In the second wave of the Covid-19 pandemic we are still seeing an unprecedented closure of personal and commercial activities, causing unparalleled vagaries in global economic conditions.
Is there light at the end of the tunnel? Perhaps, if we believe the UK government. A non-statutory guidance note it published in May regarding “Responsible Contractual Behavior in Performance and Enforcement of Contracts Impacted by the COVID-19 Emergency” aimed to encourage responsible behavior in the administration of existing contracts.
In my opinion, Pakistan’s federal and provincial governments should follow suit. They should officially issue similar non-statutory guidance in their national response to the Covid-19 slump because contractual arrangements are the mainstay of the country’s economy. By all odds, contracts ensure that the economy provides jobs, goods and services to enhance and maintain national infrastructure. Such guidance or policy will assist in ensuring uniformity in the contractual behavior of parties and will significantly contribute towards protecting businesses (especially small and medium sized enterprises), supply chains and jobs. Irresponsible behavior will reduce employment and impair the economic recovery.
The pandemic’s consequences are far-reaching and have gone beyond spreading disease. In Pakistan, it is being feared that millions of people may be pushed below the poverty line due to financial constrains caused by the pandemic. A UN study in June on Pakistan’s situation recommends a five-pronged response including “protecting jobs, supporting small- and medium-sized enterprises, and shoring up the most vulnerable workers through economic recovery programs”.
Securing the economic base
The Pakistani government also realised it well ahead of time that the most at-risk people were already living in poverty. This includes citizens from the deprived class and other marginalised groups whose lives, livelihoods, sustenance and access to amenities are the least secure. A large number of people in these groups makes their living from the construction sector, directly or indirectly.
Now that businesses are re-opening and we can ascertain the post-Covid conditions of global and local markets, it is essentially that parties to existing contracts in the private and public sector act with a responsible contractual behavior. In particular, government organisations should put a greater emphasis on this approach in managing existing contracts which are materially affected by Covid-19.
The responsible behavior may include:
Officially recognising the Covid-19 pandemic as “force majeure” unless it is already defined in specific contracts.
Making timely payments under current contracts for certified payments and amounts due.
Fairly evaluating and expediting settlements of claims for damages including time extension claims and compensation for increased cost or price escalations.
Accepting justifications for impaired performance, specifically in respect of deadlines, the nature and scope of contracted goods, works and services or making amendments to contracts or initiating variations where needed.
A responsibility to be radical
To achieve practical, fair and equitable contractual outcomes it would be highly befitting to consider the factors such as: the likely impact on the other party, the availability of financial resources, the protection of public health and the wider national interest. An organization or individual exhibiting responsible contractual behavior would be expected to carefully examine all aspects, ground realities, and the direct or indirect effects of Covid-19 prior to:
Calling bonds or guarantees and taking measures to sanction delays and contractual breaches.
Triggering clauses in relation to breached contracts or pushing opposing parties towards default or termination.
Pushing on disputes through arbitration or litigation.
The construction industry, particularly project managed by the public sector, has an even greater responsibility in this regard. Public sector employers are major drivers of the industry. However, the fear of culpability may compel them to stick to routine work-practices by following tried and tested norms.
It is this author’s considered opinion that a radical approach in terms of “responsible contractual behavior” would assist in overcoming the otherwise irreparable aftermaths of Covid-19. If this situation is properly mitigated, normality will soon resume and we will see economic growth restart for the development of the country.
Disclamer: The views, thoughts and opinions expressed in this article belong solely to the author and do not necessarily reflect the official policy, position, or opinion of any agency to which the author is professionally related including the author's employer organisation or other group or individual. Since we are critically thinking humans and not the programmed robots, these views area always subject to a change, revision and rethinking at any time. Please do not hold the author to them in perpetuity.
Image: qkcreativity, Pixabay licence.