Is The Coronavirus Event A Force Majeure Or Changed Condition Event?

David Peden | Porter Hedges

While this coronavirus event grips the nation, contractors and subcontractors are asking whether this qualifies as a force majeure or changed condition event.  We think it qualifies as both. 

When you bid and signed your contracts, if the force majeure clause was given any thought, it likely was about the impact of a hurricane hitting the job site.  Would a hurricane shut a job down for three days, or four?  Well, this coronavirus event is having an impact that will last three months, or more. 

As lawyers, we can work safely from home.  Construction, on the other hand, requires hands-on work.  Laborers are concerned about their safety, but they have bills to pay and a family to feed.  What should you do if a worker shows up sick and works for a day before their symptoms worsen and become obvious?  Do you shut the whole job down, just that crew, or just send that laborer home?  In your safety and other briefings, you should be emphasizing the importance of staying home as soon as you have any symptoms.  Document that you said this in your daily reports. 

We suggest that you read your contracts today.  Look at the delay and other clauses like the changed conditions and claim clauses.  In your contract, a force majeure event may get you more time, but not money.  A changed condition clause might get both.  If you are being impacted, get your Notices of Claim out, tailored to the exact requirements of each contract.  Send it to everyone above you to whom notice must be given.  In most contracts, you are required to use the word “Claim” in your notice, so do it if you are sending one. 

Here is some suggested sample language:

“NOTICE OF CLAIM

DATE:

PROJECT:

We are giving notice of a Claim.  The coronavirus is expected to impact our schedule and our costs.  We are not at fault.  We did not anticipate this event.  We cannot control it.  We do not know how long it will last.  The situation is changing daily.  President Trump has just granted Governor Abbott’s request to declare Texas a Disaster Area.  At this time, we cannot predict how much additional time we will need, nor can we predict how much our costs will increase.  We anticipate disruptions in our labor and in our materials supply lines.  We will do what we can to mitigate these impacts, but with symptomatic workers being required to stay home, our onsite labor forces and our suppliers will all be impacted.  We will update this Claim as we can.  Thank you for your patience and understanding.”

A Few Things You Might Consider Doing Instead of Binging on Netflix

Garret Murai | California Construction Law Blog

Governments throughout the world have issued “shelter in place” orders requiring that residents stay at home except for “essential” purposes. As a result, in the United States, more than a third of Americans have been ordered to stay at home. This, in turn, has had a direct impact on construction projects which have slowed or have been temporarily shuttered altogether, and it will (not may) have an impact on the flow of project funds. So what can project owners and contractors do? We’ve got a few tips.

1.     Read Your Contract, Paying Particular Attention to Force Majeure, No Damages for Delay and Notice Provisions

For the most part, with the exception of statutory rights and remedies which we will discuss below, your contract spells out your rights and remedies should the proverbial “S” hit the fan. It is, in other words, the rules you agreed to, and you should know what those rules provide. Three provisions you should look for, and if they’re in your contract, you should review carefully are: (1) Force majeure provisions; (2) No damages for delay provisions; and (3) notice provisions.

Force Majeure Provisions

Latin for “superior force,” a force majeure provision defines circumstances beyond a party’s control that may render contractual performance by that party difficult or impossible to perform. A force majeure provision is, by its nature, defensive. In other words, it is a defense against a higher-tiered party’s claim that a lower-tiered party has failed to perform its obligations under a contract.

Most people think of force majeure events as being “Acts of God,” or, in other words, earthquakes, tornadoes, tsunamis and other naturally occurring events. That’s not always the case though. Force majeure provisions can include any number of “triggering” events including government actions, terrorism, riots and other events that aren’t naturally occurring.

In short, if your contract includes a force majeure provision, you need to read and understand it, so that you know what events trigger the provision. You also need to understand the intricacies of force majeure provisions. For example, few force majeure provisions that I’ve seen include a trigger for plagues or epidemic outbreaks such as the coronavirus, but many include government actions as a “triggering” event. Thus, while the coronavirus itself may not be a “triggering” event, state and local “shelter in place” orders currently in effect would likely constitute a “triggering” event.

