Industry News

The Covid-19 virus has brought your ability to build to a screeching halt by robbing you of your company’s office functionality and worker pool and now you cannot meet the requirements of the construction contracts you have signed. What now?

Normally, a party who contracts to do something that was possible at the time the contract was signed will be held to that performance. Can the courts hold a builder to that standard following the onset of societal shutdown caused by the Coronavirus?

The short answer is maybe not, and if you’re in this predicament, as so many builders (and owners) are, it’s time to lawyer up, because you can be sure that the other parties to the contract are doing just that.
What can a lawyer do to help? Well there are a few methods to escape calamity under these circumstances, which are unprecedented in our time.

1. Inability to anticipate circumstances
2. Contractual “force majeure” clauses
3. Impossibility arguments

Each of these options is intricate, and the first and third have historically rarely resulted in great success for the non-performing party. However, when these legal doctrines are mixed with a nationwide mood of understanding regarding the Coronavirus, which feelings are in-turn reflected in the attitudes of judges and juries, we find ourselves in a situation more favorable to non-performing builders than may ever have been the case before.

The second method, a common contractual term known as a “force majeure” clause (pronounced "FAWS" + "ma" + "ZHUR") is a very strong option for a stuck contractor, as it can release the contractor from its contractual duties outright, but the key is that the language has to actually be stated in your contract. This is different than options one and three, which are defenses which don’t have to be written down anywhere because the court can apply them directly. Force majeure language can be written many different ways and does not need to be titled “force majeure” so your best bet is to get in touch with an attorney to figure out if you can attain the benefit of this language based upon your company’s specific contract or contracts.

What does a contractor “win” if one of these defenses is found to apply? Should one of these defenses be successfully argued on a contractor’s behalf, that contractor could be released from its duties outright and, critically, the contractor will not be liable for damages and attorney’s fees which otherwise typically result from such a breach regardless of the actual “fault” of the contractor.

What if you’re a subcontractor? Where a prime contractor cannot perform a contract for the owner for the reasons discussed above, the subcontractor will often be in exactly the same position. This is a double-edged sword. Can the general contractor escape paying you? Can you avoid a breach of contract with the prime contractor if you cannot perform your work? The answer to both of these is “possibly”, and so much of the result depends simply upon who exercises their legal rights and who doesn’t.

Call us. We can help.