When nearly a third of the world’s population is living under coronavirus-related restrictions and over three million unemployment claims have been filed in the United States thus far, the coronavirus (COVID-19) is something all businesses need to take into careful consideration. With major disruptions in the supply chain and labor shortages across the country, it is not a question of whether or not COVID-19 will impact your construction project but what provisions within your contract will come into play. In this article, a Portland construction dispute attorney examines what contractual rights and responsibilities are relevant to contractors in the wake of COVID-19.
Force Majeure Clause
The force majeure clause is a provision within the contract that excuses one or both of the parties’ performance obligations when an unforeseen circumstance beyond the parties’ control renders performance of the contract impossible. The force majeure clause should be examined to determine if the language addresses viruses, illnesses, diseases, pandemics, or acts of God as circumstances which may delay or render contractual performance impossible. Circumstances typically enumerated by the force majeure clause in contracts, include acts of war, strikes, acts of God, or acts of governmental authorities.
Under the AIA standard form A201 General Conditions of the Contract for Construction, the outbreak of COVID-19 will most likely constitute an excusable delay due to conditions outside of the contractor’s control, such as disruptions to the global supply chain. The contractor in question would, in turn, be granted a time extension on the completion date of the project and excused from liability for any actual or liquidated damages.
Delays and Disputes
Throughout the process of invoking the force majeure clause, it is important to be aware of your risk for exposure to construction disputes. The most common construction disputes in the industry arise out of contract errors and failure to meet the exact terms of the contract. The easiest way to avoid these conflicts, particularly when there are extensions made to the time span of the construction project, is to provide prompt notice of how COVID-19 has and will continue to affect labor availability or delivery of materials.
There will undoubtedly be a substantial increase in claims and litigation related to contractual terms and obligations as a result of delays in production, force majeure provisions, or attempts to receive compensation for damages. Such delays may lead owners to invoke a termination for convenience clause to remove the contractor unable to complete his scope of work from the construction project. If you are concerned with how your contract addresses delays or halts in production due to COVID-19, it is imperative that you contact a Portland construction dispute attorney today.
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.