Regional Updates

Supply chains and cost escalation

Parties facing rising costs often seek force majeure relief, but it generally requires a defined triggering event that directly prevents performance, with relief typically limited to time extensions rather than cost recovery. Where recovering additional costs is the priority, price adjustment or fluctuation provisions (if the contract includes them) offer a more direct route.

Risk allocation is determined at the point of contract execution. Subsequent events must be interpreted through the lens of the existing contractual terms. Those events do not alter the underlying allocation of risk, only how it applies. Where no applicable contractual mechanism exists or is properly engaged, whether under the contract or at law, the party carrying the risk absorbs the loss. Where a suitable mechanism is available and correctly engaged, the cost risk can shift to the other party.

Most contractual claims are subject to strict notice requirements: a formal notice must be issued within a prescribed period from the point the relevant event is identified. The consequences of missing that window depend significantly on the governing law, making the choice of law a critical consideration when assessing exposure. Force majeure, variation and change in law clauses are the provisions most likely to offer relief but are also those most prone to dispute. Those advancing a claim need to ensure it is properly framed, and those receiving one should verify all procedural requirements have been met before accepting liability.

Real estate and construction slowdown risks

When projects slow, pressure mounts quickly across the contracting chain. Contractors may face rejected extension of time claims, notices of default, acceleration demands or payment disputes from developers facing investor pressure over missed milestones or completion commitments.

Where projects have not yet commenced, developers and investors may seek to delay financial close, withdraw from or renegotiate agreements, though their ability to do so depends on the commitments already in place. Where a project is in progress, termination or suspension carries significant legal risk and exercising those rights incorrectly or prematurely can give rise to wrongful termination liability. Where restructuring is under consideration, the knock-on effects across subcontracts and third-party agreements must be carefully mapped before any steps are taken.

Investors have several layers of protection beyond the contract itself. Project insurance should be reviewed for gaps, particularly around political risk and force majeure exclusions. Step-in rights allow investors to assume the developer's position where the project is at risk, and on-demand performance bonds and guarantees provide an immediately accessible financial backstop in the event of contractor default.

Act now, not later

Parties should review their contracts now to understand which mechanisms are available and what conditions must be satisfied to engage them. 

Authors: Cheryl Cairns, Partner, and Lily Covic, Associate Trowers & Hamlins LLP