Construction Law Blog

Contractors are reporting that the coronavirus (COVID-19) is starting to impact local construction projects. Clients have observed (or may soon observe) the following impacts:

• Delays in material and equipment supply
• Labor shortage due to worker self-quarantine
• Delays in issuance of permits and inspections
• Scheduling and other delays

 These impacts will likely cause some level of financial harm or damages:

• Owners may experience increased financing costs, claims from buyers and tenants, and delays in completion.
• Contractors may incur increased general conditions, higher material prices, and directives to delay, accelerate, or compress their schedules.

 The main contract provision and legal principle that the coronavirus may trigger is a force majeure provision.  Most construction contracts contain some language discussing unforeseen circumstances that will excuse a party from performing some contractual obligation.  These are typically events outside of either party’s control.  They may also be referred to as “Acts of God,” or simply as “other causes beyond the Contractor’s control” as the AIA A201 describes them. 

 Delays caused by a pandemic such as the coronavirus may very well trigger a force majeure clause.  When a force majeure clause is triggered, a party may be excused from performance and insulated from liability.  But while these provisions may offer protection, the way the contractor responds to the specific impact will determine whether the contractor can rely on their protection.

 From a contractual standpoint, how should you respond to impacts and damages the coronavirus causes?

1.  Read your contracts. Review the provisions of your contracts that discuss a) delays, b) claims, and c) notice requirements.  When the dust settles, it may not be enough to simply prove that the coronavirus affected your performance, you may need to strictly follow contractual claim and notice provisions in order to protect your rights. 
2. Monitor impacts. Impacts of the coronavirus on construction projects will change and increase as the pandemic spreads.  A schedule acceleration impact will require a different response or claim than a delay in material supplies.  Consider the appropriate response for each impact.
3. Keep records. When it comes time to prove damages, contractors with careful records may be the ones to successfully pursue or defend a claim.
4. Mitigate damages. Parties to construction contracts have a duty to mitigate damages in order to recover them.  Carefully think through the damages you anticipate incurring and consider alternative ways to reduce damages.  This may prove the difference in recovering damages from the impact.
5. Consider insurance coverage. Many policies will not cover certain Acts of God or events that cause economic losses outside of actual damage to the project property.  On the other hand, business interruption and other policies may provide some avenue for recovery.  Careful review of these is important. 

 Each project and contract usually requires a different response and strategy – if you have specific questions about your particular situation, do not hesitate to give the construction team at Hirschler a call.