International Construction Law Review
MANAGING RISK IN CONSTRUCTION—WHO PAYS? EXTREME CONDITIONS (OR PHYSICAL IMPOSSIBILITY)
DEAN LEWIS1
INTRODUCTION
This paper will attempt to make good the following propositions:
- (a) Physical Impossibility as used in the Hong Kong Government Works Bureau General Conditions of Contract Civil Engineering Works (“the GCC”), clause 15, encompasses strict impossibility and “commercial impossibility” (or “extreme impracticability”) which can be equated with “extreme conditions”.
- (b) The GCC do not adequately provide for the consequences of physical impossibility and should do so.
A model clause to replace GCC 15, which more accurately reflects the correct interpretation of the provision and provides for the consequences of physical impossibility, can be found at the annexure to this paper.
It is not the intention of this paper to analyse in great detail the concept of impossibility and its related areas of frustration and force majeure
. Indeed such an analysis could easily fill a lengthy book. However, it will be necessary to briefly look at the concept and perhaps go into a little detail to make good the propositions above.
GCC 15 provides:
Save in so far as it is legally or physically impossible the Contractor shall execute the Works in strict accordance with the Contract to the satisfaction of the Engineer and shall comply with and adhere strictly to the Engineer’s instructions on any matter related to the Contract whether mentioned in the Contract or not.
This is a short clause that has given rise to very interesting issues:
- Does impossibility have to exist at the date the contract is entered into or can it arise later?
- Does the clause apply only where the works are absolutely impossible, tested according to the laws of nature?
- Does impossibility of one part of the works relieve the contractor from carrying out all of the works?
- Is the engineer obliged to give an instruction removing an impossibility?
- What consequences does impossibility have in terms of time and money?
As we shall see later, the government must consider that the drafting of GCC 15 clearly deals with all these issues because it has not considered that any amendment is necessary to the clause.
THE COMMON LAW POSITION
The doctrine of impossibility of performance as a defence to breach of contract was for “long smothered” under a declared commitment to the principle of sanctity of contracts: pacta sunt servanda.
2
Thus, unlike the civil law position,3
English law has never had any difficulty in recognising that parties can effectively enter a contract “requiring one of them to do the impossible”.4
According to Holt CJ in Thornborow
v. Whitacre
5
:
When a man will for a valuable consideration undertake to do an impossible thing, though it cannot be performed, yet he shall answer in damages.6
This principle is said to have rested upon a solid foundation of reason and justice. As mentioned, it valued the sanctity of contracts and it required parties to do what they have agreed to do, or pay damages.7
In the memorable decision of the Court of King’s Bench in Company of Proprietors of the Brecknock and Abergavenny Canal Navigation Co.
v. Pritchard and Others,
8
the defendant contracted to construct and maintain a bridge for a number of years. Although the bridge was completed, it was subsequently washed away by a flood. The defendant refused to rebuild the bridge, so the plaintiff sought a declaration from the court that the contractor was liable to rebuild the bridge and, for its part, the defendant raised a defence founded on impossibility. The court rejected the defence and held that the defendant was liable to rebuild the bridge.
In Tharsis Sulphur and Copper Co
v. McElroy,
9
the contractors had contracted to erect all the iron and general work required for a building for a lump sum price. However, they were unable to make some of the specified girders because the engineer’s design incorporated metal that was too thin and the
2 Paradine
v. Jane Aleyn
26; (1647) 82 ER 897, 898. See Dermott
v. Jones
(2 Wall), 69 US 1, 8; 17 L Ed 762 (1864) (US Supreme Court).
3 Eg, German Civil Code (BGB), §306 and Swiss Code of Obligations, Art 20 1.
4 Eurico SpA
v. Phillip Brokers (The Epaphus)
[1987] 2 Lloyd’s Rep 215, 218. See Treitel, Frustration and Force Majeure,
para 1–002.
5 (1706) 2 Ld Raym 1164; 6 Mod Rep 305; 3 Salk 97; 92 ER 270.
6 (1706) 2 Ld Raym 1164, 1165.
7 The Opera Company of Boston, Inc
v. The Wolf Trap Foundation for Performing Arts,
817 F2d 1094, 1097–1098 (1987, US Court of Appeals, 4th Cir).
8 (1796) 6 TR 750; 101 ER 807; [1775–1802] All ER Rep 375.
9 (1848) 5 R(HL) 171. See also Wilson
v. Wallace
(1859) 21 D 507; Gillespie
v. Howden
(1885) 12 R 800.
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