No Damages for Delay Provisions

The current crisis is going to cause delays on construction projects, whether because the project itself is temporarily shut down due to “shelter in place” orders at the state or local levels, because of an inability to get workers out to the job site because they are sick or scared, because your work is impacted because other trades are not coming out to the project site, or because of delays in the delivery of or the inability to purchase materials and equipment.

There are many grey areas here, but the impact is the same: Delays on the project. Some contracts, recognizing that there could be delays on the project which no one could have foreseen or controlled, include “no damages for delay” provisions. An example of what a “no damages for delay” provision might look like is the following:

In the event that Subcontractor’s performance of its Work is delayed through no fault of its own, Subcontractor may request an extension of time for performance of its Work, but in no event shall be entitled to any increase in the Contract Price or damages arising from such delay.

In short, a “no damages for delay” provision, while allowing a contractor to seek an extension of the contract time due to delays, prevents a contractor from seeking an increase in the contract price, whether due to the need to pay workers for overtime or hazard pay, for increases in material costs, for extended general conditions, etc.

Notice Provisions

Most construction contracts include notice provisions setting forth when, under what circumstances, and how notice may be given. Importantly, they often also set forth happens if you don’t give proper notice. In the current situation, notice provisions are extremely important as contractors face delays and time-related costs impacting their ability to meet contractually agreed upon completion dates and ability to perform their work without coming out at a financial loss.

Many notice provisions provide that if notice is not given, or not timely given, that a contractor waives its right to pursue claims in which notice was required. An example of notice provision related to delays and time-related costs is the following:

In the event that Contractor claims that its Work has been impacted through no fault of its own, Contractor may request an extension of the Contract Time and/or increase in the Contract Price by providing written notice to Owner no later than fifteen (15) days of the event giving to the claim. Provided, however, that should Contractor fail to provide timely notice, Contractor waives any right to an extension of the Contract Time or increase in the Contract Price.

In short, notice provisions are extremely important right now. In fact, even if your contract doesn’t include a notice provision requiring that notice be provided of delays and/or time-related costs, my suggestion, is that you consider sending notice anyway. To successfully bring a delay and/or time-related cost impact claim a contractor needs to show that the delay was both compensable and excusable.

2.     Understand Your Statutory Payment Rights

In California, there are three primary statutory payment remedies available to those performing work on construction projects: (1) mechanics liens and design professional liens; (2) stop payment notices; and (3) payment bond claims. Who can assert these payment remedies, when they can be asserted, and how they are asserted, varies. You can read more about each of these payment remedies by clicking the links above, but here’s a snapshot:

Who Can Assert These Payment Remedies

Only design professionals, that is, licensed architects, registered engineers, and registered land surveyors, can assert a design professional lien.

Only direct contractors, subcontractors, material suppliers, equipment lessors and laborers may asset mechanics liens.

And, only subcontractors, material suppliers, equipment lessors, and laborers may assert stop payment notices and payment bond claims.

When Can They Be Asserted

Here’s where it gets interesting, most people think that mechanics liens can only asserted after completing their scope of work. For direct contractors who are serving as general contractors that usually means when the entire project is completed. For all others it is when their work is completed.

But, importantly, given the situation we are in, “completion” under Civil Code section 8180 includes, not only completion of the entire project (in the case of general contractors) or completion of a party’s scope of work (in the case of all others), but also “cessation of labor for a continuous period of 60 days.”

Thus, in a situation where project sites may be closed for a prolonged period of time due to the various “shelter in place” orders, if this includes a cessation of labor for a continuous period of 60 days, contractors, subcontractors, material suppliers, equipment lessors and laborers would be able to record a mechanics lien even though the project or their scope of work has not yet been completed.

As to stop payment notices and payment bond claims, there is no requirement that that a subcontractor, material supplier, equipment lessor, or laborer complete its work before serving a stop payment notice or making a payment bond claim.

Similarly, for design professionals, a design professional does not need to complete its work before recording a design professional lien. However, there are three requirements that must be met first: (1) a building permit or other “governmental approval” must have previously been obtained; (2) construction must not yet have commenced; and (3) the design professional must make demand for payment not less than 10 days before recording its design professional lien.

Requirements Prior to Assertion

In order to record a mechanics lien, serve a stop payment notice or make a payment bond claim most claimants, with the exception of direct contractors, but then only if there is no construction lender on the project, must have first served a preliminary notice. More information on each of these statutory payment remedies, as well as forms, can be found in the Blueprints and Toolbox section of our blog.

