No.

Subject

Traditional contract

Alliance contract

Material difference and trade-off between traditional contract and alliance contract

9

Force Majeure

The concept of Force Majeure is not used in a traditional contract. However, certain elements of the concept of Force Majeure appear in the traditional contract as events or circumstances that may give rise to claims by the Contractor for time, cost or both. The commercial risk allocation under the contract differs according to the nature and circumstances of the event in question.

Reinstatement of damage

The cost of reinstatement of damage to the work under a traditional contract will be borne by the Contractor, unless an Excepted Risk has eventuated in which case the Principal will bear associated costs.

Where the cause of damage can only partly be attributed to an Excepted Risk, the Contractor will be entitled to costs proportionate to the extent that damage was caused by the Excepted Risk.

The Contractor will only be entitled to an extension of time if the requirements of the extension of time provisions in the contract have been met-notwithstanding that the damage to works have been caused by an Excepted Risk.

The loss or damage may be covered under the Contract Works insurance policy taken out under the contract.

Extensions of time

The Contractor can seek an extension of time, but not necessarily an allowance for costs, upon the occurrence of certain events. Events which commonly give rise to an extension of time include inclement weather, a change in Legislative Requirements, delay caused by the Principal and Latent Conditions. In addition, under the standard form of a traditional contract, the Contractor is entitled to an extension of time for delay caused by an event 'beyond the reasonable control of the Contractor' occurring on or before the Date for Practical Completion.

Variations

The superintendent may direct a variation under the contract. An extension of time and/or additional costs may be granted by the superintendent in that process.

Frustration

If the contract is frustrated, then the contract will terminate and the Principal must make a termination payment to the Contractor

If loss or damage is caused to the Works by a Force Majeure Event, then the Participants will be jointly responsible for rectifying the loss or damage. The Participants' costs of rectifying the loss or damage will be Reimbursable Costs. The loss or damage may be covered under the Contract Works insurance policy taken out under the alliance contract. Any excesses applicable to that policy will be Reimbursable Costs. If the ALT determines that the TOC should be adjusted as a result of the Force Majeure Event (for the purposes of the Risk or Reward* regime), then it will recommend an adjustment to the TOC for the approval of the Owner.

If the ALT determines that the Participants will be delayed in reaching Practical Completion as a result of a Force Majeure Event, the ALT will recommend to the Owner an appropriate extension of time.

The Owner will not have the right to terminate the alliance contract for a Force Majeure Event. However, the Owner may terminate the alliance contract for convenience, but would be obliged to make a termination payment to the NOPs (refer to Item 15).

Please note that, in some instances, the alliance contract will not include Force Majeure Event and extension of time regimes. Rather, there will be an 'adjustment event' regime under which the occurrence of any 'adjustment event' (which events will be workshopped and agreed between the Participants prior to entry into the alliance contract) will entitle the ALT to recommend an adjustment to any part of the Commercial Framework (including the Date for Practical Completion) for the Owner's approval.

Assessment of Force Majeure

Under a traditional contract, the method by which extension of time or cost claims are evaluated for 'force majeure' type events is strictly regimented and therefore fairly predictable.

Assessment of such claims under an alliance contract, however, is more imprecise, as the consequences of a Force Majeure Event are determined by the ALT. In making decisions, the ALT, including the Owner as Owner Participant, is bound to comply with the Alliance Charter and to act in good faith*, thereby reducing the risk of decisions adverse to the Owner's interests.

Responsibility for rectifying loss or damage

Under a traditional contract, the Contractor will be responsible for the cost of loss or damage to the work under the Contract caused by events of a 'force majeure' nature (which may be covered by insurance) other than Excepted Risk events.

Unlike under a traditional contract, if loss or damage is caused to the Works by a Force Majeure Event under an alliance contract, the Participants will be jointly responsible for rectifying the loss or damage. The Participants must act in good faith* and in accordance with the Alliance Charter in rectifying the loss or damage.

Time allowance for Force Majeure

Unlike under a traditional contract, the ALT recommends an adjustment to the TOC for the approval of the Owner. In addition, the ALT must act in good faith* and in accordance with the Alliance Charter.

Cost allowance for Force Majeure

Unlike under a traditional contract, the Participants will be entitled to a cost allowance (i.e. adjustment to the TOC for the purposes of the Risk or Reward* regime) for Force Majeure Events under an alliance contract. The cost allowance will be recommended by the ALT and approved by the Owner. Under a traditional contract, the Contractor will only be entitled to a cost allowance for these events where there is loss or damage caused to the work under the Contract and in certain circumstances where variations are directed.