5.3.3.1 The financial effects of delays caused by Relief Events are borne by the Contractor, so no compensation should be paid by the Authority on the occurrence of such delays. If a Relief Event occurs prior to Service Commencement any long-stop termination date will be put back by a period equal to the relevant delay. In most cases the only relief given will be relief from termination (i.e. Relief Events are separate and distinct from Compensation Events and Force Majeure Events).
5.3.3.2 There should be no extension to the Contract owing to a Relief Event. The Authority should not regard an extension of the Contract as a concession without significant cost. This is because if an extension is given, then although the Contractor does not receive the Unitary Charge during a Relief Event (save to the extent the Service is delivered), the Contractor's revenue period would be kept whole. If this occurs, then there is a reduced incentive on the Contractor to manage the effects of the Relief Event and restore the Service as soon as possible. In addition, the Authority's exposure to any risks it bears under the Contract is extended indefinitely as the Expiry Date may be continually extended. By extending the Contract, therefore, the Authority can be taking a large element of the risk of the occurrence of Relief Events (as the economic effects of an extension can be substantial).
5.3.3.3 The parties should consider, on a project specific basis, whether or not the Contractor should be relieved of any liability for liquidated damages, although availability and performance deductions should continue to be made where necessary in respect of the period of delay caused by the Relief Event (see Sections 4 (Protections Against Late Service Commencement) and 7 (Price and Payment Mechanism)). Liquidated damages prior to Service Commencement (to the extent they exist) are designed to compensate the Authority for specific losses due to late Service delivery so that if the Contractor fails to commence provision of the Service due to a Relief Event, the Authority will still suffer this loss. Depending on the nature of the Project, however, the Authority may feel that it will obtain better value for money if it allows any liability of the Contractor for liquidated damages to be postponed by the period of the delay.
5.3.3.4 When a Relief Event has occurred and the Authority has been informed, the parties should consult to discuss relevant issues, such as the likely duration of the Relief Event and the action to be taken to mitigate its effects.
5.3.3.5 The Authority should not normally expect to exercise any step-in rights it has during a Relief Event (see Section 29 (Authority Step-In)). If the Contractor is not using reasonable endeavours to rectify matters and mitigate the consequences, it will not obtain the relief afforded by Relief Events and will be at risk of termination for default (see Clause 5.3(b) (Consequences of a Relief Event)). This should provide a sufficient spur for the Contractor to perform (depending, in part, on the approach taken to relief from other obligations under the Contract).
Required drafting to deal with Relief Events is as follows:
5.3 Consequences of a Relief Event
(a) If and to the extent that a Relief Event:
(i) is the direct cause of a delay in Service Commencement; and/or
(ii) adversely affects the ability of the Contractor to perform any of [its obligations under this Contract],
then the Contractor is entitled to apply for relief from any rights of the Authority arising under Clause 21.2 (Termination on Contractor Default) [and its obligations100 under this Contract].
(b) To obtain relief, the Contractor must101
(i) as soon as practicable, and in any event within [14] days after it became aware that the Relief Event has caused or is likely to cause delay and/or adversely affect the ability of the Contractor to perform its other obligations give to the Authority a notice of its claim for relief from its obligations under the Contract, including full details of the nature of the Relief Event, the date of occurrence and its likely duration;
(ii) within [7] days of receipt by the Authority of the notice referred to in paragraph (b) (i) above, give full details of the relief claimed; and
(iii) demonstrate to the reasonable satisfaction of the Authority that:
(A) the Contractor and its sub-contractors could not have avoided such occurrence or consequences by steps which they might reasonably be expected to have taken, without incurring material expenditure;
(B) the Relief Event directly caused the delay to the Planned Service Commencement Date or, following the Planned Service Commencement Date, delay in achieving Service Commencement by the Long Stop Date or [the need for relief from other obligations under the Contract];102
(C) the time lost and/or relief from the obligations under the Contract claimed could not reasonably be expected to be mitigated or recovered by the Contractor acting in accordance with good industry practice,103 without incurring material expenditure; and
(D) the Contractor is using reasonable endeavours to perform its obligations under the Contract.
(c) In the event that the Contractor has complied with its obligations under paragraph (b) above, then:
(i) the Planned Service Commencement Date or, following the Planned Service Commencement Date, the Long Stop Date, shall be postponed by such time as shall be reasonable for such a Relief Event, taking into account the likely effect of delay; and/or
(ii) the Authority shall not be entitled to exercise its rights to terminate the Contract under Clause 21.2 (Termination on Contractor Default)104 [and, subject to paragraph (d) below, shall give such other relief as has been requested by the Contractor].105
(d) [Nothing in paragraph (c) above shall affect any entitlement to make deductions106 or any deductions made as a result of [Section 9 (Performance Requirements)] during the period in which the Relief Event is subsisting].107
(e) In the event that information required by paragraph (b) above is provided after the dates referred to in that paragraph, then the Contractor shall not be entitled to any relief during the period for which the information is delayed.
(f) The Contractor shall notify the Authority if at any time it receives or becomes aware of any further information relating to the Relief Event, giving details of that information to the extent that such information is new or renders information previously submitted materially inaccurate or misleading.
(g) If the parties cannot agree the extent of the relief required, or the Authority disagrees that a Relief Event has occurred or that the Contractor is entitled to any extension of the Planned Service Commencement Date or the Long Stop Date [and/or relief from other obligations under this Contract],108 the parties shall resolve the matter in accordance with Clause 28 (Dispute Resolution).
___________________________________________________________________
100 In most contracts Relief Events should give only relief from the risk of termination for failure to complete or failure to perform (see Section 5.3.3.1). In cases in which liquidated damages are payable to the Authority there will be an issue of the extent to which relief can be given from claims for damages or liquidated damages (see Sections 5.3.3.3 and 24 (Indemnities, Guarantees and Contractual Claims)). The performance regime should still apply and this should be made clear, to the extent there is potential for relief from liquidated and other damages.
101 The approach here is to set out a quick procedure so that relief can be given or refused on a sensible timescale without additional delays.
102 See footnote 100 above.
103 This will depend on the industry concerned.
104 See Section 21.2 (Termination on Contractor Default).
105 This wording is only appropriate where additional relief beyond relief from termination (for instance for liquidated damages) are offered. See Section 5.3.3.3 and footnote 100 above.
106 If the termination levels under the Contract for non-performance are connected to the deductions made under the Contract or the award of performance points, the Contract should ensure that deductions or points arising due to non-performance caused by Relief Events are not taken into account in the termination provisions of the Contract. This is best dealt with in the performance regime.
107 See footnote 100 above.
108 See footnote 100 above.