3.     Know How You Can Statutorily Shorten Deadlines 

While there are statutory payment remedies available to contractors and others who furnish labor, materials and equipment on a construction project, project owners are not without their own remedies. For projects that are at our near completion, or that are mid-way through construction, a project owner can shorten the deadlines for a claimant to record a mechanics lien, serve a stop payment notice, or make a payment bond claim, by recording a notice of completion or notice of cessation.

Notices of Completion

A notice of completion may be recorded upon the occurrence of any of the following events:

  1. Actual completion of a work of improvement;
  2. Occupation or use by the owner accompanied by cessation of labor;
  3. Cessation of labor for a continuous period of 60 days; or
  4. For public works projects, acceptance by the public entity.

A notice of completion may be recorded on or before 15 days after completion of a work of improvement.

Notices of Cessation

A notice of cessation can be recorded if there has been a cessation of labor for period of 30 days.

When statutorily permitted, by recording a notice of completion or notice of cessation, a project owner may shorten the time period for potential claimants to record mechanics liens, serve stop payment notices and make payment bond claims, by shortening the time to make such claims by as much as two-thirds.

Building a Case for Force Majeure in Construction Contracts

Alston & Bird

Does your construction contract include a force majeure provision that covers the coronavirus pandemic? Our Construction Group weighs in on the availability of force majeure and other related doctrines to excuse contractual performance on construction projects.

  • Establishing a force majeure event
  • Asserting and defending against force majeure claims
  • Understanding other similar doctrines and their applicability on construction projects

Alston & Bird has formed a multidisciplinary task force to advise clients on the business and legal implications of the coronavirus (COVID-19).

Building a Case for Force Majeure in Construction Contracts

The coronavirus pandemic is disrupting our lives and our businesses. Contractual commitments entered in ordinary times are proving difficult or—in the short term—impossible to perform. This is particularly acute in the development and construction world where contractual obligations are being rendered difficult or seemingly impossible to perform. Against this backdrop, is the coronavirus an event that excuses contractual performance?

Coronavirus as a Force Majeure Event

Force majeure is a common-law doctrine or principle broadly applicable in the commercial context that excuses contractual performance when an extraordinary event or circumstance beyond the control of the parties intervenes to prevent performance. Force majeure excuses nonperformance for the duration of the force majeure event. It does not void or vitiate the contract.

In the construction context, the occurrence of a force majeure event does not automatically excuse performance or entitle one or both parties to additional time or money. This determination requires a multistep analysis, beginning with a determination of whether a force majeure event has occurred. 

What constitutes force majeure?

There is no generally accepted definition of what constitutes “force majeure.” Construction contracts typically define the term, and whether the coronavirus pandemic qualifies as a force majeure event will depend on how force majeure is defined in the contract at issue.

The American Institute of Architects (AIA) A-201 does not use the term force majeure per se, but traditional concepts of force majeure are reflected in Section 8.3.1:

§ 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.

The enumerated force majeure events are labor disputes, fire, unusual delay in deliveries, and unavoidable casualties, followed by the catch-all phrase “or other causes beyond the Contractor’s control.” The catch-all phrase is likely to cover nonperformance caused by the coronavirus pandemic because the outbreak and the government’s responses to the outbreak are outside the control of the contracting parties.

If the force majeure clause in your contract does not contain a broad catch-all phrase tied to a lack of control, focus on the enumerated events of force majeure. Terms like “disease,” “epidemic,” “pandemic,” “national emergency,” or “quarantine” are all likely to capture the coronavirus pandemic.

Relief is also likely if the clause makes reference to an “act of government.” Governors and government bodies are shutting down construction sites and issuing orders to shelter at home. These types of directives excuse nonperformance under a force majeure clause covering acts of government.

Other force majeure clauses make reference to “acts of God.” The case law generally limits “acts of God” to natural disasters and weather events, so a force majeure clause containing an “act of God” provision may not be interpreted as covering the coronavirus pandemic, depending on your jurisdiction.

Timely notice

Force majeure clauses typically impose stringent notice requirements, and a failure to comply with the notice provision may well cause a waiver of the right to assert force majeure. If you are asserting a force majeure claim, or are the recipient of such a claim, be careful to confirm that any notice requirements in the contract have been satisfied.

