The following is a brief overview of issues to consider when assessing the potential impact of COVID-19 on construction project shutdowns or delays.
When considering COVID-19 related delays, the initial question will likely be who bears the risk and the loss for resulting construction delays, or increased construction costs due to the coronavirus? This will likely be determined by the controlling written contract documents. Specifically, whether the COVID-19 pandemic constitutes an excusable delay under the contracts’ force majeure clauses. Moreover, does the presence of a force majeure clause in the contract documents extend the completion date, excuse the parties for liability associated with delay damages, and provide for additional costs?
Next, what are the implications in contract documents under a force majeure situation? Force majeure clauses in construction contracts may justify an extension of time to perform under the contract and/or financial compensation for costs like overhead or remobilization associated with delays.
What steps should parties take if the project is potentially impacted by COVID-19? First, review the contract documents with counsel to determine if contract documents contain a force majeure clause. If the contract documents contain a force majeure clause, next confirm the following: a) the exact language of the clause; b) any notice requirements to invoke the clause; and c) terms governing obligations you have to mitigate the damages, or delays as a result of the force majeure event. Each project will naturally have its own project specific issues that may arise from any shutdown or delay event. As such, the above is only a general overview of issues that may arise related to force majeure clauses in contract documents related to the COVID-19 pandemic. In order to determine issues related to specific projects, a detailed analysis of the project documentation and events is likely necessary. Bryce Carroll CMAA Northern California Legal Chair
Partner at Oles Morrison Rinker Baker LLP