend to deal with the inability to perform, meaning that events preventing or fundamentally hindering your ability to either get to work at all or to complete your work whilst you're there. They're not designed to compensate you if it costs you more money to do that work, and the courts have consistently confirmed that. The fact that steel went up 20 % because of war in eastern Europe doesn't by itself trigger force -major. It makes
[07:05]
your fixed price very painful, but it doesn't get you off the hook for seeing that contract out or charging more money for it. The second trap is the notice requirement. If a force -major clause does apply, it covers the event, and it gives you entitlement, but you still have to serve notice, usually within a strict time frame and usually in a specific form. You need to do that right, or you can lose that entitlement altogether. It won't matter
[07:35]
how valid your claim is, courts and adjudicators rule on these kind of technicalities repeatedly. An example being FES versus HFD Construction Group in 2024, where a failure to comply with the contractual notice requirement costs the claiming party their entire entitlement. The notice isn't just an administrative nicety. It's a condition of your contract. It's a condition of you receiving extra money for that event. The third problem
[08:08]
is the assumption that you'll be entitled to increase your prices, but these are not standard clauses. They're becoming more common, particularly on large contracts, where the employers accepted that post -war, post -pandemic volatility needs a different risk allocation. They're willing to pay increased cost to get their hands on the job that they've started. But on a lot of domestic subcontracts and particularly on smaller packages, price increase clauses just don't exist. So the
[08:41]
risk sits with you. The fourth trap is a familiar one. It's the records. If you want to argue that cost increase has been caused by a force measure event, you need a record that proves it. This doesn't mean you retrospectively construct one. It means you prove it with contemporary records that you took the time. That might mean supplier quotes that show the price you are going to pay at tender stage and then updated quotes showing the price as you procure it, evidence that you went to multiple suppliers to try and mitigate the effects. Paper
[09:17]
trails that show what you did and why. The courts have been really clear on this when cases have got that far, and so case law confirms that contemporaneous records being absent is not a defense and can critically undermine your position decades after you've finished. Simply put, if you don't have the records, you don't have a claim. So what does this mean for you? Let's put that into a realistic scenario to explain the situation. Let's say
[09:52]
you're a still works -up contractor and you've priced a large package on a commercial build that you've won. A few weeks later you get the JCT -based subcontract on a fixed price basis, no fluctuations, no price escalation flaws. The program is due to start a few months later allowing for design to be completed and by the time you're ready to procure your first section of the steel frame, market volatility has driven your suppliers price up by 18%. And this is
[10:23]
a pretty big package, so we're looking at a six -figure sum and at 18%, it's nearly all of your overhead and profit on the project. So what are your options? First, you check your subcontract for a force measure clause and you find one, it's in there. It's lifted from the JCT's relevant events list. You'll read it carefully. It gives you a root to an extension of time if force measure causes delay to your work. But it says nothing about cost, so you're not getting back that 18 % through that root. Next,
[10:59]
you check whether there's a fluctuation clause. It's not triggered, so the price is fixed. You dig a little further and you find out that this increase is actually down to a specific tariff that's been increased due to government action, and so a useful clause about the change in law might capture that. This one is worth checking carefully. If the clause includes government imposed tariffs, trade restrictions or import controls, and if those measures come into force after your contract date, you may have a good argument.
[11:32]
But often clauses that protect you from changes in the law will only protect you if that change causes the physical work to change. And in that scenario, something that's a pure increase in price isn't going to change your physical work, so you may not have an entitlement. The honest reality of this is that it's a tough situation. Most subcontractors that got hurt by material cost spikes in the last decade had been used to a market that had been pretty stable.
[12:05]
It had been predictable. Inflation cracked up at a regular 1 .5 to 2%, the pricing against competitors who are doing and saying the same thing, and some of the big increases that we've seen, come very much from left field. Nobody builds in a 30 % stale contingency when stale hasn't moved for a few years much more than 2 to 3%. If you do do that, you don't win the work, and the market punishes that kind of caution when volatility isn't visible. So the problem
[12:37]
isn't that subcontractors should know and should have known. The problem is that the contract they've signed has given them no mechanism to respond when unpredictable things have happened. Fixed price, no means to increase, no force measure cost clause. The risk sits entirely with the subcontractors and the contract is drafted that way deliberately. You need to know that when you're heading into a contract, so that when you're at the negotiating table, you understand exactly what you're accepting.
[13:10]
I'm not saying to price in a contingency that nobody can afford to price, but have a sense of all conversation about price escalation, when materials will be procured so that you can secure them at the best price, and perhaps a discussion around an inflation cap. I won't come back to you for extra money if inflation is between 1 to 3%. But beyond that, it starts hurting my business, and I won't be able to afford to give you the service that you deserve, so beyond that kind of percentage, I need some support for me. And
[13:44]
when it comes to protecting yourself and your business, that's the kind of conversation that you need to have. The other things that you need to do are reading and understanding the force measure clause. You need to know a stand, does it cover cost, or does it cover just time? And what events are going to qualify towards it? Is it a clause to start with? It's probably costume one. But what conditions are you going to have to satisfy to convince your contractor that you've got a force measure and that you are going to trigger it? And when it comes to covering off inflation, bear in mind the length of time you're going to be tired to your fixed price.