Again, proper notice may be project-specific depending on the circumstances giving rise to the event. Likewise, when the event comes to an end and the project may resume is a project-specific inquiry.

Proving causation

In addition to timely notice, it is essential to be able to prove that there is a causal connection between the force majeure event and the failure to perform. Force majeure excuses nonperformance caused by the force majeure event, not by some other cause. It does not excuse nonperformance that predates the event, nor nonperformance that occurs after the event concludes. In this instance, the party claiming force majeure must be able to demonstrate that the coronavirus pandemic directly caused the failure to perform or the delay in performance. 

In a construction context, and to prove causation, it is essential that the project schedule be current and up to date as of the occurrence of the force majeure event. Causation needs to be shown with a schedule that accurately reflects the as-built condition of the project as of the date the force majeure event occurred. Force majeure will excuse nonperformance for the duration of the force majeure event but will not excuse delays that were already in existence at the time the force majeure event arose or delays after the force majeure event concludes. Proper scheduling will also help clearly establish the overall impact of the force majeure event upon project restart.

The relief

Once the existence of a force majeure event has been confirmed, and a causal connection between the force majeure event and the failure to perform has been established, the next step in the analysis is to determine what relief the affected party is entitled to obtain under the contract. Under the common law, force majeure extended the duration for contract performance but did not entitle one or the other of the parties to monetary compensation. In the construction context, some construction contracts follow the common law and provide time relief only, while others provide that the contractor is entitled to payment by the owner of its extended general condition costs if a force majeure event exists for a specified period. Other contracts are less definitive and allow for “equitable” compensation or relief.

Impossibility or Impracticability of Performance

In commercial contracting, the doctrines of impossibility and impracticability of performance apply and may excuse contractual nonperformance. There is some question as to whether these doctrines apply in the construction context, where risk is heavily negotiated and extensively addressed in the contractual provisions. Unless your jurisdiction has definitively ruled on the application of the doctrines in the construction context, you need to know about these doctrines and their potential application to this situation.

In Georgia, for example, the doctrine of impossibility is limited to acts of God and is codified at O.C.G.A. § 13-4-21, which states: “If performance of the terms of a contract becomes impossible as a result of an act of God, such impossibility shall excuse nonperformance, except where, by proper prudence, such impossibility might have been avoided by the promisor.”

California’s doctrine is broader and is codified at Cal Civ Code § 1511. It provides: “The want of performance of an obligation, or of an offer of performance, in whole or in part, or any delay therein, is excused by the following causes, to the extent to which they operate: … When it is prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States, unless the parties have expressly agreed to the contrary….” 

If the doctrine in your jurisdiction is tied to an act of God, like in Georgia, the doctrine of impossibility will not be of much benefit unless the courts decide the coronavirus pandemic is an act of God. In a state like California, which has a broader definition, the potential for relief is greater. If your contract does not contain a force majeure provision, or if your force majeure provision is restrictive in scope, you may need to invoke or defend against a claim of impossibility of performance.

A related doctrine is commercial impracticability, which also excuses performance. Article 2 of the Uniform Commercial Code pertaining to the sale of goods states in Section 2-615(a):

Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

Since Article 2 of the UCC applies to the sale of goods, the doctrine of impracticability will apply to vendor contracts pertaining to the purchase or sale of materials and equipment. It probably will not apply to construction contracts since they are typically viewed as services contracts not sales contracts. However, some courts look to the UCC even when addressing non-sale transactions since the legal concepts embodied in the UCC are consistent with the common law. Check the law in your jurisdiction to see how the law of impracticability has developed, since there will undoubtedly be claims that the coronavirus pandemic is a contingency the nonoccurrence of which was a basic assumption on which the contract was made and excuses contractual nonperformance due to impracticability.

Suspension

Owners and contractors should also look closely at the suspension provisions in their construction contracts. Suspension clauses typically provide the owner the right to suspend the project for some time period before providing the contractor the right to terminate. This clause may also be a vehicle to control costs.

