Is the Coronavirus Event a Force Majeure or Changed Condition Event?

By Kathryn Doran posted 04-15-2020 05:03 PM

  

By David D. Peden of Porter Hedges LLP

Published March 26, 2020

While this coronavirus event grips the nation, contractors and subcontractors are asking whether this qualifies as a force majeure or changed condition event. We think it qualifies as both. 

When you bid and signed your contracts, if the force majeure clause was given any thought, it likely was about the impact of a hurricane hitting the job site. Would a hurricane shut a job down for three days, or four?  Well, this coronavirus event is having an impact that will last three months, or more. 

As lawyers, we can work safely from home. Construction, on the other hand, requires hands-on work. Laborers are concerned about their safety, but they have bills to pay and a family to feed. What should you do if a worker shows up sick and works for a day before their symptoms worsen and become obvious? Do you shut the whole job down, just that crew, or just send that laborer home? In your safety and other briefings, you should be emphasizing the importance of staying home as soon as you have any symptoms. Document that you said this in your daily reports.

We suggest that you read your contracts today. Look at the delay and other clauses like the changed conditions and claim clauses. In your contract, a force majeure event may get you more time, but not money. A changed condition clause might get both. If you are being impacted, get your Notices of Claim out, tailored to the exact requirements of each contract. Send it to everyone above you to whom notice must be given. In most contracts, you are required to use the word “Claim” in your notice, so do it if you are sending one. 

Here is some suggested sample language:

“NOTICE OF CLAIM
DATE:
PROJECT:
We are giving notice of a Claim. The coronavirus is expected to impact our schedule and our costs. We are not at fault. We did not anticipate this event. We cannot control it. We do not know how long it will last. The situation is changing daily. President Trump has just granted Governor Abbott’s request to declare Texas a Disaster Area. At this time, we cannot predict how much additional time we will need, nor can we predict how much our costs will increase. We anticipate disruptions in our labor and in our materials supply lines. We will do what we can to mitigate these impacts, but with symptomatic workers being required to stay home, our onsite labor forces and our suppliers will all be impacted. We will update this Claim as we can. Thank you for your patience and understanding.”



David PedenDavid Peden heads Porter Hedges LLP’s Construction Section. He has extensive experience in litigation and arbitration of construction, insurance, surety and commercial issues. David frequently represents owners, lenders, general contractors, subcontractors, and design professionals in claims; disputes; arbitration and litigation; contract documents; mediation services; commercial, industrial, offshore, multi-family, and surety trials and appeals of contractual disputes; supply contracts; deceptive trade practices; and breach of warranty. He can be reached at dpeden@porterhedges.com or 713.226.6610.





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