[14:18]
If it's a particularly long program, or if there are materials that you know that are volatile already, those are the times when you want to all need to have that argument. You won't always win the argument, but you'll know where you stand, and what we do know is you don't get anything if you don't ask. The second thing to think about is your discipline around submitting notices. If there is a force measure event, then you need to serve a notice and you need to do that immediately in writing and comply with your contract, which will tell you how to submit it, where you're submitting it to. There might be
[14:51]
key persons that you're sending an email to, or it might say submitting writing to a particular address. What you don't do is wait until the job and argue about it retrospectively. Your entitlement may be time only, but even in an extension of time protects you from contract charges from your contractor, from LAD exposure, and that money is real and worth having. The other thing is the and it's driven from the government action. Changes in tariffs, sanctions, trade restrictions, import controls that didn't exist when you signed your subcontract. Check what
[15:28]
your contract says. Typically, under a JCT contract, you're only able to explore this if it changes the finished works that you're going to leave behind, but under an NEC contract, changes in law are a legitimate avenue for you to recover additional costs that you've incurred. That is an underused avenue for charging for changes or compensation events. The last thing to bear in mind is records. Records are not optional. I've spoken about records I don't know how many times on this podcast.
[16:00]
Records help you in all manner of ways. If you're doing day works, keeping a record of what hours you've spent, if you're buying materials, recording quotes that you've received, recording invoices that you've paid out. These are the kind of documents that you need to justify and increase in price. If you go to multiple suppliers to find a better price and you can't then record that as well. That's evidence of you mitigating the effects and doing what you can to overcome a force was your. Courts will
[16:31]
look to that and if you think about it logically, you're not just saying that you've obtained extra quotes from X and Y, you're proving it, that proof is so much stronger when you've got backup to it and records that you've made at the time, contemporaneous records are the only way to do that. But let me be really direct because I've sat on the contractor side and received emails and letters from subcontractors telling me that there's a force measure of foot that material costs have spiked that matters outside of anybody's control are affecting the marketplace and these subcontractors have been looking to the force measure clause as it roots to a price increase. That logic might
[17:14]
sound fair enough, but the contract steps in. The contract has a force measure clause. The subcontractors logic breaks down when you read that clause because quite often all you're entitled to is an extension of time. In JCT subcontracts, that's it and it isn't even automatic. You have to demonstrate that the force measure has actually caused a delay to your work, which is incredibly rare. It's rare enough that there is a force measure in the first place. Then on top
[17:46]
of that you have to solve the notice correctly and on time and let's face it, that extension of time is only there to protect you from LADs for that specific delay. It's not touching your fixed price. It's not compensating you for the extra site management time that you've spent on site. It's not compensating you for extra materials that might cost 20 % more than when you quoted it. That mechanism just isn't there. That clause is part of the JCT standard setup. If the
[18:18]
client or the contractor causes you a problem, you can get your money back for that. Of course you've got to follow the contract to be able to do that. But if something happens that it's outside of everybody's control that nobody would have foreseen at the outset, then the contract doesn't reward you with extra money for it. But what it doesn't do is penalise you for failing to complete on time. It doesn't take LADs, it doesn't take contract charges off you for being late. That's the balance that the JCT is trying to strike. The reality with
[18:51]
that is that even if there is an unprecedented 20 % rise in the price of your materials, you won't be entitled to additional money for it. The only real exception to that is if it changes the physical works that you're going to leave behind because of a changing law. Everything else comes down to what you've agreed before you signed and that's the real lesson here. And the lesson isn't that you should know that you should have the crystal ball, that you should see everything coming. But the reality is that you just don't know what you don't know. How
[19:24]
you approach this depends on your appetite for risk. There are things that we know that we know. There are things that we know that we don't know, like if I flip this coin, is it going to be heads or tails? You might call that unknown unknown. But then there are things that we don't know that we don't know at all. The unknown. That's the category of risk that's the most dangerous. The one that can sneak up on you because all the while you've thought inflation was going to carry on at 2 % per annum. The interest
[19:57]
rates were going to carry on at sub 1 % and overnight inflation spikes, interest rate spike as well and or all feeling the pinch. It's these situations that need that flexibility in your agreed and fixed price. You might be willing to fix your price over what you do in the next I don't know, six months, maybe 12 months. But that decision needs to come down to you. And how volatile you think your materials are. How volatile
[20:27]
is your market? And how much risk are you willing to take that you're either going to make money or not? Only you can know that. Only you know what you're signing up to. And only by reading the contract will you know what each clause does and doesn't do and let your gut tell you whether that's a good thing or not. Because that's the reality. ForceMajor under English law only exists if your contract includes an express clause that says it exists and it will be applied exactly as that clause is written.
[21:00]
There are no legal forebacks. Under a JCT subcontract, ForceMajor is almost always a time only event. It doesn't give you any extra cost. However severe your price increases might be. Under NEC4, ForceMajor type events, although they're not called that under the contract, they can give you additional time and cost. But you have to be quick, you have to be aware, you have to notify on time. If you miss the window, you lose the entitlement.
[21:32]
ForceMajor might be a main contractor's relief, but it will only flow down to you if your subcontract says it does. Even if the main contractor has got additional time and cost because of X and Y issue, it doesn't mean that you are entitled to the same. And as with every job, the better the records you take, the better your chances are. If you do file a ForceMajor claim that you recover what you're entitled to. If nothing else, I hope today's episode helps you understand where you stand as a subcontractor, in respect of the unexpected market movements that we've seen in recent years.
[22:10]
And you've hopefully leave today's episode with some ideas about what you can reasonably do about it. My mission with the podcast here is to help the million SME subcontractors working out there in our industry. If you've taken some value away from today's show, then I really need your help to share the show and pass that value onto somebody else that benefit from hearing it so that it can help as many people as possible. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www .subcontractorsblueprint .uk.
[22:47]
We're also on all your favourite socials, again, at subcontractorsblueprint. And remember, miss the contract detail and the commercial risk falls on you. Thanks all, I've been Jackie Austin and you've been awesome.
