Extra bank holidays: how might they affect construction contracts?
We have lived through turbulent times recently that have not been lost on the construction sector. Whilst many benefit from additional bank holidays, it’s not the case for everyone. With two additional bank holidays this year and likely another next year around the King’s coronation, do these impact the construction industry? Well, possibly, and here’s why.
On 10 September 2022, King Charles III announced that the Queen’s funeral would be held on 19 September 2022 and that date was then proclaimed as a bank holiday in England and Wales.
In essence, when there is a bank holiday, the obligation to make a payment or do any act on that bank holiday would be deemed to be complied with the following day. In other words, that day is not counted in certain circumstances. Construction contracts often expressly define bank holidays for the purposes of reckoning periods regarding payments, notice periods and the like. That normally refers to the underlying legislation, the Banking and Financial Dealings Act 1971 (the “Act”).
How might the proclamation of additional bank holidays impact a construction contract? Here we consider the position in a typical unamended JCT design and build contract (the “JCT”).
Time and money
In an unamended JCT contract, the definition of a “business day” excludes a “public holiday”. A public holiday is defined as Christmas Day, Good Friday or a day which, under the Act, is a bank holiday.
The JCT sets out circumstances that can entitle the contractor to an extension of time. Unless bespoke amendments are introduced dealing with the point, the proclamation of an additional bank holiday is not an expressly defined relevant event that would entitle an extension of time.
One additional bank holiday (even with short notice) would not likely amount to a force majeure event in a live contract – whilst force majeure is not defined, the consensus is that it would be interpreted narrowly. However, there is no authority on this particular point.
The proclamation of a bank holiday that occurs after the “base date” may amount to a relevant event if the exercise of statutory powers (in this case to proclaim a bank holiday) directly affected the execution of the works. On the face of it, an additional bank holiday may very well affect the works, although this is not necessarily the case and would need consideration as to the impact down the chain – employees are not automatically entitled to paid leave for an extra bank holiday.
Where a contract is entered into post-proclamation of the bank holiday, or when it is known that an additional bank holiday will likely fall within the contract term, it would be expected that the contractor would take this into account within their pricing and programming. Careful consideration should always be given to the potential effect on a time critical project, as even one or two days could have an impact on the critical path.
It is unlikely that a contractor could claim loss and expense for an additional bank holiday unless expressly provided for within the contract. This would not be caught by the JCT, for example.
The JCT defines a reckoning period of days in a typical way, effectively mirroring the Act. As such, this will apply to any additional bank holidays.
Parties to construction contracts should therefore ensure that they take account of any such additional holidays when administering the payment regime or serving notices, for example, be they employer or contractor. Bear in mind too that CHAPS payments will not be available on bank holidays, and this should be accounted for when payment runs are administered.
The statutory adjudication rules provide that public holidays are excluded from the calculation of time periods (where something is required to be done within a certain number of days of a specified date).
Therefore, all parties (including the adjudicator) should remain alert to any additional bank holidays that fall within an adjudication timetable, and the adjudicator should take account when setting and agreeing any extensions to that timetable.
Whilst the passing of a monarch is not an everyday event, we should consider the legal and practical implications, such as additional bank holidays. Parties should remain alive to the issue and factor it in when entering into new contracts, be that when pricing, programming, or amending a standard form contract to make it clear which party takes the risk.
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