COVID 19 is causing substantial disruptions to the performance of construction contracts. It appears that these disruptions will be widespread and long-lasting, including the possibility of government mandated shut downs. 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 me 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 standard terms and conditions for Washington Department of Transportation contracts contains the following provisions:
33. FORCE MAJEURE
Definition: Except for payment of sums due, neither party shall be liable to the other or deemed in default under this contract if and to the extent that such party’s performance of this contract is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the party affected and could not have been avoided by exercising reasonable diligence. Force majeure shall include acts of God, war, riots, strikes, fire, floods, epidemics, or other similar occurrences.
Notification: If either party is delayed by force majeure, said party shall provide written notification within forty-eight (48) hours. The notification shall provide evidence of the force majeure to the satisfaction of the other party. Such delay shall cease as soon as practicable and written notification of same shall be provided. The time of completion shall be extended by contract modification for a period of time equal to the time that the results or effects of such delay prevented the delayed party from performing in accordance with this contract.
Rights Reserved: The state reserves the right to cancel the contract and/or purchase materials, equipment or services from the best available source during the time of force majeure, and Contractor shall have no recourse against the state.
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 126.96.36.199, or other causes beyond the Contractor’s control;
(4) by delay authorized by the Owner pending mediation and binding dispute resolution;
(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.