Coronavirus: Construction Industry Impacts

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Matthew Emmons, Samuel Gregory and Mark Mercante | Baker Donelson

In early March, COVID-19 seemed like a distant threat, but we are now all too well aware of its rapid intercontinental spread. In the less than three months since the first case out of Wuhan, China was reported to the World Health Organization (WHO) on December 31, 2019, COVID-19 has spread to every continent, except Antarctica, and has been declared a pandemic and national, state, and local emergency. To date, more than 205,000 cases have been reported worldwide, with approximately 6,500 of those in the United States. Concerns about COVID-19 have impacted multiple facets of our day-to-day lives, from business and school closings and restrictions on travel and public gatherings, to stock market volatility.

The construction industry will not be spared from the impacts resulting from COVID-19. Projects across the country are already experiencing issues like jobsite shutdowns, labor and material shortages, and material price escalation, just to name a few. Owners, contractors, subcontractors, suppliers, and all other project participants should be preparing now for the unique and rapidly evolving challenges the construction industry will continue to face as the virus spreads. This alert offers insight on some of the key issues members of the construction industry should be evaluating now so that they will be prepared if and when this pandemic impacts one of their projects.    

A. Force Majeure Clause

For COVID-19-impacted projects, one of the first questions will typically be whether your construction contract contains a “force majeure clause” and, if so, whether the scope of that clause covers the situation presented. Force majeure provisions, sometimes known as “act of God” clauses, may excuse contractual obligations due to unavoidable circumstances outside of a party’s control.

Some form contracts specifically include “epidemics” as a force majeure event, such as ConsensusDocs 200 and Federal Acquisition Regulation (FAR) 52.249-14, whereas the force majeure language in the standard AIA construction contract general conditions (Section 8.3.1 of both the 2007 and 2017 versions of the A201) does not. Regardless of whether the force majeure clause specifically includes the words “epidemic” or “pandemic,” a party must evaluate how the circumstances could be interpreted under the contract language.

If a party intends to raise a force majeure event to attempt to excuse performance of its contractual obligations, it should begin gathering supporting information and documenting impacts immediately. For example, if getting materials from China is an issue, the China Council for the Promotion of International Trade can issue a “force majeure” certificate. Closer to home, President Trump declared COVID-19 a national emergency on March 13, 2020, and several governors have declared a state of emergency as COVID-19 has spread. Also, the WHO declared COVID-19 a “public health emergency of international concern” on January 31, 2020, and a “pandemic” on March 11, 2020. Force majeure must also be viewed in the light of any potential concurrent delays that are separately impacting the project critical path.

Additionally, notice of the force majeure event and its anticipated project impacts should be provided to the other party in accordance with the contractual notice provisions. Timely notice and open communication among all parties could help mitigate impacts and facilitate agreements on otherwise contested issues.

Finally, when entering into new contracts, carefully consider whether to specifically include or exclude infectious diseases, epidemics, pandemics, and other potential COVID-19 impacts. Foreseeability often comes into play in a force majeure analysis. Now that at least some of the risks associated with COVID-19 are known (or reasonably foreseeable), a party seeking to raise the current pandemic as a force majeure event under future contracts may face challenges based on that party’s knowledge of those potential risks.

B. Price Escalation Clause

Some contracts may contain a price escalation clause that permits the adjustment of the price of certain materials or equipment if their price has changed by a certain amount since the execution of the contract. Such provisions may also allow for the use of an acceptable substitute if the specified material or equipment is unavailable or its use is no longer economical. These clauses may also allow an extension of contract time for any delay in obtaining the materials or equipment. It is prudent to analyze any such clauses now and consider whether a price increase or the use of substitute materials or equipment may be warranted. As with force majeure, any contractually required notices should be provided.

C. Common Law or Statutory Defenses

Despite their prevalence, some contracts do not contain force majeure or price escalation clauses. In those instances, common law or statutory defenses from the relevant jurisdiction (be sure to check for choice-of-law provisions) can become critical. Some jurisdictions will find force majeure clauses implied. Further, many states recognize defenses of impossibility and frustration of purpose. For example, Louisiana Civil Code articles 1873-1878 provide default rules for when a “fortuitous event” renders a party’s performance of a contract “impossible” either in whole or in part. The potential applicability of such defenses should be analyzed under the law of each jurisdiction and the unique facts of each case.

D. Potential Insurance Coverage

Most construction contracts require parties to maintain minimum levels and types of insurance and often require the naming of other parties as additional insureds. Because of the number of policies potentially at play, it would be wise to proactively evaluate potential coverages and have a plan in place for submitting a claim if impacts from COVID-19 appear to implicate coverage. Available coverage may not be readily apparent, but coverage could be triggered as circumstances change.