Time to Review Contracts and Be Prepared for Construction Delays, Suspensions and Terminations

Thomas H. Dart and Drew F. Chesanek | Adams and Reese

With the ongoing spread of COVID-19 (coronavirus), it is becoming inevitable that the preventative measures being implemented will have significant financial impacts on the construction industry. Accordingly, owners and contractors should be reviewing their contracts for their projects and prepare now for coronavirus-related delays.

Reviewing the Contract

The first order of business is to review the contract to determine what provisions may be relevant for either the owner or contractor to extend, suspend or terminate performance under the contract.

Often, there may be several theories to address the pervasive effects we are now facing, and may face, of the coronavirus. These include force majeure, impossibility of performance and contractual remedies to address delays confronting the project.

Whether an owner or contractor is seeking to extend time limits, explain delays, suspend activities, invoke force majeure/impossibility clauses or terminate the contract, it is crucial that both owners and contractors alike follow the required notice requirements as failure to do so may make any such notice voidable and ineffective under the contract.

AIA Contract

The AIA form contract, one of the most widely used forms for construction projects, contains standard language for termination or suspension clauses that could potentially be triggered by the coronavirus pandemic. Section 1.6.1 and 1.6.2 in the standard AIA A201-2017 form typically provides the format and method of delivery for notices.

In 2017, the AIA standard form was amended and this also amended a portion of the contractual termination provisions. While it is easy to tell each party to “read the contract,” there are certain provisions both owners and contractors should focus on when dealing with coronavirus-related delays.

For Contractors

Typically, § 8.3.1 of the Standard AIA outlines the basis for extensions of time for substantial completion of a project. The standard language allows for extensions of a reasonable time for “other causes beyond the Contractor’s control.”

Therefore, if a contractor is seeking an extension of time due to coronavirus, it is important to show how the current pandemic is causing delays beyond the contractor’s control.

Although epidemics are often not mentioned as grounds for delaying performance and arguably could be anticipated, the far-reaching effects of the coronavirus and the regulatory restrictions placed by the government to control the virus are unprecedented.

Additionally, § 14.1.1 allows the contractor to terminate the contract if the work has stopped for a period of 30 consecutive days through no act or fault of the contractor for either (i) issuance of an order of a court or other public authority having jurisdiction that requires all work to be stopped; or (ii) an act of government, such as a declaration of national emergency that requires all work to be stopped.

On March 13, 2020, President Trump issued a declaration of national emergency, and certain jurisdictions may soon require work be stopped, thus potentially triggering the requirement for a contractor to terminate the contract for cause.

For Owners

Owners also likely have potential recourses to suspend or terminate performance, and thus payments, under a contract.

Under §14.2 of the AIA A201-2017 standard form contract, an owner may terminate the contract if the contractor repeatedly refuses or fails to supply enough properly skilled workers or proper materials.

Additionally, an owner may be allowed to terminate the contract or order the contractor to suspend or delay work in whole or in part for such a time period as the owner may determine either with or without cause. These clauses are frequently amended or altered to address the associated cost implications of suspension or termination.

Cost Implications

The seminal issue in the event that either the owner or contractor invokes any of the aforementioned provisions, is a determination of the entitlement to, and amount of, damages. In some instances, the contract may address these issues, which can range from a fixed amount or for lost profits or the costs to cure.

For instance, under the standard AIA contract, in the event an owner terminates the contract for “convenience,” i.e., without any cause, the owner is liable to the contractor for work properly executed, costs incurred by reason of the termination (including any costs attributable to the termination of any subcontracts) in addition to the termination fee, if any.

However, if the owner suspends for convenience, the contract sum and contract time shall be adjusted for increases in the cost and time caused by such suspension or delay and include profit.

Other contracts may have provisions that where an owner terminates without cause or as a “convenience,” the owner is liable to the contractor for a termination fee determined pursuant to a stated amount or through a formula. The courts have held that any fee or “liquidated damages” are proper where the damages are not readily ascertainable at time of drawing of contract and are not merely a penalty.

If the owner were to terminate for cause, the contractor may not be entitled to receive any further payment until the project is completed. In the event the unpaid balance of the contract sum exceeds costs of finishing the project, such excess may be required to be paid to the contractor. In the event the costs or damages exceed the unpaid balance, the contractor may be liable to pay the difference to the owner.

