15.1.1 The Contractor undertakes to ensure Service Commencement usually by a particular fixed date1 and to continue to provide the Service for the duration of the Contract. There may, however, be circumstances in which the Contractor should fairly be relieved from liability for failure to commence or provide the Service. A balance must be struck between encouraging the Contractor to manage the risk and protecting the Authority from non-performance.
15.1.2 Supervening events for which some relief is appropriate should be divided into three categories:
• Compensation Events - i.e. events which are clearly at the Authority's risk and in respect of which the Contractor should be compensated (see Section 15.2 (Compensation Events));
• Relief Events - i.e. events which are best managed by the Contractor (although not necessarily in its control) and for which the Contractor bears the financial risk, but in respect of which no rights of termination should arise (see Section 15.3 (Relief Events)); and
• Force Majeure Events - a limited set of events which arise through no fault of either party, which are best managed by the Contractor (although not in its control) and in respect of which rights of termination can arise (see Section 15.4 (Force Majeure Events)).
15.1.3 The distinction between Compensation Events and Relief Events is sometimes expressed as being the difference between the Contractor being given 'time and money' and 'time' only.
15.1.4 Certain events may be dealt with differently in specific projects, depending on the nature of the Project, the likelihood of the event occurring and the value for money obtainable if the Contractor prices the risk of such event occurring into its price. Given the effect on the Authority of adding risks to Compensation Events, this should only be done after careful consideration in specific cases. For example, in a project in which Government use means that delays during the construction phase are a high risk, the Authority may accept that the event leading to such increased risk should be a Compensation Event. In a project where such risks do not exist, the parties may agree that a Relief Event is the way to deal with that risk. An alternative way of dealing with the risk of discovery of fossils or antiquities during the construction period, which lies somewhere between the Compensation Event and Relief Event approach, is for the Contractor to bear a pre-determined initial level of loss (both financial and in terms of delays to the construction timetable), as defined in the Contract, with further losses above that prescribed level being shared by the parties in accordance with an agreed formula.2
15.1.5 Similarly, the risk of planning delays may require different treatment in different projects. For example, the Authority may accept some planning delay risk in order to obtain value for money if it wants the Contract to be signed before full detailed planning consent is obtained or challenge-periods in respect of such consents have expired3. In respect of known title issues or breach of title warranties, when the Authority is providing the land for the project, the Authority should normally bear the risk of these; similarly for contamination which cannot be surveyed because it is under the footprint of a building (see further Section 13 (Warranties)). Where surveys can be made however, it would be normal for the Authority to organise them and for the surveyor's duty of care to be extended to the winning bidder so that he can rely on it.
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1 The typical structure will require the Contractor to ensure Service Commencement either by a scheduled date for handover or at any time from the date of the Contract or the Effective Date (depending upon the presence of conditions precedent) but by a pre-agreed long-stop date (see Section 8.5 (Long-Stop Date)).
2 This alternative approach may be applied in a wide range of projects, but should only be used ordinarily when dealing with the risk of discovery of fossils or antiquities and not other risks. A different approach is justified here because of:
(a) the potential impact of such risk being greater than is the case with other possible Relief Events; and
(b) the public benefit that is derived from the discovery of fossils and antiquities.
3 In these circumstances the Authority should consider very carefully how its liabilities in the event of planning failure can be mitigated.