COVID-19 is causing substantial disruptions to the performance of construction contracts. These disruptions will be widespread and long-lasting. Most contracts contain a force majeure clause that protects the contractor by providing for a time extension when performance of the contract is frustrated by unforeseen intervening forces. In order to invoke the protections of a force majeure clause the contractor must comply with contractual notice provisions. In addition to force majeure clauses in contracts, the law provides “impracticability” as an affirmative defense in contract disputes.
The notice requirements applicable to each project will vary with each specific contract form. In addition, attention needs to be paid to effective documentation of impacts to schedule and productivity. If you have any questions or want to discuss strategy for dealing with the project impacts of Covid 19 please give us a call.
Following is a brief high level summary of force majeure provisions that are likely relevant to Washington contractors and a condensed description of the impracticability doctrine
The doctrine of force majeure is one of the oldest doctrines in contract law. Force majeure is a broad concept that provides relief from performance when performance becomes impossible due to unforeseen circumstances beyond the control of the parties. Historically, force majeure clauses have encompassed unforeseen events including acts of god, war, riots or civil unrest, strikes, fire, flood, and epidemics. “In construction contracting, legal excuse for nonperformance looks to whether the nonperformance was beyond the control and without the fault or negligence of the breaching party.” 5 Bruner & O’Connor Construction Law § 18:21.
The Washington State Department of Transportation General Requirements do not use the express term “force majeure” but nevertheless do contemplate a situation where an intervening force makes performance impossible.
1-07.13(1) General
All Work and material for the Contract, including any change order Work, shall be at the sole risk of the Contractor until the entire improvement has been completed as determined by the Engineer, except as provided in this section.
The Contractor shall rebuild, repair, restore, and make good all damages to any portion of the permanent or temporary Work occurring before the Physical Completion Date and shall bear all the expense to do so, except damage to the permanent Work caused by: (a) acts of God, such as earthquake, floods, or other cataclysmic phenomenon of nature, or (b) acts of the public enemy or of governmental authorities; or (c) slides in cases where Section 2-03.3(11) is applicable; Provided, however, that these exceptions shall not apply should damages result from the Contractor’s failure to take reasonable precautions or to exercise sound engineering and construction practices in conducting the Work.
If the performance of the Work is delayed as a result of damage by others, an extension of time will be evaluated in accordance with Section 1-08.8.
Nothing contained in this section shall be construed as relieving the Contractor of responsibility for, or damage resulting from, the Contractor’s operations or negligence, nor shall the Contractor be relieved from full responsibility for making good any defective Work or materials as provided for under Section 1-05.
Section 1-08.8 governs extensions of time and provides guidance for notice provisions and conditions under which the Engineer is to grant an extension. This term also provides that the time for physical completion will be extended for (among other things) “exceptional cases not specifically identified in items 1 through 6, provided the request letter proves the Contractor had no control over the cause of the delay and could have done nothing to avoid or shorten it.”
The AIA A201-2017 AIA General Conditions of the Contract for Construction contains the following provision:
§8.3 Delays and Extensions of Time
§8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by
(1) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor;
(2) by changes ordered in the Work;
(3) by labor disputes, fire, unusual delay in delivery, unavoidable casualties, adverse weather conditions documented in accordance with Section 15.1.6.2, or other causes beyond the Contractor’s control;
(4) by delay authorized by the Owner pending mediation and binding dispute resolution;
or
(5) or by other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.
§ 8.3.2 Claims relating to time shall be made in accordance with applicable provisions of Article 15.
§ 8.3.3 This Section 8.3 does not preclude recovery of damages for delay by either party under other provisions of the Contract Documents.
Unlike force majeure, which is a contractual mechanism of allocating risk between parties, the doctrine of discharge by supervening impracticability is an affirmative defense that a party in default can offer as excuse for non-performance. The law is summarized as follows:
Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
Washington courts have read two elements into the doctrine’s application: (1) A “fortuitous and unavoidable” event that results in a circumstance where (2) performance can only be accomplished with “extreme or unreasonable difficulty, expense, injury, or loss.” Metro. Park Dist. of Tacoma v. Griffith, 106 Wn.2d 425, 440, 723 P.2d 1093 (1986). The law specifically contemplates “prevention by government regulation or order” as a type of fortuitous and unavoidable event leading to extreme or unreasonable difficulty in contract performance.