Current logistical bottlenecks present high risks for contractors, miners, IT firms and other industries – and they need to protect themselves against penalties.
“Supply chain disruptions, which emerged as a result of Covid-19 lockdowns in 2020, and were joined by rising inflation towards the end of 2021, have intensified in the first part of 2022. With the war in Ukraine and the Covid-19 shutdown in Shanghai, it looks as if disruptions may worsen,” said legal firm Webber Wentzel.
The firm cited the global shortage of microchips, which are used in a vast range of consumer products, including cell phones and automotive vehicles. This stemmed not only from the closure of factories but also rising demand for technology when more employees had to work from home. Three-quarters of microchip production is located in East Asia, according to the New York Times.
“Material Adverse Event or Force Majeure clauses may not assist, as the materiality threshold may not be met in respect of the former and supply chain disruption is unlikely to be construed as an unforeseen or unavoidable event in relation to the latter. Where there are concerns that a potential delay in the supply chain will have an unintentional knock-on effect on the construction period, the time for completion and the defects date, and these delays are not attributable to the contractor, the contractor may consider including back-to-back provisions in their contracts with suppliers in order to mitigate these risks, the firm said.
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