Given the coronavirus disease 2019 (COVID-19) pandemic, contractors across the country are turning to their contracts in search of provisions that would excuse them of performance. When material prices rise, labor becomes scarce, and project expectations become impossible, contractors are left with little choice but to terminate their contracts. But terminating a contract is seldom a clean break in this industry, and it can often lead to costly legal disputes for cash-strapped contractors.
In this brief article, our Miami construction litigation attorneys discuss three things you should consider before terminating a contract on a project that’s been impacted by a force majeure event. Whether caused by COVID-19 or another unforeseen circumstance, delays and other issues can justify termination, but only if allowed by the contract.
1. Does Your Contract Have a Force Majeure Contract Clause?
Our Miami construction litigation attorneys have spoken at length about force majeure contract clauses. These all-important contract clauses allow for relief when an unforeseen circumstance emerges, such as a hurricane, earthquake, or pandemic. Depending on the contract language, a force majeure clause will allow for:
- Termination of the contract
- Additional time
- Or additional compensation
However, proving that a force majeure event has occurred remains the contractor’s burden.
2. Is the Unforeseen Event the Main Cause of Your Failure to Perform?
In order to invoke a force majeure contract clause, you must prove that the force majeure event, the COVID-19 pandemic in this instance, was the main cause for your failure to perform. This shouldn’t be a problem considering that the pandemic has heavily impacted the entire construction industry, but you must still comply with notice requirements and make a good faith effort to estimate the impact of the event.
3. Are You Prepared for the Legal Fallout?
In the coming months, we’re going to be seeing a lot more force majeure contract clauses and termination provisions used by contractors to end contracts impacted by the COVID-19 pandemic. Obtaining payment for work and materials provided will remain a priority for many contracts, while reducing losses will remain a priority for owners. This will inevitably lead to disputes and litigation.
Before terminating a contract, we recommend consulting a Miami construction litigation attorney. Our attorneys can help determine if this is the best course of action for your company and represent you in any ensuing litigation. For an affordable, on-demand lawyer that will stand by you during and after this difficult time, partner with the team of attorneys at Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.