COVID-19 AND RESULTING DELAYS IN CONSTRUCTION
R. Scott Clayton, Esq. and Adam C. Linkhorst, Esq.
In late February 2020, Covid-19 reached the shores of the United States and what has followed has been an unprecedented effort at “social-distancing,” resulting in abrupt decreases in commerce, including the closing of restaurants, beaches, and other non-essential services. This slowdown will certainly impact the construction industry as well. Manpower and efficiency on projects has likely decreased, if not completely stopped, as companies and individuals adjust to the evolving restrictions being placed on the public in an effort to curb the spread of the coronavirus.
Most construction contracts contain a force majeure clause, designed to excuse the parties to a contract in the event of unforeseen delays in the performance of the parties’ contractual obligations. A force majeure clause is defined as “a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.” Black’s Law Dictionary, 718 (9th ed. 2009). For a force majeure clause to be invoked by a party, certain prerequisites must be met. First, the event triggering the application of the force majeure clause must be found in the clause itself. Second, the event must have been beyond the control of the party seeking to be excused from performance. Third, the extent of the impact on the excused party’s obligations under the contract must be demonstrable. Finally, the party seeking relief must provide notice to the other party to the contract.
Considering the fact that Florida is impacted by hurricanes on an annual basis, one would expect to find an abundance of case law in which force majeure clauses were invoked by parties to a contract. This, however, is not the case. In ARHC NV WELFL01, LLC v. Chatsworth at Wellington Green, LLC, 2019 WL 4694146 (S.D. Fla. 2019), the United States District Court for the Southern District of Florida noted that “precedent on the enforcement of force majeure clauses is limited in Florida.” In this case, the plaintiff was a commercial landlord seeking to collect rent from its tenant, a skilled nursing and assisted living facility. Soon after the lease was signed, the Medicare/Medicaid rules were changed, which depriving the tenant of revenue.
The force majeure clause in the lease read as follows:
“Force Majeure Event” means any circumstance which is not in the reasonable control of either party hereto, caused by any of the following: strikes, lockouts; acts of God; acts of war; civil commotion; fire or any other casualty; governmental action; or other similar cause or circumstance which is not in the reasonable control of either party hereto. Neither lack of financing nor general economic and/or market factors is a Force Majeure Event.
The tenant argued that Medicare/Medicaid modification was a force majeure because it was “governmental action” that was not in the reasonable control of either party to the lease not the result of a lack of financing or general economic or market factors. The Court rejected the tenant’s position, holding that the tenant failed to prove that the default was because of the change in rules.
Most force majeure clauses contain language similar to the language set forth above in the Chatsworth at Wellington Green case. That is, force majeure events are often defined as acts of God, acts of war or terrorism, weather conditions, restrictions imposed by any governmental agency, or other delays beyond the control of the parties. These types of events have been upheld by Courts in Florida.
The American Institute of Architects’ General Conditions of the Contract for Construction (AIA Document A201-2017) contains the following provision:
- 8.3 Delays and Extension 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 deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 220.127.116.11, or other causes beyond the Contractor’s control; (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) 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.
The takeaway is that the foremost analysis as to whether a force majeure clause relieves a party of its contractual obligations is on the clause itself. There must be a factual determination as to whether the circumstances at issue constitute a force majeure event as set forth in the contract. If so, then as long as the event was reasonably beyond the control of the parties and did, in fact, result in the impossibility or impracticability of performance by the party seeking to be excused, the force majeure clause will excuse performance. It is critical that the party seeking to be excused from performance notify the other party as soon as reasonably possible following the party’s knowledge that an event has triggered the force majeure clause.
At the time of writing this article, all Florida residents have been urged to practice “social distancing,” allowing for a separation of 6 feet between individuals. Restaurants, bars, beaches, and other establishments that can accommodate more than 10 people have been closed to on-site service. As of the date of this article, the various executive orders promulgated by the Florida Governor’s Office and counties, have classified construction as an essential vocation, subject to adherence to social distancing requirements and other safety precautions. Nevertheless, considering the breadth of the response to the coronavirus, the fact that several states have ordered its residents to quarantine at home, and the overall interest of safety, there can certainly be an argument that the current circumstances constitute a force majeure event.
Another aspect that will likely impact the construction industry is the availability of materials, especially materials fabricated overseas. Again, the determination of whether materials shortages will constitute a triggering event under a force majeure clause, pivots on the language of the clause itself. The clauses described in the cases cited above included “material shortages.” The AIA contract provision cited above includes “unusual delay in deliveries.”
Our recommendation is that contractor send notice of potential delays and/or inefficiencies to their customers advising that there is the potential for (or have been actual) delays or inefficiency to their project due to the coronavirus. That could come in the form of a labor shortage, labor inefficiency due to spacing work out more, more time to sanitize work areas, material shortages, etc. It would also be prudent to track any additional costs that may be incurred in the event the delay or inefficiency can be argued as being compensable. It may not be, but it would nonetheless make sense to track that information, to have it, in the event it was needed to address a claim or even just be supportive of a claim to for non-compensable time extensions.
If you have a potential dispute that may be impacted by a force majeure clause, please contact our office and ask to speak with any one of our attorneys.
 ARHC NV WELFL01, LLC v. Chatsworth at Wellington Green, LLC, 2019 WL 4694146 (S.D. Fla. 2019).
 Jennifer Sniffen, In the Wake of the Storm: Nonperformance of Contract Obligations Resulting from a National Disaster, 31 Nova Law Review, 550, 557, 2007.
 See, St. Joe Paper Co. v. State Dep’t. of Envtl. Regulation, 371 So.2d 178 (Fla 1st DCA) (recognizing that a force majeure clause that excuses delays for “any cause not within the reasonable control of the company” was enforceable).