By R. Thomas Dunn, Partner at Pierce Atwood LLP
Published March 19, 2020
There is rightfully a lot of buzz in the construction industry about force majeure clauses. Authors are writing about how far and how much they protect contracting parties from unforeseen and uncontrollable events that cause delay.
While the standard AIA, ConsensusDocs, or other industry form contract time extension and/or force majeure clauses will likely provide some relief as to time extensions in appropriate situations, contracting parties may be best served to acknowledge the uncertainties our industry is confronting by crafting specific language for delays and increased costs resulting from the COVID-19 pandemic.
Sample language for consideration:
Notwithstanding the requirements and obligations set forth in the Contract Documents and this Agreement, Contractor shall be entitled to an extension of the Contract Time and an equitable adjustment of the Contract Price, due to labor shortages, material escalation, or otherwise, for the performance of Subcontractor’s Work due to events and conditions beyond Contractor’s control, including the present impacts from the Coronavirus pandemic which was declared a national emergency by President Trump on March 13, 2020 and a pandemic by the World Health Organization on March 11, 2020. Contractor will employ efforts to mitigate such delays and increased costs, in consultation with Owner, and will provide regular updates to Owner as to any time or cost impacts resulting from this provision. Disputes as to the entitlement of extensions of Contract Time or increases in the Contract Price shall be resolved pursuant to the Dispute Resolution provisions* of this Agreement.
* In addition to the clause that allows for claims of additional time and money, parties should consider agreeing upon the processes of a Project Neutral, Initial Decision Maker (AIA terminology), or Dispute Review Board (larger / governmental projects) so that prompt decisions may be made during project performance. This would allow for the numerous issues likely to arise during this pandemic to be responded to in real time allowing the project to move forward. These can be drafted as advisory or binding decisions—or a mix of both—binding during project performance subject to rights to preserve an ability to appeal/contest the interim finding.
Many owners may object and/or push back to such a clause, but proposing this specific language to address projects being performed during this unprecedented coronavirius outbreak will start the contract negotiations and performance off in the right direction by encouraging the parties to proactively collaborate and communicate regarding impacts arising from the global health crisis.
R. Thomas Dunn, is a Partner at Pierce Atwood LLP and concentrates his practice in construction law and complex business dispute resolution representing clients in various sectors of the construction industry, including power generation, utility and road work, painting, and plumbing and mechanical work. Tom has served as trial counsel representing owners, general contractors, subcontractors, and design professionals in multiparty, complex commercial litigation in state and federal courts. He can be reached at rtdunn@pierceatwood.com or 401.490.3418.