The cost and availability of fuel and the effective closure of the Strait of Hormuz is likely to cause issues for construction projects in New Zealand should the closure be prolonged. Many clients are asking what the position is under NZ’s standard form of construction contract NZS 3910.

Whilst the answer will depend on the terms of the particular construction contract, below are some issues to consider.

Cost escalation?

As at today, fuel and diesel prices have escalated by 50 and 75 cents a litre. Whether a Contractor can pass this increased cost on to the Principal will depend on whether the construction contract provides for cost escalation and the basis of payment under the contract. NZS 3910 provides that cost escalation applies unless the parties opt out in the Specific Conditions. We suggest you check Schedule 1 (Specific Conditions) of your contract.

If your contract is based on a cost reimbursable payment structure, the Contractor can claim the actual cost or expense of performing the contract works.

What if there is a delay to the project due to fuel supply issues?

On 16 March 2026, the government announced that the country has approximately a 52-day fuel buffer,^[1] but the situation is evolving rapidly. If fuel becomes scarce and the country moves from level 1 under the National Fuel Plan, then there may be restrictions on supply that could impact the progress of a construction project.

This could entitle the contractor to an extension of time where the circumstance was not reasonably foreseeable at the time of tendering. Fuel scarcity due to the war in Iran is likely to qualify. The new versions of NZS 3910 and NZS 3916 expressly refer to the consequences of war as a potential circumstance not reasonably foreseeable at the time of tendering. Whether time related costs can also be claimed will depend on the terms of the contract, but these are generally only payable if the extension of time event is also a Variation under the contract.

What should parties to a contract do?

Under NZS 3910 an early warning notice is required to be provided where a matter may materially affect the Contract Price or materially delay completion of the Contract Works. Contractors and Principals should meet to discuss the actual or potential impacts of the fuel crisis on the project. This allows the parties to consider options to reduce or mitigate the impact on the project of the likely fuel crisis, regardless of which party bears the risk of this event under the contract.

If you are currently procuring or negotiating a construction contract, consider how potential fuel supply uncertainties should be addressed in the contract.

Get in touch

If you have any questions about the implications of the potential fuel crisis on your construction contract, please contact one of our experts.