{"id":897364,"date":"2020-04-22T11:19:46","date_gmt":"2020-04-22T17:19:46","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897364"},"modified":"2020-04-22T11:19:52","modified_gmt":"2020-04-22T17:19:52","slug":"reviewing-construction-contract-protections","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/reviewing-construction-contract-protections\/","title":{"rendered":"Wait! Don\u2019t Sign Yet: Reviewing Contract Protections During the COVID Pandemic"},"content":{"rendered":"\n

Danielle S. Ward | Balestreri Potocki & Holmes<\/a><\/p>\n\n\n\n

As the circumstances of the COVID pandemic change day by day, and we all rush to keep business moving where and when we can, companies should consider hitting the \u201cpause button\u201d before renewing or executing any new contracts<\/a>. Developing contracts often takes considerable time and expense, and companies are not in the habit of reworking them often. A change in law<\/a> may prompt a company to revisit their contract terms, but otherwise business is often carried out with a standard form contract for a period of years. With the COVID pandemic affecting nearly every business and industry, life is not business as usual, and companies should make sure their contracts consider what previously seemed like an unforeseeable event.<\/p>\n\n\n\n

Force Majeure clauses<\/a> are included in many contracts to excuse contract performance when made impossible by some unforeseen circumstance. These clauses typically fall under two categories: general and specific. General force majeure clauses excuse performance if performance is prevented by circumstances outside the parties\u2019 control. By contrast, specific force majeure clauses detail the exhaustive list of circumstances (acts of god, extreme weather, war, riot, terrorism, embargoes) which would excuse contract performance. Force majeure clauses are typically interpreted narrowly. If your contract has a specific clause and pandemic or virus is not one of the listed circumstances it may not apply. Whether a particular existing contract covers the ongoing COVID pandemic will vary depending on the language of the contract.<\/p>\n\n\n\n

Force majeure clauses previously made headlines when the great economic recession hit in 2008. A number of courts held that simple economic hardship was not enough to invoke force majeure. The inability to pay or lack of desire to pay for the contracted goods or services did not qualify as force majeure. In California, impossibility turns on the nature of the contractual performance, and not in the inability of the obligor to do it. (Kennedy v. Reece (1964) 225 Cal. App. 2d 717, 725.) In other words, the task is objectively impossible not merely impossible or more burdensome to the specific contracting party.<\/p>\n\n\n\n

California has codified \u201cforce majeure\u201d protection where the parties haven\u2019t included any language or the circumstances in the clause don\u2019t apply to the situation at hand. Civil Code section 1511 excuses performance when \u201cprevented 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.\u201d (Civ. Code \u00a7 1511.) What qualifies as a \u201csuperhuman cause\u201d? In California, the test is whether under the particular circumstances there was such an insuperable interference occurring without the party’s intervention as could not have been prevented by the exercise of prudence, diligence and care. (Pacific Vegetable Oil Corp. v. C. S. T., Ltd. (1946) 29 Cal.2d 228, 238.)<\/p>\n\n\n\n

If you find yourself in an existing contract without a force majeure clause, or the statute does not apply, you may consider the doctrine of frustration of purpose. This doctrine is applied narrowly where performance remains possible, but the fundamental reason the parties entered into the contract has been severely or substantially frustrated by an unanticipated supervening circumstance, thus destroying substantially the value of the contract. (Cutter Laboratories, Inc. v. Twining (1963) 221 Cal. App. 2d 302, 314-15.) In other words, performance is still possible but valueless. Note this defense is not likely to apply where the contract has simply become less profitable for one party.<\/p>\n\n\n\n

Now that COVID is no longer an unforeseeable event, but rather a current and grave reality, a party executing a contract today without adequate protections may have a difficult time proving unforeseeability. Scientists are not sure whether warm weather will suppress the spread of the virus, as it does with the seasonal flu, but to the extent we get a reprieve during the summer we may see a resurgence of cases this Fall or Winter. Companies should take care in reviewing force majeure clauses, and other clauses tied to timely performance such as delay and liquidated damages before renewing or executing new contracts.<\/p>\n\n\n\n

Your contract scenario may vary from the summary provided above. Please contact legal counsel before making any decisions. During this critical time, BPH\u2019s attorneys can be reached via email to answer your questions.<\/p>\n","protected":false},"excerpt":{"rendered":"

Danielle S. Ward | Balestreri Potocki & Holmes As the circumstances of the COVID pandemic change day by day, and we all rush to keep business moving where and when we can, companies should consider hitting the \u201cpause button\u201d before renewing or executing any new contracts. Developing contracts often takes considerable time and expense, and… Continue reading Wait! Don\u2019t Sign Yet: Reviewing Contract Protections During the COVID Pandemic<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224],"class_list":["post-897364","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWait! 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