As mentioned, both owners and contractors should expect that the coronavirus will result in construction-related delays or, in some cases, termination of the project. Therefore, it is important for contractors and owners to review their contracts so they may appropriately plan and prepare for the corresponding implications.

Coronavirus – Are We in For Historic Construction Delay Claims?

C. Michael Shull III | Frost Brown Todd

What if a general contractor’s completion of its work is delayed due to COVID-19 (coronavirus)? Is the contractor in breach? Or, is the delay in performance due to the virus excused? Does the contractor get additional time to complete work or additional compensation for the delay to its work schedule?

There are many ways that coronavirus can cause delays to a project. The supply chain can be disrupted in many ways. While lumber, steel, concrete and other materials are sourced more locally, others come from overseas, such as marble from Italy and fixtures from China. Currently, Italy and China are two of the nations most affected by the pandemic. Local agency closures may delay the issuance of permits, approvals or inspections necessary for a certificate of occupancy required for substantial completion. And, of course, workers and crews may either become ill or wish to stay home to avoid infection. Who bears this risk of delay?

When in Doubt, Read the Contract

Most construction contracts break delays down into three categories: those caused by the project owner or its design team, those caused by the contractor, and a third category where the delay arises due to neither the actions of the owner nor contractor, but from circumstances beyond either party’s control. Whether the general contractor is entitled to an extension of its agreed-upon time for performance (contract time) or an increase in compensation (contract price) in connection with the delay often depends upon the cause of delay’s category. Typically, those delays attributable to the contractor’s failures warrant neither an increase in the contract time or the contract price. Those delays caused by the owner or its team usually warrant an increase to both. Those delays caused by neither the owner nor the contractor – often referred to as force majeure events – will typically warrant an increase in the contract time and therefore relief from any liquidated damages. Still, entitlement to an increase in the contract price varies greatly from contract to contract.

Common Contractual Language Regarding Delays

Contract forms typically used in the construction industry address the issue of force majeure damages a bit differently. The ConsensusDocs Form 200, for example, drafted for use between an owner and a contractor, lists within Article 6.3 four categories where the delay is essentially due to an owner’s action or inaction, and provides both an increase in the contract time and contract price if they occur. For delays caused by force majeure events, an adjustment to the contract time is to be provided, but the provision (6.3.3) neither expressly prohibits nor requires an increase in the contract price. Is the coronavirus such a force majeure event? In fact, the ConsensusDocs 200 specifically mentions “epidemics” as a delay for which the contract time will be equitably adjusted. On March 11, 2020, the World Health Organization (WHO) announced that coronavirus was a pandemic. WHO defines a pandemic as “an epidemic occurring worldwide, or over a very wide area, crossing international boundaries and usually affecting a large number of people.”

If the coronavirus itself did not fall within the force majeure definitions of a particular contract, and “pandemic” or “epidemic” are not specifically mentioned, then possibly one of its consequences does. For example, force majeure situations under the ConsensusDocs 200 also include “transportation delays not reasonably foreseeable,” “adverse governmental actions,” and a catch-all “unavoidable accidents or circumstances.”

Another popular industry form, the AIA A201 (2017), at Article 8.3.1 offers a contractor an extension of the contract time for delays due to “labor disputes, fire, unusual delay in deliveries, unavoidable casualties . . . or other causes beyond the Contractor’s control”, as well as “other causes that the Contractor asserts, and the Architect determines, justify delay.”

The A201 does not provide for an automatic increase in the contract price for these force majeure delays (or even for delays caused by the owner). Instead, it simply says that damages for delay by either party are not precluded.

Frequently the standard terms of both the ConsensusDocs 200 and AIA A201 are revised in favor of one of the parties’ interests. For example, an owner may revise them to provide for no damages due to delay under any circumstance, even those beyond the contractor’s control. But some states have passed legislation declaring void any contract which provides no damages for delay in the event that the owner is the cause of the delay, but leaves open the issue of damages in the case of force majeure events. Even if the contract form does provide for additional time or compensation in such circumstances, however, the contractor will still need to prove that the delay was in fact occasioned by the pandemic, and likely the exact amount of time that the pandemic affected the project’s critical path, as well as the lack of available mitigation measures and the provision of notice as required by the contract.