For more information specific to this topic, please contact the author or any member of our Construction Practice Group. Also, please visit the Coronavirus (COVID-19): What you Need to Know information page on our website.

Coronavirus (COVID-19): Coming Insurance Claims

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Richard Goetz, Tancred Schiavoni, Allen Burton, Gary Svirsky, Kieran Humphrey, Zoheb Noorani and Janine Panchok-Berry | O’Melveny & Myers

While we do not yet have a firm fix on where the COVID-19 outbreak is heading, we do know one thing that is certainly on its way: a torrent of insurance claims. Every day we read about quarantined cities, cancelled travel plans, and disrupted supply chains across the globe. The scale of the outbreak—and its economic consequences—is almost like a natural disaster, but insurers do not typically sell coverage for corporate losses caused by epidemics or pandemics.

Based on recent natural disasters and epidemics, the claimed losses could fall into several categories:

  • Business Interruption: With massive shutdowns and disrupted supply chains, business-interruption claims are likely coming.
  • Decontamination Costs: Depending on the severity of the outbreak, organizations might incur voluntary cleanup costs. And governments and regulators may force other businesses to temporarily close to clean facilities.
  • Evacuation Costs: Several infected people have already been evacuated to their home countries. There could be more. To the extent that any business—such as the employer of an evacuee—is forced to bear these expenses, it will likely seek coverage for these costs.
  • Medical Expenses: Infected people may make claims for medical expenses—especially if they got sick during business travel. Either the employees themselves or their employers may seek coverage.
  • Travel Cancellation Losses: Many travelers have canceled travel and accommodation bookings (or may in the future be required to) as a result of the travel restrictions and quarantine laws being adopted around the world. This will inevitably lead to claims from individuals and businesses under their travel insurance.
  • Other: D&O claims and third-party liability suits are also sure to follow, particularly as the plaintiffs’ bar develops theories of liability.

Traditional property and casualty insurance policies have limited coverage for epidemics. In fact, following the SARS outbreak in 2003, many insurance carriers began to include exclusions for epidemics and pandemics in business-interruption policies. Thus, many policies exclude coverage for losses “in connection with a notifiable infectious disease”—that is, a disease that doctors and medical staff must report to the government by law. So, there may be less insurance available for claims arising from COVID-19 than some businesses expect.

Still, a patchwork of policies may provide some coverage. Beyond workers’ compensation, property, and business-interruption, coverages including professional liability and some marine policies might respond in specific circumstances. While the practices used by some employers to contain the spread of the virus could give rise to claims of discrimination against protected classes, employment-practices liability policies might apply in those situations. D&O policies could cover shareholder allegations about lack of preparedness or a slow response to the crisis. General liability policies could cover illnesses by customers or other third parties. Property policies could provide coverage for decontamination and cleanup costs. Obviously, the language of each policy would govern.

The unusual circumstances of the claims that may be made over COVID-19 could give rise to a number of coverage issues:

  • Liability of Hotels/Cruise Ship Operators/Venues of Public Gatherings: These businesses risk liability for any outbreaks that occur on their premises on grounds of alleged negligence. Such situations may trigger commercial general liability policies.
  • Bodily Injury Damages: Many general liability policies cover damages “on account of, or because of, bodily injury.” But, what damages will be considered related to COVID-19? Will loss of reputation and brand value diminution because of the outbreak be damage “because of” bodily injury?
  • Damages Calculations: If a policy provides business-interruption coverage, how will those damages be calculated and what categories of damages will policyholders be allowed to recover?
  • Site-Liability Policies: Some policies provide coverage for remediation and third-party liability based on the presence of biological agents at certain sites, such as hotels or common carriers. These policies could be triggered if there is an outbreak in a hotel or at an airport.
  • Maritime Policies: Some maritime polices provide coverage if there is an outbreak of disease on a vessel. Since cruise-ship operators have been severely impacted by COVID-19, they will search for all possible coverage—and they may be surprised to find some available coverage where they did not expect it.

Obtaining coverage based on the unique circumstances related to COVID-19 may, in many cases, be like trying to fit a square peg into a round hole. What is clear is that these coverage questions will put a variety of issues to the test in courtrooms and before arbitration tribunals around the world. Both policyholders and carriers should be mindful that the cases arising from the outbreak may be highly complicated and contentious.

