CONSTRUCTION LAW
Contracting
Issues in the
COVID-19 Era
The pandemic has heightened the
importance of several key contract
clauses – make sure you’re protected
By Jeffrey M. Hummel, Seyfarth Shaw LLP
Contractors know that the terms and conditions of
their contracts are important to the success of any
construction project. These terms and conditions
may be set out in various standard form agreements adopted by
the parties or may be included in separate bespoke documents
drafted by one or more of the parties involved. Either way, it is
critical that each party understands its respective rights and
obligations before commencing work.
The arrival of COVID-19 has placed even more importance
on properly negotiating and understanding several key provisions
included in most construction contracts. Since the onset
of COVID-19 in the spring of 2020, there has been a great deal
of literature written about current and potential impacts of the
pandemic on the construction industry. This article is intended
to summarize some of the key contract clauses most impacted
by COVID-19, and highlight certain additional risks created by
the pandemic. While the American Institute of Architects (AIA)
Document A201 between the owner and general contractor is
used as an example for many of the provisions, subcontractors
should also carefully consider these issues as the same or similar
clauses are often “flowed down” into subcontracts, or, even
if not, the specific language included in a prime contract can
significantly affect the rights and obligations of subcontractors.
General contract principles
As a starting point, it is important to note courts will generally
enforce contracts as written. In determining the parties’ intent,
it follows that most courts will employ an objective analysis
of the specific language used in the contract. Unless language
is determined to be ambiguous in some way, courts normally
avoid relying on evidence of one or more of the parties’ subjective
intent regarding a provision. This concept is particularly
important with respect to many of the provisions impacted
by COVID-19 discussed below, because the specific language
included in the parties’ contract will likely control any dispute
between the parties even when the impacts of the pandemic
could not have been anticipated.
Force majeure
Force majeure is an unforeseeable circumstance that prevents
someone from fulfilling a contract obligation. Most construction
contracts have a force majeure clause that specifies the rights and
obligations of the parties when such an event occurs. The clause
may state that the obligations of one or both parties are suspended
during the period of only certain specified events or include “catch
all” language such as “and any other events beyond the party’s reasonable
control.”
By way of example, the AIA A201 standard form provides that
if the Contractor is delayed at any time in the commencement
or progress of the work by, among other things, “unusual delay in
deliveries … or other causes beyond the Contractor’s control,” then
the contract time shall be extended by such reasonable period as
the Architect may determine. Thus, while a “pandemic” is not specifically
listed as a force majeure event in the clause, many COVID-
19-related delays could fall within the clause due to the catch all
language. Without such language, however, a party could be limited
to relief only for one of the specific identified events. It should also
be noted that the AIA language neither grants nor precludes additional
compensation for force majeure events. Claims for additional
compensation would thus need to be made under one or more
other provisions.
The parties should be aware, however, that some jurisdictions
limit a party to the specific events listed in the clause and
do not enforce “catch all” language, while others require that the
non-enumerated causes be similar to those listed in the force
majeure provision.
While an open-ended clause, such as the AIA clause above, may
provide an avenue for a contractor to obtain additional time to
complete the work, each specific claim will need to be analyzed separately.
A contractor is still required to demonstrate that a particular
impact was in fact beyond its control and may not be entitled to
relief if it can be shown that the contractor was partially at fault for
the delay or could have mitigated the impacts. Force majeure provisions
also often contain specific notice requirements, which must
be complied with in order to obtain the relief requested.
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