Federal Government Contracts

Some public contract provisions, such as federal government contracts, have their terms as to delay claims determined by statute and regulation. For example, for federal government construction projects the Federal Acquisition Regulations at 48 CFR §52.249-14 “Excusable Delays” (for insertion in cost-reimbursement construction contracts among others) provide that:

. . . the Contractor shall not be in default because of any failure to perform its contract under its terms (within the Contact Time) if the failure arises from causes beyond the control and without the fault or negligence of, the Contractor.

Examples of these causes are (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, . . . (5) epidemics, (6) quarantine restrictions . . . (8) freight embargoes.

If the contractor’s failure is because one of its subcontractor’s performance is delayed by such causes, a failure to timely perform likewise will not constitute a default. 52.249-14(c) provides that upon request of the contractor of a schedule extension, the contracting officer will determine whether the contractor’s failure to meet the required schedule does, in fact, flow from one of the enumerated causes, and if so the delivery schedule shall be revised. Additional compensation to the contractor is however, not provided in such instances. The Federal Acquistion Rregulation (FAR) provision applicable to fixed-price construction contracts, 48 CFR §52.249-10, likewise provides for an extension of time for completing the work shall be provided, upon adequate proof by the contractor, that the delay in completion is due these same causes.

Relief via a claim of excusable delay due to analogous situations, such an influenza epidemic, however, has not been as easily obtained in the past as one might think. Several claims of excusable delay due to an influenza epidemic have been denied where the contractor has failed to show that the epidemic was the sole cause, not merely a contributing cause, of the performance delay. The contractor must also establish the actual extent of the delay caused by the epidemic. See e.g. Ace Electronics Associates, Inc., ASBCA Nos. 11496, 11781, 67-2 BCA ¶ 6456 (July 18, 1967) Additionally, a contractor will find difficulty alleging that its performance is excused simply because one or more key personnel were affected by an epidemic. Asa L. Shipman’s Sons, Ltd., GPOBCA No. 06-95, 1995 WL 818784 (August 29, 1995).

One should also take care to remember that if a delay is otherwise excusable, the failure of a contractor to establish reasons for not obtaining the requisite material(s) from another source can result in a denial of excusable delay and an extension of the time of performance. Cryer & Parker Elecs., Inc. ASBCA 15150, 71-2 BCA ¶ 8943.

The world “analogous” is used above hesitantly. Whether the coronavirus pandemic is analogous to anything seen before is surely debatable. Each day brings a fresh set of developments that suggest our current situation is unlike any faced in modern times. Returning to the FAR clauses above, the recitation of epidemics, quarantines, the sovereign action of the government, embargoes, and other circumstances beyond the control of a contractor were likely not listed with the anticipation that they might occur simultaneously.

For Contractors: Remember to provide notice. Contractors whose performance is affected by COVID-19 should provide notice as required under their contract, both in the format and within the time required. Suggest a meeting with the owner to discuss this possibility before it even occurs, if possible. Yes, the owner is no doubt aware of the pandemic in general but not yet as to your specific challenges. If a solution to the delay is possible with the owner and the architect’s approval, propose it. Owners will be keen to get the project completed as soon as possible. If the pandemic causes a full or partial shutdown of the work, remember to protect it and all materials as best as possible. If such protection requires atypical measures, discuss those with the owner to find a solution and protect materials onsite from the elements.

For Owners: If your contractor puts you on notice of a delay due to the pandemic, schedule a meeting. Identify with the contractor whether the delay is due to workforce or supply chain issues, and determine whether their effects might be mitigated by switching to materials from a different source (i.e., local rather than overseas). If the contractor on your project is already severely behind schedule here at the onset of the coronavirus pandemic, make sure to document the status of the project now in order to avoid the pandemic and its effects being used (or attempted) to excuse performance failures, and perhaps liquidated damages which have already accrued.

For Everyone: Communication on projects will be more important than ever before, because whether due to the virus’ effect on the workforce or the government’s reaction to it, all participants on a project will need to be flexible and responsive. If you are about to enter into a construction contract, go ahead and address the pandemic and possible ramifications now if you can.

We really are all in this together. Owners are anxious to get their projects completed without delays and additional costs. Contractors are worried about completing their current projects as well and maintaining the safety of their workforce. It is best to try and work mutually towards a solution as each challenge arises.