Have You Read Your Force Majeure Clause Lately?

By: Scott Giblin

As COVID-19 (the coronavirus) continues its spread across the country, what effect it has on the construction industry remains to be seen. However, with President Trump’s Declaration of a National Emergency on March 13, 2020, and Governor Reeves’s Declaration of a State of Emergency on March 14, 2020, you should anticipate a negative impact on your construction projects in the near future. To that end, you should review your construction contracts for the clause typically entitled “Force Majeure” (or “Act of God”). Review this clause carefully and comply with all of the requirements contained therein. The Force Majeure clause provides the parties’ obligations, rights, and remedies in the event a natural disaster or similar event, such as a pandemic, may entirely or partially prevent performance of the contract or delays performance of the contract. In the event your contract does not contain a Force Majeure provision, review the contract for any provisions addressing excusable delay. These provisions should provide guidance on how to handle any project delays resulting from COVID-19. For example, Section 8.3.1 of 2017 AIA Document A201 states that if the project is delayed by “causes beyond the Contractor’s control”, “then the Contract Time shall be extended for such reasonable time as the Architect may determine.” Regardless of what your contract says regarding Force Majeure or excusable delay, it is best to contact your owners, contractors, and/or subcontractors immediately to discuss how to prepare for COVID-19 and how to proceed should COVID-19 negatively impact the construction project, whether the impact is due to interruption in supplies and materials, transportation, labor shortages, governmental orders, or other causes and combination of causes. Ironing out a plan ahead of time, as much as possible, will save money, time and effort in the long run. Steps on the front end may prevent loss and litigation on the back end. It is important in every case that you keep detailed records of how COVID-19 impacted the construction project and the steps you took to mitigate the damages. Such records will be vital in the event litigation is pursued due to the impact of this crisis or if needed to prove entitlement to government-sponsored programs that may be put into place to boost the economy. Consider keeping a daily journal during these uncertain times. It will refresh your memory should litigation arise and provide a detailed account of what occurred during construction. Recordkeeping—who is responsible for making the records and martialing them—should be part of your crisis mitigation plan. Keep your eye on the COVID-19 crisis by checking in with Mississippi’s trade associations, including the Mississippi Associated General Contractors, who are monitoring governmental reaction. https://www.msagc.com