* * *

Just as SARS and MERS preceded it, COVID-19 is surely not the last pandemic. The novelty and nature of the financial risks presented by the current outbreak may encourage entrepreneurial market participants to turn to insurance-linked securities—not unlike catastrophe bonds for hurricane risk. While it is too late for similar offerings related to COVID-19, we may see robust interest in such products in the near future.

Coronavirus – Are We in For Historic Construction Delay Claims?

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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.

Signing a Construction Contract in the Middle of the Coronavirus Pandemic . . . Two Contract Clauses to Consider

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R. Thomas Dunn | Solid Foundation: A Construction Law Blog

There is rightfully a lot of buzz in the industry about force majeure clauses. Authors are writing about how far and how much they protect contracting parties from unforeseen and uncontrollable events that cause delay.

While the standard AIA, ConsensusDocs, or other industry form contract time extension and/or force majeure clauses will likely provide some relief as to time extensions in appropriate situations, contracting parties may be best served to acknowledge the uncertainties our industry is confronting by crafting specific language for delays and increased costs resulting from the COVID-19 pandemic.

Sample language for consideration:

Notwithstanding the requirements and obligations set forth in the Contract Documents and this Agreement, Contractor shall be entitled to an extension of the Contract Time and an equitable adjustment of the Contract Price, due to labor shortages, material escalation, or otherwise, for the performance of Subcontractor’s Work due to events and conditions beyond Contractor’s control, including the present impacts from the Coronavirus pandemic which was declared a national emergency by President Trump on March 13, 2020 and a pandemic by the World Health Organization on March 11, 2020. Contractor will employ efforts to mitigate such delays and increased costs, in consultation with Owner, and will provide regular updates to Owner as to any time or cost impacts resulting from this provision. Disputes as to the entitlement of extensions of Contract Time or increases in the Contract Price shall be resolved pursuant to the Dispute Resolution provisions* of this Agreement.

* In addition to the clause that allows for claims of additional time and money, parties should consider agreeing upon the processes of a Project Neutral, Initial Decision Maker (AIA terminology), or Dispute Review Board (larger / governmental projects) so that prompt decisions may be made during project performance. This would allow for the numerous issues likely to arise during this pandemic to be responded to in real time allowing the project to move forward. These can be drafted as advisory or binding decisions – or a mix of both – binding during project performance subject to rights to preserve an ability to appeal/contest the interim finding.

Many owners may object and/or push back to such a clause, but proposing this specific language to address projects being performed during this unprecedented coronavirius outbreak will start the contract negotiations and performance off in the right direction by encouraging the parties to proactively collaborate and communicate regarding impacts arising from the global health crisis.

Coronavirus and Construction Contracts

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Meghan DiPerna, Kenneth H. Lazaruk and Brian A. Shue | Duane Morris

As COVID-19 continues to spread throughout the country, it will impact project performance.

As you have undoubtedly heard, coronavirus disease 2019 (COVID-19) is affecting the global construction industry.

Notably, as of March 17, Boston halted all construction jobs in the city for two weeks due to the COVID-19 pandemic. This decision has affected approximately 21.4 million square feet of new or renovated development across 97 projects. Other municipalities have implemented travel restrictions and shelter-in-place orders requiring individuals to stay at home except as necessary to provide certain essential business and government services. These domestic actions, coupled with tighter border controls and quarantines at the international level, will inevitably result in supply chain disruption and labor force shortages.

As COVID-19 continues to spread throughout the country, it will impact project performance. Below are some important contract considerations that parties should keep in mind as they evaluate their response to project delays and closures, safety concerns, and vendor and workforce unavailability.

Force Majeure

A force majeure clause in a construction contract sets forth the conditions under which one party is excused from performing. These conditions tend to have two predominant elements: that the condition was unforeseeable and that parties lacked control over the condition. A force majeure clause should be read carefully, as it will specifically identify what events excuse a party from performance.

Some force majeure clauses, such as Section 8.3.1 of the AIA A201-2017, General Conditions of the Contract for Construction, will refer generally to “causes beyond the Contractor’s control” and “other causes that the Contractor asserts, and the Architect determines, justify delay.” Others, such as 48 CFR 52.249-10, a Federal Acquisition Regulation (FAR) provision applicable to government contractors, may specifically mention “epidemics” and/or “quarantine restrictions.” Still others will reference acts of governmental bodies that affect the supply or availability of labor or materials.

Contractors intending to rely on a force majeure clause in a construction contract to excuse timely performance as a result of COVID-19 must pay close attention to the notice provisions therein. Failure to notify a party of a force majeure event within the stated timeframe may waive that party’s right to any extension of time to which they might otherwise be entitled. Moreover, contractors should be aware that some force majeure clauses require that the contractor demonstrate efforts to minimize the period of delay by commercially reasonable means, which in a situation involving the stalled import of materials from overseas may include finding alternate sources of the goods domestically.

