Parties to New Zealand construction contracts are considering the potential impacts of the ongoing conflict in the Middle East. If the conflict persists, disruption is likely on several fronts:
- rising fuel prices;
- potential fuel supply shortages affecting building materials; and
- possible domestic fuel restrictions if higher levels of the Fuel Response Plan are triggered.
As with Covid-19, it is unclear how industry contracts will respond to the crisis. In our article Fuel Disruption Risk: How might your contract respond through EOTs, variations and cost fluctuations? – Hesketh Henry we looked into how contracts might respond through cost escalation, variation and extension of time clauses. This article examines how common NZ construction contracts may address these risks through change in law and force majeure provisions, and the implications for insurance.
Change in law: Triggered only by secondary legislation
A change in law affecting fuel supply would likely occur under the Petroleum Demand Restraint Act 1981, which allows the Governor-General to enact regulations to manage petroleum supply. The National Fuel Plan (published in August 2024 by NEMA), and the Fuel Response Plan (released March 2026) are considered guidance but are not legislative changes. No such regulations have been made as yet, but this remains a real possibility.
Current contracts in use provide:
- Both NZS3910 and NZS3916 entitle a contractor to a Variation (under clause 5.14.9 in NZS3910:2023, and 5.13.12 in NZS3916:2025) if secondary legislation increases or decreases costs after tender. This is often limited by common amendments excluding changes “reasonably foreseeable to an experienced contractor at the time of tender”.
- CCCS similarly provides (clause 12.4) for a Variation if costs or duration change due to new statutes, regulations or bylaws.
- Master Builders SA 2025 and ACENZ Short Form are silent on entitlements for a change in law, but relief may be available if subcontract terms import Head Contract, provisions.
We recommend reviewing your current contracts for change in law entitlements, and any amendments from standard terms.
Foreseeability may exclude relief
As noted above, no legislative change has occurred as yet, but such a change may be deemed as foreseeable from 12 March 2026. On 12 March, the International Energy Agency (IEA), of which New Zealand is a member, took emergency collective action, releasing 400 million barrels of oil to support the international oil market. On the same date, the Government established the Ministerial Economic Security and Supply Chains Group to oversee fuel security. These decisions demonstrate the unprecedented scale of the challenge facing the oil market and indicate a proclivity for governments to take proactive steps to address oil shortages. Alternatively, 27 March 2026 may be the relevant date, being the date the Government released the Fuel Response Plan identifying restrictions on access to fuel as a possibility.
To the extent a contractor was tendering for a contract after this point, cost escalation or disruption associated with fuel supply (and any associated later changes in law) may arguably have been foreseeable. Each circumstance will need to be carefully considered on its own merits to determine whether it would have been reasonable to have allowed for the effect of such change in tender pricing and/or programmes.
Risk allocation: Address upfront
Parties currently negotiating contracts should clearly allocate the fuel uncertainty risk, rather than leaving entitlements to chance. Options available include:
- agreeing that Government-imposed restrictions due to the Middle East conflict, which increase in time or cost in completing the Contract Works, are a Variation;
- agreeing that diesel price increases above a set threshold (such as, say, 30 cents per litre above the price at the date of execution of the Contract) or increases of (say) more than 10% in the cost of any material (from the date of execution of the Contract) are a cost fluctuation entitling the Contractor to relief.
Due to the lag in processing fuel before it arrives on shore in New Zealand, the real impacts of the disruption to shipments through the Strait of Hormuz are expected to continue, and clear risk allocation is critical.
Force Majeure: Rare but broader
Standard forms (NZS3910, NZS3916, and CCCS) allow extensions of time for ‘unexpected events out of the control of the parties’ clause but not additional cost. We recommend checking your contract for any entitlements arising from force majeure, as for example, FIDIC Red Book covers war/hostilities, providing relief for delay or cost without requiring a legislative change. Such a clause is not typical under New Zealand’s most common standard forms.
Early warning: essential for relief
NZS 391X, CCCS, SA 2025, and ACENZ require early warning of issues affecting the time or cost. While these early warning clauses alone do not offer relief, failure to give early warning may restrict the extent of any relief a contractor is entitled to under other provisions.
We recommend taking steps to submit early warnings now to preserve any relief available.
Insurance: Construction vs cargo
Under NZS3910, war and hostilities are included under 5.6.6 as an excepted risk. Insurance policies enacted under the contract may exclude cover for such risks.
Where additional cargo insurance or similar for off-site materials has been enacted, it is possible that cover for cargo passing through the Middle East is excluded. If such cover is newly excluded, the insurer will typically need to give appropriate notice.
Next steps
With the impact of the conflict in the Middle East evolving, parties should review their contracts and insurance to understand obligations and entitlements.
If you have questions about how the fuel crisis may affect your contractual position or project delivery, please get in touch with our Construction and Infrastructure Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
