As COVID-19 disrupts work and life as we know it, the question many contractors have is what protections are available against the inevitable project impacts and delays? Generally, construction contracts require a contractor to timely perform work until project completion or potentially face damages (liquidated or actual) and possible termination. When events occur, however, that are beyond our control (such as a national pandemic), it is important to review and understand what contract provisions or avenues are available for potential relief.
- Review Your Contract For A Force Majeure Provision.
A “force majeure” contract provision is commonly included in construction contracts, service agreements, purchase orders, etc. It typically covers events or conditions that can be neither anticipated nor controlled. These provisions, however, will vary greatly from contract to contract and may not include the language “force majeure” but rather may be included in general delay or impact clauses. For example, some common provisions include:
- Washington State Department of Transportation Clause (2018 Standard Specifications for Road, Bridge and Municipal Construction): The Contractor shall rebuild, repair, restore, and make good all damages to any portion of the permanent or temporary Work occurring before the Physical Completion Date and shall bear all the expense to do so, except damage to the permanent Work caused by: (a) acts of God, such as earthquake, floods, or other cataclysmic phenomenon of nature, or (b) acts of the public enemy or of governmental authorities; or (c) slides in cases where Section 2-03.3(11) is applicable; Provided, however, that these exceptions shall not apply should damages result from the Contractor’s failure to take reasonable precautions or to exercise sound engineering and construction practices in conducting the Work.
- Federal contracts do not use the phrase force majeure but instead employ the term “excusable delays,” excusing a contractor’s failure to perform if the failure arises from causes beyond the contractor’s control and without the fault or negligence of the contractor. See FAR 52.249-8, FAR 52.249-10, FAR 52.249-14 (which specifically refer to epidemics and quarantine restrictions).[1]
- AIA A201 – 2017: § 8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by (1) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor; (2) by changes ordered in the Work; (3) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, or other causes beyond the Contractor’s control; (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) by other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.
- ConsensusDocs200: Standard Agreement and General Conditions Between Owner and Contractor Section 6.3.1: If a Contractor is delayed at any time in the commencement of the progress of the Work by any cause beyond the control of the Constructor, Constructor shall be entitled to an equitable extension of the Contract Time. Examples of causes beyond the control of the Contractor include, but are not limited to, …(j) epidemics;…
(emphasis added). Thus, as you can see, these provisions can include specific lists of events, including epidemics, or more general “catch-all” provisions that cover “other causes beyond the Contractor’s control.” Ultimately, because the scope of a force majeure clause depends on its express terms, there is no uniform rule as to when a force majeure clause excuses performance and/or whether a party will be entitled to compensation for such an event.
Here, with respect to COVID-19, the declaration of a National Emergency, specific bans on certain business activities, quarantine directives, and potentially a “shelter in place” order in Washington will likely trigger most Force Majeure clauses. Further, even if this is not the case (or a contract does not contain such a provision), there are additional legal doctrines that may be available, including the “frustration” doctrine and doctrine of impossibility. Thus, the first step for contractors is to review each project contract and identify if there is a provision that covers the COVID-19 event (e.g., an act beyond Contractor’s control).
- Review Your Contract Notice Requirements:
As each contract may treat force majeure events differently, this will also impact whether a party is entitled to only a time extension for the delay (i.e., an “excusable” delay) or compensation for the associated costs (i.e., a “compensable” delay). Thus, if you are incurring delays and additional costs or see the potential for delays and additional costs, once you have identified what your contract provides for acts beyond your control, it is also critical that contractors review contractual notice and claim requirements set forth for delays, changes, or impacts.
While the current COVID-19 crisis and impacts may seem self-evident, Washington law strictly construes contractual notice requirements, which in some cases can threaten forfeiture of a claim if the notice provisions are not precisely followed. Thus, though there are some exceptions to these requirements, if a contractor is experiencing impacts or delays as a result of the current COVID-19 emergency declarations (e.g., labor shortages, material unavailability or delays, site closures, etc.), the contractor should review its contract requirements closely and provide any notice required.
- Conclusion
In this uncertain time, contractors of all tiers will be facing project delays and impacts, which may result in potential delay damages (liquidated or actual loses) and increasing general condition costs. Not only do contractors have an obligation to mitigate costs incurred during these periods of impact, but this must also be balanced against protecting the health and safety of its employees. Regardless, contractors should closely review their contract obligations and rights and seek counsel if there are any questions or concerns.
This article is provided for general informational purposes only and is not legal advice. If you have any questions on the above or need legal advice, please contact your Ahlers Cressman & Sleight attorney. Lindsay Watkins can be reached at Lindsay.Watkins@acslawyers.com or 206-529-3017.
[1] 52.249-10(b)(1)(vi) and (vii)