In addition to seeking an extension of time for performance in the wake of COVID-19, contractors may try to recover additional compensation to offset the impact of the outbreak. However, many owner-friendly construction contracts provide that in the event of force majeure, the contractor is entitled solely to an extension of the contract time, and not to any additional compensation as a result of the force majeure event. For instance, owner-developers are often encouraged to include in their construction contracts language making clear that force majeure events and other contemplated delays cannot give rise to any claim for damages or other compensation in the form of an increase to the contract sum, although most sophisticated general contractors and construction managers will negotiate this point.

In New York, “no damage for delay” clauses are enforceable.[1] That said, courts narrowly construe these clauses. Despite the existence of a no-damage-for-delay clause in a construction contract, the courts will allow a contractor to recover delay damages if the contractor can prove that the delays fall within one of the following four exceptions:

  1. Delays caused by the contractee’s bad faith or willful, malicious or grossly negligent conduct;
  2. Uncontemplated delays;
  3. Delays so unreasonable that they constitute an intentional abandonment of the contract by the contractee; and
  4. Delays resulting from the contractee’s breach of a fundamental obligation of the contract.[2]

The contractor bears a heavy burden of proving that one of these exceptions applies.[3] In the context of COVID-19, the relevant question will be whether delays caused by the pandemic were contemplated at the time of contract execution. The case law on this point by and large focuses on the types of delays that are more typically encountered on construction projects, such as whether delays caused by changes, design errors or inept supervision were contemplated by the parties.

Here, parties will have to debate whether the current COVID-19 outbreak was foreseeable or could have been anticipated. Owner and developers, where they can, will point to specific provisions in their contracts that contemplate epidemics, pandemics, quarantines and delays arising from governmental acts to argue that none of the above exceptions apply. Contractors, on the other hand, will argue that the last large-scale quarantine in the United States took place during the Spanish flu epidemic of 1918 and that the current restrictions in effect could not have been anticipated at the time of contracting. Ultimately, whether a particular no-damage-for-delay clause is upheld in the wake of COVID-19 will depend on the specific contract language at issue, as well as the ripple effect of the containment measures, the full degree of which may not be known for weeks or months.

Suspension of Contract

Owners and developers should also look closely at the termination and suspension provisions in their construction contracts when considering their response to the COVID-19 outbreak. If uncertainty and changing circumstances on the ground make continuing with work impossible in the short term, a suspension clause may be a helpful tool in controlling cost and impact for a finite period of delay. This is particularly true when the contract requires the contractor to hold its price for the suspension period.

The parties can also consider if a temporary suspension of the project would allow them time to determine how to proceed with the project in a manner that is mutually acceptable. Owners should be aware, however, that many construction contracts provide that a suspension lasting longer than a specific duration may trigger the contractor’s right to terminate the contract.

In the event of a project suspension, whether voluntary or by order of governmental authorities, the parties must make arrangements to secure the project site and heed all applicable safety requirements. Owners and contractors must ensure that the site is adequately monitored throughout the closure and that the proper insurance remains in place. Careful consideration and discussion should also be given to what will happen when work resumes following such a suspension.

Insurance

Insurance policies, particularly commercial property policies, may help in offsetting the effects of a project shutdown. Many of these policies contain an endorsement for business interruption coverage. Policyholders should carefully read such endorsement to determine whether delays caused by COVID-19 constitute an “occurrence.”

Loan Documents

Owners and developers must also look closely at any underlying loan documents on a project to determine what, if any, notice has to be given to a lender if the project being funded is delayed by COVID-19. Agreements between a lender and borrower will typically contain language requiring that the borrower notify the lender of any force majeure events that it anticipates will materially affect the required project completion date. Owners should be proactive in reviewing all covenants (including financial information and other deliverable requirements), notice requirements and other credit document provisions for potential breaches, and proactively seek to address the concerns of lenders before they become a crisis.

Conclusion

In conclusion, the COVID-19 outbreak continues to be a dynamic situation and the ultimate impact and timeline remain unknown at this juncture. As construction project participants navigate the novel issues it has raised, they should closely evaluate their construction contracts in order to make the best decisions regarding ongoing work and project safety, as well as to implement strategies to mitigate financial and schedule impacts as much as possible. To the extent parties can mutually agree to a resolution or workout plan now, jobs will proceed more smoothly when COVID-19 subsides.